To perform an ABC analysis

ABC analysis divides items into three categories for inventory control and planning:

  • A

    A small group of items that represent a major part of total usage or turnover. This category has the highest priority.

  • B

    A middle group that has the second highest priority.

  • C

    A large group of items that represent a relatively small part of total usage or turnover. This category has the lowest priority.

In the Perform ABC Analysis (whina6210m000) session, you can perform the ABC analysis by warehouse and/or by item. LN categorises the item based on its actual turnover. Turnover can be calculated based on standard cost, sales price, or quantity.

In the ABC analysis, LN calculates turnover by item and the total turnover of all items. LN subsequently calculates relative turnover in terms of a percentage of total turnover. This percentage is used to classify the items into the three groups.

Note: 

If you perform the ABC analysis by:

  • Item, LN stores the ABC classification in the ABC Code field of the Item - Warehousing (whwmd4600m000) details session.
  • Warehouse, LN stores the ABC classification in the ABC Code field of the Item Data by Warehouse (whwmd2110s000) details session.

Example

A items, together contributing 80% to total turnover, B items contributing 15%, and C items contributing 5%.