Inventory is an important current asset for any organization as it is associated with many different costs. Therefore inventory management is essential, which is why the concept of inventory management has evolved. There are several inventory control techniques implemented by organizations along with inventory holding costs and potential profits that come under the concept of inventory management such as ABC analysis, EOQ model, VED analysis, SDE etc. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an Original Essay Among these concepts, ABC analysis is the most in action. ABC analysis focuses on identifying items that will have a significant impact on the overall inventory cost. Organizations have various inventory items. But all these elements are not equally important since they have different values. This is why companies use ABC analysis to identify which items are the most critical based on their values. ABC analysis divides an inventory into three categories. A – High value items requiring close inspection. (70-80% of total value and 20% of total items)B - Moderate value items that require less scrutiny than A items but more scrutiny than C items. (15-20% of total value and 20-30% from the total item)C – Low value items that require less control than items A and B. (5% from the total value, almost negligible and 40-50% from the total number of items) These different categories of stock will require management and different controls such as: Please note: this is just an example. Get a custom paper from our expert writers now. Get Custom Essays Strict checks for A items and maintaining extremely accurate records, optimal order processing and follow-up mechanisms Moderate checks for B items and maintaining good records with special attention. Minor checks for type C items and easier record keeping. This ABC concept is very important because it helps organizations recognize "where the value lies". By focusing on inventory items relative to their values, a company can allocate adequate resources to achieve optimal inventory levels, reduce inventory costs, ensure customer needs are met, and gain a competitive advantage over competitors in its market.