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Min-Max Inventory Levels

Min-Max is the simplest inventory control method. Keep inventory between a minimum and maximum level. When it hits minimum, order enough to reach maximum.

The Min-Max System​

Maximum Level
    │
    │  Order until you reach here
    │
────┼─────────────────────────────────
    │
    │  Normal inventory zone
    │  (Let it decrease naturally)
    │
Minimum Level
    │  ⚠️ ALERT: Order now!
    │
────┼─────────────────────────────────
    │
    │  Danger zone
    │  (Stockout risk)
    │
  0 │  STOCKOUT (bad!)

The Formula​

Minimum Level = Reorder Point
              = (Lead Time × Daily Sales) + Safety Stock

Maximum Level = Minimum Level + Reorder Quantity
              = Reorder Point + Reorder Quantity

Real Example: Blue T-Shirt​

Step 1: Calculate Minimum (Reorder Point)
├─ Daily sales: 10 units
├─ Lead time: 30 days
├─ Safety stock: 80 units (10 days × 10)
└─ MINIMUM: (30 × 10) + 80 = 380 units

Step 2: Calculate Reorder Quantity
├─ Method: Cover 6 weeks of sales
├─ Weekly sales: 70 units (10 × 7)
├─ Weeks: 6 weeks
└─ REORDER QUANTITY: 70 × 6 = 420 units

Step 3: Calculate Maximum
├─ Maximum: 380 + 420 = 800 units
└─ Policy: Keep between 380-800 units

How Min-Max Works Over Time​

Day 1:
├─ Inventory: 700 units (in range)
└─ Status: ✓ Normal

Day 5:
├─ Inventory: 650 units (in range)
└─ Status: ✓ Normal

Day 10:
├─ Inventory: 600 units (in range)
└─ Status: ✓ Normal

Day 15:
├─ Inventory: 500 units (in range)
└─ Status: ✓ Normal

Day 20:
├─ Inventory: 380 units (HITS MINIMUM!)
├─ Action: ORDER 420 UNITS
├─ Expected arrival: Day 50 (30-day lead time)
└─ Status: Order placed ✓

Day 25:
├─ Inventory: 300 units (below minimum during lead time)
└─ Status: ⚠️ Expected, waiting for order

Day 30:
├─ Inventory: 200 units (still waiting)
└─ Status: ⚠️ Monitor for unexpected demand

Day 50:
├─ Inventory: ~50 units
├─ Action: ORDER ARRIVES (+420 units)
├─ New inventory: 470 units
└─ Status: Back to healthy ✓

Day 55:
├─ Inventory: 420 units (in range)
└─ Status: ✓ Normal cycle continues

Advantages of Min-Max​

✅ Simple — Two numbers to manage
✅ Clear — When to order (when below min)
✅ Automatic — System can trigger orders
✅ Prevents both — Stockouts (min) and overstock (max)
✅ Works with — Any product type

Challenges of Min-Max​

✗ No safety buffer — If demand spikes right after minimum, you might stockout
✗ Requires accuracy — Min/max calculations must be correct
✗ Inventory varies — Doesn't account for seasonal changes
✗ Multiple orders — In volatile periods, might order multiple times

Min-Max by Grade​

Grade A (High Priority)​

Goal: Keep high safety stock, prevent any stockout

Minimum: Higher (more buffer)
└─ Formula: (Lead Time × Daily Sales) + (Daily Sales × 14 days)

Maximum: Higher
└─ Formula: Minimum + (Daily Sales × 7 weeks)

Example - Winter Jacket:
├─ Daily sales: 5 units
├─ Lead time: 45 days
├─ Safety days: 14 days (high)
├─ MINIMUM: (45 × 5) + (5 × 14) = 225 + 70 = 295 units
├─ MAXIMUM: 295 + (5 × 7 × 7) = 295 + 245 = 540 units
└─ Keep between: 295-540 units (tight range, high priority)

Grade B (Medium Priority)​

Goal: Balance prevention of stockouts with reasonable inventory

Minimum: Standard (normal buffer)
└─ Formula: (Lead Time × Daily Sales) + (Daily Sales × 9 days)

Maximum: Standard
└─ Formula: Minimum + (Daily Sales × 6 weeks)

Example - Blue T-Shirt:
├─ Daily sales: 10 units
├─ Lead time: 30 days
├─ Safety days: 9 days (medium)
├─ MINIMUM: (30 × 10) + (10 × 9) = 300 + 90 = 390 units
├─ MAXIMUM: 390 + (10 × 6 × 7) = 390 + 420 = 810 units
└─ Keep between: 390-810 units (standard range)

