What is ABC analysis in inventory management? Why is it important?

ABC analysis is a stock segmentation method based on the Pareto principle. It classifies items into three categories—A, B, and C—according to their importance (for example, annual consumption value).
Category A items are the most important (few in number but highly critical), category B items are of medium importance, and category C items are numerous with lower impact.

This analysis helps tailor inventory management efforts: category A items receive more attention (frequent cycle counts, tighter forecasting), while category C items are managed with simpler, less resource-intensive methods.

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