Re: ABC Analysis
ABC Analysis:
Items are classified according to annual usage value
Very few items whose annual consumption value is large contribute significantly to the total inventory holding.
There are very large no of items whose annual consumption value is small and their contribution to total inventory is negligible.
Usually 10% of the items account for 70% of the total annual usage.
The next 20% of the items account for next 20% of annual usage and
Remaining 70% contribute just 10% of the total annual usage.
This should not be mixed with Pareto
analysis where 20% effort does 80% job and balance 80 % does 20%, commomnly known as 80:20 formula.