What is ABC Analysis?
ABC Analysis is a method of inventory management that classifies the inventory into different groups depending on how important it is for the business. The importance can be assigned based on the revenue it brings, profitability, cost, etc. The most important inventory is Class A and the least important inventory is Class C.
Businesses also allocate the monitoring and tracking resources based on the inventory class.
However, it’s important to note that the classes are not rigid and may require reallocation based on changing demand patterns. Sometimes the business may also go beyond Class C and allocate more classes as per requirement.