ABC Analysis for Inventory Management Essay

In supply chain, ABC analysis is an inventory categorization method which consists in dividing items into three categories, A, B and C: A being the most valuable items, C being the least valuable ones. This method aims to draw managers’ attention on the critical few (Aitems) and not on the trivial many (C-items). Prioritization of the management attention Inventory optimization is critical in order to keep costs under control within the supply chain. Yet, in order to get the most from management efforts, it is efficient to focus on items that cost most to the business. The Pareto principle states that 80% of the overall consumption value is based on only 20% of total items. In other words, demand is not evenly distributed between items: top sellers vastly outperform the rest. The ABC approach states that, when reviewing inventory, a company should rate items from A to C, basing its ratings on the following rules: A-items are goods which annual consumption value is the highest. The top 70-80% of the annual consumption value of the company typically accounts for only 10-20% of total inventory items. C-items are, on the contrary, items with the lowest consumption value. The lower 5% of the annual consumption value typically accounts for 50% of total inventory items. B-items are the interclass items, with a medium consumption value. Those 15-25% of annual consumption value typically accounts for 30% of total inventory items. The annual consumption value is calculated with the formula: (Annual demand) x (item cost per unit). Through this categorization, the supply manager can identify inventory hot spots, and separate them from the rest of the items, especially those that are numerous but not that profitable. The following steps will explain to you the classification of items into A, B and C categories. 1. Find out the unit cost and and the usage of each material over a given period. 2. Multiply the unit cost by the estimated annual usage to obtain the net value. 3. List out all the items and arrange them in the descending value. (Annual Value) 4. Accumulate value and add up number of items and calculate percentage on total inventory in value and in number. 5. Draw a curve of percentage items and percentage value. 6. Mark off from the curve the rational limits of A, B and C categories. eCommerce example The graph above illustrates the yearly sales distribution of a US eCommerce in 2011 for all products that have been sold at least one. Products are ranked starting with the highest sales volumes. Out of 17000 references: Top 2500 products (Top 15%) represent 70% of the sales. Next 4000 products (Next 25%) represent 20% of the sales. Bottom 10500 products (Bottom 60%) represents 10% of the sales. Inventory management policies Policies based on ABC analysis leverage the sales imbalance outlined by the Pareto principle. This implies that each item should receive a weighed treatment corresponding to its class: ï‚ · A-items should have tight inventory control, more secured storage areas and better sales forecasts. Reorders should should be frequent, with weekly or even daily reorder. Avoiding stock-outs on A-items is a priority. Reordering C-items is made less frequently. A typically inventory policy for C-items consist of having only 1 unit on hand, and of reordering only when an actual purchase is made. This approach leads to stock-out situation after each purchase which can be an acceptable situation, as the C-items present both low demand and higher risk of excessive inventory costs. For C-items, the question is not so much how many units do we store? but rather do we even keep this item in store? B-items benefit from an intermediate status between A and C. An important aspect of class B is the monitoring of potential evolution toward class A or, in the contrary, toward the class C. Splitting items in A, B and C classes is relatively arbitrary. This grouping only represents a rather straightforward interpretation of the Pareto principle. In practice, sales volume is not the only metric that weighs the importance of an item. Margin but also the impact of a stock-out on the business of the client should also influence the inventory strategy. Procurement and Warehouse Applications The results of an ABC Analysis extend into a number of other inventory control and management processes: 1. Review of stocking levels – As with investments, past results are no guarantee of future performance. However, â€Å"A† items will generally have greater impact on projected investment and purchasing spend, and therefore should be managed more aggressively in terms of minimum and maximum inventory levels.Obsolescence review – By definition, inactive items will fall to the bottom of the prioritized list. Therefore, the bottom of the â€Å"C† category is the best place to start when performing a periodic obsolescence review. 2. Cycle counting – The higher the usage, the more activity an item is likely to have, hence the greater likelihood that transaction issues will result in inventory errors. Therefore, to ensure accurate record balances, higher priority items are cycle counted more frequently. Generally â€Å"A† items are counted once every quarter; â€Å"B† items once every 6 months; and â€Å"C† items once every 12 months. 3. Identifying items for potential consignment or vendor stocking – Since â€Å"A† items tend to have a greater impact on investment, these would be the best candidates to investigate the potential for alternative stocking arrangements that would reduce investment liability and associated carrying costs. 4. Turnover ratios and associated inventory goals – By definition, â€Å"A† items will have greater usage than â€Å"B† or â€Å"C† items, and as a result should have greater turnover ratios. When establishing investment and turnover metrics, inventory data can be segregated by ABC classification, with different targets for each category. Definition of ‘Inventory Turnover’ A ratio showing how many times a company’s inventory is sold and replaced over a period. the Periodic Review To make the most effective use of ABC classifications, the analysis should be completed at least on an annual basis, and more often as necessary. Other Inventory Classification Techniques HML Classifications The High, medium and Low (HML) classification follows the same procedure as is adopted in ABC classification. Only difference is that in HML, the classification unit value is the criterion and not the annual consumption value. The items of inventory should be listed in the descending order of unit value and it is up to the management to fix limits for three categories. For examples, the management may decide that all units with unit value of Rs. 2000 and above will be H items, Rs. 1000 to 2000 M items and less than Rs. 1000 L items. The HML analysis is useful for keeping control over consumption at departmental levels, for deciding the frequency of physical verification, and for controlling purchases. VED Classification While in ABC, classification inventories are classified on the basis of their consumption value and in HML analysis the unit value is the basis, criticality of inventories is the basis for vital, essential and desirable categorization. The VED analysis is done to determine the criticality of an item and its effect on production and other services. It is specially used for classification of spare parts. If a part is vital it is given V classification, if it is essential, then it is given E classification and if it is not so essential, the part is given D classification. For V items, a large stock of inventory is generally maintained, while for D items, minimum stock is enough. SDE Classification The SDE analysis is based upon the availability of items and is very useful in the context of scarcity of supply. In this analysis, S refers to scarce items, generally imported, and those which are in short supply. D refers to difficult items which are available indigenously but are difficult items to procure. Items which have to come from distant places or for which reliable suppliers are difficult to come by fall into D category. E refers to items which are easy to acquire and which are available in the local markets. The SDE classification, based on problems faced in procurement, is vital to the lead time analysis and in deciding on purchasing strategies. FSN Analysis FSN stands for fast moving, slow moving and non-moving. Here, classification is based on the pattern of issues from stores and is useful in controlling obsolescence. To carry out an FSN analysis, the date of receipt or the last date of issue, whichever is later, is taken to determine the number of months, which have lapsed since the last transaction. The items are usually grouped in periods of 12 months. FSN analysis is helpful in identifying active items which need to be reviewed regularly and surplus items which have to be examined further. Non-moving items may be examined further and their disposal can be considered.

