You use this program to generate a list of stock items in descending order of usage value, based on the value of stock used over the last 12 months.
The report indicates what your most and least used items are, enabling you to determine what quantities of selected stock items should be included in your inventory.
This technique is also known as Pareto Analysis (80/20 rule) where concentration on the A class items can achieve greater results from less effort.
| Field | Description | ||||
|---|---|---|---|---|---|
| Warehouse selection | Although you can base your ABC analysis on the usage in a single warehouse, this will not accurately reflect the annual usage value for the same stock items that are held in different warehouses. | ||||
| All | Select this to base the ABC analysis on the usage of the stock items in all warehouses (i.e. across the entire company). | ||||
| Single |
Select this to base the ABC analysis on the usage of the stock items in a single warehouse. You indicate this warehouse on the Warehouse field below.
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| Warehouse |
Indicate the single warehouse on which you want to base the usage for the ABC analysis report. This applies when you select to base the usage on a Single warehouse. |
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| Print options | |||||
| Print 'A' class items |
Select this to include your A class items for printing. Based on the 80/95 default, stock items are included in class A until the sum of items equals 80% of the annual usage value of your entire inventory. |
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| Print 'B' class items |
Select this to include your B class items for printing. Based on the 80/95 default, stock items are included in class B until the sum of class A and class B items equals 95% of the annual usage value. |
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| Print 'C' class items |
Select this to include your C class items for printing. Based on the 80/95 default all other stock items having a non-zero cost that do not fall into classes A and B are assigned to class C. |
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| Print 'D' class items |
Select this to include your D class items for printing. Any stock item that has not been used or sold in the last year is assigned to class D. |
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![[Note]](images/note.png)
These options enable you to apply a theme to the report and to define multiple output destinations for the report once it has been compiled (SRS Output Options).
The Annual usage value = Usage brought forward from previous period end plus ((quantity issued x cost) + (quantity sold x cost) for the current period to date). The cost at the time the transaction was processed is used, not the current cost.
The annual usage value of a stock item is used to determine its classification. This value is the total cost of sales and issues of an item over the past 12 months.
The program calculates the total inventory usage value by accumulating the annual usage value for each warehouse. It then calculates the annual usage value for each stock item.
The annual usage value (A.u.v) is increased in a period by the sales values as invoices are processed. The cost used at the time that the invoice was processed is used. Similarly, the total inventory usage is updated when the item is issued. Therefore, during a specific period, the YTD usage is the usage as at the previous period end, plus the usage from movements that have occurred during the current period. The current cost at the time of generating the report is therefore irrelevant.
For each month end after the 12th month, the usage value is annualized by dividing the value by 13 and multiplying by 12. If the annual usage value of a stock item is based on less than 12 months history, then the value is divided by the number of months that the item has been held on file, and multiplied by 12 to give an annual usage value.
See Warehouse Values for an example of a YTD usage value calculation.
You indicate whether you want to use ABC analysis by selecting the ABC analysis required option (Stock Code Maintenance) for each individual stock item.
Once the annual usage value has been established, the program classifies each stock item into one of four categories: A, B, C and D.
The breaks between the categories are defined at the option: Percentage breaks for ABC analysis (Inventory Setup). The default A/B percentage break is 80 and the B/C percentage break is 95.
Based on these defaults, stock items are included in class A until the sum of items equals 80% of the annual usage value of your entire inventory.
Stock items are included in class B until the sum of class A and class B items equals 95% of the annual usage value.
All other stock items having a non-zero cost that do not fall into classes A and B are assigned to class C and any stock item that has not been used or sold in the last year is assigned to class D.
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If the quantity sold or issued for the last 12 months does not exceed zero, then the usage value is set to zero by the Month end function of the Inventory Period End program.