ABC Analysis

ABC Analysis

• Overview of ABC Analysis

• Steps Involved
Define and run an ABC compilation.
Define ABC classes
Define ABC groups
Assign items to ABC classes within a group
Update item assignments.
 ABC Analysis
• Overview of ABC Analysis

An ABC analysis determines the relative value of a group of inventory

items based on a user-specified valuation criterion. "ABC" refers to the
rankings you assign your items as a result of this analysis, where "A"
items are ranked higher than "B" items, and so on.
Steps Involved

1. Defining and Running an ABC Compile

You can define and compile an ABC analysis for your entire
organization or for a specific subinventory within your organization.
You choose the compilation criterion, the scope of your analysis, the
cost type to use in determining item values, and any additional
information that may be conditionally necessary, based on your
compilation criterion. The combination of all these parameters
constitutes an ABC compile header, identified by the ABC compile
name. You use this name to identify any activity pertaining to this ABC
analysis.
To define an ABC compile:

1- ABC Codes  ABC Compiles  New

To define an ABC compile (CONT.):

.Enter a unique name for the ABC compile .2

Determine the scope of the analysis by selecting the content level for .3
.items to include in the compile
Attention: You cannot compile an ABC analysis for a subinventory that is
defined as a non-quantity tracked subinventory
.Select the valuation scope for determining the ranking of items .4
Ranking must be done at the Organization level if you did not select a
.subinventory in the Content Scope field
If you only want to include items in a subinventory but you want the ranking
to be done based on the organization wide ranking, select Organization
:To define an ABC compile (CONT.)

.Select the compile criterion or method of ranking items in the ABC compile .5

Compile Criterion Field

Use the current on-hand quantity of inventory. Assign Current on-hand

the sequence number by descending quantity. quantity
Use the current on-hand quantity of inventory times the Current on-hand
cost for the cost type. Assign the sequence number by value
descending value.
Use the historical usage value (transaction history). This Historical usage value
is the sum of the transaction quantities times the unit
cost of the transactions for the time period you specify.
Assign the sequence number by descending value.
Use the historical usage quantity (transaction history) Historical usage
for the time period you specify. Assign the sequence quantity
number by descending quantity.
 To define an ABC compile (CONT.):

Compile Criterion Field (Cont.)

Use the historical number of transactions (transaction history) Historical number

for the time period you specify. Assign the sequence number of transactions
by descending number of transactions.
Use the forecasted usage value based on the forecast quantity Forecasted
calculated and the cost type you specify. Assign the sequence usage value
number by descending value.
Use the forecasted usage quantity. Assign the sequence Forecasted
number by descending quantity. usage quantity
Use the previous cycle count adjustment quantity. Oracle Previous cycle
Inventory sums the value of all cycle count adjustments since count adjustment
the last ABC compile date. Assign the sequence number by quantity
descending quantity.
Use the previous cycle count adjustment transaction value. Previous cycle
Oracle Inventory sums the value of all cycle count adjustments count adjustment
since the last ABC compile date. Assign the sequence number value
by descending value.
To define an ABC compile (CONT.):

Compile Criterion Field (Cont.)

Use the MRP demand usage quantity. Oracle Inventory sums MRP demand
the MRP gross requirements for the MRP plan you specify. usage quantity
Assign the sequence number by descending quantity.
Use the MRP demand usage value. Oracle Inventory sums the MRP demand
MRP gross requirements for the MRP plan you specify. The usage value
value is derived from the item cost type you choose in the ABC
compile form. Assign the sequence number by descending
value.
To define an ABC compile (CONT.):

6. Enter a cost type.

7. Enter a start (from) date.
You must enter a value in this field if you choose an option other than
Current on-hand quantity or Current on-hand value in the Criterion field.
8. Enter an end (to) date.
You must enter a value in this field if you choose an option other than
Current on-hand quantity or Current on-hand value in the Criterion field
9. Save your work.
Run an ABC compile:

1. Navigate to the ABC Compiles window.

2. Select an ABC compile and choose the Compile button. This submits a
request to run the compile program.
To view ABC Compile results

1. Navigate to either the ABC Compiles window or the Define ABC Compile
window.
2. Choose View Compile from the Special menu (Tools > View Compile).
The ABC Compile Items window appears.

