ABC Analysis

This is a basic management principle employed for inventory management problems. In this approach the inventory (i.e. the spare parts) are categorised according to their annual consumption cost in terms of Rupees. As the name suggests the inventories are classified into three categories, A, B and C.

• A - Class inventory are most valuable and requires more attention
• B - Class inventory are intermediate and requires moderate care
• C - Class inventory are least valuable and so does not need much attention.

A-B-C analysis takes care of two aspects :

• The annual consumption, and
• The cost.

According to Pareto's law states that "Vital Few - Trivial Many". Most generally, the valuable (costly) items are very less in number while the cheaper items will be many. So also in maintenance spares, the costly items are rarely consumed (replaced), while trivial will be frequently consumed.