Is there any system available for material ABC analysis?

Although there is not a direct correlation between the two, an ABC Analysis on MRO parts is

somewhat similar to Criticality Rankings that are developed for plant equipment by Reliability

Engineering. Criticality Rankings define the relative priority of assets in terms of their impact on

plant safety, productivity, efficiency or other criteria. An ABC Analysis determines the relative

priority of items in an MRO storeroom based on their criticality to the support of operations and

their potential impact on plant inventory and investment.

There are three key activities involved in completing the analysis: prioritization, stratification,

and optimization. The results of the analysis provide valuable information that can be used to

determine how each part should be monitored and managed from the perspectives of

procurement, warehousing, and strategic inventory management.

Prioritization

The first part of the analysis consists of rank ordering all MRO storeroom parts from 1 to n based

on a set of predefined criteria. There are several different schools of thought on the best approach

to take, and it is important to understand the advantages and disadvantages of each before

deciding which method is best suited to your particular situation.

Unlike a dependent-demand manufacturing operation with a Master Schedule and complete

BOM’s, material requirements in an MRO environment are largely unpredictable. The inherent

assumption in the ABC Analysis for MRO parts is that – at least to some degree – the past is a

fairly reliable predictor of the future. Investment brokers are quick to remind us that is not the

case, but in lieu of accurate material forecast data, there is little option. That brings up several

key points to consider:

1. It is not advisable to prioritize items by on-hand inventory value, or any other parameter

that can change significantly from day to day depending on issues, receipts, or other

transactions that take place in the storeroom. Doing so would create dramatically

different results depending on the day the snapshot of data is taken.

2. From a warehouse management perspective, there are definite benefits to analyzing

inventory by activity level (number of issues or quantity of parts issued). However, using

this method to prioritize inventory may negate some of the more important benefits of the

ABC Analysis that are discussed below. If activity data is going to be used for such

things as determining the most efficient stocking location for parts, the required data

should be readily available outside of the ABC process.