Two numbers govern when and how much to order: the reorder point, which is demand over the lead time plus safety stock, and the order quantity, which trades ordering cost against holding cost. Safety stock follows variability — and for imports, lead-time variability usually matters more.
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How is safety stock calculated?
Safety stock is the service-level factor (Z) multiplied by the combined variability of demand and lead time over the replenishment lead time: SS = Z × √(LT × σ_demand² + demand² × σ_leadtime²). A 90% service level uses Z = 1.28, 95% uses 1.65, 97.5% uses 1.96 and 99% uses 2.33. The bigger your demand swings or the more variable your supplier’s lead time, the more safety stock you need.
Why do South African importers need more safety stock?
Because safety stock grows with the uncertainty accumulated over the lead time — and it rises faster than the lead time itself once lead-time variability is added. A 1-week local supplier might need 60–80 units of buffer where a 7-week import with a variable shipping window needs several times more, often 300–500 units, for the same service level. Shortening or stabilising lead time is the single biggest lever.
What is the reorder point?
The reorder point is the stock level that should trigger a new order: expected demand during the lead time plus your safety stock (ROP = demand × lead time + safety stock). Ordering when stock hits this level means the replenishment arrives just as the buffer would otherwise run down.
What is the economic order quantity (EOQ)?
EOQ is the order size that minimises total ordering plus holding cost: EOQ = √(2 × annual demand × ordering cost ÷ annual holding cost per unit). Ordering in bigger batches cuts ordering cost but raises the cycle stock you carry; EOQ is the balance point.