ABC analysis is a strategic inventory management technique that categorizes items into three groups (A, B, C) based on their importance or value, typically following the 80/20 rule where 80% of sales come from 20% of inventory. The classification is based on annual consumption value determined by unit cost and annual usage. This method benefits businesses by optimizing resource allocation, improving inventory control, and achieving cost savings.

1. Optimizing Inventory Management: An
Introduction to ABC Analysis
Prioritize, Allocate,
Succeed
SUBMITTED TO—DR. JAGDEEP SINGLA SIR
SUBMITTED BY --- SHIVAM SYAL
ROLLNO.----CUHP23MBA082

2. Introduction
Did you know that 80% of a
company's sales typically
come from just 20% of its
inventory?

3. ABC Analysis
ABC analysis, also known as
Pareto analysis or the
80/20 rule, is a strategic
inventory management
technique that categorizes
items into three groups
based on their importance
or value: A, B, and C.

4. Principles and Criteria
A, B, and C Categories:
ABC analysis divides
inventory items into three
categories:
A, B, and C, based on
their significance to the
business.

5. Classification Criteria
• Annual Consumption Value:
Items are classified into A, B, and C categories based on annual
consumption values. This value is calculated by multiplying the unit
cost of each item by its annual usage quantity.
• Categorization Process:
(1) Identifying Annual Consumption Value
(2)Ranking Items
(3) Categorizing Items

6. 1. 2.

9. Benefits of ABC Analysis
• Optimized resource allocation
• Improved inventory control
• Cost savings

10. Conclusion
• In conclusion, ABC analysis is a powerful tool for optimizing inventory
management.
• By categorizing items based on their importance, businesses can
focus their efforts where they matter most, leading to improved
efficiency, cost savings, and better decision-making.