FREQUENTLY ASKED QUESTIONS FOR RUNNING AN EFFICIENT WAREHOUSE

1. What is ABC Analysis?

The ABC analysis is a business term used to define an inventory categorization

technique often used in materials management. It is also known as Selective

Inventory Control. ABC analysis provides a mechanism for identifying items that

will have a significant impact on overall inventory cost, while also providing a

mechanism for identifying different categories of stock that will require different

management and controls.

ABC analysis suggests that inventories of an organization are not of equal value.

Thus, the inventory is grouped into three categories (A, B, and C) in order of their

estimated importance.

Example of ABC class:

‘A’ items – 20% of the items accounts for 70% of the annual consumption value of the items. ‘B’ items - 30% of the items accounts for 25% of the annual consumption

value of the items. ‘C’ items - 50% of the items accounts for 5% of the annual consumption

value of the items.

2. What is VED Analysis? The stores when subjected to analysis based on their criticality can be classified

into vital, essential and desirable stores. This analysis is termed as VED analysis.

a. Vital: items without which treatment comes to standstill: i.e. non- availability

can not be tolerated.

b. Essential: items whose non availability can be tolerated for 2-3 days, because

similar or alternative items are available.

c. Desirable: items whose non availability can be tolerated for a long period.

Although the proportion of vital, essential and desirable items varies depending on

the type and quantity of workload, on an average vital items are 10%, essential

items are 40% and desirable items make 50% of total items available.

3. What are the Objectives of inventory control?

a. To keep the investment on inventories to the minimum.

b. To minimize idle time by avoiding stock outs and shortages.

c. To avoid carrying cost.

d. To improve quality of care with lesser inventory.

e. To avoid obsolescence of inventory (LIFE EXPIRY) by using FIFO.

4. What are the Principles of Inventory Control?

a. To place orders frequently keeping the stock low for high valued and more

used items.

b. To place orders less frequently keeping sufficient stock for low valued and low

consumed item.

5. What are the Principles of proper Warehouse Design and what are the benefits accruing there from?

Warehousing can be defined by three functions:

i) Receiving goods from a source.

ii) Storing goods until they are needed by a customer (internal or external).

iii) Retrieving the goods when requested.

Storing material for an internal customer implies the need for work-in-

process storage, whereas storing goods for an external customer may imply the

need for finished products storage. However, the functions of warehousing remain

the same and successful warehouse layouts must accomplish the following

objectives, regardless of material being stored:

i) Maximize the use of space.

ii) Maximize the use of equipment.

iii) Maximize the use of labour.

iv) Maximize accessibility to all items.

v) Maximize protection of all items.