Min-Max Policy Implementation for Inventory Management in Steel Supply Sector

This study explores the application of the Min-Max inventory management policy to improve stock control efficiency at a steel supply company in Chiang Mai Province, Thailand. The company operates two branches: a central warehouse and a retail store located 40 km apart. Due to the absence of a formal inventory management policy, the retail branch frequently experiences stock shortages, leading to daily replenishment trips from the main warehouse, causing operational inefficiencies and excessive transportation costs. The research focuses on four top-selling products from the company’s highest sales-value category. A Min-Max policy was proposed where the minimum stock level was set based on the average daily demand multiplied by the minimum lead time, and the maximum level based on average demand multiplied by the most likely lead time. Historical demand data from May 2022 to May 2023 were analyzed to determine appropriate Min-Max thresholds. Demand analysis revealed low average daily sales coupled with high variability, indicating the need for a structured inventory approach. Trace-driven simulations were conducted using historical demand data to assess the impact of the Min-Max policy. The simulation results showed a significant reduction in the number of transportation trips and cost compared to the company’s current practice of daily restocking. The study concludes that implementing the Min-Max policy can reduce operational inefficiencies and transportation costs for the company. However, the results are limited to the selected products and may not reflect the entire inventory's performance. The simplicity of the Min-Max policy makes it practical for SMEs, though further refinements such as demand forecasting techniques could optimize its performance in environments with high demand variability.