ABC Analysis is a business
tool used to categorize inventory items. Also known as Selective Inventory
Control.
It is carried out regularly
to take into account - new parts/ additions to inventory and changes in cost.
A Items: very tight
control, high cost, complex parts - requires most management attention
B Items: less tightly
control, medium cost, medium complexity
C Items: simplest control
possible, low cost - marginally important
Pareto's law:
ABC Analysis is one way an
application of Pareto's law, or the 80/20 rule (for eg: 80% of world's wealth
possessed by 20% of people).
A Class Items often form 20
% of the volume and around 80 % of value.
C Class Items often form 80
% of the volume and around 20% of value.
Uses:
Inventory planning for high
cost A Items. Frequency value planning for inventory. Market conditions (is the
part easily available)
Identify parts that will
have most significant impact on finance.
Effective purchasing (like
just in time) and storage methods most suitable to the parts and their dollar
value.
In Maximo:
In Inventory Application,
there is a section for ABC Analysis.
In Organization
Application, Select Action --> Inventory Defaults. You have a Cycle count
and break point.
There is a report with
description "Inventory ABC Analysis"
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