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What Is ABC Inventory Classification?

ABC inventory classification is a method that categorizes items in your inventory based on their annual consumption value. It considers the amount of profit you make per item sold and usage value (total number of units sold). The three categories usually follow this pattern:

  • A items: These are your company’s most important products. They typically have high sale volumes, high costs or both.
  • B items: Less critical than A-level items, B items may not sell as quickly or may be cheaper to produce.
  • C items: The least important items in your inventory. Although this category is the largest, it contributes the smallest portion to your total inventory value.

Prioritizing tasks based on these categories ensures that high-value items receive more attention, minimizing losses and managing inventory more efficiently and effectively.