# 11.7.1 Exercise: ABC Category and ABC Classification

### Intended learning outcomes: Determine meaningful ABC categories of some items and perform the ABC classification.

This exercise refers to Subsection 11.2.2. Perform an ABC classification for the items shown in the table in Figure 11.7.1.1, separately for two ABC categories 1 and 2. Class A accounts for 75% of sales turnover, and items in the B class account for 90% of turnover. Why does it often make sense to perform separate classifications for two or more ABC categories? Is your classification of the items as A, B, or C the only possible solution?

Fig. 11.7.1.1       Sales and ABC categories of some items.

Solution:

The division of the items into two categories for a meaningful ABC classi­fication is necessary so that like items can be compared; the categories will reflect different types of items, such as individual parts and final products.

The classifications in the solution above do not represent the only possible solution. Certain classifications can be problematic around the break points. For example, why should item 4711 receive the classification B, while items 8639 and 9050 are assigned to classification C?

## Course section 11.7: Subsections and their intended learning outcomes

• ##### 11.7.1 Exercise: ABC Category and ABC Classification

Intended learning outcomes: Determine meaningful ABC categories of some items and perform the ABC classification.

• ##### 11.7.2 Scenario: The ABC-XYZ Analysis and its Use in Materials Management

Intended learning outcomes: Explain the combined ABC-XYZ classification. Describe its use in materials management. Identify the appropriateness of Kanban control as the result of an ABC-XYZ analysis.

• ##### 11.7.3 Exercise: Safety Stock Variation versus Demand Variation

Intended learning outcomes: Find out whether the safety stock level increases with increasing demand.

• ##### 11.7.4 Exercise: Determining Batch Size Depending on Stockout Costs

Intended learning outcomes: Determine the batch size in dependence of carrying costs and stockout costs, average annual consumption, and the standard deviation of demand during lead time.

• ##### 11.7.5 Scenario: Effectiveness of the Order Point Technique

Intended learning outcomes: Explore the changing shape of the inventory curve for continuous and less continuous demand.

• ##### 11.7 Scenarios and Exercises

Intended learning outcomes: Calculate examples for the ABC Classification. Disclose the ABC-XYZ analysis in materials management. Differentiate between safety stock variation and demand variation. Determine batch size depending on stockout costs. Assess the effectiveness of the order point technique.