ASSIGNMENT

Client’s question: How to manage inventory of products?
Assignment 5: Application of ABC/XYZ analysis to products of Hotel ‘Chocolat’
The consultancy methodological guide recommends you to use ABC/XYZ analysis to group products sold in two outlets of Hotel Chocolat in Belfast, in relation to their usage value and variability of sales and recommend suitable ordering strategies as part of overall inventory management. Recommend which kinds of products should be ordered in Just-In-Time manner, in manner of regular orders, in manner of ordering when there is enough demand or perhaps they should be reconsidered for sale in these outlets.
Tip: see example 1 in Tutorial 6 about production strategies; the samHow to manage inventory of products?

Assignment 5: Application of ABC/XYZ analysis to products of Hotel ‘Chocolat’

The consultancy methodological guide recommends you to use ABC/XYZ analysis to group products sold in two outlets of Hotel Chocolat in Belfast, in relation to their usage value and variability of sales and recommend suitable ordering strategies as part of overall inventory management. Recommend which kinds of products should be ordered in Just-In-Time manner, in manner of regular orders, in manner of ordering when there is enough demand or perhaps they should be reconsidered for sale in these outlets. 

Tip:  see example 1 in Tutorial 6 about production strategies; the same strategies can be used to decide about ordering from the production facility

 

Questions related to the Assignment 5:

Qa) Explain what ABC analysis is, for what kind of data can be used, what are the limitations of this method. Discuss how XYZ analysis complements ABC analysis, for what kind of data ABC/XYZ can be used, what are advantages and what are disadvantages of this method. How it can be applied to deciding about production or ordering strategy?

30 project points

 

Qb)  The company selected 30 products they want you to analyse with regards to their sale in the last 7 years and usage value in 2021. They provide you with data on unit manufacturing cost per product, and sale volumes in each of the outlets:

  • Data from Outlet 1: Hotel Chocolat, 18 Donegall Square 

Perform ABC analysis on products sold in Outlet 1 to identify the products in A, B and C category based on the usage value in 2021. The usage value can be calculated as

  • Usage value = Unit manufacturing costs x Sales in 2021

Determine variability of the sales over last 7 years and categorize it according to value of the coefficient of variation (Cv) if the following is adopted:

  • Cv < 0.5, which indicates stable sale and demand

  • 0.5<=Cv <= 1, which indicates fluctuating sale and demand

  • Cv >1, which indicates irregular sale and demand

Based on the ABC/XYZ classification of items, recommend production strategies, i.e.

  • Which products should be ordered in Just in Time manner (on demand),

  • Which products should be ordered in regular intervals and kept in stock,

  • Which products should be ordered once or twice a year, when there is enough demand

  • Which products should be reconsidered for ordering

25 project points

 

  • Data from Outlet 2: Hotel Chocolat, 9 William Street

Perform ABC analysis on products sold in Outlet 2 to identify the products in A, B and C category based on the usage value in 2021. The usage value can be calculated as

  • Usage value = Unit manufacturing costs x Sales in 2021

Determine variability of the sales over last 7 years and categorize it according to value of the coefficient of variation (Cv) if the following is adopted:

  • Cv < 0.5, which indicates stable sale and demand

  • 0.5<=Cv <= 1, which indicates fluctuating sale and demand

  • Cv >1, which indicates irregular sale and demand

Based on the ABC/XYZ classification of items, recommend production strategies, i.e.

  • Which products should be ordered in Just in Time manner (on demand),

  • Which products should be ordered in regular intervals and kept in stock,

  • Which products should be ordered once or twice a year, when there is enough demand

  • Which products should be reconsidered for ordering

25 project points

Prepare your answers in Word document. The recommended number of words: between 800 and 1000 (without work log, references and appendix)

Structure your answer in the document by defining headings:

  1. ABC/XYZ analysis as a method

  2. Analysis of sales data from Outlet 1

  3. Analysis of sales data from Outlet 2

  4. References (Please do not forget to refer to the relevant sources of literature).

  5. Appendix (data)

 

Reminder

Please note that this is one part of the project and that it is a good practice to collect relevant information about the company and use it for other assignments in the project or to improve your answers before the assembly of the final report.

e strategies can be used to decide about ordering from the production facility

Questions related to the Assignment 5:
Qa) Explain what ABC analysis is, for what kind of data can be used, what are the limitations of this method. Discuss how XYZ analysis complements ABC analysis, for what kind of data ABC/XYZ can be used, what are advantages and what are disadvantages of this method. How it can be applied to deciding about production or ordering strategy?
30 project points

Qb) The company selected 30 products they want you to analyse with regards to their sale in the last 7 years and usage value in 2021. They provide you with data on unit manufacturing cost per product, and sale volumes in each of the outlets:
Data from Outlet 1: Hotel Chocolat, 18 Donegall Square
Perform ABC analysis on products sold in Outlet 1 to identify the products in A, B and C category based on the usage value in 2021. The usage value can be calculated as
Usage value = Unit manufacturing costs x Sales in 2021
Determine variability of the sales over last 7 years and categorize it according to value of the coefficient of variation (Cv) if the following is adopted:
Cv < 0.5, which indicates stable sale and demand
0.5<=Cv <= 1, which indicates fluctuating sale and demand Cv >1, which indicates irregular sale and demand
Based on the ABC/XYZ classification of items, recommend production strategies, i.e.
Which products should be ordered in Just in Time manner (on demand),
Which products should be ordered in regular intervals and kept in stock,
Which products should be ordered once or twice a year, when there is enough demand
Which products should be reconsidered for ordering
25 project points

Data from Outlet 2: Hotel Chocolat, 9 William Street
Perform ABC analysis on products sold in Outlet 2 to identify the products in A, B and C category based on the usage value in 2021. The usage value can be calculated as
Usage value = Unit manufacturing costs x Sales in 2021
Determine variability of the sales over last 7 years and categorize it according to value of the coefficient of variation (Cv) if the following is adopted:
Cv < 0.5, which indicates stable sale and demand
0.5<=Cv <= 1, which indicates fluctuating sale and demand Cv >1, which indicates irregular sale and demand
Based on the ABC/XYZ classification of items, recommend production strategies, i.e.
Which products should be ordered in Just in Time manner (on demand),
Which products should be ordered in regular intervals and kept in stock,
Which products should be ordered once or twice a year, when there is enough demand
Which products should be reconsidered for ordering
25 project points
Prepare your answers in Word document. The recommended number of words: between 800 and 1000 (without work log, references and appendix)
Structure your answer in the document by defining headings:
ABC/XYZ analysis as a method
Analysis of sales data from Outlet 1
Analysis of sales data from Outlet 2
References (Please do not forget to refer to the relevant sources of literature).
Appendix (data)

Answer

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