Supply Chain & Logistics Formulas Library

Comprehensive collection of essential supply chain and logistics formulas including safety stock calculations, freight costs, volumetric weight, and optimization methods.

Safety Stock Calculation Formulas

Five proven methods to calculate optimal safety stock levels, from simple fixed-day approaches to comprehensive statistical methods.

Fixed Days Method

SS = ADS × FD

Safety Stock = Average Daily Sales × Fixed Days

Description: Simple method using fixed days of inventory coverage.

Best for: Stable demand patterns, simple inventory management.

Requirements: Average daily sales, desired coverage days.

Average-Max Method

SS = (MaxS × MaxLT) - (AvgS × AvgLT)

Safety Stock = (Max Sales × Max Lead Time) - (Avg Sales × Avg Lead Time)

Description: Method considering both sales and lead time fluctuations.

Best for: Businesses with predictable peak periods.

Requirements: Max/average sales, max/average lead time.

Variable Demand Method

SS = Z × σD × √LT

Safety Stock = Z-score × Demand Std Dev × √Average Lead Time

Description: Statistical method for demand volatility only.

Best for: Stable supply chain with variable demand.

Requirements: Z-score, demand standard deviation, average lead time.

Variable Lead Time Method

SS = Z × ADS × σLT

Safety Stock = Z-score × Average Daily Sales × Lead Time Std Dev

Description: Statistical method for lead time volatility only.

Best for: Stable demand with variable supplier delivery times.

Requirements: Z-score, average daily sales, lead time standard deviation.

Heizer & Render Method

Recommended

SS = Z × σLTD

Safety Stock = Z-score × Lead Time Demand Standard Deviation

Where:

σLTD = √[(LT × σD²) + (ADS² × σLT²)]

Description: Most comprehensive method considering both demand and lead time fluctuations.

Best for: Complex supply chains with multiple volatility factors.

Requirements: Complete dataset with all standard deviations.

Economic Order Quantity (EOQ)

EOQ = √(2DS/H)

Where: D = Annual Demand, S = Order Cost, H = Holding Cost

Description: Calculates optimal order quantity to minimize total inventory costs.

Best for: Businesses looking to optimize ordering frequency and quantities.

Requirements: Annual demand, ordering cost, holding cost per unit.

Logistics & Transportation Formulas

Essential formulas for freight cost calculation, volumetric weight, distance measurement, and landed cost analysis in logistics operations.

Volumetric Weight Calculations

General Volumetric Weight

VW = (L × W × H) ÷ F

Volumetric Weight = (Length × Width × Height) ÷ Divisor Factor

Description: Converts dimensional weight to chargeable weight for air freight.

Best for: Air freight pricing and light bulk shipments.

Requirements: Package dimensions (cm or inches).

IATA Standard

VW = (L × W × H) ÷ 6000

IATA standard for international air freight (dimensions in cm)

Description: International Air Transport Association standard formula.

Best for: Most international air shipments.

Use when: Carrier not specified, using metric measurements.

Carrier-Specific Factors

FedEx: ÷ 5000

DHL: ÷ 4000

UPS: ÷ 5000

Different carriers use different divisor factors

Description: Carrier-specific volumetric weight calculations.

Best for: Express couriers and specific carrier pricing.

Note: Always verify current carrier rates and factors.

Distance & Freight Cost Calculations

Haversine Distance Formula

d = 2R × arcsin(√[sin²(Δφ/2) + cos φ₁ × cos φ₂ × sin²(Δλ/2)])

Great-circle distance between two points on a sphere

Description: Calculates the shortest distance between two points on Earth's surface.

Best for: Shipping route planning and distance estimation.

Requirements: Latitude and longitude coordinates of origin and destination.

Freight Cost Calculation

Total Cost = Base Rate × Weight + Surcharges + Fees

Comprehensive freight cost including all charges

Description: Complete freight cost calculation including base rates and additional charges.

Components: Base freight rate, fuel surcharge, security fees, handling charges.

Best for: Budgeting and cost comparison across shipping methods.

Landed Cost Calculations

Total Landed Cost

TLC = PC + SC + DT + I + CF + OF

Total Landed Cost = Product Cost + Shipping Cost + Duties & Taxes + Insurance + Customs Fees + Other Fees

Description: Comprehensive calculation of total cost to get products to destination.

Best for: International trade and import cost analysis.

Requirements: All cost components from supplier to final destination.

Cost Component Analysis

Component % = (Individual Cost ÷ Total Cost) × 100%

Percentage breakdown of each cost component

Description: Analyzes the proportion of each cost component in total landed cost.

Best for: Cost optimization and identifying major expense drivers.

Use case: Understanding where to focus cost reduction efforts.

Container & Inventory Optimization

Container Utilization

U% = (Loaded Volume ÷ Total Volume) × 100%

Container space utilization percentage

Description: Measures how efficiently container space is being used.

