MAQ Corporation

"Rene Corp. Ltd., a major producer of consumer electronics equipment, is currently faced with a rapidly growing product line and its associated inventory problems. Rene's CEO, Abimbola Adebayo, decided to start a program to analyse the company's inventory requirements utilizing different inventory techniques. The first phase of this program consists of an ABC analysis of the company's product line (shown in the following table). Mr. Adebayo has encountered difficulties in deciding on the appropriate criteria to use in the classification and in developing appropriate cut-off levels for each class of inventory. To solve his dilemma, Mr. Adebayo has contracted the services of a logistics consulting firm to perform the inventory analysis." Inspired by case 9.1 on pages 353 Supply Chain Management

Sales Data (One-year Period)

PRODUCT #	Unite Sold	Price Per Unit ($)	Profit Per Unit ($)
SR101	14000	245	60
SR103	700	1550	320
SR105	1500	620	90
SR201	40	2300	860.50
SR203	10	3500	1650
SR205	9350	510	120
SR301	750	650	195
SR303	600	710	198
SR305	3200	930	302.60
SR500	120	1200	442

Case Questions

1. If you were employed by the consulting firm, how would you construct your method of analysis? (Hint: create a table and do the ABC classification using the data presented in the table above. See pp. 347 in the textbook for the explanation and an example. This question will not get any mark without an ABC classification table.)
2. What criteria would you use?
3. What would the cut-off levels be? Be sure to provide explanations of the reasoning supporting your decisions.