Could someone help me with this ABC Analysis please?

A car assembly company Geely, is able to produce 11 different types of cars, ranging from hatchbacks to SPVs. In the past couple of years it started its preparations to penetrate the UK market using different companies, brands and variants. The company needs to rationalise and review its stock management operations, and be able to co-ordinate not just production but also stock management between its parent company and its subsidiaries. Geely has well over 12,000 different stock parts and components. However, not all components are of the same utilisation. The company at present simply manufactures and then updates its stock every week, to ensure full availability of parts all year round. In order to be able to open a subsidiary, a stock control analysis, initiated by the parent company, identified 3,150 parts or components that were required to sustain basic production and maintenance, in the UK. Using a Pareto analysis, these parts were split into three categories, so that an ABC analysis could be subsequently done. The first task was to calculate the average value of the A, B and C categories as follows:
• Category A items are valued at €455 on average
• Category B items are valued at €180 on average
• Category C items are valued at €45 on average
The analysis also revealed which of these items could be labelled with the above three categories:
• Category A car parts or components – 75 items
• Category B car parts or components – 325 items
• Category C car parts or components – 2750 items
The analysis also suggested new production and timing patters for the stock management tea. Instead of producing and stock items on a weekly basis, the following table was proposed to improve both stock management and cash flow, as follows:
• Category A – Reorder point every 2 weeks
• Category B – Reorder point every 4 weeks
• Category C – Reorder point every 6 weeks
Calculate the ABC of the Geely car part items being sent to the UK storage, using the data given, and calculate:
a) what is the cost (€) and
b) quantity stock requirements using a general re-stocking strategy every 4 weeks,
Also calculate :
c) what is the cost (€) and
d) quantity stock requirements using an ABC analysis over a 4 week average period.
e) What conclusions can be made from the results above?
nat123
Asked May 28, 2016

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