abc analysis (by students)
TRANSCRIPT
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7/29/2019 ABC Analysis (by Students)
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By:-
Pavitha
Raji
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ABC analysis is also called as pareto analysis
one of the most important consideration ofcontrol is the value of annual consumption ofinventory items in a year
Only a small number of inventory items consumea very large share of inventory consumptionduring the year
A little large 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 facts gave rise to the concept of ABCanalysis
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It has been observed that in an industrial unit only10% of items have 70% of annual inventoryconsumption
20% of items have 20% of annual inventoryconsumption
70% of the items have only 10% of annual inventoryconsumption
Since 70% of annual consumption of inventory iscovered by only 10% of the items in the inventorythese items deserve highest attention and are
classified as A items Similarly of the items covering 20% of the inventory
investments are B class items
Balance 70% of the inventory items are termed as Cclass items
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The steps in computing ABC analysis are:
1. Determine the annual usage in units for eachitem for the past one year
2. Multiply the annual usage quantity with the
annual unit price of each item to calculate theannual usage in rupees for each item
3. Item with highest rupees usage annual isranked first. Then the next lower annual usageitem is listed till the lowest item is listed inthe last
4. Arrange the items in the inventory bycumulative annual usage and by cumulativepercentage categories the items in A, B, and Ccategories
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Items Average
usage
Unit cost Annual usage Rank
1 17 2.5
2 50 173 15 15
4 25 17
5 5 17
6 50 119
7 153 5
8 20 2.125
9 16 2.656
10 17 2.5
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Items Average
usage
Unit cost Annual usage Rank
1 17 2.5 42.5
2 50 17 8503 15 15 225
4 25 17 425
5 5 17 85
6 50 119 5950
7 153 5 765
8 20 2.125 42.5
9 16 2.656 42.5
10 17 2.5 42.5
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Items Average
usage
Unit cost Annual usage Rank
1 17 2.5 42.5 8
2 50 17 850 2
3 15 15 225 5
4 25 17 425 4
5 5 17 85 6
6 50 119 5950 17 153 5 765 3
8 20 2.125 42.5 7
9 16 2.656 42.5 9
10 17 2.5 42.5 10
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Items Annual
usage
Cumulative
annual
usage
Annual
usage
percentage
Category
6 5950
2 850
7 765
4 425
3 225
5 85
8 42.5
1 42.5
10 42.5
9 42.5
Total 8470
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Items Annual
usage
Cumulative
annual
usage
Annual
usage
percentage
Category
6 5950 5950
2 850 6800
7 765 7565
4 425 7990
3 225 8215
5 85 8300
8 42.5 8342.5
1 42.5 8385
10 42.5 8427.5
9 42.5 8470
Total 8470
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Items Annual
usage
Cumulative
annual
usage
Annual
usage
percentage
Category
6 5950 5950 70
2 850 6800 80
7 765 7565 89
4 425 7990 94
3 225 8215 97
5 85 8300 98
8 42.5 8342.5 98
1 42.5 8385 99
10 42.5 8427.5 99.5
9 42.5 8470 100
Total 8470
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Items Annual
usage
Cumulative
annual
usage
Annual
usage
percentage
Category
6 5950 5950 70 A
2 850 6800 80 B
7 765 7565 89 B
4 425 7990 94 C
3 225 8215 97 C
5 85 8300 98 C
8 42.5 8342.5 98 C
1 42.5 8385 99 C
10 42.5 8427.5 99.5 C
9 42.5 8470 100 C
Total 8470
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Category Items % of items
in inventory
Rupees in
the
category
% rupees in
the
category
A 6 10 5950 70
B 2, 7 20 1615 19
C 1, 3, 4, 5,
8, 9, 10
70 905 11
Total 10 100 8470 100
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