Microsoft Excel is one of the most beneficial programs you can use. Using Excel‘s features and tools, you can do an almost infinite number of things with a dataset. This article will discuss the steps necessary to calculate the minimum and maximum inventory levels. The fundamental goal of inventory control is to guarantee that sufficient items or resources are available to fulfil demand without generating surplus inventory. In light of this, the subsequent lesson will focus on the step-by-step process of establishing the Min Max Inventory Calculation in Excel.
Download Practice Workbook
If you want a free copy of the sample workbook covered during the presentation, kindly click the link below this paragraph.
What Is an Inventory System?
We can monitor the sales, stocks, and supplies with the help of an inventory system. A company’s inventory consists of everything it has and plans to sell to generate revenue. If you’re looking for an easy-to-use inventory system, go no further than the Min-Max method. A lot of businesses these days use automation. It would help to keep your materials supply at the minimum level, often known as the safety stock level. A company’s maximum inventory level is the most it can keep on hand to meet customer demand at the lowest possible cost. Using the inventory tracking database to set minimum and maximum stock levels helps us avoid the risks of overstocking and wasteful expenditure while guaranteeing ready access to materials or items with extended lead times.
- Safety Stock
Safety Stock = [Maximum Consumption * Maximum Delivery Time] – [Average Consumption * Average Delivery Time]
- Order Quantity
Order Quantity = Damages + Safety Stock
- Min Inventory Level
Minimum Inventory level = Order Quantity – [Average Consumption × Average Delivery Time]
- Max Inventory Level
Maximum Inventory Level = Safety Stock + Order Quantity – [Minimum Consumption * Minimum Delivery Time]
Step-by-Step Procedures to Calculate Min Max Inventory in Excel
Establishing the Min Max Inventory Calculation in Excel might be challenging if the correct procedures are not followed. This post will lead you through the five steps required to calculate the minimum and maximum inventory levels to guarantee the availability of sufficient resources. We will begin by constructing a data model for this experiment, and we will eventually determine the monthly consumption. To illustrate this point, let’s examine a representative dataset. The below dataset has a column titled Product Name that contains some computer accessories, and other columns keep information about their monthly sales from January to December. We will determine the necessary Order Quantity and Safety Stock throughout the following steps. Lastly, with the help of two typical formulas, we will establish the Min Max Inventory Calculation. Follow these instructions attentively to understand the technique quickly.
Step 1: Implement a Date Model to Calculate Min Max Inventory in Excel
The first and foremost step is to create a data model for illustration purposes. This article will consider the practice workbook containing four sheets: Dataset, DemandSupply, SafetyStock, and Min-Max Inventory. The Dataset sheet holds information about the monthly sales of computer accessories. The sheet named DemandSupply has two tables for product consumption or demand and delivery time. The SafetyStock sheet contains information about damages and calculates the Safety Stock. The last sheet, titled Max Min Inventory, keep tabs on the minimum and maximum itemization.
- First, select the DemandSupply sheet.
- Second, choose four columns titled Product Name, Min Consumption, Max Consumption, and Average Consumption.
- Likewise, make another table for the Delivery Time in the B12:E18 range.
- Later, open the SafetyStock sheet.
- Next, select three columns: Product Name, Damages, and Safety Stock.
- Lastly, to display the Min Max Inventory Level, choose the B4:F10 range.
Step 2: Apply MIN, MAX, ROUND and AVERAGE Functions to Get Consumptions of Inventory
The MIN function finds the lowest digit in a list. Meanwhile, the MAX function multiplies together the most significant value in a collection. The ROUND function in Excel provides a result rounded to a specified precision. The AVERAGE function finds the average of the numbers you provide it. The Consumption data will be determined using these procedures.
- First, open the DemandSupply sheet and select the C5 cell.
- Second, input the following equation in the Formula bar.
- After that, press the Enter or Tab key to see the result.
- Later, utilize the AutoFill Handle icon and drag it to cell C10 to apply the same formula to other cells in the Min Consumption column.
- Now, choose cell D5.
