VALUE ((Annual demand X unit price))  ABC Analysis

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Presentation transcript:

VALUE ((Annual demand X unit price))  ABC Analysis (Always Better Control) CRITICALITY (Vital, Essential, Desirable)  VED Analysis USAGE FREQUENCY  FSN Analysis (Fast moving, Slow moving, Non moving) A B C N S F V E D USAGE FREQUENCY

Where, Average Annual usage = 25 50 75 90 100 10 Percent of number of inventory items A B C Percent of average inventory investment Where, Average Annual usage =

OBJECTIVE OF ABC ANALYSIS Rationalization of Ordering Policies EQUAL TREATMENT TO ALL Item no. Annual Consumption Value (Rs.) Number of Orders Value per order Average inventory 1 2 3 60,000 4,000 1,000 4 15,000 250 7500 500 125 Total Inventory: Rs. 8125 PREFERENTIAL TREATMENT on basis of ABC analysis 8 7,500 1,333 3750 667 Total Inventory: Rs. 4917 The optimum no of orders can be arrived at by using models of inventory control eg. EOQ time inventory Annual cost Q* Total cost carriage ordering Q* =

Prob. of stock out Total demand in lead time xL + kL kL

% risk Of shortage (min) (max)  ABC VED

decreasing decreasing

ITEM A-class C-class B-class Use EOQ and continuous monitoring Order in lots of 3 months demand if stock at hand is less than ROP Order in lots of 6 months demand if stock on hand is less than ROP EOQ, q* =