# Graphic method for determining the boundaries of groups A, B...

## 5.8. Graphic method for determining the boundaries of groups A, B and C

Let's consider a method of dividing a set of control objects, ordered by descending the sign of the significance of an object, with the help of a tangent to the ABC-analysis curve. The ABC curve is constructed in a rectangular coordinate system (Figure 27). On the OX axis, management objects (for example, assortment items) are plotted in order of decreasing share in the total result (for example, the share in the implementation), in percentage to the total number of management objects. On the OY axis, the share of the contribution of the object (the share of sales by position) is postponed in the total result (in the total implementation), calculated by the cumulative total and expressed in percent.

Join the beginning and end of the graph of the straight line OD and then draw a tangent to the curve of the ABC analysis parallel to the OD line. The abscissa of the point of tangency (point M) will show us the boundary between the groups A and B, and the ordinate will indicate the fraction of the contribution of group A to the overall result.

Now we connect the point M with the end of the curve - the point D, and draw a new tangent to the graphic ABC, parallel to the MD line. The abscissa of the point of tangency (point N) will indicate the boundary between the groups B and C, and the ordinate - the total contribution of the groups A and B to the overall result.

Fig. 27. Separation of the investigated set into groups A, B and C by means of a tangent to the curve ABC

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## 5.9. Influence of the probabilistic nature of demand for inventory management solutions (XYZ analysis)

Analysis of ABC allows you to differentiate the range (the range of resources, and in relation to trade - the assortment of goods) by the degree of contribution to the intended result. The principle of assortment differentiation in the process of XYZ analysis is different - here the entire range (resources) is divided into three groups, depending on the degree of uniformity of demand and the accuracy of forecasting.

In group X, goods are included, the demand for which is uniform or subject to insignificant fluctuations. The volume of sales for goods included in this group is well predicted.

The group Y includes goods that are consumed in fluctuating volumes. Possibilities of forecasting demand for goods of group Y are average.

In group Z include goods, the demand for which only occurs sporadically. To forecast the sales volumes of the goods of group Z is difficult.

The characteristic on the basis of which the specific position of the assortment is assigned to the group X, Y or Z, is the coefficient of demand variation (v) for this position. Among the relative indicators of variation, the coefficient of variation is the most commonly used measure of relative volatility:

where x i is the i-th demand value for the item being valued;

- the average value of demand for the position being valued for the period n;

n is the value of the period for which the estimate was made.

The value of the coefficient of variation varies from zero to infinity. The division into groups X, Y, and Ζ can be carried out, for example, on the basis of the algorithm presented in Table. 6.

Table 6

A possible algorithm for differentiating the assortment into groups X, Υ and Ζ

 Group Interval X 0 ≤ ν & lt; 10% Υ 10% ≤ ν & lt; 25% Ζ 25% ≤ ν & lt; ∞

The general analysis algorithm ΧΥΖ is given in Table. 7.

Table 7

XYZ Analysis Procedure

The XYZ curve is plotted in rectangular coordinates (Figure 28). On the OX axis, the assortment positions are postponed in order of increasing demand coefficient, expressed as a percentage of the total number of items in the assortment.

Fig. 28. The XYZ analysis curve

## 5.10. Logistics performance

You can effectively manage only what you can measure

Logistics as a science and sphere of professional activity is characterized by concreteness, which consists in the presence of a completely accurate and quantitatively determined result of the activity of managing material flows. Specificity allows you to manage logistics from the accounting and calculation units or structural bodies of the enterprise, the results of which are measured by the profit received.

The specificity of logistics provides an opportunity to assess the reaction of the process to certain management actions, adjust and optimize these impacts. The possibility of efficient control of the material flow appears only when it is possible to measure the characteristics of this flow.

The objectives of implementing a logistics metrics system:

o evaluation of the degree of achievement of goals;

o adjustment of the logistics process in case of its deviation from the established standards;

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o balanced development of the logistics system.

Principles of the application of the system of logistics indicators:

o complexity - a system of interrelated indicators;

o methodicity - the availability of techniques for calculating indicators that provide an adequate comparison in time;

o continuity - evaluation of indicators with a certain periodicity in time;

o Availability - Obtaining initial data for the calculation of indicators should not require unnecessary labor.

The state of logistics is characterized by the following groups of indicators (Figure 29):

o Inventory management metrics;

o performance indicators for transport;

o the performance of the warehouse;

o logistics service performance indicators;

o logistics performance indicators.

Let's look at each of these metric groups.

Fig. 29. Logistics Performance

1. Inventory management metrics.

The main indicators characterizing the work with stocks are the stock of goods average and stock turnover.

Average stock of goods (characterizes the average level of the company's reserves, which provides the opportunity to carry out business). The indicator of the average stock is one of the key, since it is used to calculate the majority of indicators characterizing the systems of inventory management. In logistics, the size of the average stock is determined on the basis of the inventory of goods, which contains data on their level at a certain date (for example, the end of a decade, month, quarter, year). As a result, moment series of the dynamics of commodity stocks are formed. The average stock (for the month, quarter, year) is calculated by the formula of the average chronological moment series of the dynamics:

where Z ср is the average stock;

Z i - absolute stock levels for equidistant dates; n is the number of all members of the series.

The formula of the average chronological moment series of dynamics gives an accurate result under the following conditions:

o equal intervals between the dates for which there are residual data,

o uniform change in stock size between conjugate dates.

