Page 29 - DMGT525_MATERIALS_MANAGEMENT

Materials Management

Notes Self Assessment

Fill in the blanks:
14. The basic premise is that not all inputs have the same or even …………… impact on a
given output.

15. ABC analysis type of ………………… can be used in government policy as well as individual
business decisions.



Case Study Super Sounds, Inc.

uper Sounds, Inc. (Super Sounds) is a leading speciality retailer founded more than
60 years ago in Cleveland, Ohio. The store provides a vast array of items to inspire
Saccessories of all kinds. The company aims to meet its customers’ needs not only
with its products but also with the services and advice to help with their needs. Thus,
customer service is an essential element of Super Sounds’ successful retail model.
The shop is in a storefront location on a busy street and it has limited storage space for
inventory. Recently, as demand for its few products has increased, management has had
difficulty in managing the inventory. They frequently run out of some crucial products
but seem to have endless supply of others. Hence the management of Super Sounds
understood the value of managing inventory to satisfy customers and to bring down
inventory costs. Obviously, having excess inventory will have huge inventory costs. To
reduce costs in an inventory system, the focus should be on certain important high valued
items. In this context, a management trainee provided a solution to the problem, by
suggesting ABC analysis for their needs. This ABC classification process helped manage
the inventory properly. The implementation of the ABC Analysis became a key element
of supply chain and inventory management across Super Sounds stores.
Questions
1. How ABC analysis is used in inventory management in the above case?

2. Perform a SWOT analysis of the above case.

Source: http://www.ibscdc.org/Case_Studies/Operations%20and%20Project%20Management/Operations%20Management/
OM0002.htm
2.6 Summary

 ABC analysis (sometimes referred to as the 80/20 rule and as ABC analysis) is a method of
classifying items, events, or activities according to their relative importance.

 While using ABC analysis organizations can concentrate more detailed attention on the
high value/important items.
 ABC Analysis allows inventory/purchasing managers to segregate and manage the overall
inventory/suppliers into three major groups.
 “A” Category items generally represent approximately 15%–20% of an overall inventory
by item, but represent 80% of value of an inventory.
 “B” Category items represent 30%–35% of inventory items by item type, and about 15% of
the value.

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