CASE STUDY ANALYSIS

PRODUCTION AND OPERATIONS MANAGEMENT

MGT 222

SUBMITTED TO,

Prof. MITHUN KUMAR GUHA

School of Management,
Presidency University,
Bangalore

SUBMITTED BY,

BHARATH RAJ
Class: MBA 2nd Semester
Section: C
Roll no: 20192MBA0050

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 ABC ANALYSIS

1. How would you use ABC policy to handle the inventory and inventory related issues?

ABC analysis is an inventory categorization technique. ABC analysis divides an inventory into
three categories- “An items” with very tight control and accurate records. “B items” with less
tightly controlled and good records. “C items” with the simplest controls possible and minimal
records.

A: the most valuable products or customers that we have. This category will be the smallest category reserved
exclusively for your biggest money makers We are taking 20% of total number of items which contribute more than 70%
sales. These are the products that contribute heavily to your overall profit without eating up too much of your
resources.

B: our middle of the road customers or products. Yet, category B is all about potential. The members of this category
can, with some encouragement, be developed into category an items

C: This is the category where most of our products or customers will live. It is also the category where we must try to
automate sales as much as possible to drive down overhead costs. As they contribute very less i.e. 5% to sales with 50%
of total items.

The following Steps should be adopted:

Step1: Total cost per week= Unit Cost * Weekly Demand

Step2: % usage of total usage= (Total cost per week*100)/total usage

Step3: Sort the item and Cluster them accordingly

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TABLE ITEMS AND THEIR COST INFORMATION
Weekly
Average Weekly Standard Item Value in Total Cost Per % usage of Total
Item Code Cumulative Category
Sales (Demand) Deviation of Rupees( Cost) Week Usage (100)
Demand
D47 88 7 1172 103136 18.6%
B63 107 11 730 78110 14.1%
D96 125 21 538 67250 12.1%
70.0% A
E60 231 16 254 58674 10.6%
E12 65 17 782 50830 9.2%
E46 85 30 467 39695 7.2%
C13 241 16 148 35668 6.4%
B91 56 15 319 17864 3.2%
C22 72 9 182 13104 2.4%
20.0% B
D28 13 2 879 11427 2.1%
E76 22 4 482 10604 1.9%
E31 4 1 2587 10348 1.9%
C60 178 25 54 9612 1.7%
E90 76 19 125 9500 1.7%
C17 93 10 65 6045 1.1%
B85 3 1 1645 4935 0.9%
B47 8 1 610 4880 0.9%
C51 145 16 24 3480 0.6%
B18 91 12 37 3367 0.6%
D75 12 2 234 2808 0.5%
C86 216 27 11 2376 0.4%
10.0% C
C31 554 67 4 2216 0.4%
A14 124 23 15 1860 0.3%
B31 35 14 52 1820 0.3%
A17 15 3 120 1800 0.3%
E78 101 17 13 1313 0.2%
C72 101 36 10 1010 0.2%
A27 330 41 2 660 0.1%
C63 21 5 17 357 0.1%
D51 31 15 2 62 0.0%
554811

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 Chart Title
0.2
18.6%
0.18

0.16

0.14 14.1%

0.12 12.1%
10.6%
0.1
9.2%
0.08
7.2%
0.06 6.4%

0.04
3.2%
0.02 2.4%2.1%
1.9%1.9%1.7%1.7%
1.1%
0.9%0.9%
0.6%
0.6%
0.5%0.4%0.4%0.3%0.3%0.3%0.2%
0 0.0% 0.2%
0.1%
0.1%
0.0%
0.0%

2. ANSWER
Recommend specific policies that Jay should use for better materials management.
Perpetual review system:-Hold the order size constant and lets the frequency
Of ordering fluctuate according to demand requirements.

For Class A
Cyclic Counting must be less than 1 day as it shares more in number of sales revenue, if the no of items
requires is less than the average weekly demand immediately place the order without any delay
 A continuous system keeps monitoring every single activity whether receipt or withdrawal from
inventory is needed.
 This system keeps the regular track and record of inventory.
 The stock position is monitored continuously
 When the stock position drops to the re-order point, a fixed quantity 1 week average demand is ordered

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For B Type

counting must be less than 4 days as it shares less number in sales revenue,
So for this Continues tracking is not needed but must maintain the reserve stock of 7 days as it is core
competency of the store.

For C type
On the Introduction of Integrated concept, it implements various functions such as materials planning,
purchasing, receiving, storing, controlling inventory, and disposal of surplus and scrap. These functions are
interrelated and cannot be handled independently. For instance, if the purchase department operates
independently, it may take decisions which are sub optimal. For example, an independent purchase department
may decide to buy large quantities of an item taking into consideration the discount offered by the supplier. But
this decision may have an impact on the storage and carrying costs and also the storage space may become
inadequate.

Advantages:

• Cross checking must happen for every 15 days.

• Must fallow FIFO Method in order to avoid cross of expiry date.
• Better coordination between materials management department and user departments.
• Better accountability through centralization of authority and responsibility for all aspects of materials
function.
• Better performance due to better communication and coordination between materials planning,
purchasing, stores and inventory control departments-all of which are integrated organizationally under
materials management department/division.

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