Groups and Teams in the Contemporary Organizations Essay

Groups and Teams in the Contemporary Organizations - Essay Example It has also made the top management realize that if proper undertakings within these domains are made, there is no doubt that the groups and teams would bring in more success and higher profits. The only shortcoming, however, lies in the ideology that these groups and teams have a number of different problems, all of which will be mentioned within the length of this paper. This paper takes a concise look at how the groups and teams in the contemporary business world have played their quintessential role and what these roles have meant to the different business quarters, not to forget the grave issues which have surfaced for quite a period of time now. The groups and teams within the aegis of an organization have meant that the company accepts that shared efforts are important in order to have goals achieved and objectives accomplished, for the sake of the said company. This is a reality that has dawned upon the modern day organizations because these organizations have understood the ideology of team formation and how these can bring success for the sake of the whole company. The formation of teams within an organization signifies the need for a collective thought that can envision success domains within a short-term time period or a duration that is geared to meet the needs and challenges within the long run. However one thing is certain – the organization by now has understood the premise of having groups and teams within its aegis, which will essentially play a very solid role at convincing its own people that individual efforts are not worth and that groups and teams would bring about more sanity and be strengthening effects for the sake of the company.  

Communication theory application assignment Essay

Communication theory application assignment - Essay Example Professor Maguire succeeds in gaining Will’s trust and confidence by revealing his own weaknesses, strengths, intimate emotions and true self to him. Different relationships shown in the movie reveals different communication theories. Will’s relationship with Professor Lambeau shows the expectancy violation theory in action. Social penetration theory can be seen in the interactions between Will and professor Maguire. Interactional view theory is evident through interaction between Will and his friend Chuckie. The movie is an excellent example of how being open and honest in a relationship can help in reducing the pain of life and gain meaning in personal and social life. The expectancy violation theory says that anything that happens according to the expectation does not attract attention (Littlejohn 135). People tend to notice mostly those behaviors or actions that violate their expectation (Littlejohn 135). The violation of the expectation arouses their interest and grabs their attention (Littlejohn 135). In the movie ‘Good Will Hunting’, expectation violation theory is evident in interaction between Will and professor Lambeau. Professor Lambeau writes a math problem on the board outside the class and expects that no one will be able to solve it. However, Will solves the problem and in a sense, violates the expectations of professor Lambeau. This act of Will solving the mathematical theorem is taken positively by professor Lambeau as he is impressed with Will’s genius (Good Will Hunting). Secondly, when he tries to approach Will with the idea of getting him trained and utilize his skills to solve different theorems, Will refuses to co-operate (Good Will Hunting).. This arouses the professor Lambeau and makes him to take attention of his behavior (Littlejohn 135). According to the ‘expectancy violation’ theory, the violation of expectation is not always

