Abc And Xyz Inventory Analysis

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ABC and XYZ Inventory Analysis Amritpal Kaur ACC 7145: Accounting Information Systems Prof. Habel Spring/ Summer 2015 Abstract Companies are trying hard to become more productive even though they are facing the inventory management challenge. Inventory management is becoming critical for such production companies now a days. To manage the inventory at its best, it 's very important to classify inventory efficiently. Moreover, for better inventory forecasting, it will be classified appropriately. There are several methods that will be used to classify products and items in inventory. This paper will explore the most powerful classifications of products that will improve the quality service as well as cut the product…show more content…
Moreover companies depend on inventory to operate, manage tools and to issue orders. It 's very important to maintain accurate inventory records because of its numerous benefits such as: • Protection against uncertainties in market forces(i.e. Demand and supply). • Provide CRM( customer relation management) • Control over expenses • Enable smooth running of the production process • Proper use of workforce, technology and equipment. • Discount benefits on bulk purchases. • Control over used/un-used materials. Inventory control methods Both ABC and XYZ are inventory categorization techniques and based on the Pareto analysis. Pareto analysis," is a formal technique useful where many possible courses of action are competing for attention. In essence, the problem-solver estimates the benefit delivered by each action, then selects a number of the most effective actions that deliver a total benefit reasonably close to the maximal possible one." (www). While Pareto analysis is based on "80/20 rule" that represent that " 20% of items contribute of 80% sales". It means that small quantities of products in inventory contribute to the maximum scales 1. ABC analysis: In Inventory management, ABC technique is used to divide the items into three categories. i.e. A, B and C. Under ABC analysis , the main aim of the companies is to plan and forecast for 'A ' category items. Generally, the

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