Warehousing and Inventory

Management
Module 1: ABC Analysis and Standardization

Objectives: After studying this unit, you will be able to:

Explain the Meaning of ABC Analysis
Discuss the Objective of ABC Analysis
Explain the Advantages of ABC Analysis
Discuss the Limitations of ABC Analysis
Discuss the Numerical of ABC Analysis
Module 1: ABC Analysis and Standardization

ABC analysis is an inventory classification strategy that categorizes the

goods into three categories, A, B, and C, based on their revenue. 'A' in
ABC analysis signifies the most important goods, 'B' indicates
moderately necessary goods, and 'C' indicates the least essential
inventory.
Module 1: ABC Analysis and Standardization
Module 1: ABC Analysis and Standardization
Module 1: ABC Analysis and Standardization
Module 1: ABC Analysis and Standardization
The black tee shirt is a top seller, thus an A code. Your B item is the orange shirt as it is less
sold. Only few people with specific buying criteria will get the last tee shirt: it is your C code
Why is it important to classify your products?

 Some time some product have very low contribution to the company’s profit
margin
these items often show a high volatility and are therefore difficult to
manage
 Performing an ABC analysis will help companies to bring focus
Module 1: ABC Analysis and Standardization
Module 1: ABC Analysis and Standardization
SIMPLE NUMERICAL OF ABC ANALYSIS
RANKING OF ITEMS AS PER CONSUMPTION
VALUE
CLASSIFICATION OF ITEMS IN ABC