ABC CLASSIFICATION & CYCLE COUNT
This document illustrates the ABC Classification and Cycle Counting processes within
Oracle Fusion. It includes detailed explanations of the various application screens
associated with these processes. Additionally, the document outlines the step-by-step
procedures for both ABC Classification and Cycle Counting, ensuring that users have a
clear understanding of each stage involved.
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Table of Contents
ABC Classification in Inventory Management ..................................................................................................................................... 2
ABC Classification ......................................................................................................................................................................................... 2
Example .............................................................................................................................................................................................................. 2
How to calculate percentage of item? ...................................................................................................................................................... 3
Equations for item cost .............................................................................................................................................................................. 3
Equations for On-Hand Value ................................................................................................................................................................. 3
Sequence, Percentage and Cumulative Calculation based on on-hand value: ............................................................ 3
ABC Classification Quick Set-Up without Print Screens ................................................................................................................. 4
ABC Classification Set-Up with Print Screens...................................................................................................................................... 4
1-Create ABC Classes ................................................................................................................................................................................... 4
2- Create an ABC classification set ....................................................................................................................................................... 4
3- Create ABC assignment groups ........................................................................................................................................................ 5
4-Perform ABC assignments ................................................................................................................................................................... 6
5- Update ABC assignments..................................................................................................................................................................... 7
6- Purge ABC assignment group............................................................................................................................................................ 7
CYCLE Count USING ABC Classification .................................................................................................................................................. 8
Enter Primary Details ................................................................................................................................................................................. 9
Define Schedules and Approvals ........................................................................................................................................................ 10
Define Parameters ..................................................................................................................................................................................... 11
Create Automatic and Manual Cycle Count ....................................................................................................................................... 13
1- Manual Count.......................................................................................................................................................................................... 13
2- Automatic schedule ............................................................................................................................................................................. 15
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ABC Classification in Inventory Management
ABC classification is a method used in inventory management to categorize items based on their
importance. The classification typically segments items into three or more categories: A, B, C, … etc.
ABC Classification
Classification can be done based on
ABC Classification Set Criteria Usage
-Current on-hand quantity Use the current on-hand quantity of inventory. Assign the sequence number in the descending
order of quantity.
-Current on-hand value Use the on-hand quantity of inventory x the item cost. Assign the sequence number in the
descending order of value.
-Current item cost Use the current item cost to rank items based on their individual item cost.
-Historical number of Use the historical number of transactions (transaction history) for the specified time period.
transactions Assign the sequence number in the descending order of the number of transactions.
-Historical usage quantity Use the historical usage quantity (transaction history) for the specified time period. Assign the
sequence number in the descending order of quantity.
-Historical usage value Use the historical usage value (transaction history). This is the sum of the transaction quantities
times the unit cost of the transactions for the specified time period. Assign the sequence number
in the descending order of value.
-Previous cycle count Use the previous cycle count adjustment quantity. This is the sum of the value of all cycle count
adjustment quantity adjustments since the last ABC classification set submission date. Assign the sequence number in
the descending order of quantity.
-Our Example and most uses of ABC Classification are based on item cost or on hand value
Classify items into A, B, or C categories based on the classification
- A items: Top 70-80% of the total value
- B items: Next 15-25% of the total value Note: ABC Classification Percentage can change based
- C items: Last 5% of the total value on business Needs
Example
Item Unit Cost ($) Quantity On Hand Value ($)
A 1000 2 2,000
B 150 200 30,000
C 30 150 4,500
D 5 1000 5,000
E 2 400 800
Sort items by unit cost: Sort items by On Hand Value:
Item Unit Cost ($) Percentage Item On Hand Value ($) Percentage
A 1000 84.2% A 2,000 4.7%
B 150 12.6% B 30,000 70%
C 30 2.52% C 4,500 11%
D 5 0.42% D 5,000 13%
E 2 0.16% E 800 2.11%
Classify items based on the Unit Cost percentage: Classify items based on the on value percentage:
- class A items: Item A - class A items: Item B
- class B items: Item B - class B items: Items C,D
- class C items: Items C, D, E - class C items: Items A, E
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How to calculate percentage of item?
