ABC analysis is another form of Pareto (80:20) rule. It is defined as a method of classifying clients, events, inventory, items or activities according to their relative significance and deciding upon this fact that on the extent of importance, consideration and control one should put on this analysis under such classifications.
One should use it for selection of a restricted number of tasks or clients because it produces significant overall result or profit. It basically uses the idea that by doing 20% of effort, 80% of the gain of doing the entire work can be generated. For many events, about 80% of the things come from 20% of the causes.
Some examples are as follows: -
Hence, this concludes the definition of ABC Analysis along with its overview.
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