The Benefits of Min/Max Inventory Management

Summary: By setting min/max levels based on actual usage data from the point-of-use in stockrooms and trucks, modern VMI replenishment apps can help you optimize inventory and avoid stockouts. Optimizing inventory can save you money on inventory and annual carrying costs.

What is Min/Max Inventory Management?

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. 

How Do I Set Min/Max Levels? 

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 to Implement Min/Max Inventory Management

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.

The eTurns Min/Max Dashboard displays the following data that customers can use to optimize their inventory levels:

1) the optimum min/max levels for each item based on usage history

2) the resulting inventory value 

3) how much cash can be saved 

4) the current supply level of each item

How Min/Max Benefits Point-of-Use Inventory Management

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. 

Industries that can benefit from a min/max inventory control system based on tracking inventory usage include:

• Healthcare - Ensures medical centers can replenish critical stockroom supplies as needed

• EMS – Ensures that critical supplies are always replaced in their EMS units or locations

• Manufacturers – Helps optimize their indirect MRO inventories with daily visibility into usage and replenishment needs

• Contractors - Get real-time visibility into inventory stored in all locations or service trucks so that they have what they need when they need it on the job

• Distributors - Ensure they aren’t overstocking or understocking their consignment or customer-owned inventory at a customer’s site

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.

Automating Point-of-Use Inventory Control with eTurns TrackStock

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.

One service contractor reaped the following benefits in the first year using the eTurns TrackStock app:

•       Inventory accuracy improved by more than 45%

•       Truck inventory levels decreased by over 30%

•       Warehouse inventory decreased by over 45%

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.