abc analysis

How Does ABC Analysis Work?

The process involves three main steps:
Identify and Calculate: List all inventory items and calculate their annual usage value, which is the product of the annual consumption and the unit price of each item.
Classify: Rank the items in descending order based on their annual usage value and classify them into three categories:
A items: High-value items that constitute a small percentage of the total inventory but a large percentage of the consumption value.
B items: Moderate-value items that fall in between A and C categories.
C items: Low-value items that represent a large percentage of the total inventory but a small percentage of the consumption value.
Control: Apply different inventory control strategies for each category. A items require tight control and accurate records, B items require moderate control, and C items require the simplest control methods.

Frequently asked queries:

Relevant Topics