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ABC Analysis

ABC analysis is a method for inventory control that classifies inventory items into three categories (A, B, C) based on their monetary value and consumption. Class A items account for 10-15% of inventory items but 70% of spending, and require strict control. Class B items account for 20-35% of items and 20% of spending, requiring moderate control. Class C items make up the majority at 50-70% but only 10% of spending, allowing for relaxed control procedures. ABC analysis helps companies prioritize resources and focus control efforts on the most important and costly inventory items.

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1K views10 pages

ABC Analysis

ABC analysis is a method for inventory control that classifies inventory items into three categories (A, B, C) based on their monetary value and consumption. Class A items account for 10-15% of inventory items but 70% of spending, and require strict control. Class B items account for 20-35% of items and 20% of spending, requiring moderate control. Class C items make up the majority at 50-70% but only 10% of spending, allowing for relaxed control procedures. ABC analysis helps companies prioritize resources and focus control efforts on the most important and costly inventory items.

Uploaded by

swapnil08
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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ABC analysis

It is the Methods of Inventory/Material


control

ABC Perpetual
STOCK
ANALYSI EOQ(Econo Inventory
LEVELS
S mic Order System
Quantity)
What is Inventory?

The term INVENTORY is defined as “the


systematic control and regulation of
purchase, storage and usage of materials
in such a way so as to maintain an even
flow of production and at the same time
avoiding excessive investment in
inventories.”
What is ABC Analysis?
• ABC analysis divides the total inventory into 3 classes A,B & C using the
rupee volume, as follows:
• class “A” items constitute the most important class of inventories so far as
the proportion in the total value of inventory .The “A” items consists of
approximately 15% of the total items , accounts for 80% of the total material
usage. This items merit a tightly controlled inventory system with constant
attention to the purchase & stores management. A larger effort per item on only
a few items will cost only moderately, but the effort can result in larger savings.
• class “B” items constitute an intermediate position, which constitute
approximately 35% of the total items, accounts for approximately 15% of the
total material consumption. These items merit a formalized inventory system &
periodic attention but the purchase & the stores management.
• class “C” items are quite negligible. It consists remaining 50% items,
accounting only 5% of the monetary value of total material usage . Quite
relaxed inventory procedures are used.
Class “A”

Class “B”

INVENTORY
ABC ANALYSIS OF
Class “C”
Ex - In shoes leather forms A grade
materials , sole forms B grade
materials and shoe lace forms C
grade materials
this is ABC analysis in inventory
management
ABC Analysis in Medical Stores Inventory
Control
Background: The basic principle of inventory
control is ABC based on cost criteria .
Methods: Based on ABC matrix, economic
analysis of drug expenditure of a Medical Store
in Hospital. Section 01 for the year 2003 of a
190 bedded service hospital was under taken.
Result: Out of 493 drugs in Medical Store
section 01, only 325 drugs were being used in
the reference hospital. The total cost of drugs
used
was Rupees 55,23,503. Of these 325 drugs,
47(14.4%) drugs were Category A , consuming
70% of total expenditure, 73 (22.46 %)
drugs Category B consuming 20% and rest
205 drugs (63.7%) Category C drugs cost only
10% of expenditure.
ITEM ITEMS(%) MONEY VALUE(%)

A 10 70

B 20 20

C 70 10
“A “ Class items “B” Class items “C” Class items (Low
(High Consumption (Moderate Consumption Consumption Value)
Value) Value)

1.Very strict control. 1.Moderate control 1. Loose control


2. No safety stocks or very 2.Low safety stocks 2.High safety stocks.
low safety stocks.

3.Maximium follow-up & 3.Periodic follow-up. 3.Follow –up & expediting


expediting. in exceptional cases.

4.Rigorous value analysis. 4.Moderate value analysis. 4.Minimum Value Analysis.

5.Must be handled by 5. Can be handled by 5. Can be fully delegated.


senior officers. middle management.
6. 6. 6.

7. 7. 7.

8. 8. 8.
CONCLUSION

At last I conclude that ABC analysis is a


vital method for control the Inventory.

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