Inventory Planning at AB Corp., Applying ABC Classification

Inventory Planning at AB Corp., Applying ABC Classification

The caselet pertains to the situation faced by AB Corp., a major manufacturer of agriculture and farm equipment. The company was continuously facing concerns in managing a proper and effective inventory regarding its spares and components.

In December 2014, the management of AB Corp., announced its requirement for a definite plan to manage the inventory of its various important and not-so-important spares and components, needed for fabricating, manufacturing and assembling agriculture and farm equipment. For almost a year the company had been facing a lot of mishandling and mismanagement in the upkeep and maintenance of the inventory................

Company Background

AB Corp., was one of the leading manufacturers of agriculture and farm equipment in the Vidarbha region of Maharashtra. A small-sized manufacturer and distributor of locally produced spare parts and components, it largely catered to price-sensitive rural population..............

Categorization of Spares and Components

The central storehouse of the company was catering to all the production centers, which made various farm tools and equipment. The central storehouse stocked a variety of spares, materials, parts, sub-assemblies and components it uses in its production, fabrication and assembling processes. Of late, there seemed to be a surge in the demand for the finished goods.....................

Assignment Questions

I. How are the categorizations of items done through ABC analysis?
II. List the other categorization methods available.
III. ............

Exhibit

Exhibit I: Annual Usage and Cost Value of Different Items

Inventory Planning at AB Corp., Applying ABC Classification

Synopsis

This caselet focuses on the concept and application of ABC Analysis, an inventory classification and control technique. AB Corp., is a fast growing agriculture tools and farm equipment manufacturing company in Gondia, Maharashtra. AB Corp., owing to the issues faced in the erratic supply of spares and components during the peak season production, desired to take a call to manage their inventory in a much more professional and organized manner. The Store Manager, Abhinav Tomar (Tomar), of AB Corp., was asked to resolve the problem of classification and categorization of the inventory. After a lot of consideration, Tomar, decided to apply ABC Analysis to find a solution. Can ABC Analysis solve the problem of classification of the inventory items to make the inventory planning and control more effective and efficient?

Prerequisite Conceptual Understanding

• • Jay Heizer, et al., “Chapter 11: Inventory Management”, Operations Management, 9^th Edition, Pearson Education, 2008

Expected Learning Outcomes

• • The concept of ABC Analysis for better inventory control
• • Apply ABC analysis and infer results of ABC classification

Assignment Questions

• I. How are the categorizations of items done through ABC analysis?
• II. List the other categorization methods available.
• III. How are the results interpreted once the categorizations of the items are done?

Teaching Plan

The Teaching Plan [Annexure (TN)-I], which guides in conducting the classroom discussion on the caselet is given on the last page of this Teaching Note....