Min-Max planning theory

Inventory planning

Inventory planning is the most important area for the manufacturing companies because till date the biggest challenge of the supply chain is to match the demand and supply. There can be 2 scenarios as discussed:

Carrying excess inventory	Carrying less inventory
In this case, one can face the high costs due to obsolescence, storage space, theft. Also, the money which is invested in inventory can be invested somewhere else to earn attractive returns.	In this case, there is always a risk of losing customers.

  

As a result, companies always have to tradeoff between these scenarios. There are various techniques that strike to balance between both the cases.

Let us discuss this techniques to control the inventory.  

Min Max Planning Technique

• It is replenishment technique. In this technique, we defined the maximum and minimum level of stock and when the item falls below the minimum level, we ordered the quantity which is difference between available and maximum level for the stock
• When Available quantity <= Minimum order, place order (Maximum - available) quantity. Also, the order can be further modified depending upon the lot multiplier. We can order item only in multiples of lot multipliers
• Min Max planning can be done for buy items as well as make items. For buy items, it creates the internal requisition while for make items, it can create jobs
• It does not consider lead time as well as not based upon demand projections