Provide an example of ABC classification in a business you are familiar with. What would be the A inventory items versus B and C? What ordering policies would you use for each of these?
Here’s one quick method for determining your ABC ranking based on Annual Sales Volume:
1. Calculate the 12 month dollar usage for all of your products (volume X cost).
2. Rank the items in descending order by the dollar usage.
3. The “A” items are the top 80% of the total annual usage dollars.
4. The “B” items make up the next 15% of total annual usage.
5 The “C” items are the remaining items are the remaining 5% with >0 usage in the past 12 months
6. Label zero-usage items can be labeled as “D”.
