ABC ANALYSIS
First and foremost, an ABC analysis is needed for all
inventory categories.
Recommendations
All levels of the bill of material (that is, all part numbers)
must be classified as an A, B, or C item. This is
done by multiplying the projected annual volume (or
past usage) by the standard cost. This list is then sorted
by dollar volume. A typical breakdown would be:
Class $
Volume No. of Units
A items
80%
20%
B items
15%
30%
C items
5%
50%
For example: "A" items are 80 percent of the dollar
volume and typically 20 percent of the part numbers.
These ABC classifications are used to develop a
•
Lot-sizing strategy
•
Customer service strategy
•
Safety stock (inventory strategy) at all levels
•
Purchasing strategy at all levels
•
Manufacturing, launch, and mix strategy.
These strategies provide the basis for business rules.
CUSTOMER
SERVICE LEVEL BUSINESS
RULES
More plants do not have well-developed business rules
for customer service. Without rules, sales expects everything
to be always available. Customer service expectations
must be clearly defined. An example of business
rules follow:
A items:
•
A items will be shipped same day—95% of time
•
A items not in stock will be shipped in 5 working
days
B items:
•
B items will be shipped same day—80% of time
•
B items not in stock will be shipped in 10 working
days
C items:
•
C items will be shipped same day—70% of time
•
C items not in stock—will quote delivery