What does ABC analysis in inventory control focus on?

ABC analysis in inventory control is a method that categorizes inventory into three groups—A, B, and C—based on their importance to the overall business operations and their contribution to revenue or profitability.

Group A typically includes high-value items with a low frequency of sales, which require close management due to their significant impact on overall inventory costs or sales. Group B includes moderate-value items that have a moderate impact, while Group C consists of low-value items with a high frequency of sales, which are easier to manage due to their minimal impact on costs.

By sorting inventory in this way, businesses can prioritize their management efforts, ensuring that the most critical items receive the most attention, which helps in optimizing stock levels, reducing excess inventory, and ultimately improving service levels. This method is especially useful in making informed decisions about purchasing, stocking, and maintaining inventory.