What is ABC Analysis ?

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ABC Analysis is a great approach to categorize and prioritize inventory, especially for running spares and consumables in the solar industry. Here's a suggested analysis structure:

  1. Data Collection:

    • Gather inventory data for the last three years.
    • Include details like unit price, usage frequency, and total cost of each item.

  2. Categorization Basis:

    • Calculate the cumulative percentage contribution of each item to the overall cost.
    • Sort materials by unit price in descending order and compute their cumulative cost percentage.

  3. ABC Classification:

    • Category A (0 – 75%): These are the most expensive or critical items that contribute significantly to the total cost.
    • Category B (75 – 90%): These items are moderately priced, representing average importance.
    • Category C (90 – 100%): Low-cost items that contribute the least to overall cost and have minimal impact.

  4. Considerations:

    • For Category A items, implement stringent inventory controls and ensure high availability to avoid disruptions.
    • For Category B, maintain a balanced stock.
    • For Category C, implement simplified controls, focusing on minimizing overheads.

  5. Analysis Tools:

    • Use data visualization tools like Excel, Power BI, or Tableau to visualize the ABC split.
    • Display inventory levels, reorder points, and potential cost savings for each category.

  6. Review and Update:

    • Periodically review the categorization to reflect changes in prices, usage rates, and importance, ensuring the inventory strategy remains optimized for the solar vertical.

This analysis helps in efficient resource allocation, cost control, and minimizes stockouts or overstocking, enhancing the operational efficiency of solar facilities. 

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