ABC Inventory Classification

Inventory in any organization can run in thousands of part numbers or classifications, as well as millions of parts in quantity. Therefore, inventory is required to be classified with some logic to be able to manage the same. The ABC classification system groups inventory items according to annual sales volume, value or other criteria. For example,

  • “A” approximately 10% of items or 66.6% of value
  • “B” approximately 20% of items or 23.3% of value
  • “C” approximately 70% of items or 10.1% of value

This permits selective inventory control. Policies based on ABC analysis:

  • A Group: very tight control and accurate records
  • B Group: less tightly controlled and good records
  • C Group: simplest controls possible and minimal records
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