How do you calculate safety stock?

The most common method multiplies a service factor (Z) by the standard deviation of demand and the square root of lead time: safety stock = Z x sigmaD x square root of lead time. Simpler versions swap in max-minus-average daily usage, trading accuracy for speed. Whichever you pick, the result only holds while the demand and lead-time variance behind it stays representative, which in most categories is a matter of weeks, not quarters.