ABC Analysis

Definition: ABC Analysis is a method for inventory categorization used in inventory management and/or materials management.
In this approach normally 3 types of inventory items are separated:
A Items: these require tight control and Just-in-time management, because even if they are present only in small numbers, they make up a large percentage of inventory on a cost basis.
B Items: these can be less tightly controlled because they are less expensive than A items.
C Items: these require only very limited or no control, because they are large in numbers and very cheap.

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More on inventory: Inventory, Inventory Management, Materials Management, Vendor Managed Inventory.

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