A-B-C CLASSIFICATION OF INVENTORY FOR HOUSEHOLD ITEMS CONSIDERING

A FIVE MEMBER FAMILY

Prepared for
Prof. Dr. Muhammad Ziaulhaq Mamun
Course Instructor
P501: Managing Operations

Prepared by
Sayed Abu Sufyan
Student ID: ZR1801005
EMBA 30th Batch

Institute of Business Administration

University of Dhaka

January 25, 2019

INTRODUCTION
When an organization’s inventory is listed by Taka values, generally a small number of items
account for a large Taka volume, and a large number of items for a small Taka volume. In
inventory management we focus this view by classifying the inventories into three categories A,
B and C.

A-grouping is made for those few items with large Taka value; a B-grouping for items with
moderate unit and Taka value; and a C-grouping for the large number of items accounting for a
small Taka value. Thus A-group might contain, for example, about 15% of the number of items in
the inventory costing about 60-70% of the total Taka usage; B-group might contain, for example,
about 30% of the items costing about 25% of the total Taka volume; C group might contain, for
example, about 55% of the number of items costing only about 10% of the total Taka.

This A-B-C classification can be demonstrated for household grocery items as well. In order to
comprehend A-B-C classification, an ABC classification of the inventory items of my family with 5
members is discussed below.
A-B-C CLASSIFICATION

Item Item name Qty Unit Unit Price Total Relative Cumulative Category
No. (BDT) worth worth worth
1 Beef 5 Kg 490 2450 13.48% 13.48%
2 Rice 35 Kg 60 2100 11.56% 25.04%
3 Mutton 2 Kg 750 1500 8.25% 33.29%
4 Liquid Milk 15 Liter 70 1050 5.78% 39.07%
5 Frozen 4 20 pcs 250 1000 5.50% 44.57%
parata pack
6 Chicken 5 Kg 180 900 4.95% 49.52% A
7 Powder 1 Kg 590 590 3.25% 52.77%
milk
8 Soybean oil 6 Liter 95 570 3.14% 55.91%
9 Toothbrush 5 pcs 100 500 2.75% 58.66%
10 Egg 60 pcs 8 480 2.64% 61.30%
11 Aerosol 1 800 gm 480 480 2.64% 63.94%
pack
12 Ghee 0.4 Kg 1125 450 2.48% 66.42%
13 Coffee 0.2 kg 2225 445 2.45% 68.87%
14 Shampoo 2 Bottle 220 440 2.42% 71.29%
15 Cereal 1 330 gm 350 350 1.93% 73.21%
pack
16 Butter 0.4 gm 860 344 1.89% 75.11%
17 Sugar 6 Kg 55 330 1.82% 76.92%
18 Onion 8 Kg 35 280 1.54% 78.46%
19 Oats 0.5 kg 530 265 1.46% 79.92%
20 Vaseline 1 300 ml 260 260 1.43% 81.35%
lotion pack
21 Lentil 2 Kg 125 250 1.38% 82.73% B
22 Toothpaste 2 200 gm 120 240 1.32% 84.05%
pack
23 Washing 2 Kg 120 240 1.32% 85.37%
powder
24 Flavored 2 Kg 115 230 1.27% 86.63%
rice (Pilaf)
25 Tea 0.4 kg 525 210 1.16% 87.79%
26 Spice 2 200 gm 88 176 0.97% 88.76%
powder pack
27 Potato 6 Kg 25 150 0.83% 89.58%
28 Harpic 1 Liter 150 150 0.83% 90.41%
29 Bath soaps 3 pcs 45 135 0.74% 91.15%
30 Garlic 1 Kg 120 120 0.66% 91.81%
31 Mosquito 1 pcs 120 120 0.66% 92.47%
vaporizer
32 Hair oil 0.2 liter 600 120 0.66% 93.13%
33 Mustard oil 0.5 Liter 230 115 0.63% 93.77%
34 Liquid hand 2 Packet 55 110 0.61% 94.37%
wash
35 Black 0.1 Kg 1000 100 0.55% 94.92%
pepper
36 Kitchen 2 pcs 48 96 0.53% 95.45%
tissue
37 Dish washer 1 Bottle 90 90 0.50% 95.94%
38 Turmeric 1 200 gm 85 85 0.47% 96.41%
powder pack
39 Cumin 1 100 gm 80 80 0.44% 96.85%
powder pack
40 Wheel soap 4 pcs 20 80 0.44% 97.29%
41 Ginger 0.5 Kg 120 60 0.33% 97.62%
42 Floor 0.5 Liter 120 60 0.33% 97.95%
cleaner C
43 Toilet tissue 4 pcs 15 60 0.33% 98.28%
44 Vim-bar 2 pcs 30 60 0.33% 98.61%
45 Candle 12 pcs 5 60 0.33% 98.94%
46 Bathroom 1 200 gm 50 50 0.28% 99.22%
cleaner pack
47 Match 2 12 pcs 22 44 0.24% 99.46%
box
48 Salt 1 Kg 38 38 0.21% 99.67%
49 Fabric 0.1 Liter 300 30 0.17% 99.83%
whitener
50 Bay leaves 1 100 gm 30 30 0.17% 100.00%
pack
18173 100%
EXCEPTIONAL ITEM
These are items that must be in C-category but should get equal emphasize like items in A-
category. Any of the following criteria needs to be met to be considered as exceptional item:

 Items that are critical to operation;

 Items which have short shelf-life;
 Items with erratic demand;
 Items with erratic lead time.

Considering the above definition and criteria of exceptional item, match and candle are identified
as exceptional items in this case.

Relative cumulative worth (%) vs. quantity of items (%)

100.00%
90.00%
80.00%
% worth of items

70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% 100.00%
% quantity of items

From the relative cumulative worth vs. % quantity of items plot, it is seen that A-category items
which consist of relative cumulative worth of nearly 60% is coming from only 18% of total items.
B-category items which consist of cumulative worth of 90% is from only 56% of items, therefore,
38% of the items belong to B-category and rest 44% of items belong to C-category with a
cumulative worth of only 10%.