How ABC Classification is used for ABC Inventory Control

ABC Classification contains a group of items in decreasing order of annual dollar volume, number of items, or other criteria. This array is then split into three classes called A, B, and C. The A group represents 10% to 20% by number of items, and 50% to 70% by dollar volume. The next grouping, B, represents about 20% of the items and 20% of the dollar volume. The C-class contains 60% to 70% of the items, and represents in between 10% to 30% of the dollar volume.

ABC Inventory Control

An inventory control approach is based on the ABC volume or sales revenu classification of products, where A items are highest in volume or revenue, and are lowest in volume. Sometimes a D category is added to the classification.