Normally, an organisation will need to ensure that there are effective management controls in place for Class ‘A’ items: the ‘vital few’ items that account for most of inventory cost.
The company will concentrate less on controlling Class ‘B’ and ‘C’ items, which account for less of the total inventory cost. However in certain cases, organisations may decide that they need tighter controls for alternative reasons on less expensive items.
For example:
- Warehouse Space – A bulky Class ‘C’ item will require being stored within substantial warehouse space. The item itself is inexpensive, but the cost of storing it raises the overall cost of holding the item – a good reason to tighten controls;
- Very Important Customer – The company may want tight controls on a low-cost Class ‘C’ item in order to guarantee security of supply to a very important customer; and
- Combined Orders – A regular customer always orders an expensive Class ‘A’ item and a low-cost Class ‘C’ Items together. Because the company can’t afford to run out of the Class ‘C’ item, it tightens controls.