ABC ANALYSIS FOR INVENTORY

 What is ABC Analysis for Inventory?  An inventory control system Categorizes by dollar volume contribution Valuable for small businesses 

Brainstorming Exercise
 Which items contribute most to your dollar volume? What is your inventory control method? How much inventory is wasted due tolack of inventory control? 

Nuts and Bolts

 1.Strict control of high dollar volume items2.Higher inventory control level3.Leads to inventory turnover and servicelevel increases4.Resources are better allocated to controlefforts. 

Drawbacks of ABC Analysis for Inventory

 Less control over B and C, etc. items Not an all-purpose inventory controlmethod Profit not necessarily maximized 

How does ABC analysis work?

 Steps in ABC Analysis:2.Determine the dollar volume3.Rank items.4.Calculate the percenta ge dollar volumefor each item.  1.Determine the cumulative percentagesfor number of items and dollar volume2.Classify items as A, B, C, etc. 

A items 20% of the items accounts for 70% of the annual consumption value of the items.  B items - 30% of the items accounts for 25% of the annual consumption value of the items.  C items - 50% of the items accounts for 5% of the annual consumption value of the items.[6]  Ano