My Paper
The criteria used in order to determine which of the items would be categorized as A,B or C were determined from the unit cost of each item:
above £10,000
between £2,500and £9,999
anything up to £2,499
Stock priority is very important when keeping stock control. Some stocks can be too small or less important than others whereas other stocks can be very important and large. The ABC ranking system allows for the stock to be controlled in terms of value to the company. This system is based upon the annual spending of the company on its stock. The rankings are as follows:
Highest Value Items: These items are the most valuable to the company as they are the most expensive. They generally account for 15-20% of the items that account for 75-80% of the total yearly stock value
Medium Value Items: These items are still valuable items to the company and account for 30-40% of the items that account for 15% of the yearly stock value
Low Value Items: These are the lowest valued items to the company and make up 40-50% of the 10% of the annual stock.
The above percentages can vary depending upon the stock at hand. Generally the C items would be the highest quantity and the A items the lowest but this is not always the case.
Management can use the ABC categorization of the stock and can be a guide for the management to control the stock: A items should be the tightest controlled stock, B medium and C the lowest control of the three categories. This will allow for a company to know when and how much to order of each item and will keep archives as neat as possible as each value of item is categorized to a letter depending on the value of that item.
Other uses of the ABC system can be for prioritizing