How Do You Calculate Min Max Inventory?
To calculate minimum and maximum inventory levels, you need to consider factors such as lead times, demand variability, and safety stocks. Start by determining the average demand for a specific time period, as well as the lead time required to restock inventory. Next, calculate the safety stock needed to mitigate any unexpected demand or supply chain disruptions. Finally, use this information to calculate the minimum and maximum levels of inventory needed to ensure smooth operations while minimizing inventory holding costs.