Explain the concept of abc analysis with an example.
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ABC analysis
In materials management, the ABC analysis(or Selective Inventory Control) is an inventorycategorization technique. ABC analysis divides an inventory into three categories—"A items" with very tight control and accurate records, "B items" with less tightly controlled and good records, and "C items" with the simplest controls possible and minimal records.
The ABC analysis provides a mechanism for identifying items that will have a significant impact on overall inventory cost,[1] while also providing a mechanism for identifying different categories of stock that will require different management and controls.
The ABC analysis suggests that inventories of an organization are not of equal value.[2] Thus, the inventory is grouped into three categories (A, B, and C) in order of their estimated importance.
In materials management, the ABC analysis(or Selective Inventory Control) is an inventorycategorization technique. ABC analysis divides an inventory into three categories—"A items" with very tight control and accurate records, "B items" with less tightly controlled and good records, and "C items" with the simplest controls possible and minimal records.
The ABC analysis provides a mechanism for identifying items that will have a significant impact on overall inventory cost,[1] while also providing a mechanism for identifying different categories of stock that will require different management and controls.
The ABC analysis suggests that inventories of an organization are not of equal value.[2] Thus, the inventory is grouped into three categories (A, B, and C) in order of their estimated importance.
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