MECHANICS OF AB-C

ANALYSIS :

Step 1. Calculate the annual consumption value (ACV)

for each item proposed to be used for manufacturing a
product by multiplying the number of units used by the
unit price of the item
Step 2. Arrange the all the item in the order of descending
sequence of Annual consumption value
Step 3 . Calculate the cumulative annual consumption
value for each item , item by item
Step 4 . Compute the cumulative percentage of annual
consumption value for each item

Step 5 . Locate the item in the list for which the

cumulative annual consumption value is 70 % of near 70
% of the total annual consumption value . Categories all
the previously listed items up to this item as A category
items
Step 6 . Locate the item in the list for which the
cumulative annual consumption value is 90 % total annual
consumption value . Categories the items listed after A
category items and up to this item B category items
Step 7 . Categories the remaining items as C category
items

Limitations :
1.To be fully effective , it should be carried out with
standardization and codification.
2. Importance is given to item based on ACV and not
on its criticality for the production.
3. It should be reviewed periodically so that change in
prices and consumption are taken into account