Pareto phenomenon (ABC analysis)

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Pareto phenomenon (ABC analysis)

• Classifying items, activities, or tasks according
  to some measure of importance and allocating
  efforts and resources accordingly
• A vital few things are important for reaching an
  objective or solving a problem
• 80/20 rule 80 of the problems are caused by
  20 of the activities

How do we identify the vital few?
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Pareto phenomenon, ABC analysis, Recognition of
Priorities

• Acknowledging the fact that certain aspects of
  any management situation are more important than
  others is called Recognition of Priorities.

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Models

• A model is an abstraction of reality
• Physical
• Schematic
• Mathematical

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Quantitative approach

• Linear programming
• Transportation model
• Inventory models
• Waiting line models
• Statistical models

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Recent Trends

• Global Competition
• Operations Strategy
• Flexibility
• Cycle Time Reduction
• Business Process Re-engineering
• Supply Chain Management
• Workers Involvement
• Lean Manufacturing
• Total Quality Management

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Recent Trends

• Global Competition
• Global Market
• Global Suppliers
• Operations Strategy
• Quality based
• Time based
• Flexibility
• Variety of products
• High Volume as well as Low Volume
• Cycle Time Reduction
• The less time RM (Raw Material), WIP (Work In
  Process), FG (Finished Goods) spend in the
  Manufacturing and Logistics process, the less
  opportunity they have to absorb costs.

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Recent Trends

• Business Process Re-engineering
• Value added and NVA activities
• Supply Chain Management
• NOT from RM storage to FG warehouse
• From the original suppliers to final consumers
• Workers Involvement
• Workers are not costs, they are assets
• Lean Manufacturing
• Inventory is waste
• Total Quality Management

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Examples of Exam Questions

• 1. The following activities are all a part of
  system operations as opposed to system design
• long term forecasting, product design, capacity
  planning, inventory management.
• short term forecasting, product design, capacity
  planning, inventory management
• short term forecasting, production planning,
  capacity planning, inventory management
• short term forecasting, production planning,
  quality assurance, inventory management
• none of the above

• 2. Pareto Phenomenon is the same as
• ABC analysis
• analysis of trade-off
• systems analysis
• quantitative approaches
• none of the above

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Review Questions (cont.)

• 3. In ABC analysis
• 25 of items form 25 of the measure of
  importance
• 10 of items form 10 of the measure of
  importance
• 90 of items form 90 of the measure of
  importance
• 50 of items form 50 of the measure of
  importance
• 15 of items form 75 of the measure of
  importance

• 4. Given
• (I) Lean operations, (II) Operations strategy,
  (III) Business process re-engineering
• (A) Inventory is waste, (B) Time based
  operations, (C) High Volume as well as Low
  Volume,
• (D) Value-added and NVA activities
• Which of the following selections is correct?
• (I) matches with (D), (II) matches with (C),
  (III) matches with (B)
• (I) matches with (A), (II) matches with (B),
  (III) matches with (C)
• (I) matches with (A), (II) matches with (B),
  (III) matches with (D)
• (I) matches with (A), (II) matches with (D),
  (III) matches with (C)
• (I) matches with (C), (II) matches with (D),
  (III) matches with (B)

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Review Questions (cont.)

• 5. Given
• (I) supply chain management, (II) Flexibility,
  (III) Operations strategy
• (A) Quality based operations, (B) Workers are
  asset, (C) Value added and NVA activities,
• (D) from suppliers to consumers, (E) High Volume
  as well as low volume
• Which of the following selections is correct?
• (I) matches with (D), (II) matches with (E),
  (III) matches with (C)
• (I) matches with (D), (II) matches with (E),
  (III) matches with (A)
• (I) matches with (A), (II) matches with (E),
  (III) matches with (D)
• (I) matches with (C), (II) matches with (D),
  (III) matches with (E)
• (I) matches with (E), (II) matches with (B),
  (III) matches with (D)