The Benefits of Min/Max Inventory Management

The cost of storing inventory is much more than the cost of the product itself – it involves carrying costs such as rent, utilities, payroll, insurance and shrinkage – and can typically add up to about 25% to 55% of inventory value. So, the system you use to stock and replenish that inventory is critical.

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. And while simplistic, min/max levels can be adjusted to optimize inventory. The calculation to reorder is simple: it’s the difference between the maximum and quantity on hand.

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.

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, however it helps reduce the high cost of lost sales inventory.

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 settings for each item 

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 demand-based min/max inventory control system include:

• Healthcare - medical centers can ensure they 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 inventory at a customer’s site

For example, medical centers can ensure they have sufficient critical supplies by using min/max with a demand-based app, without overstocking and wasting money or facing liability issues. 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 and 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

eTurns TrackStock Min/Max Tuning Dashboard (TrackStock MMT) proactively calculates and suggests the optimal minimum and maximum levels for each item based on actual usage. Using TrackStock mobile app with phones, scanners, RFID or IoT sensors 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 calculates demand based on what customers are using, not what they have historically ordered. With the ability to automate inventory tracking and replenishment, the eTurns TrackStock mobile app with its Min/Max Tuning Dashboard is the most cost-effective solution for companies that need to better manage and replenish point-of-use inventory.

For more information on how eTurns TrackStock mobile inventory app increases inventory visibility, optimizes inventory, and lowers procurement costs in stockrooms and service trucks, reach out to us or try eTurns free for 30 days, including set up and great phone & email support.