ABC Analysis

Type of record:
  • Micro method
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Ideal innovation phases for this method:
  1. Innovation Phase
  2. 1
  3. 2
  4. 3
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Description

ABC analysis is an examination and classification procedure for classifying large amounts of data. The basic principle of the method is to divide objects or processes into classes A, B and C according to defined focal points in order to determine the relationship between effort and success and to set priorities.

This procedure can be optimally used to evaluate larger quantities of ideas.

The ABC analysis was developed in the 1950s by the General Electric Manager H. Ford Dickie for materials management and served primarily to optimize planning processes, reduce inventory and administration costs and increase profits. The starting point of the method was the Pareto principle, the so-called 80-20 rule of the Italian economist Vilfredo Pareto and the Lorenz curve of the US economist Max Otto Lorenz.

ABC analysis is now used both within and outside business administration. In addition to materials management, their areas of application include personnel and project management, organizational analysis and task prioritization, as well as innovation management.

In the area of task prioritization, ABC analysis is used as a tool for effective time management. The tasks are divided into classes A, B and C according to urgency and importance: The main focus is on the class A tasks. They have top priority and are to be done first. After that the tasks of class B follow. They have a medium priority and can be delegated, optimized or scheduled if necessary. Class C tasks have the lowest priority and should be completed without great expenditure of time and energy, unless they are to be delegated, shortened or completely neglected.

Advantages:
The ABC analysis is a simple procedure that can be used for different business areas and questions. By focusing on just a few test objects, it is easy to understand and the results can be visualized and presented well.

Disadvantages:
The analysis only takes into account quantitative influencing variables. Qualitative aspects or complex backgrounds remain unnoticed.
  • Effective for all innovation types
  • Effective for incremental innovations and improvements
  • Effective for low complex challenges
  • Effective for medium complex challenges
  • Effective for radical innovations
  • P7 Idea selection (voting - evaluation - filtering - deciding)
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