Page 24 - DMGT525_MATERIALS_MANAGEMENT

Unit 2: ABC Analysis

with a formal inventory system. ‘B’ items formalized inventory system with periodic attention Notes
by purchase and stores management.
‘B’ Items: Moderate Value

1. Moderate control
2. Low safety stock
3. Once in 3 weeks
4. Monthly control reports

5. Two or more reliable sources
6. Moderate value analyses
7. Estimate based on past data on present plans
8. Quarterly control over surplus and obsolete items

9. Moderate efforts
“C” Category items represent 50% of actual items but only 5% of the inventory value. Most
organizations can afford a relatively relaxed inventory process surrounding these items. ‘C’
items use a simpler system designed to cause the least trouble for the purchase and stores
department.

‘C’ items: Low Consumptions Value
1. Low control
2. High safety stock
3. Bulk ordering once in 6 months

4. Quarterly control reports
5. Two reliable sources for each item
6. Minimum value analysis
7. Rough estimates for planning

8. Annual review over surplus and obsolete materials
9. Minimum clerical efforts

Self Assessment

Fill in the blanks:
4. The object of carrying our ABC analysis is to develop policy guidelines for ……………
controls.
5. ABC Analysis allows inventory managers to …………………… and ………………. the
overall inventory into three major groups.

6. A category items are of …………… consumptions value.
7. ‘B’ items formalized ……………….. system with periodic attention by purchase and stores
management.

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