Ambiguity Essay Example | Topics and Well Written Essays - 500 words

Ambiguity - Essay Example It seems that the context for which ambiguity is expressed is the main deciding factor in its impact. Its impact should be judged on presumed results of that expression. If we consider the advertising industry, people often feel that the nature of advertising in the postmodern era needs ambiguous presentation at times to attract multitude of audience. They feel that ambiguous advertising can attract more audience while satisfying orthodox thinkers about the presentation nature of a product or service. For example, if we consider the marketing of a product that is treated as unconventional, ambiguous advertising can serve two purposes. Firstly, a viewer can get impressed by the appealing presentation of the product and more inclined towards acquiring the product (The Ambiguity of Advertising, 2008). Secondly, this nature helps in attracting multiple audiences with different perceptions (The Ambiguity of Advertising, 2008). It helps respective company and/or advertising agencies to defend their marketing strategy in case of any controversies. Moreover, the ambiguous presentation aids in attracting vast audience with minimal and intelligent investment. However, this attitude may sometimes backfire with its enormous negative consequences (The Ambiguity of Advertising, 2008). The reasons for it can be related to the same factors that hill attracting more customers. Lack of clarity in advertising the intended benefits of a product or service leads to confusion for the audience whether or not to opt for its service. Also, people who misinterpret or identify exactly the actual purpose of the advertisement may feel reluctant to acquire it. With the advancements in technologies and change of various dimensions in the world, the level of ambiguity at various levels has increased dramatically over the years (Alessandra, 2001). This nature has

An investigation into the services provided by the National Insurance Coursework

An investigation into the services provided by the National Insurance Board in the Bahamas - Coursework Example ............ 6 The Urgent Need for Reforms †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦... 7 The NIB Restructure Explained †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 11 The National Insurance Fund is not in a â€Å"Crisis† †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦...13 Personal Analysis of the NIB Services †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦...14 Conclusion and Recommendation: The Need for Privatization †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦..15 Works Cited †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.17 Appendix †¦Ã¢â‚¬ ¦Ã ¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦..19 Introduction Started in 1972, the National Insurance Board (NIB) of the Commonwealth of the Bahamas is an organization in charge of the management of the Bahamian social security system. It was established based on a Parliament Act - the National Insurance Act which was signed into law by the Minister of Labor and Welfare, Clifford Darling, on December 12, 1972. The National Insurance Act is an act to institute a national insurance system for the provision of income replacement against contingencies, such as in sickness, maternity, retirement, invalidity, death, work injury or involuntary income loss (â€Å"Chapter 350: National Insurance†). ... Moreover, the Commission aimed to evaluate the viability of unemployment benefits (â€Å"Better Social Security for Bahamians†). In 2009, following the 8th Actuarial Review of the National Insurance Fund, recommendations were made by the Social Security Reform Commission to guarantee the long-term sustainability of the NIB Funds and to ensure the protection of the aging and insured population by increasing revenues and reducing operational costs (Ward). This paper aims to investigate the services rendered by the National Insurance Board to the Bahamian people; to explain the NIB losses; and to assess the need for increased contributions, reduced benefits, improved compliance and reduced administrative costs for securing long-term sustainability of the National Insurance Fund. This author will give personal analysis of the NIB services and will give recommendations for the solution of its present dilemma. The National Insurance Board In 1972, the NIB was established in accordan ce with the 1972 National Insurance Act, aimed at providing social security coverage to the insured Bahamian members and their dependents through Benefit Payments in such cases as sickness, funeral, invalidity, maternity, retirement, unemployment, and the death of the family's bread-winner survivorship, work injury comprising disablement, death and medical care. Moreover, the NIB offers a minimum level of social security coverage for persons unqualified for such benefits as of right; and provides efficient administration of the National Insurance Programme and Fund compliant with the judiciary rules of the National Insurance Act; and supports the country’s socio-economic growth and development (â€Å"The National Insurance Board†). Benefits and Assistance The National Insurance Board provides

