ABC inventory control is a method of ranking items by their importance, as focusing on the most important items is crucial when resources are limited. Criteria for deter- mining item importance in include annual cost, annual usage, revenue generated, and usage by priority customers. In a typical situation, about 20 percent of items make up 80 percent of the yearly cost and become A items. Another 30 percent of the items make up 15 percent of the cost and become B items. C items make up the remaining 50 percent of items and consume only the remaining 5 percent of the cost. In ABC inventory control, A items are carefully managed and ordered frequently to minimize investment; less time and resources are devoted to the B items; a very low amount of time and resources are dedicated to the C items.
ABC Inventory control also is used in cycle counting. For example, the A items are counted often—once per month, for example. The B items are counted less often— once per calendar quarter, for example. The C items may be counted even less often— once per year, for example.