How to do an avs analysis

ABC analysis is a method that allows you to classify resources by degree of importance in the functioning of the company. It is based on the Pareto principle, which states that managing 20% ​​of the most significant products allows you to control up to 80% of the entire system. You can find out which categories should be controlled by performing ABC analysis.

You will need

Calculator, computer

Instruction manual

1

Define the purpose of the analysis. Without a clear goal, you cannot get accurate data. Most often, as a result of the study, they wish to obtain a classification of the available goods by the degree of their importance for the company.

2

Identify the actions that will be performed according to the results of the analysis. Identify the strategy for using the data. For example, you can redistribute resources or pay more attention to the production of significant goods that generate the greatest income.

3

Select an object of study and analysis parameters. Answer the question, what exactly and on what basis will you explore. The objects of ABC analysis can be suppliers, customers, product groups and categories, nomenclature units. As parameters, you can choose the sales volume, the number of orders, the average inventory, etc.

4

Make a rating list of categories to reduce the presence of a significant attribute in them. Calculate the proportion of the parameter from the total result. Each heading should have its own share. Then determine the total amount of parameters with the cumulative total. To do this, add the sum of the previous parameters to the parameter.

5

Select groups A, B, and C. There are several ways to do this. The most popular is the empirical method. It involves dividing into groups in the proportion of 80/15/5. These numbers are not random. It is believed that 20% of significant goods provides 80% of sales, 30% of intermediate goods - 15% of sales, and the remaining 50% - only 5%.

6

Try not to push the boundaries of the definition of groups A, B and C. This can lead to the fact that the customer does not get the expected results, because he will initially rely on the division of groups in a standard percentage ratio.

note

Do not confuse ABC analysis with the ABC method, which stands for Activity Based Costing.