Alpha Inc. is a small medical device manufacturer. The company uses various types of materials in its manufacturing process. These materials constitute a large part of the company’s assets. The management of this critical asset greatly affects the company’s profitability. The owner of Alpha Inc. tasks you, an operations analyst, to evaluate the effectiveness of the company’s inventory management of these materials.
The accounting department of Alpha Inc. collects inventory data of July to December 2023 for your analysis. The data set (see Appendix) includes the following information for 125 parts used in the manufacturing process.
• Part ID: the unique part identifier.
• Units Sold: the total number of units sold in the six-month period.
• Unit Cost: the estimated unit cost used in manufacturing process.
• Inventory Level: the estimated average number of units held in the warehouse.
(a) As the first step of the analysis, ABC classification allows one to distinguish between critical materials and ordinary materials so that a company can optimise its efforts and resources in managing materials of different significance. Choose the techniques learnt in BUS352 to classify the 125 parts into Type A, Type B, and Type C items. You should document the detailed steps (e.g., how to do calculation, how to separate the parts into A/B/C types) in the word document and show the numerical analysis in the Excel spreadsheet. You should exp licitly highlight or signify the three types of items.
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