Proposed Model for Inventory Review Policy through ABC Analysis in an Automotive Manufacturing Industry

Abstract

A global market inventory is one of the largest and most significant resources of a manufacturing business. ABC analysis is one of the methods used extensively in manufacturing industries for inventory classification. The familiar ABC inventory classification approach categorizes inventory items as A, B and C classes according to their annual consumption value. To direct and control the inventory items more proficiently the inventories managers regularly classify and group all the inventory items. The objective of this paper is to create a periodic review policy based on the ABC classification in order to control the raw materials more efficiently. Based on the data collected through original equipment manufacturer, the necessary analysis was carried out. From the observed results, it was found that the developed periodic review policy improved the inventory turnover ratio from 3.15 to 2.13 by optimizing the inventory level for one year.