ABC analysis classifies inventory items according to relative importance, most commonly by annual usage value. In the typical ABC pattern, “A” items represent a small percentage of the total number of items but a large percentage of total inventory value or annual usage value. Therefore, “A” items generally represent about 20% of the inventory items , not 20% of the value.
Exact extract: “Items can be ranked in order of their relative importance by ABC analysis… This technique ranks items as A- B- or C-class most commonly according to their annual usage value. Inventory management may then focus most on A-class and least on C-class items.”
The practice material also explains the control logic: “ABC inventory control operates on the assumption that a company should allocate its limited resources to maintaining high priority items or ‘A’ items.”
Therefore, “A” items generally represent about 20% of the inventory items , while accounting for a much larger share of annual usage value.
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