In materials management, ABC analysis is an inventory categorization technique. ABC analysis divides an inventory into three categories—"A items" with very tight control and accurate records, "B items" with less tightly controlled and good records, and "C items" with the simplest controls possible and minimal records.
How do you classify ABC inventory?
'A' items – 80% of the annual inventory value of your items (likely made up of just 20% of your items) 'B' items – 15% of the annual inventory value of your items (likely made up of 30% of your items) 'C' items – 5% of the annual inventory value of your items (likely made up of 50% of your items)
How do you categorize items in ABC analysis?
The steps to conduct an ABC analysis are as follows:
- Determine annual usage or sales for each item.
- Determine the percentage of the total usage or sales by item.
- Rank the items from highest to lowest percentage.
- Classify the items into groups.
