A,B,C Inventory Classification

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    What is the best way to classify inventory in A,B,C class. Is it value or usage?
    We have some exceptions to the rule like:
    An item can be of low procurement value but highly important from a company standpoint such that a stock-out can result in a huge loss. This item can be of low-mid usage frequency that will make it fall under the B or C class but since it demands control it has to go in A. Wit so many exceptions to the rule how do you best recommend classifying inventory?


    In my view , ABC classification has to be done taking in to account both the cost & usage. The “A” class items are generally involving high costs as they are fast running items & hence need more control from the point of view of working capital. They need to be handled with JIT approach.The B class items are also high class but the usage is less than th “B” class items, they would preferebly need to be handled at par with “A” class items.The real catch is the “C” class items.Their usage in terms of quantity per part is far less but their stock out would mean sure shot stoppage to production.The would need to be monitored & replinished with utmost vigilance.

    In summary inventory management is a onerous job, too much of an inventory woudl put pressuer on the cost where as too little of it would cost production !


    Chris Seider

    Ummm, why classify inventory into classes? This sounds like a waste of time to me.

    Consider looking at which items are out of stock in the last few months (year) and do a basic pareto on frequency and address the causes for high frequency items.

    If one runs out of stock of something, it will always impact production unless it’s an obsolete SKU.


    you put healthcare supplies into classes A,B,C because some supplies are not important, (C), A items you must never run out of your par level, your safety stock etc is all viewed differently.
    You run out some one dies…..A items…


    Mike Carnell

    John Walker The Healthcare is different because people die thing is getting very tedious. Guess what if you screw up a jet engine hundreds of people die all at once. If you run a smelter wrong it can explode and they are hot enough to melt rocks. People can die. If you build antilock brake controllers wrong people die. How about an original thought. I know I have incited the healthcare business – try this. Medicine isn’t healthcare. It’s sickcare. Food is healthcare. Water is healthcare. No you all have something to really be mad about.

    @pmpawde First why do you have to choose one or the other? Nobody goes to inventory jail if you do something that may or may not be different. As long as what you do makes sense for your business do it and don’t worry about what people think. Take a look at the cause and effect matrix (C&E Matrix) it may be a tool that could help you use both to get a rating.

    I am with Chris we have all kinds of software to help manage inventory and now on top of the software you need to classify it A, B & C. It’s your time so do what you want. Seems redundant.

    All of this is just my opinion.

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