ABC Analysis for Inventory Control




Materials Management
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ANUJ KUMAR SHRIVASTAVA
Manager, India

ABC Analysis for Inventory Control

Each quarter or so, an ABC analysis of the materials in the inventory has to be done (the exact interval may differ from industry to industry).
ABC analysis is based on the 80/20 rule or Pareto Principle.
Category A items are just 15% of all inventory on a volume basis, but make up 75-80% of inventory on a cost basis.
Category B are 30- 35% on a volume basis, and about 15-20% on a cost basis.
Category C are about 50% of inventory on a volume basis and just about 5-10% on a cost basis.
You need to be most careful for the proper flow of Category A materials as the losses here would be huge. Whereas the B and C items must be analyzed for their influence on a continuous flow, as they might be vital sometimes and if they're not managed properly they can effectively stop the working of the entire assembly line or plant.
ABC analysis helps to control cost. Further exercising with it helps to achieve cost savings and gives a competitive edge in inventory turn over ratio.
 

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Jaap de Jonge
Editor, Netherlands
 

ABC Inventory Analysis and Kraljic Matrix

Thanks for your interesting posting. The ideas behind ABC Inventory Analysis are a bit similar to th... Sign up

 
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abdullahi salad
Student (MBA), Somalia
 

Similarities Between Kraljic and ABC Analysis

@Jaap de Jonge: Indeed the Kraljic Matrix and ABC Analysis are quite similar, despite the fact that ... Sign up

   

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