CPIM Practice Exam

How are products classified in the ABC inventory control process?

1. By their color codes

2. By the number of suppliers

3. Based on cumulative percentage of dollar usage

4. Based on their shelf life

The correct answer is: Based on cumulative percentage of dollar usage

In the ABC inventory control process, products are classified based on their cumulative percentage of dollar usage. This method helps prioritize inventory management efforts by recognizing that not all inventory items are equally important in terms of value. The classification typically segments items into three categories: A items, which represent the highest dollar value but may constitute a small percentage of total items; B items, which represent moderate dollar value; and C items, which make up the largest quantity of items but have the lowest dollar value. This approach allows companies to focus their resources more effectively, ensuring that the most valuable items (A items) receive more attention in terms of monitoring, ordering, and control. By applying this methodology, organizations can optimize their inventory levels, reduce carrying costs, and ultimately enhance their overall supply chain efficiency.