Question

In the context of inventory management, the purpose of an ABC analysis is to ___?

a) alphabetically list SKUs
b) determine which products a retailer should carry in its stores
c) categorize customers by purchase frequency
d) identify the classes of products that represent high, medium, and low annual usage, respectively

Answer 1

ABC analysis in inventory management helps to categorize inventory into three classes based on their annual usage, allowing businesses to prioritize which items need more attention in terms of management.

Step-by-step explanation:

In the context of inventory management, the purpose of an ABC analysis is to identify the classes of products that represent high, medium, and low annual usage, respectively.

The ABC analysis is a business tool that is used to categorize inventory into three categories: A items are high value and low frequency, B items are moderate value and moderate frequency, and C items are low value and high frequency.

By using this method, businesses can prioritize their inventory management efforts, focusing on the more critical and valuable A items while optimizing the handling and storage of B and C items.