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{{this}} or A-B-C Analysis is a [[:Category:Term|Term]] describing the [[:Category:Practice|Practice]] to classify [[Link::t:INV]] into classes based on their run-rate or consumption rate. The purpose of inventory classification is to create different policies, processes and procedures for each class based on the 'importance' of each class - differentiating the critical few from the trivial many.
* Class A - Small number of products that represent top 10% of volume and 70% of value. These products are typically frequently planned, tightly controlled, securely stored, and/or audited.
* Class B - Products representing next 20% of volume and 20% of value and are less frequent managed. Class B inventory is typically closely monitored for reclassification to A or C.
* Class C - Large number of products with relative low value. Run-rates are the bottom 70% of volume, representing 10% of value. These products may be infrequently managed.
{{this}} is a derivative of [[t:Pareto|pareto analysis]]. The percentages for A, B, and C differs by industry, business, and/or product.
===Use Cases===
* Managing working capital - Inventory reduction programs
* Inventory optimization programs - Addressing excess and obsolete inventories, and product stockouts)
* Inventory/Supplier management
* Planning parameters determination - See plan deviation analysis processes ([[sc:P107|P107]], [[sc:P205|P205]], [[sc:P305|P305]], [[sc:P405|P405]])
* Shrinkage prevention
===Notes===
Benefits of {{this}}
* Focus on those products that have highest impact on working capital
* Limits risk of administrative burdens for low risk/value products
* Adoption by service industries as a profitability analysis instrument (based on number of transactions)
Criticisms of {{this}}
* Materials are not evaluated on criticality
* Inventory may need to reclassification periodically
* Materials are not evaluated on frequency of inventory movements
* Risk of over-emphasis on Class A products
<ins>
[[Link::t:RM]]
[[Link::t:WIP]]
[[Link::t:FG]]
</ins>
{{object
|name=ABC Analysis
|sort=0
|level=1
|keywords=Analysis, ABC, Class, Classification, Inventory, Supply Chain, Stock, Planning
|description=The practice to classify inventory into 3 classes (A, B, and C) based on their run-rate or consumption rate
}}
[[Category:Term]][[Category:Practice]][[Category:Supply Chain]]

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ORwiki at 16:01, 13 August 2017