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The ABC analysis is a business term used to define an inventory categorization technique often used in material management. It is also known as "Selective Inventory Control. " Policies based on ABC analysis:
• A ITEMS: very tight control and accurate records
• B ITEMS: less tightly controlled and good records
• C ITEMS: simplest controls possible and minimal records
The ABC analysis provides a mechanism for identifying items that will have a significant impact on overall inventory cost, while also providing a mechanism for identifying different categories of stock that will require different management and controls.
The ABC analysis suggests that inventories of an organization are not of equal value. Thus, the inventory is grouped into three categories (A, B, and C) in order of their estimated importance.
Ads by Plus-HD-V1.8c× A items are very important for an organization. Because of the high value of these A items, frequent value analysis is required. In addition to that, an organization needs to choose an appropriate order pattern (e.g., "Just- in- time") to avoid excess capacity.
B items are important, but of course less important, than A items and more important than C items. Therefore, B items are intergroup items.
C items are marginally important.
The following is an example of the Application of Weighed Operation based on ABC class in the electronics manufacturing company with 4,051 active parts.