Algro Inc. keeps a wide range of parts and materials on hand for use in its production processes. Management has recently had difficulty managing parts inventory as demand for its finished goods has increased; they frequently run out of some critical parts while having an endless supply of others. They would like to classify their parts inventory according to the ABC approach to better control inventory. The following is a list of parts, along with their annual usage and unit value: Item Annual Unit Item Annual Unit Number Usage Cost Number Usage Cost 1 36 $350 16 2 510 30 17 3 50 23 18 4 300 45 19 5 18 1900 6 500 8 7 710 4 8 80 26 9 344 28 10 67 440 11 510 2 12 682 35 13 95 50 14 10 3 15 820 1 676222222222222 60 $610 120 20 270 15 45 50 20 19 3200 21 910 3 12 4750 23 30 2710 24 24 1800 25 870 105 244 30 750 15 28 45 110 29 46 160 30 165 25 a. Classify the inventory items according to the ABC approach using the dollar value of annual demand. b. Clearly explain why you classified items as A, B or C. c. Draw a Pareto chart to show the classification of the items.
Algro Inc. keeps a wide range of parts and materials on hand for use in its production processes. Management has recently had difficulty managing parts inventory as demand for its finished goods has increased; they frequently run out of some critical parts while having an endless supply of others. They would like to classify their parts inventory according to the ABC approach to better control inventory. The following is a list of parts, along with their annual usage and unit value: Item Annual Unit Item Annual Unit Number Usage Cost Number Usage Cost 1 36 $350 16 2 510 30 17 3 50 23 18 4 300 45 19 5 18 1900 6 500 8 7 710 4 8 80 26 9 344 28 10 67 440 11 510 2 12 682 35 13 95 50 14 10 3 15 820 1 676222222222222 60 $610 120 20 270 15 45 50 20 19 3200 21 910 3 12 4750 23 30 2710 24 24 1800 25 870 105 244 30 750 15 28 45 110 29 46 160 30 165 25 a. Classify the inventory items according to the ABC approach using the dollar value of annual demand. b. Clearly explain why you classified items as A, B or C. c. Draw a Pareto chart to show the classification of the items.
Purchasing and Supply Chain Management
6th Edition
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Chapter16: Lean Supply Chain Management
Section: Chapter Questions
Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...
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