Chapter 12, Problem 2.2VC

Summary Introduction

Case summary:

One of the biggest problems for WC Company was controlling the inventory. The mass customization and responsiveness made the firm realize that the success of the firm is dependent on the inventory control.

The firm is a competitive giant where its competitors do not have the purchasing power as that of WC Company. But the cost advantage cannot be taken lightly. The bill of materials must be precise if the products are to be delivered on time.

To determine: The additional policies and techniques that can be initiated to maintain accurate inventory records.

Introduction: They are classified as A-class with 15% of items, B-class with 30% of the items, and C-class with 55% of the items.

ABC classification system:

It is an inventory method for classifying the items under three different categories as follows:

• A: most valuable items that account to 70-80 percent of the annual consumption value. A-items typically account for 10-20 percent of the total inventory.
• B: intermediate items that account to 15-25 percent of the annual consumption value. B-items typically account for 50 percent of the total inventory.
• C: least valuable items that account to 5 percent of the annual consumption value. C-items account for 30 percent of the total inventory.

The classification is done for the firm to concentrate more on the critical few items rather than the trivial many items.