Inventory Management and Production Planning and Scheduling - Essay Example

These usually shares 50%-70% of the total items yet contribute only 5% to 20% of their total value. As A items are most valuable in the business operation, stricter and tighter inventory control policies are implemented for their maintenance. For one, A items requires the most accurate and detailed records which are done through a more rigid control on transaction documents. Also, daily updating is done to gain a regular accurate insight of their demand and order quantities. I believe that these tighter inventory policies for type A items are logical.

Since they constitute the highest dollar value of the total stock of merchandise, they must be treated with utmost care. These items do entail the stricter documentation as loss of only a minute portion will lead to huge losses for the company as their per unit value is relatively high. Also, inventories with higher values are typically marketed at a higher price to customers. Type A are considered high-end products as they typically require a huge amount of purchasing power from the consumer.

Since they are sold to the high-end market, a loss of a single sale of the inventory will lead to a significant loss to the company. Closely monitoring the level of these stocks will yield a higher profitability for any business operation. B items, though given a less strict policy than A items, requires normal control which involves accurate records and timely attention. As opposed to A items which require daily updating, order quantity and order points for B items only need to be revised on a quarterly basis.

These stocks require only normal processing, yet they are given top priority when critical situations arise. Moderate control policies are implemented in keeping B items as they comprise only an intermediate value of the company’s total inventory. These items do not require