Page 27 - DMGT525_MATERIALS_MANAGEMENT

Materials Management

Notes 13. Pareto charts cannot be used to calculate the average of the data, its ………………… or
changes in the measured attribute over time.

2.5 Simple Numerical of ABC Analysis

In its simplest terms, Pareto analysis will typically show that a disproportionate improvement
can be achieved by ranking various causes of a problem and by concentrating on those solutions
or items with the largest impact. The basic premise is that not all inputs have the same or even
proportional impact on a given output. This type of decision-making can be used in many fields
of endeavor, from government policy to individual business decisions.
Bulchand & Co. Company inventories 20 items. The company decided to setup an ABC inventory
system with 10% of A items, 20% of B items and 70% of C items. The company records provide
the information, which is as follows:

Table 2.1: Company Records

Source: http://cde.annauniv.edu/CourseMat/mba/sem2/dba1651/abc.html
Now we need to analyze the above items into ABC categories on the basis of information.

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