Equations for item cost
1. Percentage of Each Item
Percentage = (Unit Cost of Item / Total Unit Cost) × 100
For example, for Item A: Percentage = (1000 / 1187) × 100 ≈ 84%
2. Cumulative Percentage:
Cumulative percentage is calculated by adding the percentage of the current item to the sum of the
percentages of the previous items in the sorted list.
3. sequence:
In ABC classification, items are typically sequenced based on determined criteria used
Example
Sequence Item Unit Cost ($) Percentage Cumulative Percentage
1 A 1000 84.2% 84.2%
2 B 150 12.6% 96.8%
3 C 30 2.52% 99.32%
4 D 5 0.42% 99.74%
5 E 2 0.16% 100%
Equations for On-Hand Value
On-Hand Value Calculation:
On-Hand Value = Unit Cost × Quantity
For example, for Item A: On-Hand Value = 1000 × 2 = 2000
2. Total On-Hand Value:
Total On-Hand Value = Sum (On-Hand Value for all items)
For this example: 2000 + 30000 + 4500 + 5000 + 800 = 42300
3. Percentage of Each Item On-Hand Value:
Percentage = (On-Hand Value of Item / Total On-Hand Value) × 100
For example, for Item A: Percentage = (2000 / 42300) × 100 ≈ 4.73%
3. sequence:
In ABC classification, items are typically sequenced based on determined criteria used
Sequence, Percentage and Cumulative Calculation based on on-hand value:
Sequence Item On Hand Value ($) Percentage Cumulative Percentage
1 B 30,000 70% 70%
2 D 5,000 13% 83%
3 C 4,500 11% 94%
4 A 2,000 4.7% 98.7%
5 E 800 2.11% 100%
Note: To be able to add an item to a cycle count, you must set the item's Cycle Count
Enabled attribute to Yes.
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ABC Classification Quick Set-Up without Print Screens
In the Setup and Maintenance work area >> Inventory Management, you set up ABC information to perform ABC
analysis:
1. Manage ABC classes (to determine relative ranking of each item)
2. Manage ABC classification sets (to arrange the items based on the defined criteria)
3. Manage Create ABC assignment groups (to associate ABC classes with ABC classification sets)
3.1 perform ABC (to associate items to ABC classes within an ABC assignment group)
3.2 Update ABC Assignments (to view and update the Classification per Item)
ABC Classification Set-Up with Print Screens
1-Create ABC Classes
Steps: Home Page >> Setup and Maintenance >> Setup: Manufacturing and Supply Chain Materials
Management >> Manage ABC Classes >> click on add >> Fill data>>Save and Close
- to determine relative ranking of each item
2- Create an ABC classification set
Steps: Home Page >> Setup and Maintenance >> Setup: Manufacturing and Supply Chain Materials
Management >> Manage ABC Classification sets >> click on add>> Fill Data >> Save and Close
- To Arrange the items based on the defined criteria
Content scope (for sub inventory Option) Valuation scope could be Organization or sub inv.
Organization: where all items in the organization are included in the ABC classification set, which includes
the items with zero cost or zero quantity.
Subinventory: where you can restrict your ABC classification set to items within a selected Subinventory.
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3- Create ABC assignment groups
Steps: Home Page >> Setup and Maintenance >> Setup: Manufacturing and Supply Chain Materials
Management >> Manage Create ABC assignment >> click on add >> Fill Data >> Save and Close
- to associate ABC classes with ABC classification sets
- Create Sequance Based on Imbortance of Each Class
- 1 the most imbortant class
- 2 less Imbortance …etc
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4-Perform ABC assignments
Steps: Home Page >> Setup and Maintenance >> Setup: Manufacturing and Supply Chain Materials
Management >> Manage ABC assignment Groups >> Click on Perform ABC assignments >> Save and Close
- to determine the items on each class
We are Performing ABC Analysis for unit cost – performing uses always the cumulative values
1. Sequance: Items are sequenced based on a chosen criterion (e.g., unit cost). The sequence determines which items are classified
into Class A, B, or C.
