Many organizations have cycle count processes developed and based on using an ABC stratification of the inventory. Organizations that have not yet utilized this approach should seriously consider it. It is simple to get started and to implement.

The first step in using ABC stratification is to have the item master or part number files stratified by value. This is normally done with factors that include:

• Monetary item value

• Item usage

• Criticality of an item in the manufacturing process

• Difficulty to procure

Most business systems have an equation for calculating the break points for inventory class assignment built into the software. All of the popular business system software packages have this ABC stratification feature, as do most of the less popular ones. The equation will typically ask for value cutoffs and volume factors in the setup of this feature. The Pareto principle is applied here. (The Pareto principle says that generally 80 percent of the impact will be caused by 20 percent of the factors.) This application of the Pareto principle results in some generally accepted patterns:

• A items The top 10 to 15 percent of the monetary-value-based(cost per piece and usage volume) part numbers after stratification are often automatically assigned to the status of an A class item. These are items that require the most attention and investment in maintenance for accuracy. These are the items that have the biggest impact if errors in counts occur. Once the calculation is completed, most organizations also manually...