ABC analysis and cyclic inventory

Question

What is the relAtion between ABC indicators and CC indicators?Why do we need to run ABC analysis for cyclic inventory?Cant we randomly assign the CC indicators in MM02?

Answer 1

Please see the below note
What is A, B, C and D Indicator for a material for cyclic count?
All the material may not be important for cyclic count purpose, it may be required to count
some items frequently and some items rarely.
A cyclic count indicator A or B or C or D is allocated to material in the material master
based on either consumption value (consumption X rate) or forecast value
(forecast quantity X rate).
The item with more consumption value are classified as A, and with minimum as D.
u201CAu201D indicator items will be counted frequently (say every month), D will be less frequently
(say every 6 months or every one year). Daily a number of items will be taken for count, some
may be with A indicator, some with B and so on.
Mark all materials that are to be included in cycle counting with a cycle counting indicator
in the material master record (storage data). The cycle counting indicator is used to group
the materials together into various cycle counting categories (for example, A, B, C, and D).
There is an option in SAP to have a fixed indicator for a material say A for a material which
does not have a high consumption value but it is important to count it every month, then the
material can be marked as A indicator in material master with indicator u201Cfixedu201D
In Customizing OMCO, for Inventory Management, you can define for each category the time
intervals at which the materials are to be counted.
Fields : No. of phys. inventories per fiscal year for cycle counting
For e.g. A - 12, B - 6, C - 3, D - 1
Specifies how often during the fiscal year a physical inventory is to be carried out for a
material subject to cycle counting.
The system uses this specification to convert the count interval into workdays.
Fields : Physical inventory interval (in workdays) for cycle counting
For e.g. A = 12 times per year and your Total Factory Calendar days = 300
The interval will be calculated as 300 / 12 = 25 days
Specifies after how many workdays following the last inventory count another physical
inventory has to be carried out for a given material.
The count interval is determined automatically on the basis of the number of physical
inventories specified for the fiscal year.
Fields : Float time (in workdays) for cycle counting
For e.g. A - 10, B - 20, C - 30, D - 0
Indicates the number of workdays by which the planned count date may vary from the current
date.
For examples :-
For the plant, the float time is five days.
A physical inventory has been planned for a material belonging to category C for June, 1.
On expiration of the float time (after June, 6), the physical inventory has not yet been
carried out.
Irrespective of the category, the material is parked for the next cycle counting run.
Fields :- Percentage of performance measure for cycle counting ind.
Specifies the percentage allocation of the materials to the individual cycle counting
categories.
The percentage value is used for automatic assignment of the cycle counting indicator.
For example :-
In the given plant, 200 materials are subject to the cycle counting physical inventory
procedure.
In Customizing for Inventory Management, the following percentage allocation has been defined
for the plant:
A materials: 50%
B materials: 25%
C materials: 15%
D materials: 10%
            100%
In the cycle counting analysis, the materials are sorted by consumption. After completion
of the analysis, the cycle counting indicator is assigned as follows:
The first 3 materials (sorted in descending order according to consumption) represent 50% of
the consumption and have the indicator A.
The next 12 materials represent 25% of the consumption and have the indicator B.
The next 49 materials represent 15% of the consumption and have the indicator C.
The remaining 136 materials represent the rest (10%) of the consumption and have the
indicator D.
Marking Materials for Cycle Counting
This step is only required if you perform cycle counting for the first time or if you want
to update the cycle counting indicators.
In the material master record (storage data), maintain the cycle counting indicator for all
the materials that are to be included in cycle counting.
You can set the indicator in one of the following two ways:
1. manually in the material master record. To do this, choose
   Material -> Change from the Material Master menu.
2. automatically using ABC analysis To do this, choose
   Special procedures -> Cycle counting -> Set CC indicator from the Physical Inventory menu.