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ABC ANALYSIS
ABC ANALYSIS - 1
One of the most important considerations of control is the value of annual consumption of inventory items in a year. Only a small number of inventory items consume a very large share of inventory consumption during the year. A little larger number of inventory items covers a moderate share of annual inventory consumption. A very large number of items just cover a very small share of annual inventory consumption. These facts gave birth to the concept of ABC analysis. 2
ABC ANALYSIS - 2
It has been observed that in an industrial unit only 10% of items have 70% of the annual inventory consumption, 20% of the items have 20% of annual inventory consumption, and 70% of the items have only 10% of the annual inventory consumption. Since 70% of the annual consumption of inventory is covered by only 10% of the items in the inventory, these items deserve highest attention and are classified as A items. Similarly 20% of the items covering 20 % of the inventory investment are B class items Balance 70% of the inventory items are termed as C class items. 3
2
3 4 5 6 7 8 9 10
50
15 25 5 50 153 20 16 17
17
15 17 17 119 5 2.125 2.656 2.5
5
2
3 4 5 6 7 8 9 10
50
15 25 5 50 153 20 16 17
17
15 17 17 119 5 2.125 2.656 2.5
850
225 425 85 5950 765 42.5 42.5 42.5
6
2
3 4 5 6 7 8 9 10
50
15 25 5 50 153 20 16 17
17
15 17 17 119 5 2.125 2.656 2.5
850
225 425 85 5950 765 42.5 42.5 42.5
2
5 4 6 1 3 7 9 10
7
4
3 5 8
425
225 85 42.5
7990
8245 8330 8372.5
1
10 9 Total
42.5
42.5 42.5 8500
8415
8457.5 8500
8
4
3 5 8
425
225 85 42.5
7990
8245 8330 8372.5
94
97 98 98.5
1
10 9 Total
42.5
42.5 42.5 8500
8415
8457.5 8500
99
99.5 100
9
4
3 5 8
425
225 85 42.5
7990
8245 8330 8372.5
94
97 98 98.5
C
C C C
1
10 9 Total
42.5
42.5 42.5 8500
8415
8457.5 8500
99
99.5 100
C
C C
10
A
B C Total
6
2, 7 1, 3, 4,5,8,9,10 10
10
20 70 100
5950
1615 935 8500
70
19 11 100
11