Grade C (Low Priority)​

Goal: Minimize inventory, OK with occasional stockouts

Minimum: Lower (minimal buffer)
└─ Formula: (Lead Time × Daily Sales) + (Daily Sales × 4 days)

Maximum: Lower
└─ Formula: Minimum + (Daily Sales × 4 weeks)

Example - Niche Item:
├─ Daily sales: 0.5 units
├─ Lead time: 30 days
├─ Safety days: 4 days (low)
├─ MINIMUM: (30 × 0.5) + (0.5 × 4) = 15 + 2 = 17 units
├─ MAXIMUM: 17 + (0.5 × 4 × 7) = 17 + 14 = 31 units
└─ Keep between: 17-31 units (loose range, low priority)

Multi-Location Min-Max​

Each location gets its own min-max based on local demand:

Product: Blue T-Shirt

BERLIN WAREHOUSE (60% of demand):
├─ Daily sales: 6 units
├─ MINIMUM: (30 × 6) + (6 × 9) = 180 + 54 = 234 units
├─ REORDER: 252 units (6 × 7 × 6)
└─ MAXIMUM: 486 units

MUNICH STORE (25% of demand):
├─ Daily sales: 2.5 units
├─ MINIMUM: (30 × 2.5) + (2.5 × 9) = 75 + 22.5 = 97.5 units
├─ REORDER: 105 units (2.5 × 7 × 6)
└─ MAXIMUM: 202.5 units

HAMBURG STORE (15% of demand):
├─ Daily sales: 1.5 units
├─ MINIMUM: (30 × 1.5) + (1.5 × 9) = 45 + 13.5 = 58.5 units
├─ REORDER: 63 units (1.5 × 7 × 6)
└─ MAXIMUM: 121.5 units

Action:
Each location has different min-max levels
Each orders independently when it hits minimum

Adjusting Min-Max Seasonally​

For seasonal products, adjust min-max before each season:

WINTER JACKET - OFF-SEASON (Apr-Aug)

Daily sales: 2 units (low)
├─ MINIMUM: (45 × 2) + (2 × 5) = 90 + 10 = 100 units
├─ REORDER: 56 units (2 × 7 × 4)
└─ MAXIMUM: 156 units

WINTER JACKET - PEAK-SEASON (Oct-Dec)

Daily sales: 8 units (high)
├─ MINIMUM: (45 × 8) + (8 × 14) = 360 + 112 = 472 units
├─ REORDER: 224 units (8 × 7 × 4)
└─ MAXIMUM: 696 units

Action:
Same product, different policies per season
Adjust in August for Oct-Dec peak
Adjust in April for May-Sep low season

Checking if Min-Max is Working​

Monthly review checklist:

✓ How many times did we hit minimum?
  Target: Once per month
  Too often? Increase minimum
  Too rarely? Decrease minimum

✓ Did we ever hit maximum?
  Target: Once per month
  Too often? Decrease reorder quantity
  Never? Increase reorder quantity

✓ Any stockouts during lead time?
  Target: Zero for Grade A, <5 for Grade B, <10 for Grade C
  Yes? Increase safety stock days

✓ Any excess inventory (way above maximum)?
  Target: Rare
  Happening? Reduce reorder quantity or increase sales forecast

✓ Lead time changes?
  If yes? Recalculate minimum immediately

FAQ​

Q: What if demand is seasonal?

A: Create two min-max levels (low season and peak season). Switch in August and April.

Q: Should I adjust max if I'm running promotion?

A: Yes. If promoting, increase minimum and maximum for that period. Demand will spike.

Q: Can I have different min-max per supplier?

A: Not typically. But if one supplier has much longer lead time, they might need higher minimum.

Q: What if my lead time varies (20-40 days)?

A: Use the longer time (40 days) in the calculation. Better safe than sorry.

Q: How often should I recalculate min-max?

A: Quarterly minimum. More often for volatile products. Immediately if lead time changes.

Next Steps​

  1. Calculate minimum for one product
  2. Calculate reorder quantity
  3. Calculate maximum
  4. Monitor for 30 days — Do you hit min/max roughly once per month?
  5. Adjust if needed — Based on what you observe

Questions?​

Contact support@synplex.io for help setting up min-max levels.