Index • The Three Classes Used in ABC Analysis • Industry Uses and Applications • Challenges of ABC Analysis • Future Trends With ABC Analysis ABC analysis is a system for inventory control used throughout materials and distribution management. It is also sometimes referred to as selective, or SIC. ABC analysis can be put to use for a wide range of inventory items, such as manufactured products, components, spare parts, finished goods, unfinished goods or sub assemblies. Whatever sort of items on an inventory it is used for, the approach works by setting all of them into three distinct categories. Therefore, ABC analysis is a system of categorization, using three classes, of which each class has a differing management control. The Three Classes Used in ABC Analysis The ‘ABC’ in ABC analysis, as known as, refers to the three classes or categories used in the system.

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The first, A, is the category for items that are outstandingly important, or business critical. The second, B, is the classification for items of average or middling importance. Finally, category C is the designation for relatively unimportant items. As a basis for a control scheme, each class ought to be handled in a different way. As you might have guessed, more attention will usually be devoted to category A items, with less to B and still less further to C.

Many people are familiar with the so-called ’80/20 rule’, also known as the which can be put to use with the ABC analysis for inventory management. Under this rule, in terms of consumption, 80 percent of the value of inventory would be held in about 20 per cent of the items. By using this principle, categories B and C would make up the remaining 80 per cent of the items, perhaps B with 30 per cent and C with 50 percent. Opel corsa. However, in terms of their consumption value B and C would make up on 20 per cent of the value combined, with C the least, perhaps split at 15 per cent and 5 per cent respectively. The percentages will vary based on a distributor’s unique needs. This means that ABC analysis conforms with the Pareto principle which states that items that account for a large proportion of the overall value are small in number and that items with a low overall value are high in number. It is also worth remembering that the proportions of the ABC values, both in terms of their consumption value and their number of items, are not set in stone, so long as they add up to 100 percent.

Industry Uses and Applications Extensively used for supply chain management, inventory systems and stock checking methods, ABC analysis is often applied to the design of cycle counting systems. Monkey quest game full version for pc. For example, a warehouse or factory store might choose to count A items, of high worth once a quarter, but B items only two times a year with and C items only counted once. From an optimization point of view, companies looking to drive down and should be analyzing inventory far more frequently as these industry averages leave the door open for large quantities of and to pile up in warehouses. Unfortunately, most wholesale distributors and manufacturers do not put this into practice and as a result have a large percentage of working capital tied up in unhealthy inventory levels.