Subject: TM 721 MANAGERIAL ECONOMICS EDSA EDILLO GAROTE Discussant

Technology analysis According to Spacey, John 2017 According to Spacey John is the process of researching technology solutions, problems and risks. It is a component of business analysis that is used to develop requirements, specifications and validate technical designs.business analysis is also an IT operations capability used to identify fixes, improvements and optimizations.

The following are common technology analysis techniques and considerations. BenchmarkingBottlenecks Capacity ManagementData Analysis Incident ManagementInformation Technology Risk Non-Functional RequirementsProblem Management Problem SolvingPrototypes Root Cause AnalysisService Management Systems ThinkingTechnical Feasibility Troubleshooting

 Based on utilization.  Fast moving.  Slow moving.  Non-moving.  Non-moving items must be periodically reviewed to prevent expiry& obsolescence FSN ANALYSIS items are classified according to their rate of consumption

ABC ANALYSIS (ABC = Always Better Control) Selective Inventory Control This is based on cost criteria. It helps to exercise selective control when confronted with large number of items it rationalizes the number of orders, number of items & reduce the inventory.

‘A’ ITEMS Small in number, but consume large amount of resources Must have: Tight control Accurate record Rigid estimate of requirements Strict & closer watch Low safety stocks Managed by top management

‘B’ ITEM Intermediate Must have: Moderate control Purchase based on rigid requirements Reasonably strict watch & control Moderate safety stocks Managed by middle level management

‘ C’ ITEMS Larger in number, but consume lesser amount of resources Must have: Ordinary control measures Purchase based on usage estimates High safety stocks ABC analysis does not stress on items those are less costly but may be vital

ABC ANALYSIS (ABC = Always Better Control) Selective Inventory Control PARETO PRINCIPLE About 10 % of materials consume 70 % of resources About 20 % of materials consume 20 % of resources About 70 % of materials consume 10 % of resources

Distribution of ABC class ABC class Number of items Total amount required A 10 ％ 70 ％ B 20 ％ C 70 ％ 10 ％ Total100 ％ Using this distribution of ABC class and change total number of the parts.

Uniform purchase Application of weighed purchasing condition Uniform conditionWeighed condition ItemsConditionsItemsConditions All items Re-order point=2 week supply Delivery frequency=weekly A-class items 200 Re-order point=1 week supply Delivery frequency=weekly B-class items 400 Re-order point=2 week supply Delivery frequency=bi- weekly C-class items 3400 Re-order point=3 week supply Delivery frequency=every 4 weeks

Comparison of "equal" and "weighed" purchase (4 weeks span) ABC classNo of items % of total value Equal purchaseWeighed purchase note No of delivery in 4 weeks average supply level No of delivery in 4 weeks average supply level A20075% weeks weeks a same delivery frequency, safety stock reduced from 2.5 to 1.5 weeks a, require tighter control with more man ・ hours. B40015% weeks8003 weeks increased safety stock level by 20%, delivery frequency reduced to half. Fewer man- hours required. C340010% weeks weeks increased safety stock from 2.5 to 3.5-week supply, delivery frequency is one quarter. Drastically reduced man ・ hour requirement. Total % weeks weeks average inventory value reduced by 23%, delivery frequency reduced by 69%. Overall reduction of man ・ hour requirement

The ABC concept is based on Pareto's law. If too much inventory is kept, the ABC analysis can be performed on a sample. Steps are carried out for the ABC analysis : : Arrange the items in descending order of the usage value calculated above. : Compute the annual usage value for every item in the sample by multiplying the annual requirements by the cost per unit.

: Make a cumulative total of the number of items and the usage value. : Draw a graph connecting cumulative % items and cumulative % usage value. The graph is divided approximately into three segments, where the curve sharply changes its shape. This indicates the three segments A, B and C. : Convert the cumulative total of the number of items and usage values into a percentage of their grand totals.

VED ANALYSIS Based on critical value & shortage cost of an item – It is a subjective analysis. Items are classified into: Vital: Shortage cannot be tolerated. Essential: Shortage can be tolerated for a short period. Desirable:  Shortage will not adversely affect, but may be using more resources. These must be strictly Scrutinized

VED ITEMCOST AAVAEADCATEGORY 11070% BBVBEBDCATEGORY 22020% CCVCECDCATEGORY 37010% CATEGORY 1 - NEEDS CLOSE MONITORING & CONTROL CATEGORY 2- MODERATE CONTROL. CATEGORY 3- NO NEED FOR CONTROL

SDE ANALYIS Based on availability Scarce Managed by top level management Maintain big safety stocks Difficult Maintain sufficient safety stocks Easily available Minimum safety stocks

HML ANALYSIS Based on cost per unit Highest Medium Low This is used to keep control over consumption at departmental level for deciding the frequency of physical verification.

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