In a nutshell: The minimum stock

The minimum stock level is a value that can be stored on an item-specific basis in most ERP systems.

The minimum stock level is therefore a control variable in materials management and describes the minimum stock level of an item that should never be exceeded. It is often confused with the safety stock because this also represents a lower limit for the stock. However, while the safety stock should be determined statistically and is typically aimed at buffering fluctuations in demand, the minimum stock corresponds to a lower limit usually set by the user. Reasons for setting a minimum stock level, in addition to the safety stock, may be technical or contractual criteria with customers or suppliers.

A differentiated and properly configured ERP system will try not to attack the minimum distance in terms of planning. If the safety stock determined by the system is greater than the minimum stock level, an attempt is made not to fall below this level. If the safety stock is lower than the minimum stock, the minimum stock is still hedged. The minimum stock therefore acts as a minimum safety stock, which should not be undercut regardless of the calculated safety stock value.

Our tip: In practice, the terms “safety stock”, “minimum stock” and “iron stock” are used interchangeably and are sometimes understood as synonyms. In meetings, always make sure that you are talking about the same control variable and make sure you know exactly how the three inventory control parameters work in your ERP system.

Prof. Dr. Andreas Kemmner

Prof. Dr. Andreas Kemmner

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