Define these two terms. Provide a context in which they should be mentioned and finally use an example using another company.

1. Inventory management using the Pareto concept

Inventory management using the Pareto concept

1. Definition:
2. Context:
3. Personal Example:

Uses of and cost of inventory *Meaning explain how inventory is used and understand what it costs.

1. Definition:
2. Context:
3. Personal Example

Information from textbook

L0113 Analyze inventory using the Pareto principle. . Most inventory control systems are so large that it is not practical to model and give a thorough treatment to each item. In these cases, it is useful to categorize items according to their yearly dollar value. . A simple A. B. C categorization where A items are the high annual dollar value items, B items are the medium dollar value items. and C items are the low dollar value items is useful. This categorization can be used as a measure of the relative importance of an item. . Typically, A items are roughly the top 15 percent of the items and represent 80 percent of the yearly dollar value. B items would be the next 35 percent and make up around 15 percent of the yearly dollar value. The C items would be the last 50 percent of the item. and have only 5 percent of the yearly dollar value. . Cycle counting is a useful method for scheduling the audit of each item carried in inventory. Companies audit their inventory at least yearly to ensure accuracy of the records. ABC inventory classication Divides inventory into dollar volume categories that map into strategies appropriate for the categ01y. Cycle counting A physical inventOIytaking technique in which inventory is counted on a frequent basis rather than once or twice a year. LO111 Explain how inventory is used and understand What it costs. . Invent01y is expensive mainly due to storage. obsolescence, insurance, and the value of the money invested. . This chapter explains models for controlling inventory that are appropriate when it is difcult to predict exactly what demand will be for an item in the future and it is desired to have the item available from \"stock." . The basic decisions that need to be made are: (1) when should an item be ordered, and (2) how large should the order be. . The main costs relevant to these models are (l) the cost of the item itself, (2) the cost to hold an item in invent01y. (3) setup costs, (4) ordering costs, and (5) costs incurred when an item luns short. Inventory The stock of any item or resource used in an organization. Independent demand The demands for various items are unrelated to each other. Dependent demand The need for any one item is a direct result of the need for some other item, usually an item of