ABC Classification / Analysis of Inventory
In management, the ABC analysis is categorization technique used for finished products, or any other items lying in inventory or customers into three categories. ABC analysis divides a range of objects into three categories- A - outstandingly important; B - of average importance; C - relatively unimportant as a basis for a control scheme. Each category can and sometimes should be handled in a different way, with more attention being devoted to category A, less to B, and still less to C. Here, we will discuss ABC analysis particularly in the context of inventory. However similar analysis can be practiced for other range of objects like customers, employees etc. The ABC analysis provides a mechanism for ascertaining 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. Popularly known as the "80/20" rule ABC concept is appl...