ABC analysis

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Fig. 1 ABC Analysis. The Pareto curve.

ABC analysis


Pareto analysis

a means of classifying items such as sales, stock, etc., in which items are ranked according to their relative importance to the firm. For example, products may be ranked according to their sales value, as in Fig. 1, with sales items plotted cumulatively on the horizontal axis and sales cumulated on the vertical axis to show a Pareto curve. Using this curve it is possible to place items into three classes: A items, often the first 10% of items, which may account for up to 60% of sales value; B items, often the second 30% accounting for perhaps 30% of sales value; and finally C items. Having classified items in this manner it is possible to develop STOCK CONTROL procedures which are appropriate for each class of item.

In retailing, for example, products could be ranked according to their profit margins and the speed at which they sell, for example a high margin, fast-moving product could be ranked A and at the other extreme a low margin, slow-moving product could be ranked C. The rankings can assist management to decide the frequency with which the items will be monitored, for example A items daily, B items weekly and C items monthly. See PARETO DISTRIBUTION.

Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson
References in periodicals archive ?
Using Pareto Analysis on Surveys, Developing Actionable Economic Analysis and forecast.
The focus of ECP's civic education has been on academic institutions whereas a simple Pareto analysis of voting patterns would have suggested otherwise.
There are several tools of creative thinking such as fishbone diagrams, mind mapping, Pareto analysis, brainstorming, nominal group technique, metaphorical thinking, and why analysis.
The dashboard provides data on cycle times, current machine status, part counts, alarm description and Pareto analysis, hourly incident reporting, job scheduling and tracking, and machine OEE (Overall Equipment Effectiveness, which is a single percentage number that combines ratings of machine availability, productivity performance, and good/bad part production).
The downtime interactive Pareto analysis with the SCADA platform allows operators to cite these stops and, in effect, talk to maintenance technicians while not being on the floor.
For the detailed analysis authors choose the Pareto analysis, which belongs to the seven basic tools of quality management system.
Parik et al [5] used Pareto analysis and value stream mapping to reduce the cycle time and set-up time of their study.
The tools are check sheets, histograms, scatter plots, Ishikawa diagrams, and Pareto analysis. These tools can be used during the project to aid in process improvement.
The LSS team used a series of tools to do this, including developing a cause and effect diagram (or "fish bone chart") and conducting Pareto analysis, failure modes and effects analysis, and analysis of variance.
(ii) Pareto analysis of suggested solutions of QCs in IDMW:
To help keep the problem solving manageable, a Pareto analysis was performed (a popular Six Sigma technique) that allowed the spec check team to determine the biggest, thorniest and costliest scrap-related problem.