Question

Explain in detail how you arrived approached the application of the ABC assessment.?

Make at least three recommendations as to how Jones might best manage the inventory of the items listed in the table. Explain in detail why these recommendations would prove a better means of controlling the inventory thereby saving the company money.

Answer 1

ABC analysis of Inventory is a method of sorting Inventory in to 3 Category :

A- Best Selling item ,Not take major space in Warehouse space and Cost

B - Middle range of item that sale regularly  but not like A and may cost more than A items to hold

C- Rest of Inventory , holding more cost and adverse impact on bottom line

ABC analysis is very close to Pareto Analysis ( 80:20 principle)

Importance of ABC analysis is to to categorised Jones Inventory in a best way to identify which product desrves most of resources and attempt to help Jones to boost up revenue and bottom line

Working capital cost maintain low with help of ABC analysis with help of reducing Inventory Obsolete and optimize Inventory Turnover days

Following points will help jones in relates to Inventory Management with help of ABC method :

1) Better Forecasting

2)Smarter negotiation with Supplier

3) Strategic pricing