Best for: Container load planning and cost optimization.

Goal: Maximize utilization to reduce per-unit shipping costs.

Reorder Point Formula

ROP = (AD × LT) + SS

Reorder Point = Average Daily Demand × Lead Time + Safety Stock

Description: Determines when to place new orders to avoid stockouts.

Best for: Inventory management and order timing.

Benefits: Prevents stockouts while minimizing excess inventory.

Inventory Turnover

IT = COGS ÷ Average Inventory

Inventory Turnover = Cost of Goods Sold ÷ Average Inventory Value

Description: Measures how efficiently inventory is being used.

Best for: Inventory efficiency analysis.

Higher ratio: Indicates more efficient inventory management.

Service Level Z-Score Reference

Standard Z-score values for different service levels in safety stock calculations.

Z-Score Service Level Table

Service Level	Z-Score	Description	Recommended Use
90%	1.28	Basic Service Level	General products, low cost items
95%	1.65	Good Service Level	Important products, standard business use
97.5%	1.96	High Service Level	Critical products, high-value items
99%	2.33	Premium Service Level	Strategic products, life-saving items

How to Choose the Right Formula

Select the most appropriate safety stock calculation method based on your data availability and business needs.

Data Availability Guide

Complete Data: Use Heizer & Render Method (Method 5) for most accurate results

Partial Data: Choose between Variable Demand (Method 3) or Variable Lead Time (Method 4)

Basic Data Only: Use Fixed Days (Method 1) or Average-Max (Method 2) for simpler calculations

Business Context Guide

High Value Items: Use higher service levels (95%+) with Heizer & Render Method

Stable Supply Chain: Fixed Days Method may be sufficient for predictable items

Seasonal Products: Average-Max Method accounts for peak periods effectively

Ready to Calculate Your Safety Stock?

Use our comprehensive safety stock calculator with all five methods built-in. Get intelligent recommendations based on your specific business context.

Supply Chain & Logistics Formulas Library

Comprehensive collection of essential supply chain and logistics formulas including safety stock calculations, freight costs, volumetric weight, and optimization methods.

Safety Stock Calculation Formulas

Five proven methods to calculate optimal safety stock levels, from simple fixed-day approaches to comprehensive statistical methods.

Fixed Days Method

SS = ADS × FD

Safety Stock = Average Daily Sales × Fixed Days

Description: Simple method using fixed days of inventory coverage.

Best for: Stable demand patterns, simple inventory management.

Requirements: Average daily sales, desired coverage days.

Average-Max Method

SS = (MaxS × MaxLT) - (AvgS × AvgLT)

Safety Stock = (Max Sales × Max Lead Time) - (Avg Sales × Avg Lead Time)

Description: Method considering both sales and lead time fluctuations.

Best for: Businesses with predictable peak periods.

Requirements: Max/average sales, max/average lead time.

Variable Demand Method

SS = Z × σD × √LT

Safety Stock = Z-score × Demand Std Dev × √Average Lead Time

Description: Statistical method for demand volatility only.

Best for: Stable supply chain with variable demand.

Requirements: Z-score, demand standard deviation, average lead time.

Variable Lead Time Method

SS = Z × ADS × σLT

Safety Stock = Z-score × Average Daily Sales × Lead Time Std Dev

Description: Statistical method for lead time volatility only.

Best for: Stable demand with variable supplier delivery times.

Requirements: Z-score, average daily sales, lead time standard deviation.

Heizer & Render Method

Recommended

SS = Z × σLTD

Safety Stock = Z-score × Lead Time Demand Standard Deviation

Where:

σLTD = √[(LT × σD²) + (ADS² × σLT²)]

Description: Most comprehensive method considering both demand and lead time fluctuations.

Best for: Complex supply chains with multiple volatility factors.

Requirements: Complete dataset with all standard deviations.

Economic Order Quantity (EOQ)

EOQ = √(2DS/H)

Where: D = Annual Demand, S = Order Cost, H = Holding Cost

Description: Calculates optimal order quantity to minimize total inventory costs.

Best for: Businesses looking to optimize ordering frequency and quantities.

Requirements: Annual demand, ordering cost, holding cost per unit.

Logistics & Transportation Formulas

Essential formulas for freight cost calculation, volumetric weight, distance measurement, and landed cost analysis in logistics operations.

Volumetric Weight Calculations

General Volumetric Weight

VW = (L × W × H) ÷ F

Volumetric Weight = (Length × Width × Height) ÷ Divisor Factor

Description: Converts dimensional weight to chargeable weight for air freight.

Best for: Air freight pricing and light bulk shipments.

Requirements: Package dimensions (cm or inches).

