on your industry or have a high level of importance in relation to the
assets or products they support. These items require much more
stringent control but turn relatively slow and should be inventoried
frequently to monitor inventory accuracy and verify the condition of
spares. Critical materials are usually hard to come by, may have an
excessively long lead-time to obtain from vendors, and require special
handling instructions during transportation or while in storage to
prevent damage or injury to personnel. Material classifications also
aid in prioritizing restocking expenditures, and class ‘A’ materials are
the highest priority. As a result, quantities are usually limited to one
or two and restocking is triggered when one or all of the stocked items
are issued, this is referred to as a point-of-issue reorder level.▪ Class ‘B’ Material: The majority of your MRO supplies fall into this
category as they are used frequently enough to require stocked on-
hand quantities and will turnover a as much as four times per year.
Class ‘B’ materials represent approximately 20% of the on-hand
quantity and 20%-30% of the total inventory value. Unlike class ‘A’
materials, these items become a restocking priority when the on-hand
quantities reach the predetermined minimum (MIN) value, thus the
reorder point is equal to the MIN. Maximum (MAX) on-hand
quantities should also be determined based on the volume of
materials consumed annually, the volume required to satisfy a
minimum of two turns per year, and the economical order quantity
(EOQ) available from your vendor. EOQ’s are like buying in bulk and
is the quantity where your vendor reduces the single item cost. Class
‘B’ materials typically do not require special handling instructions and
should be stored by commodity to improve retrieval of materials,
cycle counting, and to maintain good first-in-first-out (FIFO) practices
which are designed to manage shelf-life limitations relative to the type
of material.
▪ Class ‘C’ Material: The lowest level classification for materials is also
referred to as “Consumables”. These items represent less than 10%
of the total inventory value but equate to nearly 60%-70% of the
quantity on-hand. Material control is minimal and rarely requires
anything more than free-bin issue practices. The most effective
means of managing transactions with class ‘C’ materials is through
vendor managed inventories (VMI) which places the responsibility of
counting, reordering, and stocking on the vendor and allows the end
user to pick (issue) their own materials. With this said, and as you can
imagine, reconciliation is a critical focus within Stores to ensure that
MIN/MAX values are not abused by vendors and customers, and to
verify that usage and cost distribution histories are maintained
accurately. Storage of class ‘C’ materials is based on point-of-use to
support usage and cost records, increase accessibility by customers,
and to optimize warehouse space utilization. Class ‘C’ storage
locations can be referred to as “Mini-stores”, “Satellite-stores”, or
even “Supermarkets” in some companies.
Table 1 illustrates the relationship of materials within a typical MRO
warehouse. Notice the number of items per class vs. the inventory value
(“dollars”).Table 1 : ABC Classification Example DataClass Items % in class Dollars % Dollars
A 245 8.61% $ 2,205,090 70.00%
B 600 21.09% $ 595,375 18.89%
C 2000 70.30% $ 349,664 11.11%
Total 2845 100.00% $ 3,150,129 100.00%