Consolidated Electric Classification System Analysis
Nowadays every sector needs to keep important customer demands before many things in the system because if company provides meeting the demands of customer, then they turn into loyal consumers which means money. In order to balance or managing inventory system, Consolidated Electric aims maximize customer service and minimize cost of these arrangements. Firstly they totally change their on-hand system to computer for diminishing the mistakes and promoting certain and clear inventory records. Thanks to new system, new developments happened through the company’s benefit, for example data about lead time becomes crystal clear for using and calculations, balancing inventory level well provides paying less holding cost, ordering cost and shortage
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This system, ABC (Activity Based Costing), used as identifying the transactions that a CE firm does and then designate indirect costs to product. It divides inventories as a 3 groups like A, B and C. First group is A, respects the highest value parts of inventory, in this case it written as Consolidated Electric stocks almost 20,000 items and buys its inventory from around 200 different manufacturers. The price of the items they purchase range from $0.01 to several hundred dollars. The top 2,000 items account for 50% of sales and the bottom 10,000 items account for 20% of the sales leaving the remaining 8,000 items accounting for 30% of the sales. That is to say, according to ABC analysis group A would include the top 2,000 items which accounts for fifty per cent of total sales. Then we made group B to second big sale which is bottom 10,000 items that accounts for twenty per cent. Finally the part C would remain 8,000 items so we clearly identified 3 groups as what ABC analysis needs that are why we decided to use ABC analysis for Consolidated Electric.
Under favour of the method of order-point, the economic order quantity (EOQ) formula need to be used that the demand rate should be stable, repeater and recognized. Lead Time not ought to diversify, cost of item would stable without discounts, and ordering is done in batches. The EOQ model decreases the total cost of holding as well as the ordering costs. Determinants of the Reorder point are the rate of demand, the lead time, safety stock and demand or lead time
This system, ABC (Activity Based Costing), used as identifying the transactions that a CE firm does and then designate indirect costs to product. It divides inventories as a 3 groups like A, B and C. First group is A, respects the highest value parts of inventory, in this case it written as Consolidated Electric stocks almost 20,000 items and buys its inventory from around 200 different manufacturers. The price of the items they purchase range from $0.01 to several hundred dollars. The top 2,000 items account for 50% of sales and the bottom 10,000 items account for 20% of the sales leaving the remaining 8,000 items accounting for 30% of the sales. That is to say, according to ABC analysis group A would include the top 2,000 items which accounts for fifty per cent of total sales. Then we made group B to second big sale which is bottom 10,000 items that accounts for twenty per cent. Finally the part C would remain 8,000 items so we clearly identified 3 groups as what ABC analysis needs that are why we decided to use ABC analysis for Consolidated Electric.
Under favour of the method of order-point, the economic order quantity (EOQ) formula need to be used that the demand rate should be stable, repeater and recognized. Lead Time not ought to diversify, cost of item would stable without discounts, and ordering is done in batches. The EOQ model decreases the total cost of holding as well as the ordering costs. Determinants of the Reorder point are the rate of demand, the lead time, safety stock and demand or lead time