ABC Classification

To classify the items in different groups based upon the quantitative criteria of transaction value,
inventory value or number of transactions.

Overview

ABC classification will be used to determine the importance rating for different items and help
the Stores in better inventory control. It is dynamic and can be varied upon the operation and
type of decision making. Following are some of the objectives of undertaking the classifications:

• Purchasing and Finance may want to classify the items in three classes viz. ‘A’, ‘B’ and ‘C’
based upon last year’s consumption value.

• Stores may want to classify the items in class ‘High’, ‘Medium’ and ‘Low’ based upon on-
hand quantities for the purpose of doing a better store space planning.

• Inventory Controller may want to classify the items in ‘High’ movement, ‘Medium’
movement and ‘Low’ movement for analyzing the Min-Max levels of different items.

Process

Define the name of ABC Classification. ABC Classification name drives the classification for a
particular objective.

Following are the relevant compilation criteria for WTA:

• Current on hand quantity

• Current on hand value

Define the Item grouping terminology for an ABC classification name. Grouping name could be:

A, B, C.
High, Medium, Low etc.

User will run the ABC Assignment process and decide on classification brackets.

System will automatically perform the classification process. Each item will be assigned the
grouping code by system.

Steps in ABC Classification

Step 1: Define ABC Compile

Navigation: ABC Codes  ABC Compile

Screen: ABC Compile

The user will navigate to the ABC Compiles folder window and choose New to open ‘Define
ABC Compile’ window. The following details will be entered to define a new ABC compile:

• Compile Name / Description: A unique name for the ABC compile and the description will
be entered here.

• Content Scope: The user will determine the scope of the analysis by selecting the content
level for items to include in the compile. If the entire organization is used, system includes all
items defined in the current organization in the ABC compile (even those with zero cost or
zero quantity). If a particular subinventory is used, system includes all items for which item
subinventory relationship exists for the selected subinventory.

• Valuation Scope: The user will select the valuation scope for determining the ranking of
items. Valuation scope should be ‘Organization’ if ‘Organization’ is selected in the content
field.

• Compile Specifications: The user will select the compile criterion or method of ranking items
in the ABC compile. The following compilation criteria will be relevant in WTA:

 Current on-hand quantity

 Current on-hand value

• Cost Type: Enter the cost type.

• From / To Date: The user will enter From and To date if ‘Historical usage quantity’ is selected
as the compilation criteria.

On selecting the ‘Compile’ button, the system will start a concurrent request. At the completion
of the concurrent request, the information in the last compile results will be automatically
updated by the system as shown in the screen print provided below:

Screen Shot – Define ABC Compile

Step 2: Define ABC Classes:

Navigation: ABC Codes  ABC Classes

Screen: ABC Classes

ABC classes will be defined to provide a terminology to grouping of items. For example, High
Usage, Medium Usage and Low Usage can be defined as the ABC Classes for carrying out
classification based upon the ‘Historical usage value’ criteria. Similarly A, B and C class of items
may be defined to group items based upon ‘Current on-hand value’ compilation criteria.

The ABC Classes will be defined as follows:

• Class Name / Description: A unique name and description will be entered for the class.

• Description: Description for the above-entered class will be entered here.

Screen Shot – ABC Classes

Step 3: Define ABC Assignment Groups

Navigation: ABC Codes  ABC Assignment Groups

Screen: ABC Assignment Groups

ABC assignment groups associate ABC classes with an ABC compile. The items will be assigned
to the earlier defined classes within a particular group. This allows the same items to be assigned
to different ABC classes in different groups.

The ABC Assignment Group will be defined as follows:

• ABC Group: The user will enter a unique ABC group name.

• Compile Name: The valid ABC compile will be selected in this field.

• Subinventory: System displays the selected Compile is applicable for a subinventory.

The user can view the compile information, if required, by choosing View Compile from the
Special menu. This option is available only after selecting the compile name.

Subsequently, the user will select the ‘Group Classes’ button to open the ‘ABC Group Class
Assignments’ window. This window has the following details:

• Priority: The user will enter the sequence number in which the classes are ordered. The lower
the number the higher the importance of the class.

• Class Name: The user will enter the class name in this field by selecting from the List of
Values having the classes defined earlier.
The entered information will then be saved.

Screen Shot – ABC Assignment Groups

Step 4: Assign Items

Navigation: ABC Codes  Assign Items

Screen: Assign ABC Items

This step will be used to assign the ‘ABC Classes’ to the items as per the following method:.
Following is the method of assigning the classes using the ‘ABC descending value report’ :

• Pick the ABC group for which to assign classes to items.

• Specify the cutoff point for each ABC class. Each ABC class must have at least one item
assigned to it. Following are the details of the cutoff point :

 Seq: The user will enter the sequence number from the ABC Descending Value Report
for the last item to be included in each ABC class. Oracle Inventory automatically
calculates this value if another method is used to classify the items.

 Inventory Value: The cumulative value from the ABC Descending Value Report for the
last item to be included in each ABC class will be entered here.

 % Items: The percent of number of items compiled from the ABC Descending Value
Report to include in each class will be entered here.
  % Value: The percent of total compile value from the ABC Descending Value Report to
include in each class will be entered in this field.

The user will enter only one of the above four fields. System will derive the value for the
other three fields.

The user will select the ‘Assign’ button to launch the concurrent request to assign the items to the
classes in the ABC group.

Screen Shot – Assign ABC Items

Step 5: Updating Assigned ABC Group

Navigation: ABC Codes  Update ABC Item Assignments

Screen: Update ABC Item Assignments

If the user is not satisfied with the item classification as a result of the automatic ABC assignment
process, the same can be modified by this step. This is an optional step.

For example, assume the ABC analysis was compiled based on current on-hand value. A
relatively new item in inventory has been ranked at 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 in future, this item will have a
high usage value and should really be classified as a high rank item. In this case, the Update ABC
Assignments form will be used to reclassify this item into the higher class.
An ABC group can also be updated to include those items that were not part of the initial ABC
compile.

The method for updating an ABC item assignment is as follows

• Enter an ABC group for which items are required to be updated

• Enter the inventory item and a valid ABC class.

• Save the transaction.

Screen Shot – Update ABC Item Assignments