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  • Min Max Size Calculation
  • 2014-10-29 07:18:26

Traditionally Min-Max is used with two different values of min and max but that method is not optimized for inventory onhand and results in lower inventory turn. 


In traditional Max-Min, you always bring Max-Min quantities and the avg onhand inventory would be around 0.8 to 1.2 times of min value.


You can do the same with inoERP i.e Using the Min Max planning method for the item and system ‘ll automatically calculate the min max sizes for you but multi bin min max optimizes the inventory on hand quantities .


Let me explain with an example.


Min = 50, Max = 100 and Lead time = 30 days and average daily usage = 1


In this case whenever the on hand goes below 50, system ‘ll trigger you to buy 100 – X quantities. 


So, when onhand ‘ll 49 system ‘ll trigger to buy another 51…You ‘ll receive the 51 quantity after 30 days i.e when the onhand is 21 (safety stock)…


Onhand after receiving new lot = 21 + 51 = 72….


After another 23 days, system ‘ll again generate a new requisition/PO for 51 quantity.


So the avg. onhand inventory would be approx..  (21 + 72 ) / 2  = 46.5


This model can be further improved by reducing the max size…


What Multi-Bin Min Max does is that it makes Min = Max


Now, system calculates the number of bins / size depending on the fixed days supplies that business wants to carry


Suppose business decides to replenish the item in every 10 days.


Then number of bins = Lead Time/ Fixed Days’ Supply +  1 = 30/10 + 1 = 4


And the card size would be = 10 (FDS) *  1(Avg daily usage) = 10


So the min = max  = 10*4 + 1 = 41….and 41+21 = 63 , if safety stock is considered.


Now , in this scenario the on hand inventory would be between 9 to 19 (avg 24) and rest of the units ‘ll remain in supply chain as purchase orders.


Can this achieved with diff min max size ?


Yes, you have to setup the max = min + demand during replenishment lead-time.


The concept of multi bin min max (or automated kanban ) is not different. It’s the same concept of kanban (bin size) and min max(auto triggering supplies) combined together for better inventory turn and system control.

Reply
  • Anonymous
  • 2014-11-05 10:30:30

Sounds interesting concept…btw how the average daily usage is calculated by system or is it manually calculated and entered into the system

Reply
  • Alok
  • 2015-01-02 14:05:43

Thanks for the explanation. I was trying in the demo site. I didnt see any changes to teh min max value of my item after running the program.


The item number was TEST1919. Can you check

Reply
  • Sdirky
  • 2015-05-14 04:34:00

I have been in supply chain for 2 decades and have used many different methods but never heard/thought about this idea.Looks quite impressive; I might give it a try and do some excel simulation for our current inventory process.Reply
Read the documentation @
http://inoideas.org/content.php?content_type=documentation&category_id=30

Easy to understand both the conceptReply
  • Anonymous
  • 2015-07-14 07:48:51
Can I use this Min Max for planning purpose with our existing ERP system.

Is it possible to integrate this product with out using all the features. I am really impressed with this idea of inventory management and want to try it. But I can't ask my organization to use a new ERP for this purpose. So, I would like to try it first.
Reply
  • Anonymous
  • 2016-03-16 05:42:16
does this new method of min/max help service parts/spare parts planning in service organization?
many parts experience intermittent, sporadic, erratic usage.
http://www.winashare.comReply
  • Anonymous
  • 2016-03-17 05:28:43
For spare parts industry, the average daily usage is very low for majority of parts. Average daily usage almost zero.
In this way, does your Multi-bin concept still apply?
2) if the lead time is 2 days, the FDS is 5 days, then Then number of bins = Lead Time/ Fixed Days’ Supply + 1 = 1.4.
Do you round it up to 2 bins or 1 bin?
look forward to your reply.
http://www.winashare.comReply
  • tonny
  • 2016-03-17 05:32:02
How did you work it out the equation - Then number of bins = Lead Time/ Fixed Days’ Supply + 1?
Fixed Days' Supply I think is the order cycle in days. As in the periodic review system, it has order cycle and lead time.
in your example, "business decides to replenish the item in every 10 days". The order cycle is 10 days. The fixed days are 10 days as well. Is it correct?
Please advise
http://www.winashare.comReply
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