ABC System or Pareto analysis
It is also called the 82/20 rule, control by importance/exception. It concentrates on high value items. In here, items are categorized into three classes as follows:
Class A: These are high cost, fast moving and high usage items. They are few accounting for only 20 percent of the total number of items yet account for 80 percent of the total inventory budget. These items are worth to be under highest control.
Class B: These are medium moving goods. They account for 15 percent of the total number of the budget. They are moderately controlled.
Class C: These are slow moving low value items. They are very many accounting for 65 percent of the total number of items and only 5 percent of the total inventory budget. These items might be under simple physical control