Manage Minimum and Maximum Stock Levels to Reduce Your Inventory

Objective: reduce the value of your inventory and keep in stock only what turns over 3-7 times a year.

Remember, every item you keep in inventory is not in your bank account.

If you keep $10,000 in inventory, that's the same amount that's not available in your coffers.

How do you decide on your minimum?

Daily consumption:

• Annual quantity consumed divided by the number of working days 220 days

Replenishment lead times :

• How often you will send your orders to your supplier considering 1 day for delivery.

Minimum stock = Daily consumption * Replenishment lead time

(round up to the nearest whole number)

Example 1:

• 300 filters per year of a rotating model
• Daily consumption = 1.36
• The minimum order list is issued on Monday, i.e. 5 working days + 1 day for delivery.

Minimum = 6*1.36 = 8.18 = 9 units

Example 2:

• 100 filters per year of a rotating model
• Daily consumption = 0.45
• The minimum order list is issued on Monday, so 5 working days + 1 day delivery time

Minimum = 6*0.45 = 2.72 = 3 units