If the primary data are in the form of an interval series of dynamics, the average stock is calculated using the simple arithmetic mean formula:

where cp i is the average margin for the i-th period of the interval series of dynamics.

If the periods of time separating one date from another are not equal to each other and in the intervals between conjugated dates the stock remains unchanged, then the average stock is calculated by the formula of the average arithmetic weighted, for which weights are taken between the dates, e. by the formula

where T i is the time during which this level of inventory (Z i ) remained unchanged.

Inventory turnover is a characteristic of the resumption process. It is determined with the help of two indicators: turnover speed and stock circulation time.

The turnover speed (C O ) shows how many times the available stock is realized and resumed within one period. The indicator is determined by the number of stock turns during one period:

where O is the turnover for the period;

Z ср - the average stock for the period.

Stock circulation time (T) shows the length of the period during which the stock is realized, determined by the formula

where Z ср - average commodity stocks for the period; t is the number of days in the period.

As follows from the above formulas, the indicator of the time of circulation of goods is inversely proportional to the rate of turnover.

2. Transport performance

Indicators, characterizing the work of transport, are the freight turnover of transport, the mileage utilization factor, the load utilization factor, and a number of other indicators.

The freight turnover of the transport is determined by summing the products of the mass of individual shipments (tons) by the corresponding transportation distance (km).

The mileage utilization factor (K IP ) is estimated as the mileage fraction with the cargo in the vehicle's total mileage:

where П Г - mileage with cargo, km;

П ОБЩ - total mileage, km.

Load capacity utilization ratio shows how fully the nominal load capacity of the vehicle was used during transportation. For road transport, calculate the static and dynamic coefficients of using the vehicle's load capacity.

The coefficient of use of the vehicle's static load (K igs ) is estimated by the formula

where M φ is the actual mass of the goods carried;

M n is the nominal mass, i.e. the possible mass that could be transported at the nominal carrying capacity of the car.

The coefficient of using the vehicle's dynamic load (K igd ) is estimated by the formula

where Р F is the freight turnover of transport, т · km;

П г - mileage with cargo, km;

Г н is the nominal load capacity, t.

Here in the numerator the actual transport work (tonne-kilometers), and in the denominator - the maximum possible transport work, which could be performed under the condition of full loading of the vehicle.

3. Warehouse performance

The warehouse resource in the first approximation is estimated by indicators of capacity and capacity. These two indicators help to answer the questions:

o what quantity of products can be passed through the warehouse in a unit of time,

o how many products can be placed in a warehouse at a time.

3.1. Warehouse capacity - the ability to provide the maximum possible turnover for a certain period of time while observing the standards and technological processes envisaged by the project or taken during operation. The capacity of a warehouse (throughput) is measured in monetary or physical units: rubles, tonnes, cubic meters or other units.

The capacity of a warehouse, calculated in tons for a specified period of time, is called cargo turnover of a warehouse . The freight turnover calculated on arrival or on departure is referred to as the " one-way freight turnover .

The turnover of the warehouse (Г о ) is calculated by the formula

where Q is the number of tons that entered the warehouse (or sold from the warehouse) for a period of time T;

T - duration of the time period.

3.2. Warehouse capacity. Measured in cubic meters, in tons or in other units, and shows the number of products that can be stored.

4. Logistic service metrics

The level of logistics services provided to the recipient of goods can be estimated by a large number of different indicators. The composition of the indicators used depends on which characteristics of the logistics service for the recipient are significant.

Most often, the level of logistics services is estimated in the context of the characteristics of the "complete order execution". The metric used is ready for delivery ( G n ). Let's consider three methods of calculating the availability for delivery, used in logistics.

4.1. Evaluation of the availability for delivery using the proportion of completed orders:

where Ч вZ is the number of completed orders;

Ч о is the total number of orders received.

4.2. Evaluation of the readiness for delivery using the ratio of quantities of delivered and ordered products measured in natural units:

where m is the actual volume of deliveries in physical terms (t, m, pcs, etc.);

M - the volume of the order in kind.

4.3. Evaluation of the readiness for delivery using the ratio of quantities of delivered and ordered products measured in value units:

where С F - actual volume of deliveries in value terms (rubles);

With 3 - the volume of the order in value terms.

5. Logistics Performance Indicators

The effectiveness of logistics is assessed by the efficiency of using the basic resources involved in the logistics system. Accordingly, the following metrics are used.

5.1. Productivity of workers in the logistics chain - freight turnover of the company for a period per one employee of logistics units:

5.2. Efficiency of transport costs - the number of ton-kilometers performed per transport cost unit:

5.3. Specific turnover of the warehouse - turnover of the warehouse, per 1 m of the usable area of ​​the warehouse:

5.4. Logistics costs per unit of turnover.

The indicator characterizes the share of logistics costs in the company's turnover (D l ). The higher D l , the more significant is the activity to streamline material flows:

where C l - the cost of logistics for the period;

About - turnover per period.

The costs of logistics include the costs of the following operations:

o placing orders;

o Transportation to the enterprise;

o operations in the supply warehouse;

o Internal workflows

o operations in the finished goods warehouse;

o shipping operations;

o delivery to the buyer.

In addition, it also includes all costs for personnel, equipment and premises used in logistics processes, but not included in the list above.

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