Inventory Management of Automotive Industries using ABC Analysis: A Systematic Approach

In any business, it is important to ensure that appropriate amounts of stock are maintained to be able to meet customer demand without delay while keeping holding costs to a minimum. This requires the use of various inventory control techniques. ABC analysis is one such approach for implementing control on the inventory levels of various items by classifying them based on their consumption values. Consumption value indicates the total value of any product consumed over a specified time period, for example a year. This approach is based on the Pareto principle, which is widely known as the 80/20 rule. It is observed that categorizing of inventory using ABC analysis provides better control over high-value inventory, which in turn improves its availability and reduces losses and costs. In this case study, two major product categories of an automotive component manufacturer (Spark Minda, Ashok Minda Group) are considered for ABC analysis and an optimized inventory categorization pattern is suggested according to the results.