Advanced Materials Research Vols. 1030-1032 (2014) pp 2515-2518 Submitted: 04.07.

2014
Online available since 2014/Sep/22 at www.scientific.net Accepted: 10.07.2014
© (2014) Trans Tech Publications, Switzerland
doi:10.4028/www.scientific.net/AMR.1030-1032.2515

Application of ABC Analysis in Inventory Management

LIU Jichang1, a and WU yue2,b
1
Address Beijing Fuhe street 1.Zip Code 101149..
2
Address Beijing Fuhe street 1. Zip Code 101149.
a
Email 6199444418@qq.com , b Email wuyuenet@hotmail.com .

Keywords: ABC analysis; inventory management; logistics

Abstract: ABC inventory analysis method is widely used in practical applications, this paper
analyzes the inventory of ABC concepts, principles, advantages and discuss the steps implemented
by the ABC analysis to analyze the actual case, for a thorough analysis of the case studies and
propose appropriate measures on the findings solution ultimately prove ABC inventory analysis has
important theoretical and practical value in practice. Convenient in practice.

1 Inventory management concepts

Inventory management is also known as inventory control, is a manufacturing or service
production, management of the whole process a variety of items, finished goods and other resources
to manage and control, it reserves to maintain a reasonable level in the economy.
Inventory management is widely used, mainly used in the production to meet lower demand
operating conditions, the analysis of inventory control, it remains economically reasonable level of
inventory and real-time monitoring, can the right time at the right bulk orders for procurement,
inventory strict control to prevent other ultra reservoir or stock status; inventory management is also
able to control the warehouse space market share, reduce unnecessary storage, reduce capital share,
reducing the total cost of inventory, but also to accelerate the turnover of funds for warehousing
enterprises of great help.
2 ABC inventory analysis using the analysis method
2.1 ABC Analysis Method
ABC analysis is the use of mathematical statistics methods, and a wide variety of all kinds of
things related factors influencing factors according to the weights of property or things or different
requirements, statistics, arranged and classified into A, B, C three parts, namely, to give priority, in
general, secondary and other appropriate management to varying degrees. Corresponds to inventory
management, ABC analysis of the variety and the cumulative proportion of funds in the possession
of the inventory items are classified by grade, divided into three classes, A level (not to mention an
important inventory), B grade (generally important inventory ), C grade (unimportant stock), and
different levels of control and management of the analytical methods, the specific classification as
follows:

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2516 Materials, Transportation and Environmental Engineering II

Classification The total number of The proportion of the

species proportion of the total amount of money
number of species
Class A 5%-15% 60%-80%
Class B 20%-30% 20%-30%
Class C 60%-80% 5%-15%
2.2 Implementation methods ABC inventory analysis method
In inventory management, implementation steps of commodities ABC classification:
2.2.1 Data collection
Material Storage Company F large library there are two main forms, one is stacking the rules
in place, and the other one is laying by a professional appliances, such as store shelves stacked
engine specifications: 4 layers freight, warehousing six layers, empty frame 10 layer, layer 2 or less
dynamic, static layer 3 or less. Both can not be higher tiered storage, or there will be a security risk,
so the company decided to form the material requires more storage space. F Company carried out
not only in the library district warehousing, still open pit storage warehouse near the periphery,
large library storage area of 7000 square meters, the external storage area of 1,000 square meters,
warehouse with a total area of 8,000 square meters. An analysis of the object and analyze the
content, collect relevant data, the data should be collected as follows: each inventory materials
inventory, supplies for each unit and so on.
Goods The number of monthly consumption Price / Yuan
A 157 2700
B 313 1250
C 241 2150
D 920 120
E 112 15000
F 720 680
G 696 520
H 827 150
I 150 10000
J 1070 200
2.2.2 Data processing
After data collection is completed, the need for data processing, as required calculations and
summary. Monthly consumption of stocks calculated by multiplying the amount of each item's
price, according to the amount of goods descending sort, calculate the percentage share of the total
number of each commodity finance, and then calculate the cumulative percentage amount.
Calculate the total number consumed each month, and then calculate the percentage of the monthly
consumption, and finally calculate the cumulative percentage of the monthly consumption.
2.2.3 ABC Analysis Table
ABC analysis table column contains information on: goods number, monthly consumed
quantity, unit price, amount, a percentage of monthly consumption, the monthly consumption of
cumulative percentage, the percentage of the amount, the amount of the cumulative percentage.
2.2.4 determine the classification according to ABC analysis table
By ABC analysis table, based on the percentage and amount of the monthly cumulative
consumption cumulative percentage for analysis, the cumulative percentage of the monthly
 Advanced Materials Research Vols. 1030-1032 2517