- At this point, in the Formula bar, type the following formula.
- After that, you can see the result by pressing the Enter or Tab key.
- Later, use the AutoFill Handle icon and drag it to cell D10 to apply the same equation to other cells in the Max Consumption section.
- Choose cell E5 cell.
- At this moment, type the following equation into the Formula bar.
- Afterwards, you can press the Enter or Tab key to see the result.
- Eventually, you can use the AutoFill Handle icon to apply the same formula to other cells in the Average Consumption portion.
To understand this formula, you must be familiar with the following Excel function:
The MIN function finds the least significant digit in a list. We must put an Exclamation mark between the sheet’s name and the range to refer to data or cells in other sheets. In this example, by involving the MIN function, we find 2.
For this formula to make sense, you need to know how to use the following Excel function:
When called, the MAX function always returns the highest number in the given range. In this example, by using the MAX function, we get 26.
To understand this formula, you must be familiar with the following Excel function:
ROUND and AVERAGE Functions
In Excel, you can get the mean of a set of integers using the AVERAGE function. To refer a data or cells in other sheets, we must use an Exclamation sign between the sheet name and range. In this demonstration, by involving the AVERAGE function, we find 12.8333333333333.
The ROUND function is what we need to round off a value to a certain precision. In this context, by utilizing the Round function, we find 13.
Step 3: Use AVERAGE Function to Find Average Load Time of Inventory in Excel
This section will find the Average Delivery Time or supply time from the Min and Max Delivery Time. To accomplish the work, please follow the instructions below.
- First, input the Min and Max Delivery Time throughout C and D columns.
- Pick cell E13 right now.
- Type the following equation into the Formula bar right now.
- Then, you can see the result by pressing the Enter or Tab key.
- In the end, you can use the AutoFill Handle icon to apply the same formula to other cells in the Average Delivery Time column.
Step 4: Determine Safety Stock for Min Max Inventory Calculation
Safety Stock is a backup product supply in case of an unexpected demand spike or shortage. Having a safety stock on hand reduces the consequences of supply chain disruptions, including supplier outages and lead time unpredictability. In this context, we will input the Damages in the data model and determine the Safety Stock using a typical formula.
- Firstly, open the SafetyStock sheet.
- Second, input the intended values in the Damages column.
- Third, go to cell D5.
- Now, type this equation into the Formula bar.
- Then, you can see the result by pressing Enter or Tab.
- Lastly, the AutoFill Handle icon can apply the same formula to other cells in the Safety Stock column.
Step 5: Display Min Max Inventory Calculation in Excel
Lastly, we will calculate the Order Quantity or Re-order level from the Damage Quantity and establish the Min Max Inventory Calculation in Excel utilizing the abovementioned formula. Please follow these directions to the letter to complete the assignment.
- First, choose the C5 cell in the Min Max Inventory sheet.
- Second, type the following equation into the Formula bar.
- Later, we can see the result using the Enter or Tab key.
- Afterwards, use the AutoFill Handle icon and drag it to C10 to apply the same formula to more cells in the Order Quantity section.
- Now, pick cell D5.
- Input the following procedure at this place in the Formula bar.
- The result is then accessible through the Enter or Tab key.
- Use the AutoFill Handle icon to apply the same formula to other cells in the Safety Stock section.
- Select now cell E5.
- Enter the following formula here in the Formula bar.
- We can use the Enter or Tab key to retrieve the result.
- Use the AutoFill Handle icon to apply the same procedure to other cells within the Minimum Inventory Level.
- The next step is to go to cell F5.
- Copy and paste this formula into the Formula bar.
- Then, hit Enter or Tab to see the output.
- When finished, click the AutoFill Handle symbol and drag it to cell F10.
- As a result, the desired outcome will display like the below one.
You can execute the Min Max Inventory Calculation in Excel by following the steps below. The ExcelDemy website provides further articles with the comparable subject matter. Please provide any additional recommendations or enhanced techniques as you continue to use them. Remember to put your thoughts, questions, and instructions in the space provided.