Inventory Decisions

ABC (Always Better Control) Analysis –

• Class A – constitutes 10% of total items and accounts for 75% of total money spend on inventories.
• Class B – constitute 15% of total items and accounts for 15% of total money spend on inventories.
• Class C – constitute 75% of total items and accounts for 10% of total money spend on inventories

Rule is called a PARETO’s law –

States that a few high usage value items constitute a major pat of the capital invested in inventories where    as bulk of inventories having low usage value constitute insignificant part of capital.