The ABC inventory method (also known as ABC analysis) is a business categorization technique used to classify and manage inventories of items based on their value. This method assigns products into three categories, A, B and C, based on the total cost of each item. Items with the highest costs are categorized as ‘A’, while those with lower costs are classified as ‘B’ or ‘C’. The ABC approach divides inventory into three classes—the most important class ‘A’, followed by class ‘B’ and least important class ‘C’. This method assists inventory managers in identifying priorities when it comes to ordering and reordering products, so that the most essential items get top priority.