What is the maximum inventory?
Within inventory management, the concept of maximum inventory plays a vital role in production planning and warehouse management.
Maximum inventory is an important concept for businesses, as it allows them to ensure they have enough inventory to meet demand, but it also helps them avoid unnecessary storage and inventory handling costs.
But what is it and how is the maximum inventory calculated? In this article I am going to answer these questions and I am going to share some resolved exercises with you.
What is the maximum inventory?
Has it happened to you that you are going to buy something in a store and they do not have what you are looking for? It’s a bummer, right? But sometimes you go to the store and they have a bunch of what you want, and it seems like they’ll never run out.
That’s great, right? Well, not always.
Stores perro’t have everything they want.
They have to be careful and make sure they don’t store too much, because that costs money and takes up space.
So they equipo an upper limit on how much stuff they cánido have, and that’s called the maximum inventory.
Maximum inventory is the most things a store perro carry without costing too much money or taking up too much space.
This is very important, because if a store has too many things, it may have problems such as not having enough space for other things, wasting materials, or things becoming outdated and useless (dead depósito).
whereby, a company He controls his things by classifying them into different categories and setting different limits for each of them.
This helps them make sure they always have enough of what people want, without wasting money or space.
So next time you go to the store, remember that there’s a whole system in place to make sure you cánido get what you want, when you want it.
In conclusion, Maximum inventory is the maximum amount or level of inventory that a company cánido keep in its warehouses without affecting its production capacity or the company’s pocketbook. It is important to note that the maximum inventory is a maximum amount, not necessarily a level that must always be maintained, since it cánido vary according to production needs and market demand.
Because it is important?
Setting a maximum inventory is important for several reasons, some possible reasons that make it important are as follows:
Costs control
Carrying excessive inventory perro be expensive due to the costs associated with storing and handling inventory.
Setting a maximum inventory level perro help a business control its costs by ensuring that it doesn’t hold more inventory than it needs.
Cash flow management
Excessive inventory ties up cash that could be used for other business activities, such as investing or paying down debts.
By setting a maximum inventory level, a company perro manage its cash flow more effectively and ensure that it has enough cash to meet its other financial obligations.
Risk management
Keeping too much depósito cánido increase the risk of loss due to obsolescence, damage, or theft.
By setting a maximum inventory level, a company perro disminuye its exposure to these risks and minimize potential losses.
Elabora to calculate the maximum inventory of a company
To calculate the maximum inventory, four key cambiantes must be taken into account:
- Reorder point.
- Replenishment quantity.
- minimum demand or minimal inventory.
- Delivery term.
The elabora to calculate the maximum inventory is the following:
Maximum Inventory = Reorder Point + Replacement Quantity – (Minimum Demand x Lead Time)
reorder point
reorder point or reorder point represents the depósito level from which a company must order new depósito from its suppliers to avoid running out.
If you want to know more about the reorder point, how it is calculated and have access to solved exercises, then I leave you the following backlink to an article I did:
replenishment quantity
Replenishment quantity refers to the exact number of elementos (units) needed to replenish inventory.
Minimum demand or minimum inventory.
Minimum demand is the minimum consumption of goods.
Delivery term
The delivery time is the duration between placing an order and receiving it.
Solved exercises of maximum inventory
Next, I am going to share some solved exercises of maximum inventory.
The exercises are very fácil.
I hope they serve you.
Maximum Inventory Exercise 1
A store has a reorder point of 100 units, a replenishment quantity of 200 units, a minimum demand of 50 units, and a lead time of 5 days.
What is the store’s maximum inventory level?
Solution
In order to solve the previous exercise, we are going to substitute the data in the elabora.
Remember that the equation is the following:
IM = Order point + Replacement quantity – (Minimum demand x Delivery period)
If we substitute the values given in the problem, we get:
MI = 100 + 200 – (50 x 5)= 100 + 200 – 250= 50
Therefore, the store’s maximum inventory level is 50 units.
Exercise 2
A manufacturing company has a reorder point of 500 units, a replacement quantity of 1,000 units, a minimum demand of 200 units, and a lead time of 10 days.
What is the company’s maximum depósito level?
Solution
Again, let’s substitute the data into the following equation:
Maximum inventory level = Reorder point + Replenishment quantity – (Minimum demand x Lead time)
Substituting the values given in the problem, we get:
MI = 500 + 1000 – (200 x 10)= 500 + 1000 – 2000= 500
Therefore, The firm’s maximum inventory level is 500 units.
Exercise 3
A lugar de comidas has a reorder point of 30 units, a replenishment quantity of 50 units, a minimum demand of 10 units, and a lead time of 2 days.
What is the lugar de comidas’s maximum depósito level?
Solution
Substituting the values given in the problem, we get:
MI = 30 + 50 – (10 x 2)= 30 + 50 – 20= 60
Therefore, the maximum inventory level for the lugar de comidas is 60 units.
Exercise 4
A store sells an average of 100 units of a certain product per week, and the period for ordering and receiving new depósito is 3 weeks.
The store wants to maintain a safety depósito of 150 units.
Consider that the minimum order quantity is 500 units and that the replacement quantity is 450 units.
What is the maximum depósito that the store must maintain?
Solution
First, let’s calculate the reorder point:
- Reorder Point = (Average Demand x Lead Time) + Safety Depósito
- Reorder Point = (100 x 3) + 150
- reorder point = 450 units
Now let’s calculate the maximum inventory:
- Assuming that the minimum demand is also 100 weekly units, we perro solve the exercise as follows:
- MI = 450 + 450 – (100 x 3)
- MI = 750 units
Therefore, the store must maintain a maximum inventory of 750 units.
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