What is ABC Classification?
ABC Classification or Inventory Stratification allows you to manage and classify your inventory depending on usage and price. ABC Classification is available in the Enterprise tier CMMS, but what is it and how does it work?
There are 3 classifications, A, B, and C, that can be assigned to each inventory item in the CMMS. Classification takes both price, and frequency of consumption into account. Let's look at each of these in some detail.
A - Items classified in the A category are those items that are rarely used but account for a large portion of annual spending on inventory. These are the high priority items that are rarely called upon but it is vital to have them in stock at all times. When being used in production these parts are vitally important for the smooth running of your business.
B - Items classified in the B category are used more frequently used than those in the A category. These parts are of high importance to a business. These parts account for a relatively small portion of your inventory and the same can be said for their impact on your total expenditure.
C - Items classified in the C category are your day to day parts, the nuts and bolts of your operation. These parts come and go on a regular basis. They account for the majority of your physical inventory but the smallest portion of your expenditure
Below we have an example of some parts that have been classified in the CMMS. You will notice how consumption level of those parts classified C is generally much higher than those classified A and B
There are two ways in which you can classify parts in the CMMS. One way is to take the steps outlined in our ABC Classification & Cycle Counting Procedure. Alternatively the CMMS will classify your parts as you go.
Before you begin classifying your parts it is recommended that you set your Classification Parameters in the CMMS. This sets the % of total expenditure on each of the classifications, i.e Class A = 80%, Class B = 15% & Class C = 5%. This plays a key role in how the CMMS will classify your inventory. This is done through the Inventory Cycle Count Tab of your CMMS.
Let's get into it.
1. Set ABC System Parameters
1. Click Settings, CMMS Settings, and Inventory Cycle Count
2. You can change your Classification Parameters if necessary. Simply enter your desired % in the relevant box. You can also set your annual usage. This allows you to view the classification of parts between certain periods, this is a great way to view historical information about the parts. Click Save to complete.
Note:- Any changes made here will have a direct impact on how your information is displayed when viewing individual sites.
3. It is possible to set site specific classification parameters that differ from those configured under the system-wide Classification Parameters section. To set site specific classification parameters, select a site under the Classification window.
5. Select, Use site specific settings, configure the site specific parameters, and click Update. This recalculates the Annual Cost, and Annual Cost % values, and reclassifies certain parts if necessary.
6. Click OK to complete
7. You will notice that the system wide parameters have not changed.
8. You can add site specific parameters for each site using following the steps outlined above.
Once your inventory is classified you can go about creating some inventory cycle counts. This can be done using the steps outlined in the Cycle Counting procedure. Cycle counts can be done through the mobile app, making the process extremely quick and easy.