ABC analysis
Problem statement Randy Smith was very proud of his new position as inventory control manager for the Johnson Trinket Company. His primary responsibility had been fairly clearly defined: Maintain an inventory level in the warehouse that ensures that production will not run out of stock, yet also maintain an inventory level that will minimize inventory holding and control costs. Since Randy had recently had a course in materials management, he knew an approach that should help him. He decided to make a list of inventory items in one small section of the warehouse to see if he could develop a good plan for inventory control. If it worked in the one small section, he could expand it to the rest of the more than 30,000-part numbers in the warehouse. The following is the data Randy compiled Part Number 1234 1235 1236 1237 1238 1239 1240 1241 1242 1243 1244 1245 1246 1247 1248 1249 1250 1251 1252 1253 Part Unit Value In S 2.5 0.2 15 0.75 7.6 4.4 1.8 0.05 17.2 9 3.2 0.3 1.1 8.1 5 0.9 6 2.2 1.2 5.9 Quantity Currently in Inventory 300 550 400 50 180 20 200 10 950 160 430 500 25 60 390 Average Annual Usage 3000 900 1000 7900 2800 5000 1800 1200 2000 2500 7000 10000 7500 2100 4000 6500 3100 6000 4500 Annual $ Usage 7500 180 15000 5925 21280 22000 3240 60 34400 22500 22400 3000 8250 17010 20000 5850 18600 13200 5400 5310 830 700 80 480 230 900 When Randy scanned the list, he noticed several things that disturbed him, and he asked one of the experienced inventory clerks. The following list summarizes the part number issues that concerned Randy, and the explanation from the clerk: Part number 1236, a very expensive part with almost half-a-years' worth of inventory. This part is used for a product that has very cyclical demand, and the busy time of the year is about to start. Part number 1241 is very inexpensive, yet the inventory is very small. This part has a supplier with an erratic delivery history, and the part also has a very long lead time. A lot of 150 has been on order for some time and is now several days past due. Part number 1242, like is expensive with almost half a year worth of inventory-this part is shipped to a location on the other side of the country and is being accumulated into a large lot to save shipping costs. Part number 1246 is not too expensive, with a low inventory. This part is produced in-house, and has a quality tolerance that the older equipment, which was used to produce it, had a difficult time meeting. The last batch was rejected by the quality department. Part number 1253 is moderately expensive with a large inventory compared to usage. This part was subject to a recent quality audit, and almost 150 of the items were rejected as a result of that audit. Assignment: 1. Use the information above to evaluate the current situation. 2. Given your evaluation, try to develop an integrated inventory control policy that Randy should consider. 3. How can you improve and enhance the process? 4. What conclusions you could draw from the obtained results? 5. As an IE, what other recommendations could Randy have for the Company? Project guidelines and instructions: a. Please note that delaying the submission will affect your grade. 2. The presentations will be during our lectures and start on Monday, April 04, 2021 3. Teams should be at least of two members and do not exceed three members. 4. During the presentation session, be attentive and discuss the solutions with other teams. 5. Use Microsoft office package to write your report and do presentation. 6. Prepare a word document for your report. The following is a suggested format: Title Page (Students Names, Students IDs, Course Name, Course Section, Instructor Name, Date, University name, Title of the project... Etc.) b. Table of Contents, List of Tables, and List of Figures. The Project (introduction, problem statement, solution, conclusions, and recommendations). d. References (if any). a. c
