Min-max is the oldest replenishment rule there is, and for most products in most warehouses it is still the right one. Each product gets two numbers. When stock falls to the minimum, you order. You order enough to bring it back to the maximum.
The rule is simple. Setting the two numbers well is where the work is, and both come from the same three inputs as any reorder calculation: how fast the product is used, how long the supplier takes, and how much buffer you want.
The minimum is a reorder point
The minimum is the level at which you must order to avoid running out before the delivery arrives. That is exactly a reorder point:
A product used at 20 a day, from a supplier who delivers in 7 days, with a safety stock of 100: minimum = 100 + 20 × 7 = 240. At 240, an order placed today arrives as stock reaches the safety level.
The maximum is the minimum plus an order
The maximum is the level stock returns to after a delivery. It is the minimum plus the quantity you want each order to bring, usually expressed as days of use:
With 30 cover days: maximum = 240 + 30 × 20 = 840. Each order is then about 600 units, roughly a month’s use, and you order about once a month.
The second term matters. If 600 are already on their way, the product is not short, whatever the shelf says.
The cycle
| Day | Event | Stock in hand | On order |
|---|---|---|---|
| 0 | Stock reaches the minimum | 240 | 0 |
| 0 | Order 840 − 240 = 600 | 240 | 600 |
| 7 | Delivery arrives | 100 + 600 = 700 | 0 |
| 30 | Back at the minimum | 240 | 0 |
Stock swings between about 100 and 700. The average on the shelf is around 400, which is the figure to use when you think about what it costs to hold.
Setting the two numbers for different products
The formula is the same for every product. The inputs are not.
Fast, cheap, reliable supplier. Short cover days and a small safety stock. A product used daily with a local supplier can run on 7 cover days and a week of safety stock. Frequent small orders cost little and keep the shelf lean.
Slow or expensive. Longer cover days, because each order has a fixed cost in handling and the stock is cheap to hold, or short cover days if the units are expensive and each one on the shelf is money.
Unreliable supplier. The maximum stays where it is; the safety stock inside the minimum goes up. A supplier whose lead time varies from 7 to 20 days needs a buffer sized for 20, which raises the minimum and makes you order earlier, not more.
Minimum order quantity. If the supplier will not ship fewer than 1,000 and the formula says 600, raise the cover days until the order reaches 1,000. Ordering 600 and being rounded up to 1,000 anyway means the maximum you planned is fiction.
Four mistakes
Setting the maximum as a shelf capacity. The maximum is a planning number, not the size of the rack. If the rack holds 500 and the formula says 840, the rack is the problem.
Copying one product’s numbers to its neighbours. Two products from the same supplier with different usage need different minimums. Copying is how a slow product ends up with a month of stock it will take a year to use.
Forgetting stock on order. A product below its minimum with a delivery due tomorrow does not need a second order. Compare the maximum with stock in hand plus stock on approved orders.
Never revisiting them. Usage changes. A minimum set two years ago is wrong in one direction or the other. Review the products that ran out, and the ones that never dropped near their minimum, every quarter.
Min-max in StockBold
StockBold works the same way, with its own names for the two numbers. The reorder point is the minimum: the product’s safety stock plus average daily use multiplied by its expected lead time, with the safety stock set by hand, calculated in months of use, or both. The cover days set the maximum: when stock in hand plus stock on approved purchase orders falls to the reorder point, the reorder list suggests the quantity that brings the total back up to the reorder point plus the cover days of use, rounded up to whole units. Draft and pending orders are not counted as on order; approved ones are.
Each product shows the usage, safety stock and lead time behind its figures, and products with automatic calculation on get an expected reorder date, a place in the 30-day run-out forecast and a daily email for the people who follow them. A person always creates the order: Create PO turns the suggestions for a supplier into a purchase order to review.
Read more about reorder and low-stock alerts, or the help guide on where the suggested quantity comes from.