## ABC Analysis — Advantages

ABC analysis classifies inventory items by value of consumption so that managerial control is concentrated where the money is (the high-value 'A' items) rather than spread equally across every item.

### Why ABC analysis is useful

Advantage	What it gives you
Continuity in production	Smooth production with minimum inventory investment, avoiding stockouts.
Lower cost	Reduces ordering, receiving and storing costs — especially powerful when combined with EOQ.
Less attention required	Saves management time by focusing on high-value (A-class) items instead of monitoring every item equally.
Systematic working	Purchase operations become routine and organised, and can be handled by subordinate staff.

> Key idea: control effort should be proportional to value. A-class items get tight, frequent control; C-class items get loose, bulk control.

⚠️ Common exam mistakes

Giving all inventory items equal monitoring effort — ABC's whole point is to focus tight control on high-value 'A' items.
Forgetting that ABC works best alongside EOQ to also cut ordering and carrying costs.

Reference:

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