Guidelines:
AA products are your most profitable products and hence, must be treated them with care:
Raise your service levels
- Secure a high service level
- These items should have the higest inventory turnover ratio
- Lowering cost prices will have a huge impact on your buttom line
- Spend time on managing these items
- Make sure your gross margin is acceptable – this is your core business
- Do remember: running short on AA products will have severe consequences for your business
AC items are defined as having high econimically importance and are sold rarely and irregularly:
- Securing a high service level is often very costly
- Optimize your turnover ratio in order to cut costs on inventory
- These items are high risk – watch out for obsolecense
- Spend time on forecasting – be carefull when purchasing
- Try to shorten the lead time from suppliers
- These items should only be sold or purchased to order if possible
CA items are the ”paper clips” of supply chain companies: Everybody buys them – but their economically impact is very low:
- Secure a high service level – the cost of doing so is relatively low
- A high inventory turnover ratio is expensive – the transaction costs will eliminate your contribution margin
- Too many purchases can cause problems down at the goods reception
- Buy large quantities unless the volumes are causing space problems on inventory
- Apply simple management policies
CC items are defined as your least important items – which are rarely sold
- Securing a high service level is very costly
- Most items are dead or with a very low frequency with almost no usage – a few items may be new
- A lot of these items should be phased out
- These items most likely have excessive levels of inventory – clean up your inventory!
- Purchase these items once or twice a year
- Identify which items should be made or purchsed to order