ABC Analysis

Posted in Operations and Supply Chain Terms, Total Reads: 14570

Definition: ABC Analysis

ABC Analysis comes under the purview of inventory management. It refers to the categorization of inventory based on its significance in the production process.

This analysis works under the assumption that all inventories are not of equal value to the organization so they need to be treated differently.  A typical ABC analysis classifies the inventory based on the following table.

Type of Inventory

Type of Importance

Type of control

A Items

Very Important

Accurate records, very tight control

B Items

Little less important

Decent records, a little less tight control

C Items

Marginally important

Only essential records, light controls

Typically “A items” consist of minimum amount of items but these items account for a major proportion of value for the organization and so on with the other items.

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