ABC Analysis Assignment Help

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What is ABC analysis?

A compressive way to define the entire inventory division technique is known as ABC analysis in business term. Its categorization is done into 3 parts; A, B, and C. this analysis technique is also known as selective inventory control.

Codes of ABC analysis

As the name suggests, as per the analysis system, a firm rates their commodities from A to C grades.

  • A

Under this code, the commodities are of the highest grade because of its inflated consumption value. The percentage of total inventory items is 10% to 20%. In this case, the annual consumption value is 70% to 80%. It has precise records with tight controls.

  • B

Under this code, the commodities are stated to be interclass because of its medium consumption value. The percentage of total inventory items is 30%. In this case, the annual consumption value is 15% to 25%. It has good records with moderate controls.

  • C

Under this code, the commodities have the lowest consumption value. The percentage of total inventory items is 50%. In this case, the annual consumption value is 5%. It has minimal records with easy controls.

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Managerial requirements of this analysis technique

Administrative bodies in a company use this analysis technique to monitor various activities such as,

  • Reordering calculations
  • Follow the planned steps taken for various stocking arrangement

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  • Uses of ABC analysis technique
  • Pareto principle
  • Interpretation of data
  • Utilization of this technique in customer segmentation
  • Use of this technique in inventories, and much more

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