what is ABC analysis please describe briefly.
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Answer Posted / prabhu
ABC have many terms like Always Best Control etc. Lets take
an example of television, Picture tube or CRT is the major
part, contributing up to 70% of total cost but in quantity
it is only one set or piece. So it comes in A class and in
B class other products like monitor, speaker parts, outer
frame etc, contributing up to 20% of total cost and in
qunatity wise-around 20% of total parts. In C class, other
minor parts like screws, wires, circuit boards etc,
contributing the remaining 10% of cost and in quantity wise
70% of parts. Ok.. How it is used in inventory management?
The holding and carrying cost for the A class products are
very high and also if the demand decreases, it is difficult
to return these product. So we have to follow the practice
of less inventory or JUST IN TIME ordering. Thus B products-
Moderate inventory level and C products-More inventory
minimizes also the transportation and ordering cost.
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