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ABC ANALYSIS
In this technique the materials are divided into 3 groups. A,B,C according to the cost of the materials and money value.
A items - A few costly items come under this category these items require proper storage and handling, overstock is avoided.
B items - These are neither costly nor cheap.
C items - Cheaper in cost.
It is also known as Selective Inventory Control Method
A ITEMS
it covers 10% of the total inventories.
It consumes about 70% of the total budget
It requires very strict control
B ITEMS
It covers 20% of the total inventories,
It consumes about 20% of the total budget
It requires moderate control.
C ITEMS
It covers 70% of the total inventories.
It consumes about 10% of the total expenditure
It may require low control.
It requires either no safety stock or low safety stock.