 To print the ABC Descending Value Report:

1. Navigate to either the ABC Compiles window or the Define ABC Compile
window.
2. Choose Print Compile from the Special Menu. (Tools > View Compile).
 2. Defining ABC Classes

You use ABC classes to identify the value groupings to which your items belong.
You define these classes using your own terminology. For example, you might
define classes High, Medium, Low, and later assign your items of highest rank to
the High class, those of lower rank to the Medium class, and those of lowest
rank to the Low class. You can add to the list of classes you have already
defined.
To define an ABC class (cont.):

1. Navigate to the ABC Classes window

To define an ABC class (cont.):

2. Enter a unique name for the class.

3. Save your work.
 3. Defining ABC Assignment Groups

ABC assignment groups link a particular ABC compile with a valid set of ABC
classes.
This allows you to selectively reduce or increase the number of ABC classes
you want to use in your item assignments for a particular ABC compile. For
example, you might have five classes, A, B, C, D, and E, defined for your
organization where you perform your ABC analysis by subinventory.
The first subinventory is rather small. You need only three classes in which to
divide your items. You define an ABC group, associating the ABC compile for
the first subinventory with the classes A, B, and C. The second subinventory
for which you compile an ABC analysis is much larger. There are five distinct
value groupings of items. You define a second ABC group, associating the
ABC compile for the second subinventory with all five classes defined for your
organization, A, B, C, D, and E.
To define an ABC assignment group:

1. Navigate to the ABC Assignment Groups window.

To define an ABC assignment group (Cont.):

2. Enter a unique ABC group name.

To define an ABC assignment group (Cont.):

,If you want to assign items to this ABC group using an ABC compile .3
.enter the name of a valid ABC compile for your organization
If you entered an ABC compile name, Oracle Inventory displays the
.subinventory (if any) and the valuation associated with that ABC compile
Example
Optionally, you can view compile information by choosing View Compile .4
from the Special menu. This option is available only if you enter a compile
. in the Compile Name field
.Save your work .5
To enter classes to use with an ABC group:

1. Choose the Group Classes button. The ABC Group Class Assignments window appears.
To enter classes to use with an ABC group:

Enter the sequence number in which classes are ordered. The lower the .2
number the higher the importance of the class. Oracle Inventory defaults to
the next available integer.
.Enter the name of the class to use with this ABC group .3
Optionally, you can navigate to the ABC Classes window by choosing .4
.Classes from the Special Menu
 4. Defining ABC Item Assignments

You can assign and update ABC classes to an ABC assignment group where an
ABC compile was also entered. From the ABC Descending Value Report you
determine the cutoff points for assigning ABC classes. You can then use the
classifications for other purposes such as determining how often you cycle count
a given item.
To define ABC assignments:

1. Navigate to the Assign ABC Items window, or navigate to the ABC

Assignment Groups window and choose the Assign Items button.

2. Enter the ABC group for which to assign items to classes.

If you navigate from the ABC Assignment Groups window this field is already
entered The Compile Name, Subinventory, Number of Items, and Total Compile
Value fields display information for the compile used by the ABC Group.

3. Specify the cutoff point for each ABC class. Each ABC class must have at least
one item assigned to it, and all items in the ABC compile must be assigned to an
ABC class.
To define ABC assignments (Cont.):

4. Choose the Assign button to launch the concurrent request to assign the
items to the classes in the ABC group.
 5. Updating ABC Item Assignments

If you are not satisfied with the class into which an item falls as a result of the
.automatic ABC assignment process, you can change it
For example, assume you compiled your ABC analysis based on historical
usage value. You have a relatively new item in your inventory that was ranked
toward the bottom of your ABC Descending Value Report since it has very little
transaction history on record. Therefore, after the assignment process, this
item was assigned to a class of low rank. However, you know that in the
future, this item will have a high usage value and should really be classified as
a high rank item. You use the Update ABC Assignments form to reclassify this
.item to now be a high rank item
To update an ABC item assignment:

1. Navigate to the Update ABC Item Assignments window, or navigate to the ABC
Assignment Groups window and choose Update Items.
2. Enter an ABC group whose items you want to update.
If you navigate from the ABC Assignment Groups window this field is already entered
3. Enter an inventory item and a valid ABC class.
You can use the Find button to display items currently assigned to the ABC group you
entered.
4. Save your work.
To update an ABC item assignment (Cont.):