Always Better Control (ABC)

ABC Classification of inventories

A – Very Important, B – Moderately important, C – Least important

The criterion for classification as A, B or C is monetary value. Separate vital few from trivial many. For A item, use EOQ model & for B & C, use fixed interval model.

Item	Number of items	Dollar Value ($)
A	5% - 10%	60% - 80%
B	20% - 30%	10% - 15%
C	50% - 60%	1% - 5%

A item – They should receive close attention through frequent reviews of amounts on hand and control over with-drawls, where possible, to make sure that customer service levels are attained.

C item – They are not unimportant, their absence can cause shutdown of an assembly line. However, due to low annual cost, there may not be much additional cost incurred by ordering larger quantities of some items, or ordering them a bit earlier.