Which class in ABC Analysis represents the highest dollar usage inventory items?

In ABC Analysis, Class A items represent the highest dollar usage inventory items. This classification is based on the principle that a small number of products account for a large portion of the total inventory value. Specifically, Class A typically includes the top 10-20% of items that contribute to approximately 70-80% of the total inventory cost.

By focusing on these high-value items, businesses can prioritize their management and control efforts effectively. Class A items often require stricter inventory controls, more accurate forecasting, and frequent review to ensure optimal stock levels, thereby reducing the risk of stockouts or excess inventory. Understanding this classification is crucial for effective inventory management and supply chain efficiency, as it allows companies to allocate resources more intelligently and maximize their return on investment in inventory.

In contrast, items classified as B and C (or D, if applicable) require less stringent control and management, as they contribute to a smaller percentage of the overall inventory cost. This hierarchical approach enables businesses to streamline their operations and focus on what truly impacts their financial performance.