5-1 PERSEDIAAN MULTI ITEM

The ABC Inventory Classification System The ABC classification, devised at General Electric during the 1950s, helps a company identify a small percentage of its items that account for a large percentage of the dollar value of annual sales. These items are called Type A items.  Adaptation of Pareto’s Law 20% of the people have 80% of the wealth (in 1897 Italy) u Since most of our inventory investment is in Type A items, high service levels will result in huge investments in safety stocks. u Tight management control of ordering procedures is essential for Type A items.

For Type B items inventories can be reviewed periodically Items can be ordered in small groups, rather than individually. Type C items require the minimum degree of control Parameters are reviewed twice a year. Demand for Type C items may be forecasted by simple methods. The most inexpensive items of type C can be ordered in large lot, to minimize number of orders. An expensive type C items ordered only as they are demanded The ABC Inventory Classification System Percentage of items Percentage of dollar value 100 — 90 — 80 — 70 — 60 — 50 — 40 — 30 — 20 — 10 — 0 — Class C Class A Class B

Copyright 2006 John Wiley & Sons, Inc.12-4 ABC Classification  Class A 5 – 15 % of units 5 – 15 % of units 70 – 80 % of value 70 – 80 % of value  Class B 30 % of units 30 % of units 15 % of value 15 % of value  Class C 50 – 60 % of units 50 – 60 % of units 5 – 10 % of value 5 – 10 % of value

Copyright 2006 John Wiley & Sons, Inc.12-5 ABC Classification: Example 1$ PARTUNIT COSTANNUAL USAGE

Copyright 2006 John Wiley & Sons, Inc.12-6 ABC Classification: Example (cont.) Example $ PARTUNIT COSTANNUAL USAGE TOTAL% OF TOTAL% OF TOTAL PARTVALUEVALUEQUANTITY% CUMMULATIVE 9$30, , , , , , , , , , $85,400 AB C % OF TOTAL CLASSITEMSVALUEQUANTITY A9, 8, B1, 4, C6, 5, 10,

References “Production & Operations Analysis” by S.Nahmias “Factory Physics” by W.J.Hopp, M.L.Spearman