A second use of ABC involves categorizing inventory items into "A" items, "B" items, and "C" items. The "A" items are a relatively small number of items which account for the majority of the inventory's value. For example, the "A" items might be 20% of the items in inventory which account for 70% of the inventory value. At the other extreme the "C" items might be 60% of the items in inventory but they account for only 10% of the inventory value. The "B" items might be 20% of the items accounting for 20% of the inventory value. Under this system, the "A" items will receive the most attention since they account for 70% of the value. This ABC is sometimes referred to as Pareto analysis or Pareto's rule and it can be applied to more than inventory. For example, 20% of a company's customers might account for 70% of the company's sales.
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