abc analysis and eoq

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ABC analysis & EOQVijay Prasad sir

Presented by A.Pawan kumarPGDM 2014-2016Rollno-15Presented To

Vilfredo ParetoBorn15 July 1848Paris, FranceNationalityItalianFieldMicroeconomicsSocioeconomicsContributionsPareto indexPareto chartPareto's lawPareto efficiencyPareto distributionPareto principleSignature

Pareto Principle The Vital Few and Trivial Many Rule

80:20 Rule

1950

The Pareto PrincipleA small number of causes is responsible for a large percentage of the effect-usually a 20-percent to 80-percent ratio.

This basic principle translates well into quality problems - most quality problems result from a small number of causes.

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(1)80% of crimes are committed by 20% of criminals.

(2)80% of the time we were 20% of clothes.

(3)80% of the pleasure that we get from relationshipsComes from 20% of people.

80% of Complaints comes from by 20% of customersWhen we are saying 80:20 its just an approximationWhat is important ??There is an unbalance between causes and effortsAll this is great but how does it help us??Why is 80:20 principal so valuable ?The reason the 80:20 principle is so valuable because its counter intuitive.Most people think rewards are proportional to effort.The 80/20 Principle (or Pareto Principle) according to Richard Koch (Less is More)

Born28 July 1950London, BritainEducationM.B.A. University of Pennsylvania, Wadham College, Oxford University (M.A.)OccupationAuthor, speaker and investorEmployerSelfNotable workThe 80/20 PrincipleRichard Koch: The key is not effort or hard workBut finding right thing to achieve.The crucial part is to find 20% and focus on it.13INVENTORY CONTROL TECHNIQUES..

INVENTORY CONTROL TECHNIQUES :OPERATIONAL ASPECT OF THE INVENTORY MGTREALISE THE OBJECTIVE OF INVENTORY MGT &CONTROL.

ALL DEPENDS ON THE CONVIENIENCE OF THE FIRM TO ADOPT ANY OFTHE TECHNIQUESMost commonly used techniques

Copyright 2006 John Wiley & Sons, Inc.12-21

Classification of inventory itemsClass A5 15 % of units70 80 % of value Class B30 % of units15 % of valueClass C50 60 % of units5 10 % of valueITEMITEMS(%)MONEY VALUE(%)A1070 B2020C7010A Class items (High Consumption Value)B Class items (Moderate Consumption Value)C Class items (Low Consumption Value)

1.Very strict control.1.Moderate controlLoose control2. No safety stocks or very low safety stocks.2.Low safety stocks2.High safety stocks.3.Maximium follow-up & expediting.3.Periodic follow-up.3.Follow up & expediting in exceptional cases.4.Rigorous value analysis.4.Moderate value analysis.4.Minimum Value Analysis.5.Must be handled by senior officers.5. Can be handled by middle management.5. Can be fully delegated.6.6.6.7.7.7.8.8.8.

Economic Ordering QuantityEOQis theamountofinventoryto be ordered at onetime forpurposesof minimizing annual inventory cost.

Formula for Economic Ordering Quantity :

Ordering Cost: Cost of placing single order.Holding Cost: Cost to hold one unitinventoryfor a year

2Dco/PciUSE OF EOQ AS A PART OF A CONTINUOUS REVIEW OF INVENTORY SYSTEM MODEL FOR CALCULATING THE APPROPRIATE REORDER POINT AND THE OPTIMAL REORDER QUANTITY TOOL FOR DETERMINING QUANTITY OF INVENTORY EOQ MODEL

Conclusion :

Economic order quantity method is an highly efficient method so as to overcome In management of inventory difficulties.

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Conclusion Efforts is important, but knowing where to make an effort makes all the difference!

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