MANAGEMENT

Detailed explanation-1: -ABC inventory analysis is based on the Pareto Principle. The Pareto Principle states that 80% of the sales volume are generated from the top 20% of the items.

Detailed explanation-2: -ABC Analysis is an inventory control model based on the 80/20 rule (which is based on the Pareto principle for inventory).

Detailed explanation-3: -Based on Pareto’s 80/20 rule, ABC analysis identifies the 20% of goods that deliver about 80% of the value. Therefore, most businesses have a small number of “A” items, a slightly larger group of B products and a big group of C goods, a category that that defines the majority of items.

Detailed explanation-4: -ABC analysis is a categorization technique used in inventory management. The technique is based on the Pareto principle (or 80/20 rule), which states that 80% of the consequences originate from 20% of the causes, meaning that the relationship between inputs and outputs is unequal.

Detailed explanation-5: -The 80/20 rule of ABC analysis The principle holds that in general about 80% of effects are attributable to about 20% of causes: 20% of your accounts are likely to produce about 80% of the company’s revenue. In ABC analysis, 80% of a business’s annual sales value comes from 20% of its items such as category A items.