Group 1 includes parts that did not

Group 1 includes parts that did not have any demand in two years regardless of the price. Due to the large number of different equipment types and their long life-cycle time, these parts may still be needed in stock, for example if they are last-time buy parts from the supplier or have other strategic value for the company. Otherwise these parts could be scrapped to reduce stock-holding
costs. For categorizing the rest of the parts, price and demand variability as a combination of standard deviation and number of zero demand months were considered. Groups 2 and 3 include low value parts; in Group 2 the parts have low demand and in Group 3 high demand. As the value of the parts is low, two groups were considered to be enough as management wanted to focus more closely on the high priced material.