1.

Produce an ABC Inventory Result

Perce
Deman Cumulativ Categor
Item name Price Dollar Volume nt of
d e $-vol % y
$-Vol
Mineral Water 25,000 5 125,000 77.33 77.33 A
Plastic Caps 50,150 0.3 15,045 9.31 86.64 A
Consumables 25 500 12,500 7.73 94.38 B
Bottles 5,050 1.8 9,090 5.62 100 B
TOTAL 80,225 161,635

Table above shows an ABC Inventory Analysis. It is a method used in

categorizing the items into three. A items with very tight control and accurate record, B

items with less tightly controlled and good records, and C items with the simplest control

possible and minimal records.

Based on the results, it shows that Mineral Water is very important to Fresh

Mineral Water because it has a high demand and percent in the total cost of all the

items of 77.33% same with the plastic caps with 9.31% which belongs in the category A.

Consumables and Bottles were in category B because it gives a lesser value to the

company with a percentage of 7.73% and 5.62% respectively. Thus, A items-Mineral

Water and Plastic Caps is more valuable than items B which is Consumables and

Bottles.

2. Which items do you think need to pass through a cost and price analysis to save
more?

Based on ABC Analysis inventory results, the Consumable bottles will pass

through cost and price analysis because it has a higher price other than the four items.

Fresh Mineral Water operations managers should reduce the cost or expenses in

producing Bottles.
3. How many bottles left for the store manager to place an order?

Parameter Value
Z value 0
Expected demand during lead time 161
Safety Stock 0
Reorder point 161

Fresh Mineral Water has a reorder point of 161 bottles, it indicates that if

the inventory stock drops to 161, an order should be placed. It is also the level of

inventory that Fresh Mineral should store or stocked in order for the company to

cover the demand until the next order will arrives.

4. If the safety stock has a negative value, what does it mean?

Safety stocks is an extra inventory beyond expected demand. Operations

Managers carry safety stock to prevent stockouts, caused by changes in

customer demand, incorrect forecast and variability in lead times for raw

materials. A negative safety stocks indicates that the capability for a positive

(non-zero) on-hand sometimes and a zero on hand at other times. Negative

safety stock would have less capital and fill contribution than if it were stock item

and more than if it were a non-stock item.

Negative values for safety stocks will work perfectly well in current reorder

point system with no modification. In such systems a Re-order point is calculated

as the safety stock plus the usage during the lead time.
 5. Interpret the inventory results.

Parameter Value Parameter Value

(Daily) Demand (d-bar) 393 Z value 0
(Daily) Demand std dev
164 Expected demand during lead time 161
(sigma-d)
Service level % 100 Safety Stock 0
Lead time (in days) (L) 0.41 Reorder point 161
Lead time std dev (sigma L) 0.16

Inventory results shows that there is a zero (0) value for the Z and safety stock

and have a 161 values for the expected demand during lead time and reorder point.

There was a total demand of bottles of 393 with a reorder point of 161 and expected

demand during lead time of 161. It shows that Fresh Mineral Water lead times in days of

0.41 indicates the delay on the inventory control. This delay is typically the sum of the

supply delay, the time it takes a supplier to deliver the goods once an order is placed,

and the reordering delay, which is the time until an ordering opportunity arises again.