A-B-C Analysis

Hey students...now I am going to tell you about an important concept "A-B-C Analysis"
It is a system of inventory control. It exercises discriminating control over different items of stores classified on the basis of the investment involved. Usually the items are divided into 3 categories according to their importance, namely, their value & frequency of replenishment during a period.
(i) "A" category of items consists of only a small percentage i.e. , about 10% of the total items handled by the stores but require heavy investment about 70% of inventory value, because of their high prices and heavy requirement.
(ii) "B" category of items are relatively less important; they may be 20% of the total items of material handled by stores. The percentage of investment required is about 20% of the toal investmen inventories.
(iii) "C" category of items do not require much investment; it may be about 10% of total inventory value but they are nearly 70% of the total items handled by store.
'A' category of items can be controlled effectively by using a regular system which ensures neither over stocking nor storage of materials for production.
In the case of B category of items, as the sum involved is moderate, the same degree of control applied in A category of units is in not warranted.
For C category of items, there is need of exercising constant control. In this case the objective is to economise on ordering and handling costs.
NITIN BHALLA
9873029766
9958641376