ABC Analysis

Published by MBA Skool Team, Last Updated: April 16, 2012

What is 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.

This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

Browse the definition and meaning of more similar terms. The Management Dictionary covers over 2000 business concepts from 6 categories.

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