IATA Standard

VW = (L × W × H) ÷ 6000

IATA standard for international air freight (dimensions in cm)

Description: International Air Transport Association standard formula.

Best for: Most international air shipments.

Use when: Carrier not specified, using metric measurements.

Carrier-Specific Factors

FedEx: ÷ 5000

DHL: ÷ 4000

UPS: ÷ 5000

Different carriers use different divisor factors

Description: Carrier-specific volumetric weight calculations.

Best for: Express couriers and specific carrier pricing.

Note: Always verify current carrier rates and factors.

Distance & Freight Cost Calculations

Haversine Distance Formula

d = 2R × arcsin(√[sin²(Δφ/2) + cos φ₁ × cos φ₂ × sin²(Δλ/2)])

Great-circle distance between two points on a sphere

Description: Calculates the shortest distance between two points on Earth's surface.

Best for: Shipping route planning and distance estimation.

Requirements: Latitude and longitude coordinates of origin and destination.

Freight Cost Calculation

Total Cost = Base Rate × Weight + Surcharges + Fees

Comprehensive freight cost including all charges

Description: Complete freight cost calculation including base rates and additional charges.

Components: Base freight rate, fuel surcharge, security fees, handling charges.

Best for: Budgeting and cost comparison across shipping methods.

Landed Cost Calculations

Total Landed Cost

TLC = PC + SC + DT + I + CF + OF

Total Landed Cost = Product Cost + Shipping Cost + Duties & Taxes + Insurance + Customs Fees + Other Fees

Description: Comprehensive calculation of total cost to get products to destination.

Best for: International trade and import cost analysis.

Requirements: All cost components from supplier to final destination.

Cost Component Analysis

Component % = (Individual Cost ÷ Total Cost) × 100%

Percentage breakdown of each cost component

Description: Analyzes the proportion of each cost component in total landed cost.

Best for: Cost optimization and identifying major expense drivers.

Use case: Understanding where to focus cost reduction efforts.

Container & Inventory Optimization

Container Utilization

U% = (Loaded Volume ÷ Total Volume) × 100%

Container space utilization percentage

Description: Measures how efficiently container space is being used.

Best for: Container load planning and cost optimization.

Goal: Maximize utilization to reduce per-unit shipping costs.

Reorder Point Formula

ROP = (AD × LT) + SS

Reorder Point = Average Daily Demand × Lead Time + Safety Stock

Description: Determines when to place new orders to avoid stockouts.

Best for: Inventory management and order timing.

Benefits: Prevents stockouts while minimizing excess inventory.

Inventory Turnover

IT = COGS ÷ Average Inventory

Inventory Turnover = Cost of Goods Sold ÷ Average Inventory Value

Description: Measures how efficiently inventory is being used.

Best for: Inventory efficiency analysis.

Higher ratio: Indicates more efficient inventory management.

Service Level Z-Score Reference

Standard Z-score values for different service levels in safety stock calculations.

Z-Score Service Level Table

Service Level	Z-Score	Description	Recommended Use
90%	1.28	Basic Service Level	General products, low cost items
95%	1.65	Good Service Level	Important products, standard business use
97.5%	1.96	High Service Level	Critical products, high-value items
99%	2.33	Premium Service Level	Strategic products, life-saving items

How to Choose the Right Formula

Select the most appropriate safety stock calculation method based on your data availability and business needs.

Data Availability Guide

Complete Data: Use Heizer & Render Method (Method 5) for most accurate results

Partial Data: Choose between Variable Demand (Method 3) or Variable Lead Time (Method 4)

Basic Data Only: Use Fixed Days (Method 1) or Average-Max (Method 2) for simpler calculations

Business Context Guide

High Value Items: Use higher service levels (95%+) with Heizer & Render Method

Stable Supply Chain: Fixed Days Method may be sufficient for predictable items

Seasonal Products: Average-Max Method accounts for peak periods effectively

Ready to Calculate Your Safety Stock?

Use our comprehensive safety stock calculator with all five methods built-in. Get intelligent recommendations based on your specific business context.

Procurement

Inventory

Logistics

Order Fulfillment

Supply Chain & Logistics Formulas Library

Safety Stock Calculation Formulas

Logistics & Transportation Formulas

Volumetric Weight Calculations

Distance & Freight Cost Calculations

Landed Cost Calculations

Container & Inventory Optimization

Service Level Z-Score Reference

How to Choose the Right Formula

Ready to Calculate Your Safety Stock?

Procurement

Inventory

Logistics

Order Fulfillment

Supply Chain & Logistics Formulas Library

Safety Stock Calculation Formulas

Logistics & Transportation Formulas

Volumetric Weight Calculations

Distance & Freight Cost Calculations

Landed Cost Calculations

Container & Inventory Optimization

Service Level Z-Score Reference

How to Choose the Right Formula

Ready to Calculate Your Safety Stock?