About Dave at InventoryOps.com Expertise I can answer questions relating to inventory management, inventory accuracy,warehouse operations, material handling, storage equipment.
Experience 15 years experience working warehouseing, distribution, manufacturing
Expert: Dave at InventoryOps.com Date: 9/12/2002 Subject: Inventory turns
Question Hello, I'm Chuck Seper the Equipment Parts Supervisor for The County Of San Bernardino. I'm trying to set up an A,B,C category system for my inventory. I'm thinking that 80% of my inventory should be in "A" fast moving parts, 15% in "B" seasonal parts and 5% "C" in emergency parts. Does this sound correct? How many yearly turns on my inventory should I set for my goal? I would appreciate any guidance you can give.
Answer ABC can be assigned in many ways. The most useful tend to be by number of transactions, quantity sold, dollars sold, or inventory investment. Choose whichever makes the most sense based upon your intended use of the classification. There is no standard for exactly where you make the cutoffs. Also, it sounds like you are wording the use incorrectly. Usually you want "A" items to represent the top ?? Percentage of transactions, sales, or investment. So it's a percentage of activity, not a percentage of SKU's. Normally "A" would be set anywhere from 50% to 80% but would probably only include 5% to 30% of the total SKU's.
Also, if have items that are specifically seasonal or specifically "emergency"(whatever that means), you are better off using an additional separate category code to designate these. Many systems have additional fields available on the item masters that can be used for this type of classification.
As for inventory turns, there's no way I can give you a target without knowing a lot more about your company (more than can be accomplished in an email). Companies have inventory turns anywhere from 1 to 50 depending upon the industry and specific operation. I wrote articles on EOQ and Safety Stock that should help you in determining inventory levels. Use the following links:
