Definitions for "ABC Classification"
The classification of inventory, after ABC analysis, into three basic groups for the purpose of stock control and planning. Although further divisions may be established, the 3 basic categories are designated A, B and C as follows: A Items - An item that, according to an ABC classification, belongs to a small group of products that represents around 75-80% of the annual demand, usage or production volume, in monetary terms, but only some 15-20% of the inventory items. For the purpose of stock control and planning, the greatest attention is paid to this category of A-products. A items may also be of strategic importance to the business concerned. B Items - An intermediate group, representing around 5-10% of the annual demand, usage or production value but some 20-25% of the total, that is paid less management attention. C Items - A product which according to an ABC classification belongs to the 60-65% of inventory that represents only around 10-15% the annual demand, usage or production value. Least attention is paid to this category for the purpose of stock control and planning and procurement decisions for such items may be automated.
Method used to stratify or categorize inventory into groups or sections based upon certain activity, request, or use characteristics. Examples of ABC stratifications would include ABC by order velocity (# of times item has been sold), ABC by sales volume, ABC by quantity sold / consumed, ABC by average inventory investment, ABC by margin, etc. ABC stratifications are used to develop inventory planning policies, set count frequencies for cycle counting, slot inventory for optimized order picking, and other inventory management activities in an ICS. ABC codes are typically set by item.
The classification of inventory, after ABC analysis, into three basic groups for the purpose of stock control and planning. Although further divisions may be established, the 3 basic categories are designated A, B and C as follows: A : 80% of demand from 15% of products B : 5% of demand from 20% of products C: 15% of demand from 65% of products
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