Inventory Classification Case Study
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ScribdTranslationsInventory Classification Case Study
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ScribdTranslationsProduct evidence: Case study - Inventory classification.
PRODUCTS IN RAW MATERIAL
PROCESS
INVENTORIES
SUPPLIES
PRODUCTS
FINISHED
Chain supermarket Independent supermarket
Physical inventories are conducted on all marketed products, meat and fruits and vegetables.
in large and small surfaces.
In large retail spaces, cyclical inventories are conducted on specific lines of merchandise.
which represent a greater risk of loss and an annual general inventory is conducted
to the entire surface in the sales room and its respective warehouses.
In some independent supermarkets, the control is not as strict and organized as
In chain supermarkets, the inventories are annual and according to the low stock in lines.
of greater loss reduction.
INVENTORY CLASSIFICATION
The classification of inventories is a very useful tool to keep track of the days of
ideal and expected inventory in a business whether small, medium, or large
company, it is an internal control that will provide real results on how the company is doing
according to their inventory stock. All companies work day by day for that.
maintaining an optimal inventory in businesses, this inventory figure depends on
many decisions, whether financial or administrative.
Within this inventory classification, we find the ABC methodology which
it consists of categorizing products according to their unit cost and volume
merchandise that is demanded within the business which will be divided into a group in
special. The criterion with which most companies carry out this classification is with the
unit cost of each product with their percentage of participation. I will give an explanation
brief of each zone:
CATEGORY A: They are those raw materials that represent a part
important of the total inventory value. Products with higher turnover and stock of
high inventories. For the sales team, this group allows them to carry out
negotiations with suppliers who commit to maintaining stock
ideal of these products without generating inventory shortages. Represents 80% of
total inventory.
CATEGORY B: The raw material of this group is important for
intermediate business between category A and C. Represents 15% of the total.
inventory.
CATEGORY C: It is the least important material for the company, consisting of products that
not very profitable; even this category is not important to maintain for the salesperson.
inventory stock.
A company has the following categorization of lines in its inventory along with its
unit cost and quantity of inventory:
Analysis according to the average cost of the product.
First, they are classified by their highest cost and the percentage of total cost is calculated.
Line Average Cost Quantity Total Cost Percentage
Liquors $ 18,037 8052$145,233,868 21%
Imported $ 10,460 3104.5 $ 32,473,382 5%
Personal Use $ 7,500 22586$169,389,333 25%
Pharmacy $ 5,843 2274 $ 13,287,162 2%
Refrigerated 5,398 9086.71 $ 49,052,623 7%
Home Cleaning $ 5,065 20156$102,092,695 15%
Groceries $ 4,818 98475 $ 47,472,257 7%
Bakery $ 3,534 1864 $ 6,588,961 1%
Grains $ 2,829 26915 $ 76,139,219 11%
Liquid Drinks $ 2,258 16288 $ 36,777,372 5%
Total $678,506,872 100%
Then it is ordered from highest to lowest, according to the percentage of the total cost, and it is accumulated the
percentage.
Percentage
Line Costo Total Porcentaje
Accumulated
Personal Use $169,389,333 24.97% 24.97%
Liqueurs $145,233,868 21.40% 46.37%
Home Cleaning $102,092,695 15.05% 61.42%
Grains $ 76,139,219 11.22% 72.64%
Refrigerated $49,052,623 7.23% 79.87%
Groceries $ 47,472,257 7.00% 86.87%
Liquid Beverages $36,777,372 5.42% 92.29%
Imports $32,473,382 4.79% 97.08%
Pharmacy $ 13,287,162 1.96% 99.04%
Bakery $6,588,961 0.97% 100.00%
Total $678,506,872 100.00%
Finally, they are grouped according to the defined criterion.
Classification Percentage
Line Costo Total Porcentaje
Accumulated ABC
Personal Use $169,389,333 24.97% 24.97%
Liquors $145,233,868 21.40% 46.37%
A
Home Cleaning $102,092,695 15.05% 61.42%
Grains $76,139,219 11.22% 72.64%
Refrigerados$ 49,052,623 7.23% 79.87%
Groceries $ 47,472,257 7.00% 86.87%
B
Liquid Drinks $36,777,372 5.42% 92.29%
Imports $32,473,382 4.79% 97.08%
Pharmacy $ 13,287,162 1.96% 99.04%
C
Bakery $ 6,588,961 0.97% 100.00%