Posted: October 12th, 2020

ABC analysis

ABC analysis or selective inventory control is a method used to identify all items that may have tangible impacts on the total inventory cost together with identifying various stock categories that may require different methods of management and control as noted by Perkins, D. (2010). While executing ABC analysis, all inventories should be valued and ranked into the three band codes ABC. Use of ABC analysis by Wheeled Coach helps the company to develop polices and procedures for controlling inventory. Implementation of ABC analysis in Wheeled Coach ABC analysis mainly involves the control and management of inventories.
Inventory control is made up of strict polices and regulations and it is focused on the inventories movement and accountability while inventory management mainly focuses on the quantity of the inventory as well as its location in the warehouse (Perkins, D. 2010). Control and management of inventories are not well implemented in Wheeled Coach Company which is a good sign of poor implementation of since the inventory management lack adequate knowledge of Bill-of-Materials. Control of inventories also involves ranking the inventories according to their monetary value.
In this company inventories have been ranked according to their value with “A” items being the expensive ones like chassis, aluminum and plywood for use in flooring and cabinetry. These items are highly and tightly controlled and with high security from the point of purchase to use. “B” items are less expensive and controlled less tightly in the company while “C” items are cheap and have less control. All of these items are then stored under a key and lock or under tight security as a sign of inventory accountability. Even though the company shows high accountability of its inventories, its inventory movement is slow.

Due to the lack of sufficient knowledge in Bill-of-Materials by the inventory managers, the company takes a long period of time before it avails inventories for production process. Proper implementation ABC analysis in any company means that assets for production process should always be made available whenever needed for the process (Shapiro, J. , & Wagner, S. 2009). Inventory management includes economic order quantity, quantity discounts and re-order period (Shapiro, J. , & Wagner, S. 2009). For example in Wheeled Coach Company orders are negotiated to maximize quantity discounts while minimizing on-hand quantities.
Also items like aluminum have a re-order period of eight months. It is also evident that Wheeled Coach Company managers lack enough knowledge on BOM and as a result a lot of time is taken before a decision on when to order or purchase is made leading a long re-order period. Tight security is held at the warehouse where the items are located and are only removed if they are on the Bill-of-Materials. Though Wheeled Coach Company shows a lot of efforts in ensuring proper implementation of ABC analysis, the company lacks enough expertise to execute the implementation process and as a result it exhibits poor ABC analysis implementation.