What it means
A storeroom may assign each item two levels: the minimum triggers a replenishment review, and the maximum guides the quantity. The levels are planning choices, not physical limits that stock can never cross.
Oracle's min-max planning compares total available quantity with the minimum, suggests an order when availability is below it, then targets the maximum after accounting for order constraints, although the exact trigger can differ by system. Available quantity is not always the same as stock on a shelf, because open orders and committed demand may be included, so document which receipts and reservations the calculation counts.
A fictional cafe has nine kilograms of beans physically available, no incoming orders, a minimum of ten and a maximum of 30, so a simple policy suggests ordering 21 kilograms, although supplier pack sizes could change the actual order. Negative available quantity may occur when committed demand exceeds usable stock and due supply, so investigate missing receipts or inaccurate reservations as well.
An order placed does not instantly restore physical stock, so the minimum should reflect demand and uncertainty over the replenishment period. If delivery takes five days, current stock must cover sales during that lead time.
IBM describes safety stock as extra inventory against demand and supply variation; it can be part of choosing the minimum, but no fixed safety amount works for every item, and too much buffer ties up cash. The maximum limits how much stock is held after an order, so consider storage space, shelf life, order costs and expected demand, because a high maximum for a perishable item may create waste.
Supplier minimum orders or case packs may push the actual quantity above the nominal maximum, so show both the suggested and final order quantity. A fictional clinic assigns a higher buffer to critical items with uncertain delivery and a smaller range to stable, low-risk products, since the same pair of numbers for everything would be weak planning.
Review demand changes and stock accuracy regularly, because a busy season can cause repeated stockouts at an old minimum, as when a fictional repair workshop with screws set at 200 to 600 boxes runs out repeatedly after a supplier lengthens lead time, and an inventory record showing 20 units when only five are usable delays a reorder. The method does not forecast every demand shift by itself, so a planned promotion, project or closure may require a one-off adjustment, as when a fictional bakery temporarily increases ingredients for a festival sale and restores normal levels afterwards.
Not every product merits min-max control, since expensive custom items may be ordered for specific jobs while common consumables suit simple replenishment. Useful measures include stockouts, inventory age, service level and carrying cost, and a lower stock value is not progress if customers cannot be served.
Name who may change levels, why and when to review them, because without an owner a simple policy becomes a set of stale numbers. Min-max inventory makes routine buying easier when availability, lead time and limits are maintained, but it is a control rule, not a guarantee that stock always stays between two numbers.
In practice
Real-world examples.
Example
Nine kilograms of coffee beans on hand with a minimum of ten and a maximum of 30 suggests ordering 21 kilograms before order modifiers. The cafe manager rounds up to the supplier's five-kilogram bags and orders 25.
Example
A supplier case pack increases the final order above a simple target. The buyer records both the suggested quantity and the final quantity so that the extra stock is visible when the next review comes.
Example
A clinic sets different levels for critical and routine supplies. Sterile dressings carry a high minimum because delivery is uncertain, while paper towels carry a low one because a stockout is a minor inconvenience.
Formula
Calculation
Under one simple policy, order when available quantity < minimum; suggested quantity = maximum - available quantity. Define available quantity and apply pack, minimum-order and maximum-order rules.
Worked example. A workshop stocks a $4 box of screws with a minimum of 200 and a maximum of 600. Available quantity is on-hand 150 + on order 0 - reserved 20 = 130 boxes, which is below 200, so it orders 600 - 130 = 470 boxes. If the supplier sells only in cartons of 100, the final order rounds up to 500 boxes, or 500 x $4 = $2,000, bringing the position to 630 boxes, just above the nominal maximum.Case study
Seen in the real world.
In this fictional example, Willow Dental Lab repeatedly runs short of a common material. It finds that the supplier's lead time increased while its minimum stayed fixed. The lab revises the level, checks actual receipts and reviews stockouts monthly. It avoids simply raising every item's maximum.
The lab's manager also splits items into three groups. Critical materials, such as the resin used in most jobs, get a higher minimum and weekly review, while slow-moving items are ordered only against a confirmed job. After a quarter, stockouts on the critical group fall, and the value of stock on the shelf is lower than before because the lab stopped over-ordering rarely used items. The names and figures are invented.
Watch out
Common mistakes.
- Using on-hand stock without checking open supply and committed demand.
- Ignoring supplier lead times and pack sizes.
- Leaving levels unchanged after demand shifts.
Questions
People also ask.
Does stock always remain between min and max?
No. Demand, delivery delays and order constraints can move physical stock outside them.
Is the minimum just safety stock?
No. It normally needs to account for expected demand before replenishment plus uncertainty.
How often should levels change?
Review them when demand, lead times, costs or service needs change.
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