![]() ![]() As the name suggests, inventory categorization is a method to strategically set the price of various products based on their demand value. Inventory classification is a viable solution that can help enterprises streamline their inventory management process. It may include inadequate knowledge about the stock, inefficient management process, finding problems in managing people and space, and more. Furthermore, there are various other inventory management challenges that a business entrepreneur has to tackle. Many organizations have massive Stock Keeping Units or SKUs, but it hasn't helped them to flourish and upscale their business. ![]() Why is it Critical to Use ABC Analysis for Inventory Management? In short, A signifies most important, B indicates moderately necessary, and C denotes least essential inventory goods. C only generates 10% of revenue hence it has limited control. Here, A gains the spotlight with almost 70% of inventory value and revenue generation, while B retains its mid-level spot controlling 20% of inventory value. Similarly, if one perceives the second pyramid representing the percentage of average inventory value, the structure reverses. Here Category A comprises only 10% of products, B contains 20% items, and C has the maximum number with 70% of products. The first pyramid suggests the percentage of the total number of inventory items. ABC Analysis Graph The two pyramids represent the ABC Analysis Graph. Hence the stock managers are quite lenient while calculating this category of inventory. ![]() B regulates approximately 30% of the goods with 15% revenue, while C has the lion's share controlling almost 50% of the stock but only powering 5% of the total revenue. Hence, it demands a robust and consistent control. ![]() If one implements the Pareto Principle to ABC Analysis, then A consists of 20% of the total products with almost 80% revenue generation. ABC Analysis is based on the theory that all inventory items cannot have similar or equal value. ![]()
0 Comments
Leave a Reply. |
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |