ABC classification A method of classifying items in decreasing order of importance,
such as annual dollar volume or your companyâ€™s transaction history.
An ABC analysis determines the relative value of a group of inventory
items based on a userâ€“specified valuation criterion. â€?ABCâ€? refers to
the rankings you assign your items as a result of this analysis, where
â€?Aâ€? items are ranked higher than â€?Bâ€? items, and so on.
You can optionally use the ABC analyses you compile to drive your
cycle counts, where you might count items of high value (A items) very
frequently, items of lower value less frequently, and items of lowest
value very infrequently.