Abc Analysis

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  • How to decide the items to be keep in materials warehouse? There’s one popular methods is to use ABC analysis… it is the most popular method to use.

ABC analysis is a very important method using to analyst the stock control in the material warehouse and to decide the acceptable point of storage for each items.

  • The materials warehouse items can be category into 3 group of items which is

  • A = high price items

  • B = Medium price items

  • C = Low price items

  • Then the storage can be breakdown of ABC classes as below:

  • ‘A’ items – 20% of the items accounts for 70% of the annual consumption value of the items.

  • Means A have 20% of the total items use but the total cost is 70% of the

  • Total value. It is the most expensive items.

  • ‘B’ items – 30% of the items accounts for 25% of the annual consumption value of the items. It is the most expensive items.

  • Means B have 30% of the total items use but the total cost of the total value. It is medium cost items.

  • ‘C’ items – 50% of the items accounts for 5% of the annual consumption value of the items.

  • –  have 50% of the total items but the total cost is only 5% of the
  • total value, it is low cost items

  • ‘A’ items will typically account for a large proportion of the overall value but a small percentage of the overall volume of inventory.

  • Another recommended breakdown of ABC classes[
  • “A” approximately 10% of items or 66.6% of value

  • “B” approximately 20% of items or 23.3% of value

  • “C” approximately 70% of items or 10.1% of value

This means A is 10% of the total items but in term of value is 66.6%, it is the most expensive items

B is 20% of the total items , the value is 23.3% of the total value, it is the medium cost items.

C is  70% of the total items, but it is only 10.1% of the total value, it is the

   Cheapest items.

it is very important to make a cost and usage analysis to determine the stock items, others then ABC analysis, others factors which should be consider is minimum order quantity, leadtime and also the freught cost.

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