Inventory Management - ranking stock items:-
Ranking your stock items for leaner inventory management
Most business operations involve many inventory items. In practice it is not possible to give a similar amount of attention to each item. An effective method of establishing the appropriate degree of control, makes use an A, B, C classification scheme. This method divides your inventory items into 3 categories based on sales volumes:
- high dollar volume = A
- moderate dollar volume = B
- low dollar volume = C
By ranking items in accordance with the dollar volume, you can create a stock management plan which will place the emphasis on the more important items.
A Parts should comprise the top 80% of dollar volume, B Parts approximately 15%, and C Parts around 5%. This will represent about 20%, 30% and 50% of your part numbers (known as Stock Keeping Units—SKUs) respectively. In the event that B and C items consume too much of your inventory, a strategy is required to work with your suppliers to reduce minimum order sizes or lead times for these items.
A Product Ranking Strategy is part of Core Logistics Consulting's standard audit
The dollar volume is also a measure of importance. Category A items should receive closer monitoring with more frequent cycle counts and shorter time periods between reviews. However, there are some cases where lower ranked parts may be of special importance to a business process and thus may deserve to be pushed into a higher level of importance as a result. Once established, the A, B, C classification system will help you achieve greater efficiencies in your inventory control operations.