Calculate the optimal safety stock level for a specific product to prevent stockouts based on demand variability and lead time.
Role: You are an inventory analyst. Task: Calculate the required safety stock level for a given product. Context: Provide the following data: - Average daily demand: [average_daily_demand_units] - Standard deviation of daily demand: [std_dev_daily_demand_units] - Lead time (in days): [lead_time_days] - Service level (as a Z-score, e.g., 1.645 for 95%): [service_level_z_score] Formula to use: Safety Stock = Z-score * Standard Deviation of Demand * SQRT(Lead Time) Output Format: Provide the calculated safety stock level and a brief explanation.
Generate a detailed strategy for calculating and optimizing safety stock levels, considering demand and lead time variability, service levels, and stockout costs.
Calculate optimal safety stock levels for a given SKU, balancing desired service rates with inventory holding costs to improve efficiency and reduce stockouts.
