What the min/max method is
Min/max inventory management sets two numbers for each product: the minimum quantity that triggers a reorder, and the maximum quantity you order back up to when that happens. When stock hits the minimum, you place an order sized to bring the quantity to the maximum—no calculation required at order time, since both numbers are decided in advance.
It is popular with smaller catalogs and simpler operations because the two thresholds can be set from experience and gut-check ("we never want fewer than 20, and 100 is a comfortable stock-up") rather than requiring a demand-forecasting formula.
How to set min and max thresholds
The minimum should cover expected usage during your supplier lead time, plus a buffer for demand variability—conceptually the same as a reorder point, just set by judgment rather than a formula. The maximum is usually driven by storage space, cash tied up in inventory, and how much of a bulk-order discount is worth capturing without overstocking.
Review both numbers periodically. A minimum set too low causes stockouts when lead times slip; a maximum set too high ties up cash and shelf space in slow-moving stock. Products with seasonal or promotional demand spikes need their min/max revisited before the spike, not after a stockout during it.
- Minimum ≈ expected usage during lead time + a demand-variability buffer
- Maximum is bounded by storage space, cash tied up, and bulk-order economics
- Revisit both when demand patterns, lead times, or storage capacity change
Min/max vs. reorder point and EOQ
Min/max and a calculated reorder point solve the same problem—when to reorder—but min/max is the simpler, less formula-driven version. A reorder point is typically calculated as (average daily usage × lead time) + safety stock, and is often paired with an economic order quantity (EOQ) that mathematically minimizes ordering and carrying costs. Min/max skips the formula and uses two round numbers instead.
For a small catalog with stable demand, min/max is often good enough and much faster to set up. For high-value items, volatile demand, or long and variable supplier lead times, a calculated reorder point with a proper safety-stock buffer is worth the extra setup effort—the cost of getting it wrong (a stockout or a pile of excess stock) is higher.