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4QA3 F12 Week 7 Lecture Notes

# Class a b c 4qa3 f12 percentage of units 5

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Unformatted text preview: ●  ABC analysis is the inventory application of Pareto principle. ●  The idea is to establish inventory policies that focus resources on the few critical inventory parts and not the many trivial ones. ●  Classify inventory into 3 categories, typically on the basis of the dollar value to the Iirm. Class A B C 4QA3 F12 Percentage of units 5 - 15 30 50 - 60 Percentage of dollars 70 - 80 15 5 - 10 A. Gandomi Source: Hiezer & Render (2006) 7 Part 1 2 3 4 5 6 7 8 9 10 4QA3 F12 Unit Cost \$ 60 350 30 80 30 20 10 320 510 20 Annual Usage Total Value 90 40 130 60 100 180 170 50 60 120 A. Gandomi \$5,400 14,000 3,900 4,800 3,000 3,600 1,700 16,000 30,600 2,400 8 Part 9 8 2 1 4 3 6 5 10 7 4QA3 F12 Total % of Total Value Value \$30,600 35.8 16,000 18.7 14,000 16.4 5,400 6.3 4,800 5.6 3,900 4.6 3,600 4.2 3,000 3.5 2,400 2.8 1,700 2.0 \$85,400 % of Total Quantity % Cumulative 6.0 6.0 5.0 11.0 4.0 15.0 9.0 24.0 6.0 30.0 10.0 40.0 18.0 58.0 13.0 71.0 12.0 83.0 17.0 100.0 Class A B C A. Gandomi % of Total % of Total Items Value Quantity 9, 8, 2 71.0 15.0 1, 4, 3 16.5 25.0 6, 5, 10, 7 12.5 60.0 9 C 100 – B % of Value 80 – 60 – A 40 – 20 – 0 – | 0 | 20 | 40 | 60 | 80 | 100 % of Quantity 4QA3 F12 A. Gandomi 10 ●  Inventory models answers two questions: o  How much to order, o  When to order. ●  Demand: o  May be known or uncertain o  May be changing or unchanging in time o  Independent or...
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