Conducting ABC analysis
To conduct ABC analysis, following steps are necessary:
a) Prepare the list of the items and estimate their annual consumption (units).
b) Determine unit price (or cost) of each item.
c) Multiply each annual consumption by its unit price (or cost) to obtain its annual consumption in rupees (annual usage).
d) Arrange items in the descending order of their annual usage starting with the highest annual usage down to the smallest usage.
e) Calculate cumulative annual usages and express the same as cumulative usage percentage. Also express the number of items into cumulative items percentage.
f) Graph cumulative usage percentages against cumulative item percentages and segregate the items into A, B and C categories.
g) Decide the policies of control for the three categories.
To conduct ABC analysis, following steps are necessary:
a) Prepare the list of the items and estimate their annual consumption (units).
b) Determine unit price (or cost) of each item.
c) Multiply each annual consumption by its unit price (or cost) to obtain its annual consumption in rupees (annual usage).
d) Arrange items in the descending order of their annual usage starting with the highest annual usage down to the smallest usage.
e) Calculate cumulative annual usages and express the same as cumulative usage percentage. Also express the number of items into cumulative items percentage.
f) Graph cumulative usage percentages against cumulative item percentages and segregate the items into A, B and C categories.
g) Decide the policies of control for the three categories.