Scribd
Upload
85 views13 pages

Abc Analysis Theory: BY Sourabh Paul (Bm-09214) ZIAUDDIN (BM-09238)

ABC analysis is a method for classifying inventory items into three categories based on monetary value of usage. Class A items account for 15% of total items but 80% of monetary value. They require strict control through frequent ordering, expediting, and senior management oversight. Class B items account for 35% of items and 15% of monetary value, requiring moderate control. Class C items are 50% of total items but only 5% of monetary value, allowing for relaxed control. The goal is to focus most control efforts on the items providing the greatest returns.

Uploaded by

jain111
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
85 views13 pages

Abc Analysis Theory: BY Sourabh Paul (Bm-09214) ZIAUDDIN (BM-09238)

ABC analysis is a method for classifying inventory items into three categories based on monetary value of usage. Class A items account for 15% of total items but 80% of monetary value. They require strict control through frequent ordering, expediting, and senior management oversight. Class B items account for 35% of items and 15% of monetary value, requiring moderate control. Class C items are 50% of total items but only 5% of monetary value, allowing for relaxed control. The goal is to focus most control efforts on the items providing the greatest returns.

Uploaded by

jain111
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 13

ABC ANALYSIS THEORY

BY
 SOURABH PAUL(BM-
09214)
 ZIAUDDIN(BM-09238)
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 and 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
revenue of inventory.The “A” items consist of
approximately 15% of the total items, accounts for 80%
of the total material usage.The 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
efforts can result in large savings.
 Class “B” items constitute an intermediate
position ,which approximately 35% of the total
items, accounts for approximately 15% of the
total material consumption.These items merit a
formalized inventory system & periodic attention
on the purchase and 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 here.
EXAMPLE

In Shoes, Leather forms A class


materials,Sole forms B class
materials and lace forms C class
materials.

(this is ABC Analysis in inventory


management)
Share of money values
in different classes

ITEM ITEM(%) MONEY


VALUE(%)
A 10 70

B 20 20

C 70 10
CHARACTERSTICS OF
DIFFERENT CLASSES
ITEMS
CHARACTERSTICS OF CLASS “A” ITEMS

 High consumption value.


 Very strict control.
 No safety stocks or very low safety stocks.
 Maximum follow-up or expediting.
 Rigorous value analysis.
 Must be handled by senior officers.
 Centralized purchasing.
 Frequent ordering or weekly deliveries.
 As many suppliers are possible.
 Weekly control statements.
 Accurate forecasts in materials planning.
CHARACTERSTICS OF CLASS “B” ITEMS
 Moderate consumption value.
 Moderate control.
 Low safety stocks.
 Periodic follow-up.
 Moderate value analysis.
 Can be handled by middle management.
 Centralized and decentralized purchasing.
 Three or more reliable sources of supply.
 Ordering once in three months.
 Monthly control reports.
 Estimates based on past data or present.
CHARACTERSTICS OF CLASS “C” ITEMS
 Low Consumption value.
 Loose control.
 High Safety Stocks.
 Follow-up and expediting in exceptional cases.
 Minimum value analysis.
 Can be full delegated.
 Decentralized purchasing.
 Three reliable sources for supply.
 Bulk ordering once in six months.
 Quarterly control reports.
 Rough estimates for planning.
CONCLUSION
ABC Analysis is a vital method for
controlling inventory, in which, more
effort is taken to control the Category
A items which deliver the greatest
monetary advantage,whereas control
on Category B items are moderate and
control on Category C items are kept
under minimum control.
Do you know ...........

'A' class items are also usually 'Fast Moving' items of


inventory?                      

And'C' class items are also usually 'Slow / Non Moving'


items of inventory ?

For effective management, you need to classify 'A' items


into further A1, A2 classes for better identification of and
control on 'A' class inventory as also on B1,B2 of B class
items as some of them need more focus than other B class
items. 
THANK YOU

You might also like