Question 1: Perform an ABC analysis to classify the inventories (200 SKUs) to three classes: Class A, Class B, and Class C, with justification. Calculate the annual expense of each inventory class (Class A, Class B, and Class C), and briefly discuss its implications on this company's financial performance.
Question 2: Currently, the inventory level of Class A parts/SKUs is 60 Days of Supply (DoS), the inventory level of Class B parts/SKUs is 60 DoS, and that of Class C parts/SKUs is 120 DoS. How much money does your company have to pay for these parts/SKUs stored in your warehouse? If 80% of this inventory expense is from a 10-year fixed-rate loan of CBA bank and CBA charges your company an interest rate of 8%, how much are your monthly repayments of principals and interests?
Question 3: The senior management asks you to cut the inventory level to save 15% of the inventory cost (inventory value), compared to the current inventory value stated in Question 2-2, to help the company to improve the financial condition. What's your proposed inventory levels of these three classes of parts/SKUs (Class A, Class B, and Class C)? Justify your answer and discuss the financial benefits of your proposed inventory plan