Min-max
Definition: What is Min-max
Min-Max is a way of organizing inventory replenishment using the following simple calculation: Min value is the order point (we are running out of the goods), while Max is the quantity of the goods we need. Subtracting Min from Max we get the reorder quantity.
Using this calculation is the simplest way to prevent stock-out. It gives us the data needed to file an order with a supplier or a manufacturer in a timely manner.
Min-Max provides us with a relatively precise reorder point (a.k.a. reorder trigger level). Once our operation hits this point, as calculated using Min-Max, we revert to using the so-called economic order quantity (EOQ).
In warehouses, replenishments from producers are typically larger and of longer order cycle than in other forms of operation that reorder any kind of goods or materials. In material handling, we calculate such reorders in weeks rather than days. Lead times can vary (from next-day delivery for local producers to several months for overseas manufacturers). Besides, other factors such as volume discounts or seasonal changes, etc., can influence the economic order quantity.
In general economic theory, min-max relates to the strategy in game theory that minimizes the maximum risk for a player. It is also described as the selection of a strategy that benefits the most advantaged member of a group the least.