Page 20 - DMGT525_MATERIALS_MANAGEMENT

Unit 2: ABC Analysis

The relative contribution can be based on the number of occurrences, the quality damage or the Notes
cost associated with each cause (or problem).

2.1 Meaning of ABC Analysis

ABC analysis (sometimes referred to as the 80/20 rule and as ABC analysis) is a method of
classifying items, events, or activities according to their relative importance. It is frequently
used in inventory management where it is used to classify stock items into groups based on the
total annual expenditure for, or total stockholding cost of, each item. Organizations can
concentrate more detailed attention on the high value/important items. ABC analysis is used to
arrive at this prioritisation.

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Caselet ABC Analysis / E-TIP Analysis in CLG

hile behaviour is, on the surface, a simple overall process, it is influenced at
almost every step. Managing employee and organizational behaviour is a
Wresult of understanding these influences, and determining the outcomes that
are necessary to your company’s success.
ABC Analysis

CLG employs the ABC Analysis to dissect the structure of common behaviours. This tool
helps managers to understand why behaviours occur, and to identify the strategies for
encouraging desired behaviours and discouraging undesired behaviours.
The ABC Analysis is comprised of three elements (Antecedents, Behaviours and
Consequences) in a simple formula: Antecedents trigger Behaviours, and Behaviours are followed
by Consequences. By understanding the characteristics that impact each of these elements,
the ABCs can be used to emphasize desired behaviour.

Antecedents
 Are events that precede or prompt behaviour
 Have only short-term effects unless paired with consequences

 Have much less impact on behaviour than consequences
 Are overused compared to consequences
Behaviour
 Consists of what a person says or does
 Pinpointed behaviours correlate with business results

Contd...

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