ABC Inventory Analysis is a process of classifying inventory into three categories – A, B, and C – based on factors such as use, cost, and importance. This helps businesses better manage inventory levels, reduce costs and increase profits. Category A items are those that are in high demand and need to be available to customers at any given time; B items are used in production but can be replaced if necessary; and C items are used for long-term storage or rarely ordered. By understanding the different types of inventory and how they’re used, businesses can make smarter decisions about purchasing and stocking their products.