Abc Analysis Definition

ABC analysis is a method of classifying inventory based on the value of each unit. The value is determined by the cost of the item, the frequency of turnover, and the importance to the company.

A items are those with high value and high turnover. These items are given the most attention because they have the greatest impact on the company’s bottom line.

B items are those with moderate value and turnover. These items are given less attention than A items, but more than C items.

C items are those with low value and low turnover. These items receive the least amount of attention because they have little impact on the company’s bottom line.