ABC analysis

It is the Methods of Inventory/Material control
ABC ANALYSI S STOCK LEVELS Perpetual Inventory System

EOQ(Econo mic Order Quantity)

What is Inventory? The term INVENTORY is defined as “the systematic control and regulation of purchase.” . storage and usage of materials in such a way so as to maintain an even flow of production and at the same time avoiding excessive investment in inventories.

which constitute approximately 35% of the total items.B & C using the rupee volume. . accounts for approximately 15% of the total material consumption. accounts for 80% of the total material usage.The “A” items consists of approximately 15% of the total items . • class “C” items are quite negligible. This items merit a tightly controlled inventory system with constant attention to the purchase & stores management. but the effort can result in larger savings. These items merit a formalized inventory system & periodic attention but the purchase & the stores management. accounting only 5% of the monetary value of total material usage . It consists remaining 50% items.What is ABC Analysis? • ABC analysis divides the total inventory into 3 classes A. • class “B” items constitute an intermediate position. Quite relaxed inventory procedures are used. as follows: • class “A” items constitute the most important class of inventories so far as the proportion in the total value of inventory . A larger effort per item on only a few items will cost only moderately.

Class “A” ABC ANALYSIS OF INVENTORY Class “B” Class “C” .

sole forms B grade materials and shoe lace forms C grade materials this is ABC analysis in inventory management .Ex .In shoes leather forms A grade materials .

consuming 70% of total expenditure. 73 (22. The total cost of drugs used was Rupees 55.23.503. economic analysis of drug expenditure of a Medical Store in Hospital.4%) drugs were Category A . only 325 drugs were being used in the reference hospital. 47(14. Section 01 for the year 2003 of a 190 bedded service hospital was under taken.46 %) drugs Category B consuming 20% and rest 205 drugs (63. Result: Out of 493 drugs in Medical Store section 01. Of these 325 drugs. ABC Analysis in Medical Stores Inventory Control .7%) Category C drugs cost only 10% of expenditure.Background: The basic principle of inventory control is ABC based on cost criteria . Methods: Based on ABC matrix.

ITEM A B C ITEMS(%) 10 20 70 MONEY VALUE(%) 70 20 10 .

5.High safety stocks. 4. . 5. Can be fully delegated.Moderate value analysis. 2. “B” Class items “C” Class items (Low (Moderate Consumption Consumption Value) Value) 1.Moderate control 1.Minimum Value Analysis. 3.Low safety stocks low safety stocks.Very strict control.Maximium follow-up & expediting. 4. 5. Loose control 2. 3.Periodic follow-up. 4. 3. No safety stocks or very 2. Can be handled by middle management.“A “ Class items (High Consumption Value) 1.Must be handled by senior officers.Rigorous value analysis.Follow –up & expediting in exceptional cases.

7. 6. 8. 7. 6.6. 8. 8. 7. .

.CONCLUSION At last I conclude that ABC analysis is a vital method for control the Inventory.

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