1. ABC Analysis: Effective Inventory Management
Improving Control, Reducing Costs, and Enhancing Service
2. What is Inventory?
Systematic control and regulation of materials
• Maintains an even flow of production
• Avoids excessive investment in inventories
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3. What is ABC Analysis?
Categorizing inventory items based on importance
• Enables selective control
• Rationalizes number of orders and items
• Reduces inventory levels
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4. Categories 'A', 'B' & 'C'
Classification based on importance
• 'A' items: High value, tight control
• 'B' items: Intermediate value, intermediate control
• 'C' items: Low value, low control
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5. Philosophy Behind ABC Analysis
Selective control for better management
• Identifying the vital few from the trivial many
• Different decisions based on results
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6. When & Why to Use ABC Analysis
Benefits and applications
• Demand identification and leveraging opportunities
• Focuses on highest value items
• Optimizes inventory control
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7. ABC Classification of Inventory Item
Steps to determine categories
• Classify items based on expected use and price
• Rank items by total value
• Compute ratios of units and value
• Form three categories: A, B, and C
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8. Implementations
Applying ABC analysis in inventory management
• Control: Optimize inventory mix for supply and demand
• Cost: Establish cost-reduction initiatives at SKU level
• Improved Service: Stock the right inventory to improve order fulfillment
• Warehousing: Give priority space to faster-moving items
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9. Advantages
Benefits of ABC analysis
• Better control over inventory
• Cost reduction initiatives
• Improved customer service levels
• Efficient warehouse management
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10. Conclusion
Recommendations for inventory policy improvement
• Efficient utilization of financial resources
• Improved procurement and handling
• Enhanced inventory management
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