consumption of 5-15% and the amount of cumulative percentage is about 60-80% of the items
identified as Class A; monthly consumption cumulative percentage of 20% -30% and the amount of
cumulative percentage is about 20% -30% of the items identified as class B; monthly consumption
cumulative percentage of 60% -80% of the amount of the cumulative percentage of about 5% -15%
items identified as Class C.

Percentage Amount of
The number Percentage of monthly the
of monthly of monthly consumption Percentage cumulative Classifi-
Goods consumption Price / Yuan Total consumption ... Amount percentage cation
E 112 15000 1680000 2.15% 2.15% 28.90% 31.25% A
I 150 10000 1500000 2.88% 5.03% 25.80% 54.70% A
C 241 2150 518150 4.63% 9.66% 8.91% 63.62% A
F 720 680 489600 13.83% 23.49% 8.42% 72.04% B
A 157 2700 423900 3.02% 26.51% 7.29% 79.33% B
B 313 1250 391250 6.01% 32.52% 6.73% 86.06% B
G 696 520 361920 13.37% 45.89% 6.23% 92.29% C
J 1070 200 214000 20.55% 66.44% 3.68% 95.97% C
H 827 150 124050 15.89% 82.33% 2.13% 98.10% C
D 920 120 110400 17.67% 100.00% 1.90% 100.00% C
The total
amount 5206 5813270 100.00% 100.00%

2.2.5 Strategies adopted after ABC analysis

ABC analysis to classify finished goods need to take different measures to manage different
types of goods to different aspects of device configuration, management points, order quantity,
ordering, inspection methods, statistical methods, and preservation of reserves, etc. different
planning. Makes inventory management more scientific rationalization.
ABC classification management will now be summarized as follows
Category A B C
Value High General Low
The degree of Controlled by species Control by the total
control Control by species or size categories amount of

Fully configured storage, transport Appropriate to ensure that, to

and handling equipment to ensure its the extent and importance of
Device frequency and efficiency out of the article needs to determine
Configuration storage its device configuration Non-Critical Control

Into a larger force carefully managed Tight inventory levels to Tight inventory levels
Management inventory compressed to the lowest adjust the volume press to adjust the volume
Guidelines level release press release
Order quantity Less More More
Order by experience,
can be double-stack
Quantitative regularly by method to manage
Ordering methods economic order quantities Quantitative order inventory

Frequent inspection and General inspection and An annual or quarterly

Check the way inventory inventory inventory checks

Statistical Detailed statistics by species, size and By the amount of

Methods other statistical breakdown Statistics by category statistics
Insurance reserves Low Larger Allowing higher
2518 Materials, Transportation and Environmental Engineering II

3 Conclusion
Inventory problems are not completely the result of information sharing between businesses or
departments, therefore, the most important thing is not inventory management and logistics
management of materials, but the business processes of the enterprise inventory management
classification. ABC analysis of the implementation of the inventory stock management to achieve
efficiency, increase management efficiency, improve profit margins. ABC analysis of this simple
and scientific management methods to excessive inventory of corporate resources and limited social
realities of great promotional value.

References
[1] Li Pengwei Application ABC Analysis in China's logistics enterprise. Commodity storage and
conservation of .2004 (2).

[2] Lai Shi-red. ABC analysis of inventory in the logistics enterprise inventory management
application.Posts and Telecommunications Design Technology, 2006

[3] Liu Lian-Hui Peng Kuang Xiang logistics system planning and analysis and design Beijing:
China Material Press, 2006

[4] Zhou Wansen warehousing and distribution management Beijing: Peking University Press, 2005

[5] Liang Yuan warehouse space management for logistics .2007 (6): P53-55
Materials, Transportation and Environmental Engineering II
10.4028/www.scientific.net/AMR.1030-1032

Application of ABC Analysis in Inventory Management

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