ABC analysis is a technique that identifies the items that represent the greatest investment for your company in terms of monetary value and turnover rate.
The ABC analysis feature ensures that crucial inventory does not fall below minimum levels, and helps to ensure that the current balance figures for items remain reconciled with the actual count. The ABC type for an item is determined by running an ABC analysis report that multiplies the year-to-date issued quantity by the last cost of the item. Each item is sorted in descending order of the dollar value that is reached by this calculation. The ABC type is set to A, B, or C based on a percentage that you set as a default in the Organizations application.
The ABC analysis report changes the cycle count frequency for an item, based on the ABC type and on the count frequency. If the ABC type is set to N, the cycle count frequency does not change. In the Organizations application, set the count frequency to the number of days for each ABC type.
The ABC type is set to A, B, or C based on a percentage that you set as a default. For example, you can set the following percentages:
When you apply these values, the top 30% of items by cost are type A, the next 30% of items are type B, and the last 40% are type C.