Purchase & store glossary
Min-Max Inventory Method: Meaning & Example
Min-max inventory, in short
Min-max inventory is a stock control method where each item has a minimum level (the reorder point) and a maximum level. When stock falls to the minimum, you order enough to bring it back up to the maximum. It prevents both stockouts and overstocking.
Also called: Min-max method, Minimum and maximum stock level, Min max level
Min-max is the simplest stock control rule that works in a factory store. Every item gets two numbers, and the storekeeper's job becomes checking stock against them.
The two levels
- Minimum level: the reorder level. Usually daily usage × lead time + safety stock.
- Maximum level: the most you ever want to hold. It limits the cash tied up on the shelf.
Order quantity = maximum level − current stock − quantity already on order
Subtract what is already on order. If an order is on its way, don't order again.
Worked example
Welding electrode E6013, 3.15 mm:
- Minimum level: 200 kg
- Maximum level: 600 kg
- Current stock: 180 kg
- Already on order: 0 kg
Stock is below the minimum, so order 600 − 180 − 0 = 420 kg. (Illustrative figures.)
How to set the maximum
A practical rule: maximum = minimum + the quantity you would normally order in one lot. For fast movers, keep the gap small and order more often. For slow movers with long lead times, a bigger gap is fine.
When min-max works well
- Spares, consumables and packing material with steady usage
- Items bought from several vendors with predictable delivery
It works less well for items used only for planned shutdowns, which should be bought against the plan.
Why maximums matter as much as minimums
Plants focus on avoiding shortages and forget the top end. Without a maximum, buyers overorder "to be safe", and money sits on the shelf as slow-moving or dead stock.
How IndustryPrime handles it
Min and max levels are set per item. IndustryPrime alerts you when stock falls below the minimum, suggests the order quantity and shows open indents and pending POs, so you don't order twice. Dead and slow-moving stock reports catch the items where maximums were set too high. See prevent stockouts.