ABC analysis

Also known as: Program structure analysis

The ABC analysis is an evaluation method that is used in business administration to simplify complex number structures and present them in an understandable manner. They are divided into classes "A", "B" and "C".

Definition / explanation

The main aim of the ABC analysis is to represent very large and complex sets of numbers in a simplified manner. The objects are divided into different classes. In the A-class there are goods that have a high share of value, but the amount of which is comparatively small. The B-class contains goods with a lower value than the goods of the A-class, in a medium quantity. The C-goods are available in large quantities, but have only a small value.

If such data is available, it can be weighed up which procedures and what effort is sufficient for their procurement and storage. Long comparisons of offers are only useful, for example, for A-goods or important B-goods. With C-goods, only a small saving can usually be achieved, so that this effort is not worthwhile.

A = very important or urgent,
B = important or urgent,
C = less important or urgent

goals - The ABC analysis should avoid inefficiencies and focus on the essential things.

advantages - A major advantage is the ability to simplify complex problems with little effort. In addition, the results can be displayed graphically. In addition, it can be applied to almost any good and is extremely easy to use.

disadvantage - However, the division into only three classes is a disadvantage. It would of course be possible to create several classes, but then the complexity increases again. Only quantitative and not qualitative factors are taken into account in the analysis and the analysis is only one-sided.

Summary

• ABC analysis is used to simplify the presentation of complex processes
• Division into "A", "B" and "C" classes with the highest weighting of class "A"
• Objective: less inefficiency and greater focus
• Advantages: little effort, good graphical representation and ease of use
• Disadvantages: large division and no consideration of quality
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