The min-max inventory strategy is straightforward to implement, making it accessible to small businesses or those without complex inventory management systems. While inventory management software can smooth the process thanks to automation, the min-max system requires only simple calculations. Perishable goods like fresh produce and dairy often use min-max inventory management to maintain a consistent supply of products while minimizing waste.

MIN Function Example

This can lead to cost savings, improved delivery schedules, and increased overall efficiency in the supply chain. This leads to a reduction in the time and effort spent on manual inventory checks and order placements, allowing staff to focus on more strategic tasks that drive business growth. – This is the percentage of inventory that you what is the distinction between debtor and creditor want to keep on hand in order to avoid running out of stock. Enter an Exclamation mark between the sheet’s name and the range to refer to data or cells in other sheets. Meanwhile, the MAX function multiplies together the most significant value in a collection. The ROUND function in Excel provides a result rounded to a specified precision.

• To find the highest value (maximum number) in a set of values, use the MAX function.
• We will also walk you through our simple real-world examples to illustrate how it works.
• After the summer season, Sweet Delights Bakery noticed a surge in muffin sales, likely due to increased tourism.
• Now that you have your projected usage rate and desired level of customer service, you can plug it into the min/max inventory formula.
• It becomes much easier if the values are sorted, from smallest to largest, because then it is enough to just look at the first and last values to find the minimum and maximum values.

MAX IF Formula

The reorder point is the inventory level at which a business will place a new order to replenish the stock. Businesses usually set the reorder point at or just above the minimum inventory level to prevent stockouts and keep revenue flowing. However, if other statistical measures, such median and quartiles, are to be calculated at the same time it can sometimes be motivated to sort the list. This method tracks the current total stock level, which is typically the sum of the stock-on-hand plus the stock-on-order for every single SKU. The reorder quantity targets the Max value for the new total stock level, hence the reorder quantity is the difference between Max and Min (i.e. Max minus Min). The min/max method tracks the current stock level, or the amount on hand plus the amount on order for every item.

Method 5 – Display Min Max Inventory Calculation in Excel

This number will be different for every business, but is typically between 95-98%. For example, this formula (for Excel 365) finds the minimum quantity for the customer selected in cell C3, and the product name in cell B6. In Excel 2019, or Excel for Office 365, you can use the MINIFS and MAXIFS functions, shown below, to find a minimum value, or maximum value, based on one or more criteria. Calculate the values of the function at all these points and ends of the interval. The point at which the largest value is obtained is the global maximum and the lowest value is the global minimum. The Min/Max method was one of the earliest automated inventory replenishment methods to be used in enterprise software dedicated to inventory management.

How Do I Set Min/Max Levels Accurately for Optimized Stockroom Inventory?

By storing this data about item usage, in addition to the following important variables about your suppliers and your organization, the app can calculate optimal min/max levels for each item. Small businesses with simple operations may find min-max to be the best, most cost-efficient method to manage inventory and meet all the demand of their customer base. Businesses with more complex supply chains may prefer a more sophisticated inventory control method like economic order quantity (EOQ) or just in time (JIT). Min is the lowest quantity of product a business is willing to keep in stock before reordering.

Method 3 – Use the AVERAGE Function to Find Average Load Time of Inventory in Excel

The min/max inventory system primarily operates around the concept of setting a minimum and a maximum inventory level. Optimize reorder points (ROP) by accurately calculating your company’s demand during lead time and your supplier’s lead time (in days). If there’s a difference in lead times among various suppliers, create individual ROP calculations for each of those suppliers.

The primary benefit of this method is its extreme simplicity of implementation. That means, each time your inventory reaches 18, you’ll order 6 more. Min/Max is also ideal for distributors with a short supply chain that don’t have a lot of extra time for in-depth forecasting.

When your inventory reaches the minimum value, a trigger alerts you to reorder. Additionally, consider collecting data on supplier performance, such as lead times and order fill rates. This information will help you assess the reliability of your suppliers and factor it into your inventory calculations.

It ensures that you can meet unexpected customer demands and avoid stockouts. We hope this article has given you a better understanding of the min max inventory formula and how you can use it to effectively manage your inventory. TrackStock offers a min/max tuning slider for users who aren’t ready to immediately trust the automatically-calculated optimal min/max levels. TrackStock allows the user to reset all of the min/maxes from the Min/Max Tuning Dashboard rather than entering each one manually. By optimizing levels, users benefit from one-time inventory reduction savings as well as annual savings from inventory carrying costs.