ABC Analysis

Overview

An ABC Analysis is an advanced inventory management function that determines the level of importance of an item on a proportional basis to the inventory's total cost. The analysis is based on item usage not quantities on hand. Items classified as an A are of high importance they usually represent 20% of the inventory items, but will equal 80% of the dollar usage Items classified as a B are of medium importance as they usually represent 30% of the items but only 15% of the dollar usage. Items classifieds as a C are of lowest importance they will equal 50% of your inventory items but not much of you inventory value.

With the majority of your inventory value wrapped up in a small amount of sales most resources should go towards managing the A items. This report defaults to the 80%/15%/5% model, but any percentage can be selected by the user. The report will analyze usage and unit costs for all inventory items and will assign the items making up the highest 80% of the total to class A. The next 15% is assigned to class B and the last 5% is assigned to class C.

The report will display the item, item description, the usage quantity, the average unit cost, the usage amount, the current and a suggested ABC code based on the average usage of the item and the total dollar usage subtotal. The ABC field on inventory items will change automatically to the suggested category by checking the Update Inventory box on the report selection screen.

INV>Reports>ABC Inventory Analysis Report