Free tool
Min/max inventory calculator
Enter demand, lead time, safety stock and an order-quantity basis to get your min, your max, and how much to order right now.
Your demand, lead time and safety stock
Get safety stock from the safety stock calculator first if you do not already have one.
Estimated order-up-to quantity
636 units
- Min (reorder trigger)
- 386 units
- Max
- 986 units
- Inventory position
- 350 units
- Order now?
- Yes
Inventory position is on hand plus on order, minus what is committed or backordered. It is compared to min, not raw on-hand stock, so an order already placed does not trigger a second one.
The formula
Min = average daily demand × lead time + safety stock
Max = Min + order quantity
Inventory position = on hand + on order − committed − backordered
Order-up-to quantity = Max − inventory position, when inventory position is at or below Min
- Min
- The reorder point: the trigger level that fires a new order.
- Order quantity
- How much a single order adds: a fixed quantity, days of cover, or a known figure such as an EOQ result.
- Max
- The ceiling stock should reach after an order arrives.
- Inventory position
- What is actually available to cover future demand: on hand plus on order, minus units already committed or backordered. Not the same as raw on-hand stock.
Worked example
- An item sells 20 units a day with a 14-day lead time and 106 units of safety stock, so min is 20 × 14 + 106 = 386 units.
- Ordering 30 days of cover each time adds 20 × 30 = 600 units, so max is 386 + 600 = 986 units.
- With 350 on hand and nothing on order, committed or backordered, inventory position is 350 units, at or below min, so it is time to order.
- The order-up-to quantity is 986 − 350 = 636 units.
When it applies
- Reorder-point systems where an order fires the moment inventory position drops to or below min.
- Items where you already have, or can get from the safety stock calculator, a sized safety stock figure.
- SKUs ordered in variable timing but a fairly consistent quantity per order.
When it breaks down
- Items reviewed and ordered on a fixed calendar day regardless of stock level. A periodic review system sizes the order differently, off the review period rather than a live trigger.
- A safety stock of zero or an unreliable guess feeding in from outside; min/max is only as good as the buffer behind it.
- SKUs with a supplier minimum order quantity larger than what min/max would call for, where the order-quantity basis needs to reflect that floor.
Common mistakes
Comparing on-hand stock to min instead of inventory position
On-hand alone ignores stock already on order, which can trigger a duplicate order, and ignores committed or backordered units, which overstates what is actually available.
Treating max as a hard ceiling rather than a planning figure
Max is Min plus however much a single order adds. Ordering past it because 'there's room' defeats the point of a level sized to lead time and safety stock.
Skipping safety stock
Setting min to average demand over lead time alone, with no buffer, means an order arrives exactly on the average, and half of all cycles then run short before it does.
Questions
What is a min/max inventory system?
A min/max inventory system reorders a SKU whenever its inventory position drops to or below a minimum level, and orders up to a maximum level each time. The minimum is the same figure as a reorder point (average demand over the lead time plus safety stock), and the maximum is that minimum plus however much a single order adds.
How does a min/max inventory system work?
It watches inventory position, not raw on-hand stock, against the minimum. When position falls to or below min, an order fires for enough to bring position back up to max. Between those checks nothing is ordered, so the system runs itself off two numbers per SKU rather than a calendar review.
What are minimum and maximum inventory levels?
Minimum is the trigger level: average demand over the lead time plus safety stock, the point at which a new order should fire. Maximum is the ceiling stock should reach right after that order arrives: min plus however much a single order adds, whether that is a fixed quantity, a number of days of cover, or a known order quantity such as an EOQ result.
What is the difference between min/max and reorder point?
Min in a min/max system is the same figure as a reorder point; they are not two different calculations. The difference is what happens on the order side: a reorder-point system on its own only says when to order, while min/max also states an order-up-to ceiling, so the same trigger produces a defined order quantity rather than a separately computed one such as EOQ.
What is inventory position?
Inventory position is on hand plus on order, minus what is committed or backordered. It is the figure a reorder decision should actually compare to min, because on-hand alone would trigger a duplicate order on stock already on its way.
Related
Published by Skuvelo. Results are estimates computed from the figures you enter, not a reading of your own sales or stock.
A calculator answers once. Skuvelo keeps answering.
This tool computes one number from what you type. Skuvelo computes it continuously, for every SKU, from your own sales and stock.