Min/max order method

The min/max [minimum or maximum] order method is also known as the order-up-to method. This method can be used when a branch orders only one product at a time, or if a product has a short, consistent lead time, usually less than a week. This method is most often used when products in a branch are supplied from a central warehouse.

The order quantity is the difference between the maximum and minimum quantity. The line point is used as the maximum and the order point is used as the minimum.

Product Administration Month End Processing Report calculates the maximum quantities based on 12 turns per year. The calculation uses the results from Product Administration Inventory Classification and Rank Report. For a Class 1 item, the difference between the minimum and the maximum is 1/20th of a year’s supply. For example, if a Class 1 product’s monthly usage is 100, the annual usage is 1200. Dividing the annual usage by 20 gives you the replenishment quantity of 60. If you select not to calculate the order quantity based on 12 turns, then Product Administration Month End Processing Report calculates the minimum, and resets the maximum so that the same gap exists as did before.