ABC Inventory System

What is the ABC Inventory System?

The ABC inventory system is an inventory system designed to give control over inventory with less effort.

How it Works

With traditional inventory control, the business needs to count each and every item in their inventory.

The provides an extremely accurate tally of inventory.

However, it’s a time consuming and arduous task and is probably overkill for the business’s needs.

To control inventory, a business may only need to check the behavior of a small but highly significant segment of that inventory.

The ABC inventory system is designed to help a business achieve this. 

How to Set Up an ABC Inventory System

With this system, you set up a spread sheet and rank inventory by significance.

You begin by identifying those inventory items that have least significance on the inventory as a whole.

This segment is often quite large.

Designate stock items in this segment with a C.

After this, identify the segment that has next greatest significance.

Designate these items with a B.

This leaves relatively few items.

These should be of high value or significance to the total inventory.

Designate these items with an A.

By ranking inventory in this manner, you get a sense of how you should check and control your inventory.

This allows you to formulate an appropriate stock take schedule.

© R.J. Hickman 2020