How Buffer is calculated or What are the key parameters to calculate buffer?

Question

Accepted Answer

Buffer is calculated based on lead time, demand variability, and service level.

Lead time is the time it takes to receive an order.
Demand variability is the fluctuation in demand over time.
Service level is the desired level of customer satisfaction.
Buffer is calculated using the formula: Buffer = (Z-score x Standard Deviation of Demand during Lead Time) + Safety Stock.
Z-score is the number of standard deviations from the mean.
Safety stock is the extra inventory kept to protect against unexpected demand or delays in delivery.

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