Inventory management

Pareto Analysis (ABC analysis)

ABC analysis is a stock-classification system that uses three categories to classify the different items kept in a store. Categories (A, B, C): A being the most valuable items, C being the least valuable ones.



The importance is assessed in terms of the annual usage

‘A’ items – 20% of the items accounts for 70% - 80% of the annual consumption value of the items.
‘B’ items - 30% of the items accounts for 15% - 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.

Example:
Classify the items shown in the table below using ABC analysis.
Black: Question; Red: Answer