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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.

2.77.1 InventoryThe Pareto Classification (ABC Analysis)

  • TheClass ParetoA Principle:(High Value): Top 10-20% of items representing 80% of inventory value (e.g., CPUs, Displays).
    • A Items (Top 20% value):Control: CountedMonthly monthly.cycle counts. Strict access control.
    • B Itemscontrol (Nextlocked 30%):cages). CountedTolerance: quarterly.
    • C0% Items (Bottom 50% value / High volume): Counted annually or via "Two-Bin" Kanban systems.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: DefiningStatistical thereserve differenceto andcover calculating levels based on demand variability.variability.
  • Buffer Stock: Temporary reserve to cover supply variability (e.g., unreliable lead times).

Final Checklist

Class

Count Frequency

Accuracy Target

Access Control

A

Monthly

100%

Restricted / Caged

B

Quarterly

>99%

Standard Warehouse

C

Annually

>95%

Open Bin / Point of Use

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