Held deliberately to separate the decision making at

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Unformatted text preview: liberately to separate the decision making at the different echelons. - 14 This is different than classifying the inventories for accounting purposes (e.g., in terms of raw materials, supplies, finished goods, etc.) Frameworks for Inventory Management A-B-C Classification The inventories must be controlled at the item level. Stock-keeping unit (SKU) E.g., same style shoes in different sizes are typically different SKUs In practice, SKUs can be defined capturing lower level of detail Observation regarding the usage rates of different SKUs 15 20% of the SKUs account for 80% of the total annual dollar usage Frameworks for Inventory Management A-B-C curve example Demand * unit value OR Profit * volume Source: http://www.resourcesystemsconsulting.com 16 Frameworks for Inventory Management A-B-C Classification Class A items The most important class of items 5%-20% of SKUs; 80% of the value Review (costs, demand forecasts) more frequently Class B items 17 Of secondary importance Often, the largest number of SKUs fall in this category 30%-50% of SKUs; 15% of the value Class C items 30%-50% of SKUs; 5%-10% of value Don’t invest much time to control these items Use simple decision and monitoring systems A-B-C Classification Example: 18 A-B-C Classification A-B-C Classification 19 20 Mini In-Class Exercise Work in groups of 2-3 - Hospital - University cafeteria - Gas station Suppose that you are the managers (or directors) of one of the following organizations: - Supermarket - Automobile factory - Bookstore Answer the following: 1. 2. 3. 21 What is the mission of your organization? Define two critical aspects that you would include in the mission statement. Define two objectives (one for each critical aspect); how would you know your organization has achieved its mission? What types of inventories would you observe in your organization? Think about at least two. Discuss the reasons for holding such inventory....
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This note was uploaded on 04/14/2013 for the course ECET 101 taught by Professor Michealolimpus during the Winter '12 term at Briarwood College.

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