Inventory control is responsible for the security, movement, accuracy, and in some cases the allocation of inventory.

Every item has inventory control information associated with it used to track and control the movement of the item. For example, if an item has an expiration date, the system does not issue the item after that date.

You can make sure that codes are entered consistently by entering the allowed codes into Generalized Codes Maintenance (36.2.13). The system verifies entered codes against these predefined values, preventing incorrect codes from being entered.

ABC classification codes determine the cycle count frequency and the error tolerance allowed for each item. ABC class can also determine how an item is managed.

Class A items often require tighter physical control, such as a locked stocking area, and tighter planning parameters, as well as more frequent cycle counts.

You can generate some reports, such as the Inventory Valuation Report, for ranges of ABC classes.

The value entered in Item Master Maintenance is used as the default for all sites. You can set up site-specific values in Item-Site Inventory Data Maintenance (1.4.16).

You can use Item ABC Status Report/Update (1.5.9 or 3.6.3; in Enterprise Edition, the enhanced .NET UI version is available at 1.5.32 and 3.6.25) to calculate ABC codes automatically based on annual item usage amounts.

The default percentages are:

However, you can adjust these percentage as needed.

Any quantity below C is assigned a blank ABC code. For example, when A is 10%, B is 20%, and C is 30%, the remaining 40% is set to blank. You can also classify items manually. You might do this for an item that has low use but is expensive or theft-prone.

While you can assign other class codes, Item ABC Status Report/Update only reports and updates items with a class of A, B, C, or blank. Be careful not to assign a non-blank and non-ABC code to any item that may become an A, B, or C item.

Assign any non-inventory items such as configured products, pseudo items, or planning parts a different ABC class.

ABC analysis is based on Pareto’s law, which says that in any group of items to be controlled, a small percentage accounts for the largest percentage of the total effect. This is also known as the 80/20 rule, which says that 20% of the items have 80% of the effect.

In inventory management, 20% of the items generally hold 80% of the inventory value. Usually this value is monetary, but it can also include:

Value can be any factor that makes this item more important than the average item.

The system sets the classification of inventory items when you run the Item ABC Status Report/Update (1.5.9). The calculation is based on annual usage, either sales or issues, and cost or gross profit.

The Item ABC Status Report/Update identifies the item’s relative importance and how tightly controlled it should be. More important A items are cycle counted more often and more carefully than C items. Count frequencies and error tolerances are identified by ABC Class. Normally ABC classifications are reviewed and updated at least once a year.

You can choose different methods of classification for different product lines. For example, the top 50% of the items by gross profit of sales may be class A in one product line, but only the top 20% may be class A in another product line. After the ABC analysis is run, you may want to change the system suggestions for classification for some items. A key $0.10 item that takes six months to buy and a $100 item may both be class A items.

Only items with a class of A, B, C, or blank are reported and updated by the Report/Update. Items you assign to any other class are not included. Do not apply a non-blank and non-ABC code to any item that may ever become A, B, or C items. Assign a different ABC class to any non-inventory items, such as warranties, configured products, pseudo items, planning parts.