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ABC Analysis:
ABC that is Always Better Control analysis is an application of the principle of 'Management by Exception' to the field of inventory control. If we seem at the inventory mix of a firm, this would constitute of hundreds of items. Mainly of these items would be cheap and the frequency of their utilization would be less. The left items would be costly, more frequently employed and account for huge proportion of firm's investment in inventories.
This would be a costly and cumbersome act to adopt a general policy and determination of economic order quantity and reorder point for management of each that item of inventory. In such technique all the items of inventory are categorized in three categories that are: A, B and C depends on the usage rate, rupee value and criticality of the item.
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