2.7 Inventory Classification (ABC Analysis)

Cycle counting every component with equal frequency is operational malpractice. Resources must be concentrated on the assets representing the highest financial risk. This chapter mandates the use of ABC Stratification to govern inventory accuracy and control intensity.

2.7.1 The Pareto Classification

• Class A (High Value): Top 10-20% of items representing 80% of inventory value (e.g., CPUs, Displays).
  • Control: Monthly cycle counts. Strict access control (locked cages). Tolerance: 0% variance.
• Class B (Medium Value): Next 30% of items representing 15% of value.
  • Control: Quarterly cycle counts. Tolerance: <1% variance.
• Class C (Low Value): Bottom 50% of items representing 5% of value (e.g., resistors, screws).
  • Control: Annual count or "Two-Bin" visual replenishment. Scale-counting permitted.

2.7.2 Safety Stock vs. Buffer Stock

• Safety Stock: Statistical reserve to cover demand variability.
• Buffer Stock: Temporary reserve to cover supply variability (e.g., unreliable lead times).

Final Checklist