Explanation

ABC analysis is applied to stock and its management. It is based loosely on the Pareto principles, better known as 80/20 rule. Pareto principle is the theory that 80% of outcome results from 20% of inputs. For example, 80% of sales are to the top 20% of customers; 80% of spend on inventory is accounted for by the top 20% of stock items.

The ABC concept is based on Pareto ' s law. The following steps are carried out for the ABC analy-sis.

- Step 1: Compute the annual usage value for every item in the sample by multiplying the annual requirements by the cost per unit.

- Step 2: Arrange the items in descending order of the usage value calculated above.

- Step 3: Make a cumulative total of the number of items and the usage value.

- Step 4: Convert the cumulative total of the number of items and usage values into a percentage of their grand totals.

- Step 5: Draw a graph connecting cumulative % items and cumulative % usage value. The graph is divided approximately into three segments, where the curve sharply changes its shape. This indicates the three segments A, B and C.

LO 2, AC 2.1

Explanation

Available inventory (or Inventory position - IP) is equal to inventory on-hand plus quantity on order minus backorder (if any)

Explanation

Material requirement planning (MRP) is a production planning and material (inventory) control system used in manufacturing. Objectives of MRP are to ensure materials are available for production while minimising inventory and to plan production and procurement activities.

Bill of materials (BOM) is an important component of MRP. BOM is also known as product struc-turer. This lists all the items that comprise each assembly and sub-assembly that make up the final product or end item. Therefore, MRP is commonly used to manage dependent demand stock.

Explanation

Below is a formula from Toyota you can use to make an informed decision.

1. Start with the basic right-angle stacking width

2. Add the load length

3. Add 12 inches for clearance

The basic right-angle stacking width is the smallest amount of space a forklift needs turn in order to insert its forks into a pallet. You can find basic right-angle stack measurements in the equipment manual or by contacting TMHNC if your business is located in Northern California. This measurement does not include the length of the load or room need for clearance.

Load lengths vary depending on your application, products, etc. As a starting point, a standard pallet has a 48-inch load length. Always check your forklift’s data plate for the rated capacity (which is affected by attachments and other factors).

Adding 12 inches for clearance ensures you have enough room for your forklift’s turn radius and helps protect against damage from operator error and/or product that may hang over the edge of the pallet.

Explanation

Vendor Managed Inventory (VMI) is a business model where the buyer of a product provides in-formation to a vendor of that product and the vendor takes full responsibility for maintaining an agreed inventory of the material, usually at the buyer ' s consumption location.

Floor-Ready Merchandise can be defined as the merchandise that is pre-tagged, pre ticketed and pre-occupied with all the necessary details and information such as marked to their specifications for style, size, type, color and price, this information is required in the retail store and is done before it reaches the retail store.

Economic order quantity (EOQ) is the ideal order quantity a company should purchase to minimize inventory costs such as holding costs, shortage costs, and order costs. This production-scheduling model was developed in 1913 by Ford W. Harris and has been refined over time. The formula assumes that demand, ordering, and holding costs all remain constant.

The full definition of reverse logistics, as according to The Council of Logistics Management, is the process of implementing, controlling, and planning the cost-effective flow of finished goods, raw materials, and in-process inventory. The flow is from the point of consumption (i.e. the customer) to the point of origin (i.e. the manufacturer), to properly dispose of these or to recapture value.

In the scenario, XYZ solves the current situation by letting the supplier to management the inventory and sharing stock level information with the supplier. Vendor managed inventory is the most suitable answer.

Explanation

The purposes of stores and warehouses are:

1. Maximum use of space.

2. Ready access to all items.

3. Efficient movement of goods.

4. Effective utilization of labour & equipment’s

5. Maximum protection of items

6. Good-house-keeping.

Explanation

Minimum open aisle width for standard counterbalance forklift is 10.5-13.1 ft. You can look at the minimum aisle width for different equipment here, or calculate yourself with an instruction here.

LO 1, AC 1.3

Explanation

Many codes have integrated check digits. These are additional numbers or characters added to codes that a computer uses to verify the number is valid. The intention is to reduce the likelihood of miskeying an item and hitting an alternative live item. More often, a system is devised which a computer can calculate using combination of numbers.

Barcode is a graphic symbol used to convey data. Typically the characters in a barcode symbol consist of bars/space pattern. Barcode is the method of representing data in a visual, machine-readable form. Initially barcodes represented data by varying the width and spacing of parallel lines.

Radio-frequency identification (RFID) uses electromagnetic fields to automatically identify and track tags attached to objects.

A prefix is an affix which is placed before the stem of a word or a string. A product code may have prefix which indicates its group, country, origins, etc.