Min/Max Stock Policies

A min/max policy sets two lines for each item: a minimum (the floor you should not drop below) and a maximum (the ceiling you should not exceed). Stock should live between them.

It matters because two simple numbers replace constant judgement calls — the minimum guards against stockouts, the maximum guards against overstock, and anyone can manage stock by keeping it between the lines.

For a SKU you might set min 50 and max 200. Below 50 you risk running out before restock; above 200 you are freezing cash in excess. The band from 50 to 200 is your healthy zone, and the policy makes "are we okay on this item?" a glance, not a calculation.

When stock hits the minimum, a min/max policy reorders enough to bring you back up to the maximum. The order quantity is the maximum minus what is on hand, less anything already on order — otherwise two buyers a day apart would both order the same gap.

Top-up ordering matters because it removes guesswork from order size — you do not pick a number, the gap to the ceiling decides it. In AWRA this is the Reorder screen under purchasing: choose a warehouse in Stock in and every item at or below that warehouse’s minimum is listed with a suggested quantity that fills it to the warehouse’s maximum. A counted item is rounded up to a whole unit; an item stocked in kilograms or litres is suggested to three decimals. Every row can be changed before the purchase orders are created.

With max 200, on-hand at the min of 50 and nothing on order, the suggestion is 200 − 50 = 150 units. If on-hand had drifted to 30 with 40 already on an open order, it would be 200 − 30 − 40 = 130. A warehouse with a minimum but no maximum is filled using the item’s reorder quantity on top of what it holds, or else to twice its minimum — so set the maximum if you want the ceiling to be yours.

Set the minimum from demand during lead time plus a safety buffer (so you do not run out while waiting), and the maximum from how much you can sell before stock ages plus storage limits. The two are derived, not guessed.

Setting them well matters because a min set too low stocks you out and one set too high wastes the buffer; a max set too high freezes cash and one too low triggers constant tiny orders.

If a SKU sells 10/day with a 5-day lead time, demand-in-lead-time is 50, so a min around 60–70 (with buffer) is sensible. A max of 200 gives about 3 weeks of cover. To set it in AWRA, open Inventory, Items, the item, then its Stock tab: the Min / max per warehouse table lists each warehouse with its on-hand, a Minimum, a Maximum and a status (at or below minimum, within levels, above maximum). Type the levels for each branch and save — editing needs the edit items permission. Leave a row blank and that warehouse uses the item’s nightly-calculated reorder point instead. A measured item takes levels to three decimals; a counted one, whole numbers.

Min/max levels are not permanent. As demand rises or falls, or lead times change, the levels need adjusting so the band still matches reality and orders stay right-sized.

Tuning matters because stale levels quietly misbehave — a min left too low after demand grows causes repeated stockouts, and a max left too high after demand falls keeps refilling to a ceiling you no longer need.

If a SKU’s demand doubles from 10 to 20/day but the min stays 60, you now stock out mid-cycle; raising min toward 120 and max toward 350 restores the buffer. A quarterly review of fast-moving SKUs against recent sales keeps the bands honest instead of letting last year’s numbers run this year’s orders.