ABC analysis technique.

ABC analysis technique.

ABC analysis is a technique used in inventory management to classify items based on their level of importance or value. The technique is named after the three categories it uses: A, B, and C. The items are classified based on their contribution to revenue, usage frequency, or other relevant criteria.


The items that fall under the A category are considered the most important or valuable. These items typically account for a large portion of the revenue or usage frequency, and it is critical to manage them efficiently. These items are closely monitored, and inventory levels are closely controlled to prevent stockouts.


The items that fall under the B category are considered moderately important or valuable. These items may account for a smaller portion of revenue or usage frequency, but it is still necessary to manage them effectively. Inventory levels for these items are monitored regularly, but not as frequently as those for A items.

The items that fall under the C category are considered the least important or valuable. These items typically account for a small portion of revenue or usage frequency, and it is not necessary to manage them as closely as A or B items. Inventory levels for these items are typically set at a higher level to avoid stockouts.


By using ABC analysis, businesses can prioritize their inventory management efforts and focus on the items that have the greatest impact on their operations. This helps to ensure that inventory is managed efficiently, and resources are allocated effectively.

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