ABC classification

ABC classification

1) The classification of inventory, after ABC analysis, into three basic groups for the purpose of stock control and planning. Although further divisions may be established, the three basic categories are designated A, B and C as follows:

A Items – items that, according to an ABC classification, belong to a small group of products that represent around 75–80 per cent of the annual demand, usage or production volume, in monetary terms, but only some 15–20 per cent of the inventory items. For the purpose of stock control and planning, the greatest attention is paid to this category of A-products. A items may also be of strategic importance to the business concerned.

B Items - an intermediate group, representing around 5-10 per cent of the annual demand, usage or production value but some 20-25 per cent of the total, which is paid less management attention.

C Items - products which, according to an ABC classification, belong to the 60-65 per cent of inventory that represents only around 10-15 per cent the annual demand, usage or production value. Least attention is paid to this category for the purpose of stock control and planning and procurement decisions for such items may be automated.

Source: David Lowe. The Dictionary of Transport and Logistics. Kogan Page, 2002. – P.1-2 (288 p.)