The difference between the Max and the Min is frequently interpreted as the EOQ (Economic Order Quantity). And while Min/Max inventory planning is quite a crude method for inventory ordering, Min/Max settings can be dynamically adjusted to offer better inventory performance. Your minimum is the quantity of product on hand when it’s time to place an order and your maximum is the most you want on hand at any given time. It’s very easy to use but can lead to shortages or overstocks if not carefully monitored. Azure Couture is a prominent fashion brand known for its trendy clothing. They decided to refine their inventory levels for a particular summer dress to cater to their fashion-forward clientele without the burden of excessive holding costs.

Step 1: Determine Your Safety Stock

When the stock level drops to or below this min value, inventory control software or supply chain management software can trigger a reorder. Below is an in-depth analysis of each step that will help you calculate minimum or maximum inventory levels. Furthermore, implementing a min/max inventory system can also enhance demand forecasting accuracy. By analyzing historical data and consumption patterns, businesses can make informed decisions about inventory levels.

Minimum inventory level

It is to be noted that if a function does not have a global extreme then it will return a local extreme in that case. The calculator is not only easy to use, but it can find extreme values for a variety of functions such as algebraic, exponential, and trigonometric functions. Your supplier needs 10 days to deliver new inventory from the time you place an order. Learn how the inventory management system works, its benefits, and how to calculate it for your business.

Min Max Inventory Method: Everything You Need to Know in 2024

Then, keeping both Min and Max values equal all the time would, in practice, lead to constant reordering every time any single unit is sold. In reality however, except for drop shipping situations, reorders are not made on-the-fly as soon as customer orders are received. Instead, reorders are usually made according to a pre-determined schedule.

• To overcome this problem, companies need an app that can track usage automatically and adjust min/max settings dynamically.
• You may need to adjust your safety stock percentage depending on the volatility of your product demand.
• The calculator has two options that are Maximize and Minimize in the “Find the” box.
• The min-max inventory strategy is straightforward to implement, making it accessible to small businesses or those without complex inventory management systems.

With Spare Parts Inventory

However, the only way to set accurate minimum and maximum levels that will prevent stockouts and help optimize inventory levels are to calculate average daily usage. Then the min/max levels need to be tuned and optimized with usage data. Users need to evaluate their distributor or supplier’s performance on delivery time from order to receipt. If this period is two days, then perhaps the minimum levels should be set to four days of average daily usage to be conservative. TrackStock allows users to filter to those specific items that have longer lead times in order to to calculate what their minimums should be in comparison to typical items. Over time, the min-max strategy allows businesses to analyze reorder patterns and adjust the minimum and maximum levels accordingly.

Inventory Management 101 – Min Max Inventory Calculation

Max- Maximum value represents a the target stock level, will not trigger to ordering activities. After the summer season, Sweet Delights Bakery noticed a surge in muffin sales, likely due to increased tourism. They will re-evaluate their numbers every quarter to ensure their inventory calculations remain aligned with the actual sales trend.

The strategic objective is to optimize inventories and maximize service levels. These industries need an app that tracks consumption at the point of use (POU) and uses it to their strategic advantage. A Maximum and Minimum Calculator is an online calculator that can be used to determine the maximum and minimum values of a mathematical function. The calculator returns the global maximum and minimum of the function along with a graph in the cartesian plane as a solution. The Maximum and Minimum Calculator is an online widget that helps to find the maximum and minimum values of a function.

The pros of min-max inventory include simplicity, cost-effectiveness, and automated processes to control stock levels and keep your inventory within a specific range. Cons include a potential oversimplification of inventory management. For example, min-max does not factor in the need for buffer stock (or safety stock) that some businesses keep to handle the most extreme demand surges. Now that you’ve calculated your min/max inventory levels, it’s time to implement them effectively.

This can be calculated by taking your current sales and dividing it by the number of days in your calculation period. For example, if you sold 10 Widgets last month and you want to calculate your min/max inventory for the next month, you would take 10 (current sales) and divide it by 30 (days irs announces e 2020 in a month). Azure Couture observed fluctuating demand for a specific summer dress. Typically, they sell 200 dresses daily, but sales can spike to 500 on peak summer or promotional days. The average lead time for dress deliveries is 5 days, extending to 8 days during peak production periods.