A brief rant about the ABC’s | Bill Waddell

See on Scoop.itlean manufacturing

“Apparently the folks writing about stratifying inventory into A, B and C items and building calculations of such into ERP packages didn’t get the lean memo.

Wikipedia is typical of such thinkers when they describe the ABC thought process as:

  • ‘A’ items – 20% of the items accounts for 70% of the annual consumption value of the items.
  • ‘B’ items – 30% of the items accounts for 25% of the annual consumption value of the items.
  • ‘C’ items – 50% of the items accounts for 5% of the annual consumption value of the items.

The idea of micromanaging some items and slacking off on others based on purchase price is the very same theory they taught me at the University of Cincinnati back in the days  when … ”

Michel Baudin‘s comments:

I agree with Bill that, from the point of view of manufacturing operations, the purchase price of materials is not the most important parameter. because the lack of a nail can prevent the completion of a product as effectively as the lack of a pump costing 1,000 times more.

It doesn’t mean, however, that classifying items to treat them differently is wrong, but it must be done by frequency of use rather than price, and I prefer to call the categories “Runners,” “Repeaters,” and “Strangers” rather than A, B, and C.

As a function of rank, I then look for the percentage of units actually built that can be fully assembled with only the items of this rank and higher. It starts at 0%, and, as long as it stays at 0%, I consider the items to be Runners, essentially items you can’t build any product without. At the other end of the spectrum, I call Strangers all the items without which you can make 95% of the units. And everything in-between is a Repeater.

Then you may decide, for example, to dedicate an easily accessible storage location to each Runner, and make special arrangements with suppliers. For Repeaters, you may use the Kanban system, with smaller dedicated locations.  And you don’t keep any stock of Strangers, but order them as needed and store them, if at all, in dynamically allocated slots.

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