Monday, August 25, 2014

ABC ANALYSIS

Long ago, I did a course in Materials Management. While studying Inventory Control, I had to learn about ABC Analysis. Materials are classified into three categories A, B and C. The most valuable are classified as A. Those that are less valuable are classified as B and the least valuable as C.
The A group materials are tightly controlled so that there is no pilfering and only sufficient amount is held in stock to avoid money being locked up as stock. There is less control for B group materials and least control for C group materials. Some loss due to pilfering can be tolerated for C group materials and the expense involved in control can be reduced for this category.
I think ABC Analysis is useful in daily life too. We keep expensive jewelry in a safe place. We focus on important issues and deal with them effectively. Less important issues do not receive the same attention. A salesman works hard to get a big order. He does not put as much effort on a small order. We are more careful in selecting when we purchase something expensive and may look for reviews. It is not necessary when we buy something cheap.

No comments:

Post a Comment