Inventory Management for EMC Research Paper Example | Topics and Well Written Essays - 1000 words - 1

Inventory Management for EMC - Research Paper Example Figure 1 indicates that most of the goods are work-in-progress. At the beginning of the year work-in-progress (WIP) represented approximately 39% of the goods in stock, finished goods 25, raw materials 21% and purchased parts 15%. At the end of the period they represent 36%, 28%, 19% and 17% respectively. According to Wong (2006) the first step in determining an inventory situation can be facilitated through the use of ABC analysis. This analysis determines the importance of items and the level of controls placed on them. Using the relative proportions of cost of goods sold for the company’s product line the relative proportions of the different inventory types are shown in Table 1 below. The actual raw material and purchased parts that are used to make the different products in each product line has not been identified but it shows that 37.48% are decorative hardware, 27.25% construction hardware, 25.85% Cabinet Hardware and 9.42% Fasteners. In order to improve the inventory situation at EMC the company should first apply ABC analysis. ABC analysis places emphasis on the value of inventory (Wong n.d.). Focusing on inventory with the highest value can allow companies to assign the necessary resources to achieve the optimum inventory levels and in so doing reduce inventory cost while ensuring that customers needs are met (Wong n.d.). ABC analysis when applied to EMC’s inventory situation will help the company determine the importance of items and the level of controls that should be placed on them. The majority of EMC’s inventory relates to items used in the production of decorative and construction hardware. These could be described as the A items because they are of higher value while those used in the production of cabinet hardware would be the B items, and fasteners - C items. The A items (a combination of decorative and construction hardware