Advantages And Disadvantages Of An MRP System

5403 Words Mar 10th, 2015 22 Pages
Purchasing and supplies assignment

The relevant details

NAME
LEAH JERUTO REGISTRATION NUMBER

NATURE OF ASSIGNMENT
Individual work
DATE PRESENTED
21/03/ 2015
TASK
HANDLING INVENTORY MANAGEMENT TOOLS
LECTURER NAME
William mwangi

ABC analysis
In materials management, the ABC analysis (or Selective Inventory Control) is an inventory categorization technique. ABC analysis divides an inventory into three categories- "A items" with very tight control and accurate records, "B items" with less tightly controlled and good records, and "C items" with the simplest controls possible and minimal records.
The ABC
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Traditional costing systems allocate cost drivers by the actual unit cost, rather than by the activity percentage of the cost driver. As a result, ABC cost assignments often differ from traditional cost system assignments.

Requires Substantial Resources
The ABC method requires more resources to maintain than traditional costing systems. When cycle counts are performed, class A inventory must be routinely analyzed to determine if the inventory still consists of high-priority items. If an inventory piece is no longer used or demanded as frequently, it is moved to another inventory classification. This constant process requires much more data measurement and collection

Just in time A strategy for inventory management in which raw materials and components are delivered from the vendor or supplier immediately before they are needed in the manufacturing process

Advantages & Disadvantages of Just-in-Time Inventory
Companies turnover significant inventory control to suppliers with just-in-time inventory.
Just-in-time (JIT) inventory refers to an inventory management system with objectives of having inventory readily available to meet demand, but not to a point of excess where you must stockpile extra products. Maintaining inventory takes time and has costs, which is what motivates companies to implement JIT programs.

Customer Needs
Balancing the goals of avoiding stock outs while minimizing inventory costs is at the heart of just-in-time
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