Abc Analysis – Inventory Control
ABC analysis – inventory control
In the present day competitive business, the need for management by exception is felt more than ever before. ABC analysis is one such tool whereby a manager can practice management by exception. ABC analysis is a basic technique of materials management and the applicability of this technique extends over almost all respects of material management such as purchasing, receiving of materials and inspection, inventory control etc. The ABC principle can also be applied to many other types of activity.
Ideally, one must understand that the efforts put forth in the control of each inventory item will vary in proportion to the value of that item to the firm or to the profit potential. An executive, who treats all items in inventory in the same manner, fails to recognize the importance in every inventory. The modern executives must therefore be selective if he is to be effective. This is achieved by classifying all the items into ABC category.
The ABC classification assists in the proper selection of a control system. The degree of control must be first decided to have a good control over the inventory items. As far as inventory control systems are concerned a wide range of systems approach is possible from simple bin cards to highly sophisticated computed systems. However, the unfortunate aspect of many control systems is that the clerical control over enormous paper work is generally applied to all items regardless of their relative contribution to the inventory value and total profit. Each category of group of items is segregated by the ABC classification which possesses its own characteristics and these characteristics in turn dictate the most appropriate approach in the design of the inventory control system.
Large savings in investment are possible if proper attention is paid to inventory items in proportion to their value and it is always desirable to classify the items depending upon their importance. This ABC technique is a selective control as applied to inventories and it is one of the keys for better control.
ABC is said to connote, “Always better control”. The basis of analyzing the annual consumption cost for usage cost goes after the saying. The classification should be made according to total value of annual consumption. This is very important thing which one must remember in applying the technique.
ABC analysis is made in such a way that “A” items will be about 10 percent of the total number of items but will account for 70% of the total value of annual consumption. ‘B” items will be roughly about 20% of the total number of items and will account of about 20% of the total value of annual consumption, whereas “C” items will be 70% of the total number of items but will account for only 10 percent of the total value of annual consumption. The exact percentage differs from organization to organization and may even vary from year to year.
This article has been compiled by Classof1, a leading online Homework-Help provider.
For assistance with your Financial Accounting Homework Help and academic Financial Accounting Assignment Help, you can visit classof1.com
Classof1.com is open 24/7. You can call us at 1-877-252-7763 or drop an email to learning@classof1.com
Medicine/experimen | Sfte | Nicklausillustrated | Lead/architect | Manage Your Finances For A Better Life | Your Guide To Mobile Marketing Success In This Era | Loan Rate | was ist kratom muessen ihnen gerne erleutern und wo euch es online kaufen koennt | Galt | Rchome | Access More Mobile Device Users With Custom WordPress Themes for ECommerce Website Design | All about CP-690550 JAK inhibitor | deciding on the appropriate world wide web internet hosting A Fast Web Hosting Provider | How to Properly an Effectively Scale Your Internet Business | Best Lead Generation Software For Business Leads | security
Inventory Control | Ruben | 
May 21, 2012 5:43 am | 
Comments Off
Subscribe