You are given the below mentioned data ofZain Company and as

You are given the below mentioned data of\"Zain Company\", and asked to perform an ABC anlayis Please determine cumulative demand (volume) cumulative percent and then assign and classify items as \'A\', \'B\' or \'C\' YOU MUST show why you classified items as A, B, or C. Please note that item B 390 is a special item that has to be imported from Saudia Arabia and has a lead time of 12 months. In addition going to be phased out due to engineering changes in the next 3 months. Does that change your classifications.

Solution

(a)

The cumulative demand is given in the table below:

Item

Unit Cost

Annual Demand

Cumulative Demand

A211

4

1200

1200

B390

90

100

1300

C003

6

4500

5800

D100

150

400

6200

E707

2000

35

6235

F660

120

250

6485

G473

90

1000

7485

(b)

First of all we will calculate usage of item in total usage

Item

Unit Cost

Annual Demand

Total cost per year

Usage as percentage of total usage

A211

4

1200

4800

1.7%

B390

90

100

9000

3.1%

C003

6

4500

27000

9.3%

D100

150

400

60000

20.6%

E707

2000

35

70000

24.1%

F660

120

250

30000

10.3%

G473

90

1000

90000

30.9%

Total Usage

290800

100%

Now sort the items by usage

Item

Cumulative % of item

Unit Cost

Annual Demand

Total cost per year

Usage as percentage of total usage

Cumulative % of total

G473

14%

90

1000

90000

30.9%

30.9%

E707

29%

2000

35

70000

24.1%

55.0%

D100

42%

150

400

60000

20.6%

75.6%

F660

56%

120

250

30000

10.3%

85.9%

C003

71%

6

4500

27000

9.3%

95.2%

B390

84%

90

100

9000

3.1%

98.3%

A211

100%

4

1200

4800

1.7%

100%

Total Usage

290800

100%

So, the classification is

Category

Item

Percentage of Item

Percent Usage

Class A

G473, E707, D100

42

75.6

Class B

F660, C003

28

20

Class C

B390, A211

30

4.6

Item	Unit Cost	Annual Demand	Cumulative Demand
A211	4	1200	1200
B390	90	100	1300
C003	6	4500	5800
D100	150	400	6200
E707	2000	35	6235
F660	120	250	6485
G473	90	1000	7485