ABC Classification

ABC classification

Refer to the APICS Dictionary, it means: The classification of a group of items in decreasing order of annual dollar volume (price multiplied by projected volume) of other criteria.

This array is then split into three classes, called A, B and C. The A group usually represents 10% to 20% by number of items and 50% to 70% by projected dollar volume. The next grouping, B usually represents about 20% of items and 20% of the dollar volume. The C class contains 60% to 70% of the items and represents about 10% to 30% of the dollar volume.

The ABC principal states that effort and money can be saved through applying looser controls to the low-dollar-volume class items than will be applied to the high-dollar-volume class items. The ABC principle is applicable to inventories, purchasing, sales and so on.