Compare and contrast the classical and Keynesian theory of Essay

Compare and contrast the classical and Keynesian theory of unemployment. Conclude by discussing which argument has been more convincing for you and why - Essay Example A lower wage rate will lead to an increase in the number of workers being employed and the vice versa. Unemployment occurs when there is excess supply of workers in the market at a particular wage level. The equilibrium level of the demand and supply for labour is established after the unemployed workers accept lower wages. The full employment level is associated with the equilibrium level in the labour market (Blanchard, 2005). Unemployment occurs when the wage level is above the equilibrium wage; hence, leading to a higher labour compared to the quantity being demanded in the market. As a result, unemployment can be classified as the difference between the supply and the demand. The flexibility of the wages has a direct effect on the level of unemployment. A decrease in the demand for a product will lead to a decrease in the demand for labour; hence, leading to high levels of unemployment. Consequently, the wage rate will fall but competition between the workers will cause them to accept the low wages; therefore, leading to a new equilibrium state. The theory explains a situation where low wage rates do not result to higher employment levels due to the employers are facing low demand for services and goods when the economy is in a recession (Phoa, Focardi and Fabozzi, 2007). The aggregate demand is the main determinant of the level of economic outputs during recessions. However, it does not have an equal effect on the productive ability off the economy but is influenced by certain determinants such as inflation and employment rates. According to the Keynesian theory, the changes in aggregate demand have short run effects on employment and output unlike in the prices. The unemployment occurs when the aggregate demand function intersects the aggregate supply function since the economy cannot experience a full employment level. The theory states that the government can use public investment programs to raise the aggregate

Neurological Disorders Research Paper Example | Topics and Well Written Essays - 1750 words

Neurological Disorders - Research Paper Example Asia particularly the West and Central areas also are not spared from the disorder. Russia, Middle East and India have high prevalence of neurological disorders with multiple sclerosis on the top list. With this situation, not only the budget of the country and families with neurological cases are challenged but also in the treatment and researches. The discussion of pathophysiology, prognosis, treatment, considerations, and impact on self and family may lead to a better understanding of the disease. Among the neurological disorder that is of interest is the Parkinson’s disease. Parkinson’s disease is a slow degenerative disorder of the central nervous system affecting the cognitive, motor, and other bodily functions (Tortora, 2008). Despite the many medical researches that were conducted regarding the Parkinson illness, it still is the second neurological disorder affecting many. Unfortunately, the treatments are focused not on Parkinson itself but on alleviating the s igns and symptoms of it because the cause is unknown. It is believed that the disorder is the result of the interplay of genetics and the environment. It has been known that mutations in the genes are being passed from one generation to the next. Other factors like smoking, toxins, and deficiency in vitamin E are all contributory factors to the sensitivity of the nervous system which may in turn elicit its prevalence. Age is also found to be another culprit of the disease. In the study of Stephen and company (2003), they revealed that the rapid increase of incidences occur at the age of 60 with lesser percentage of victims below 50 of both sexes. They further found out that ethnicity and race also plays a role in the prevalence of Parkinson. Physiological Basis Although the pathophysiology of Parkinson’s disease is not fully understood, the disorder is a result of the interplay of several factors. Normally, stimulus from either outside or within the body causes impulses that could travel several meters along the billion neurons in just seconds to the brain. The impulse travels to the pre synaptic axons where it activates calcium gated channels that may trigger calcium influx. This may in turn activate neurotransmitters which diffuse into the synaptic gaps of the myelinated sheath to stimulate the next node. Thus, impulses leap from node to node along the mylelinated sheath until it is conducted to the brain for interpretation and proper action to take place. The fastest impulses involve those that innervate the skeletal muscles (Thibodeau & Patton, 2003). This might be the reason why individuals can retrieve their hands immediately if subjected to hot iron. Furthermore, actions are refined with the help of chemicals in the brain to adjust and guide actions. In the case of Parkinson’s disease, neurons of the substantia nigra undergo degeneration resulting in dopamine depletion. Dopamine is a neurotransmitter related to purposeful movement that inh ibits the excitatory action of another neurotransmitter called acetylcholine to maintain balance. In addition, it controls emotion and pleasure. Dopamine is believed to be located within the nuclei thus the role of cerebral nuclei is very crucial in Parkinson disorder. Cerebral nuclei are diencephalic gray matters located in the cerebral cortex within the basal ganglia that function to inhibit several motor actions. For the cerebral nuclei to function normally, neurons from