ABC analysis – what is it?

ABC analysis – what is it?

ABC Analysis (ABC) is an inventory classification method that helps manage a company’s resources by dividing products into three categories: A, B and C, according to their importance and impact on company value. The main goal of this method is to identify the most valuable inventory items and efficiently allocate resources to focus on key elements of the business.

1. Class A includes the highest-value products, which typically account for about 70-80% of the total value of inventory, even though they represent only 10-20% of the total number of items. These products require special attention and strict control, as their effective management is critical to the operation of the company.
2. Class B are medium-value products, which account for about 15-25% of the total inventory value and usually represent 20-30% of the total number of items. Management of these products requires moderate control, but not as intense as Class A.
3. Class C includes the lowest value products, which account for about 5% of the total inventory value, but represent the majority of items – about 50-70%. These products require minimal control to minimize management costs, but they do not have as much impact on the overall value of the business.

ABC analysis helps companies make informed decisions on inventory management, optimize storage costs and allocate resources efficiently. It helps focus on key products (Class A) and reduce spending on less important products (Class C). The method is widely used in logistics, production and warehouse management to increase operational efficiency and improve a company’s cash flow.

Frequently asked questions

1. What is ABC analysis?

ABC analysis is an inventory classification method that divides products into three categories (A, B and C) according to their value to the company, in order to better manage resources and allocate resources efficiently.

2. What are the benefits of ABC analysis?

ABC analysis helps companies identify key products, optimize inventory management, minimize warehousing costs, and focus resources on the most important parts of the business, helping to improve operational efficiency.

3. What do A, B and C categories mean?

Class A products are those with the highest value that have the greatest impact on a company’s operations, class B is medium value, and class C includes the lowest value products that make up the majority of inventory but have the least impact on total value.

4. In what industries is ABC analysis used?

ABC analysis is used in various industries such as logistics, manufacturing, retail and warehouse management to improve the efficiency of inventory management and optimize operating costs.