SMU MBA ASSIGNMENTS

Answer:   The ABC analysis is a business term used to define an inventory categorization technique often used in materials management. It is also known as Selective Inventory Control. Policies based on ABC analysis:

• A  ITEMS:  very tight control and accurate records
• B  ITEMS:  less tightly controlled and good records
• C  ITEMS:  simplest controls possible and minimal records

 

The ABC analysis provides a mechanism for identifying items that will have a significant impact on overall inventory cost,  while also providing a mechanism for identifying different categories of stock that will require different management and controls.

 

The ABC analysis suggests that inventories of an organization are not of equal value. Thus, the inventory is grouped into three categories (A, B, and C) in order of their estimated importance.

 

‘A’ items are very important for an organization. Because of the high value of these ‘A’ items, frequent value analysis is required. In addition to that, an organization needs to choose an appropriate order pattern (e.g. ‘Just- in- time’) to avoid excess capacity.

 

‘B’ items are important, but of course less important, than ‘A’ items and more important than ‘C’ items. Therefore ‘B’ items are intergroup items.

 

‘C’ items are marginally important.

One of the most important considerations of control is the value of annual consumption of inventory items in a year .

 

 

• Only a small number of inventory items consume a very large share of inventory consumption during the year.

 

• A little larger number of inventory items covers a moderate share of annual inventory consumption.

 

• A very large number of items just cover a very small share of annual inventory consumption.

 

• These acts gave birth to the concept of ABC analysis.STEPS IN ABC ANALYSIS

  The steps in computing ABC analysis are:

   

  a Determine the annual usage in units for each item for the past one-year.

   

  b. Multiply the annual usage quantity with the average unit price of each item to calculate the annual usage in US$ for each item.

   

  c. Item with highest dollar usage annually is ranked first. Then the next lower annual usage item is listed till the lowest item is listed in the last.

   

  d. Table 1 shows ranks of the items according to the annual usage in US$. for 10 items.

   

  e. Arrange the items in the inventory by cumulative annual usage (dollars) and by cumulative percentage. Categorize the items in A, B , and Categories.

   

   

   

  Quantitative analysis

  • It has been observed that in an industrial unit only

   

  • 10% of items have 70% of the annual inventory consumption,

   

  • 20% of the items have 20% of annual inventory consumption.

   

  • 70% of the items have only 10% of the annual inventory consumption.

   

  • Since 70% of the annual consumption o inventory is covered by only 10% of the

   

  • items in the inventory, these items deserve highest attention and are classified as A ‘items.
  • Similarly 20% of the items covering 20 % of the inventory investment are B class items
  • Balance 70% of the inventory items are termed as C class items.

   

   

   

   

  Limitation of ABC analysis

   

  • It doesn’t  take into account the criticality of an item

   

  • It might be possible that item tagged in C category might be crucial for the functioning

   

  • So sometimes it is being implemented along withed to overcome this issueQ2. Why scheduling the maintenance activities is an important process in

    management and what benefits will accrue to the organisation?

    Q3. What is called as Universal Maintenance standards? What are the techniques

    used in UMS system?

    Q4. A machine is purchased for Rs.300000. It is expected that this machine will

    be used for 12 years, at the end of which it will be sold for Rs.15000.

    Calculate the depreciation to be charged for each of the first 3 years of the

    machine’s life, using: (I) The straight line method (ii) The reducing balance

    method at 30% pa

     

    Q5. Briefly explain eight pillars that support TPM in an organisation?

    Q6. a. What are the objectives served to a firm by practicing good craft and

     

     

    b. What are the objectives served by practicing Autonomous Maintenance