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this video will demonstrate how to do ABC analysis or ABC classification the idea behind ABC analysis or classification is to organize your inventory and identify those items that constitute a high value of your inventory and need to be tracked much more closely than those parts of your inventory that do not account for a whole lot of money so instead of treating all of your inventory items as equal there are certain inventory items that constitute a large percentage of your inventory the the dollar value and therefore those should be tracked much more closely than those that dont constitute a whole lot of value in regards to your inventory and the way you do that is first of all its a combination of the demand the quantity and and the cost in other cases if the demand is fairly equal then some companies will concentrate just on the cost or if there is difficulties in ordering certain items they may use those so there are variations to ABC analysis but the traditional approach is to