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Unformatted text preview: ry group of
each item determines the item’s level of monitoring. The A group items receive
the most intense monitoring because of the high dollar investment. Typically, A
group items are tracked on a perpetual inventory system that allows daily verification of each item’s inventory level. B group items are frequently controlled
through periodic, perhaps weekly, checking of their levels. C group items are
monitored with unsophisticated techniques, such as the two-bin method. With
the two-bin method, the item is stored in two bins. As an item is needed, inventory is removed from the first bin. When that bin is empty, an order is placed to
refill the first bin while inventory is drawn from the second bin. The second bin is
used until empty, and so on.
The large dollar investment in A and B group items suggests the need for a better method of inventory management than the ABC system. The EOQ model, discussed next, is an appropriate model for the management of A and B group items. The Economic Or...
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