Inventory management to reduce your inventory: Minimum and maximum stock

Goal: Reduce the value of your inventory and only keep in stock what turns over 3-7 times a year.  Remember, every piece you put into inventory is not in your bank account. If you keep $10,000 worth of inventory, that's the same amount that is not available in your coffers.

How to decide on your minimum?

 Daily consumption:

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

 

Resupplying time:

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

 

Minimum stock = Daily consumption * Resupplying time

          (round up to the nearest whole number)


Example 1:

 

300 filters per year of a rotating model / 220

 

Daily consumption = 1.36

 

The minimum order list is issued on Monday, so 5 working days + 1 day of delivery time

 

Minimum = 6*1.36 = 8.18 = 9 units

Example 2:

 

100 filters per year of a rotating model /220

 

Daily consumption = 0.45

 

The minimum order list is issued on Monday, so 5 working days + 1 day of delivery time

 

Minimum = 6*0.45 = 2.72 = 3 units

 



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