Logistics
Case study 9.1
Randy Smith, Inventory Control Manager has to consider an ABC Inventory Control Policy.
The ABC classification system is to grouping items according to annual issue value, in an attempt to identify the small number of items that will account for most of the issue value and that are the most important ones to control for effective inventory management. The emphasis is on putting effort where it will have the most effect.
All the items of inventories are put in three categories, as below:
A Items: These Items are seen to be of high consumption volume. "A" items usually include 20% of all inventory items, and account for 80% of the dollar usage.
B Items: "B" items are those that are 30% of all inventory items, and account for 15% of the total dollar usage. These are important, but not critical.
C Items: "C" items account for 50% of all inventory items, but only 5% of the dollar usage.
In our case parts number 1236 and 1242 will be an item A. They are both very expensive parts with almost half a year worth of inventory. These two parts include 10% of all inventory items, and account for 35% of the dollar usage.
Item B will be parts 1238, 1239, 1243, 1247, 1248, 1250 and 1253. These parts include 35% of all inventory items, and account for 43% of the dollar usage. These parts are moderately expensive with a large inventory compared to usage.
Item C will be parts 1234, 1235, 1237, 1240, 1241, 1244 – 1246, 1249, 1251 and 1252. These parts include … % of all inventory items, and account for … % of the dollar usage. These parts are very inexpensive, yet the inventory is very small. Some of these parts produced in-house and some of them have a long lead time.
With ABC classifications the inventory manager will be able to assign priorities for inventory control. Main focus has to be kept on A and B items, with preferably low safety stock level. I think that the C class items can be maintained with looser control and with high safety stock level. The
Randy Smith, Inventory Control Manager has to consider an ABC Inventory Control Policy.
The ABC classification system is to grouping items according to annual issue value, in an attempt to identify the small number of items that will account for most of the issue value and that are the most important ones to control for effective inventory management. The emphasis is on putting effort where it will have the most effect.
All the items of inventories are put in three categories, as below:
A Items: These Items are seen to be of high consumption volume. "A" items usually include 20% of all inventory items, and account for 80% of the dollar usage.
B Items: "B" items are those that are 30% of all inventory items, and account for 15% of the total dollar usage. These are important, but not critical.
C Items: "C" items account for 50% of all inventory items, but only 5% of the dollar usage.
In our case parts number 1236 and 1242 will be an item A. They are both very expensive parts with almost half a year worth of inventory. These two parts include 10% of all inventory items, and account for 35% of the dollar usage.
Item B will be parts 1238, 1239, 1243, 1247, 1248, 1250 and 1253. These parts include 35% of all inventory items, and account for 43% of the dollar usage. These parts are moderately expensive with a large inventory compared to usage.
Item C will be parts 1234, 1235, 1237, 1240, 1241, 1244 – 1246, 1249, 1251 and 1252. These parts include … % of all inventory items, and account for … % of the dollar usage. These parts are very inexpensive, yet the inventory is very small. Some of these parts produced in-house and some of them have a long lead time.
With ABC classifications the inventory manager will be able to assign priorities for inventory control. Main focus has to be kept on A and B items, with preferably low safety stock level. I think that the C class items can be maintained with looser control and with high safety stock level. The