abc analysis and eoq

Presented by

A.Pawan kumar

PGDM 2014-2016

Rollno-15

Presented To

Vilfredo Pareto

Born 15 July 1848Paris, France

Nationality Italian

Field MicroeconomicsSocioeconomics

Contributions Pareto indexPareto chartPareto's lawPareto efficiencyPareto distributionPareto principle

Signature

Pareto Principle

“The Vital Few and Trivial Many Rule”

“80:20 Rule”

1950

The Pareto Principle

• A 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.

(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 customers

counter intuitive

The 80/20 Principle (or Pareto Principle) according to Richard Koch (Less is More)

Born 28 July 1950London, Britain

Education M.B.A. University of Pennsylvania, Wadham College, Oxford University (M.A.)

Occupation Author, speaker and investor

Employer Self

Notable work The 80/20 Principle

Richard Koch:

INVENTORY CONTROL TECHNIQUES……..

INVENTORY CONTROL TECHNIQUES :

OPERATIONAL ASPECT OF THE INVENTORY MGT

REALISE THE OBJECTIVE OF INVENTORY MGT &CONTROL.

ALL DEPENDS

ON THE

CONVIENIENCE OF THE FIRM TO

ADOPT ANY

OF

THE TECHNIQUES

Most commonly used techniques………

Two bin system

SDE (Sarce,difference and easy)

FSN(fast,slowand non

moving)

EOQ(economic,order quantity)

Max minimum system)

VED(vital,essential

and desirable)

ABC(always better control)

HML(high

medium and low)

Copyright 2006 John Wiley & Sons, Inc.

12-21

Classification of inventory items

• Class A

5 – 15 % of units

70 – 80 % of value

• Class B

30 % of units

15 % of value

• Class C

50 – 60 % of units

5 – 10 % of value

ITEM ITEMS(%) MONEY VALUE(%)

A 10 70

B 20 20

C 70 10

“A “ Class items (High Consumption Value)

“B” Class items (ModerateConsumption Value)

“C” Class items (Low Consumption Value)

1.Very strict control. 1.Moderate control 1. Loose control

2. No safety stocks or very low safety stocks.

2.Low safety stocks 2.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 Quantity

• EOQ is the amount of inventory to be ordered at one time for purposes of minimizing annual inventory cost.

Formula for Economic Ordering Quantity :

– Ordering Cost: Cost of placing single order.

– Holding Cost: Cost to hold one unit inventory for a year

2Dco/Pci

USE 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.

Conclusion Efforts is important,but knowing where to make an effort

makes all the difference!

Thank u