ABC Analysis (Always Better Control Analysis)

 

✅ ABC Analysis for Kitchen Items

Given:

• Top 10% items = 70% value → A Category

• Next 20% items = 20% value → B Category

• Remaining 70% items = 10% value → C Category

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A – Category (Most Important)

🔹 Top 10% of kitchen items
🔹 Account for 70% of total value
🔹 Need highest focus, strict control, frequent monitoring
🔹 High-cost, high-usage, critical items

Examples (Kitchen):

• Premium oil/ghee

• Rice/wheat bulk

• Spices (imported/expensive)

• High-quality vegetables (Bhaji with 70% value contribution)

• Dry fruits

• Milk products

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B – Category (Moderately Important)

🔹 Next 20% of items
🔹 Account for 20% value
🔹 Moderate control and periodic monitoring

Examples:

• Pulses

• Basic spices

• Cleaning supplies

• Common vegetables

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C – Category (Least Important)

🔹 Remaining 70% of items
🔹 Account for only 10% value
🔹 Simple control, bulk purchase, minimal supervision

Examples:

• Salt

• Sugar

• Tea powder

• Basic masala packets

• Miscellaneous small kitchen items

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🎯 Key Focus Strategy

Focus More On:

✔ A Category (High value, critical items)
– Track daily
– Maintain optimum stock
– Avoid wastage
– Quality check

Monitor B Category:

✔ Weekly review
✔ Maintain safety stock

Simplify C Category:

✔ Buy in bulk
✔ Low monitoring needed

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⭐ Summary (One-Liner)

A = top 10% items with 70% value (highest priority), B = 20% items with 20% value (medium priority), C = 70% items with 10% value (low priority).

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ABC Analysis (Always Better Control Analysis)

Definition:
ABC Analysis is an inventory control method that classifies items into three categories (A, B, and C) based on their annual consumption value (Annual Usage × Unit Cost). It helps prioritize management efforts on the most valuable items.

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1. Classification

A-Category Items

• High-value items (≈70–80% of total inventory value).

• Low quantity (≈10–20% of total items).

• Require strict control, accurate records, frequent review.

B-Category Items

• Moderate-value items (≈15–25% of value).

• Moderate quantity (≈20–30% of items).

• Require periodic monitoring and control.

C-Category Items

• Low-value items (≈5–10% of value).

• High quantity (≈50–70% of items).

• Simple controls, bulk ordering, less monitoring.

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2. Steps in ABC Analysis

1. List all inventory items.

2. Calculate Annual Consumption Value = Annual Usage × Unit Cost.

3. Arrange items in descending order of consumption value.

4. Calculate cumulative value percentage.

5. Classify into A, B, and C categories.

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3. Utility / Importance

• Helps focus management on critical items.

• Minimizes inventory cost.

• Improves material planning and purchasing efficiency.

• Reduces stockouts for high-value items.

• Supports effective budgeting and forecasting.

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4. Advantages

• Simple and effective classification tool.

• Helps prioritize purchasing.

• Reduces working capital requirement.

• Improves inventory turnover.

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5. Applications

• Stores and inventory control.

• Purchase management.

• Warehouse management.

• Spare parts control.

• Pharmaceutical, manufacturing, and retail industries.

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6. Conclusion

ABC Analysis is a powerful inventory management technique that categorizes items by value to ensure tight control over critical items (A), moderate control for B items, and simple control for low-value items (C), ultimately optimizing cost and improving operational efficiency.