
3 Steps for Making Vendor Managed Inventory (VMI) Work
What is vendor managed inventory? In theory, Vendor Managed Inventory (VMI) is a mutually beneficial system for optimizing inventory flows and ...
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One of the most popular methods of inventory control, and the simplest to implement, is the min/max method. The min/max method attempts to keep current on-hand inventory within a specific range. Users set a minimum stocking level, which when reached triggers a reorder to reach the maximum stocking level of a particular item. The calculation to reorder is simple: it’s the difference between the maximum and quantity on hand.
At a basic level, the point of setting min/max levels is to avoid stockouts. But apps exist today that can help you set min/max levels based on past usage of items and thereby optimize inventory levels to save cash.
The minimum stock quantity of a particular item depends on several factors, including lead time, safety stock, contractual (blanket) orders, sales cycle times, seasonal demands, accuracy of sales forecasts and the item’s review period.
A good guide to start with is Minimum = Safety Stock + (Daily Run Rate * Lead Time).
However, the only way you set accurate minimum and maximum levels that will prevent stockouts and help optimize inventory levels is to calculate average daily usage. Modern inventory replenishment apps only need around 45 days of tracking consumption, plus lead time inputs, to suggest accurate min/max levels that will optimize storeroom and truck inventory. And by optimizing levels, users benefit from one time inventory reduction savings as well as annual savings from inventory carrying costs.
Get a demo of how min/max reordering can optimize your stockroom inventory
When used with a typical ERP system, the min/max method is ideally suited for newly introduced items that have no data history. It’s also good for items that are fast-moving or have a predictable throughput. But managed with just an ERP system, this method may leave you with over or understocked items.
An automated inventory replenishment app, like eTurns TrackStock, provides a better solution for businesses that want to track inventory usage and manage on-hand quantities at the point of use, such as in stockrooms or service trucks. Once the customer has used eTurns for at least 45 days to replenish their inventory, eTurns has enough data to calculate what optimum minimum and maximum settings should be and will recommend those settings.
With eTurns TrackStock, users have access to timely data based on actual consumption, and the min/max method ensures that they have the product they need on the shelf, and nothing more.
For example, medical centers can ensure they have sufficient critical supplies by setting min/max levels and triggering replenishment without overstocking and wasting money or facing liability issues from stocking out. With fluctuating consumption and sourcing issues, a demand-based replenishment app using min/max will be much more accurate than traditional demand planning software, which aggregates past orders to make assumptions about future demand.
Industries like mining benefit from having the needed MRO supplies onsite, especially since they are typically hours away from their nearest supplier. By having the min/max levels constantly monitored with the eTurns app that triggers automated replenishment when needed, these companies are assured they have the necessary quantities of stock needed to avoid costly shutdowns.
The eTurns TrackStock Optimize Solution includes a Min/Max Tuning Dashboard that proactively calculates and suggests the optimal minimum and maximum levels for each item based on actual usage. Using the TrackStock app with phone scans or SensorBins to automate stockroom replenishment and optimize inventories, companies can remove excess inventory from their stockrooms or service trucks, saving money and freeing up storage space.
If you are a contractor with a fleet of service trucks, just a small reduction in excess inventory in each truck can add up to significant savings.
Read our Service America Case Study
eTurns creates suggested orders and suggested min/max levels based on what customers are using, not what they have historically ordered. This capability sets the eTurns TrackStock mobile app with its Min/Max Tuning Dashboard apart from traditional ERP systems. eTurns is the most cost-effective solution for companies that need to better manage and replenish point-of-use inventory in storerooms and service trucks.
For a demo of how eTurns can help you set more accurate min/max levels for you storeroom inventory, please contact us! Get a demo Start Free Trial.
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