Minimum and maximum, or “min-max,” is the most popular inventory stocking strategy. It’s simple: you choose the maximum quantity on-hand of a stock item and its reorder point (the minimum), and when the quantity on-hand falls below the reorder point, you order enough to bring the stock level up to the maximum.
Here’s an example. Say a company uses 4 hard drives a day, and it takes 7-10 days to get the hard drives from the vendor. They would probably set the minimum (the reorder point) at 40 hard drives, the longest delivery time you could have. In fact, the company might want to keep 3 days’ worth of hard drives in stock in case delivery takes longer than 10 days, so your reorder point would be 52. And, say the company has enough space for 40 cases of 24; their maximum would be 960. Now, say the company drops to two cases of 24 on-hand, or 48. They would order 38 cases (912 hard drives), which would bring them up to the maximum. Got it?
I was a software trainer for two companies for about 20 years, specializing in inventory systems. I bet you never would have guessed.
One day, I came home after a day spent going over problems like this one, and found Mary sitting there with two kittens. “What should we name them?” she asked. Guess what the first words were out of my mouth? Here’s a picture of the little darlings; they’re about ten years old now and much bigger than this. Mary wanted you to know that Minnie is bigger than Max…
from The Sound of One Hand Typing