Contemporary Logistics

Management

FRANCES KEATING PMP, PGTE

Frances Keating

Questions From Previous Lesson?

Frances Keating

Learning Outcomes

Inventory Management
ABC Classification
XYZ Analysis
AX Control
Frances Keating

ABC Classification

Based on value of inventory

Inventory items that generate the
most return/value for money
A = Outstanding importance
B = Average importance
C = Relatively important
Frances Keating

ABC Classification
Derived from Pareto 80/20 Rule
10 20% of A = 70 80% consumption
15 25% of B = 10 20% consumption
65 75% of C = 5 10% consumption
20% of inventory accounts for 80% of the turnover of
stock
Frances Keating

ABC Classification

ABC Analysis
Score inventory items by
Annual consumption value X Cost of
item
E.g.
Turnover value of 10K Widgets is 100K
Cost of each Widget is 10 cent
100,000 x 0.10 = 10,000
Frances Keating

XYZ Analysis

Based on usage/turnover
Usage or demand for inventory
items
X = Constant demand
Y = Some fluctuations in demand
Z = Not used regularly
Frances Keating

XYZ Analysis

X = Constant demand
Little change in usage
Established pattern of usage
Stock levels can be easily
forecasted
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XYZ Analysis

Y = Some fluctuations in
demand
Usage changes due to unpredictable
events
May be seasonal
Harder to establish a usage pattern
Harder to forecast
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XYZ Analysis

Z = Not used regularly

Harder to identify what will
increase or decrease
demand
Very hard to forecast
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XYZ Analysis

Also based on Pareto 80/20 Rule

20% of stock (X ) = Easy to forecast. High
turnover so needs frequent monitoring
30% of stock (Y) = Harder to forecast. Lower
turnover so needs less monitoring
50% of stock (Z) = Difficult to forecast. Very low
turnover so needs sporadic monitoring
Frances Keating

AX Control

Combine ABC & XYZ analysis

Helps to identify control measures based on
high consumption and high value of stock
Stock less of some items at given times
Understand demand to enable tighter
consumption control
Reduce supply constraints by identifying
alternative/additional sources
Frances Keating

AX Control

Frequency of Demand
Value of
Demand

AX

AY

AY

BX

BY

BZ

CX

CY

CZ

AX & AY - Require weekly review of stock levels

AY, BX, BY & CX - Require monthly review of stock levels
BZ, CY & CZ - Require quarterly review of stock levels
Frances Keating

Additional Inventory Management Techniques

VED Analysis
Based on the criticality of the stock to the
business
V Vital stock items. Will stop production
or halt distribution
E Essential stock items. Will impact or
slow production or distribution
D Desirable stock items. Low impact on
production or distribution
Frances Keating

Additional Inventory Management Techniques

FSN Analysis
Based on the movement of the
stock
F Fast moving
S Slow moving
N Non-moving
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Additional Inventory Management Techniques

SDE Analysis
Based on the availability of the
stock
S Scarce
D Difficult to source
E Ease to source
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Inventory Management

Forecasting
Demand
Supply

Requires awareness of
Markets
Trends
Frances Keating

 Frances Keating

 Frances Keating

Inventory Control

Frances Keating

Break, then discussion time.

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Frances Keating