Example:
1. Class A:
If the sequence number for Class A is set to 1, the system will select the top item based on unit cost (MOAY-A) and classify
it as Class A.
If the sequence number is set to 2, the system will select the top two items (MOAY-A & B) and classify them as Class A.
2. Class B:
The sequence for Class B must follow the sequence of Class A. For example, if Class A is set to 2, the sequence for Class B
must be set to 3 or higher. The system will then select the next item in the sequence (MOAY-C) and classify it as Class B.
All items after Class B default to Class C
Important Note:
The system requires that the sequence number for Class B (and subsequent classes) must be greater than the sequence
number for Class A. This ensures that items are correctly classified in increasing order of importance.
2. inventory value: The cumulative value (Unit Cost × Quantity) for selected items
3. Item Percentage: on our example we have 5 items so Item Percentage = 100%/5(number of Items) = 20%
The Sort of items will be based on the cumulative sequence so because we said that we have 1 item on class A percentage is 20%
And 2 on class B means (only Item with sequence 2 “MOAY-B”) using cumulative method so it will be Percentage of item A
(20%) + Percentage of item B (20%) = 40%
4. Value Percentage: The cumulative percentage of the total value of the items on the ABC classification set.
On our ex. We wrote 1 on the sequence so system defaults all the next segments for example, entering 1 on sequence means Item A
is assigned to Class A. The corresponding classification set, cumulative Sequence, cumulative Item Percentage, and Inventory
Value default for all the class A items up to the items designated in the sequence we entered
4.73% means Inventory Value of Item MOAY-A = unit cost (1000) * Quantity (2) / Total On-Hand Value (42300) = 4.73%
75.65% means cumulative Inventory Value of MOAY B = Inventory Value of Items MOAY-A + MOAY-B
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5- Update ABC assignments
- to view and update the Classification per Item
6- Purge ABC assignment group
From actions
Purging an ABC assignment group deletes all ABC class assignments to the ABC assignment group, as well
as the ABC assignment group itself.
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CYCLE Count USING ABC Classification
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Enter Primary Details
1. Add the cycle count Name
2. Select The Subinventories
3. Click on include on count
4. Choose the ABC Assignment Group
5. Choose Synchronization Mode
Synchronization Mode: When you select an ABC assignment group, you can select a synchronization
mode to determine how changes to the ABC Assignment group synchronize with cycle count classes and
items.
Append changes: Use when adding items to a cycle count. During synchronization, only the new
items are added to the ABC assignment group and cycle count
.
Complete: Use during the initial creation of a cycle count. During synchronization, the entire
contents of the designated ABC assignment group replace whatever is currently in the cycle count
tables. Whether you add, remove, or change classifications of items in the ABC assignment group,
when in Complete mode, all changes that occur in the assignment group are reflected in the cycle
count upon synchronization.
None: No synchronization takes place.
Delete Additional Items: Select this check box if you're using the Append Changes synchronization
mode and you want to delete items that have been recently removed from the ABC assignment group.
Note: Clicking the Next button is the trigger for synchronization of the ABC assignment group and
the cycle count.
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Define Schedules and Approvals
Frequency
Weekly: Account schedule generates that includes all items due for counting in the next 1 week.
Daily: One count schedule generates for every day. The schedule includes only those items that are
due for counting on that day.
By period: The schedule generates count sequences based on the calculation
- the number of items assigned to the class, multiplied by the number of counts per year, divided by
the number of working periods in a year. The calculation uses 13 working periods as defined in
the Quarterly Type field on the time schedule used for the cycle count.
Positive and Negative Quantity Tolerance Percentages
Enter the percentage variances of count quantity to on-hand quantity beyond which adjustments are held
for approval.
Positive and Negative Adjustment Value Tolerance
Enter the positive and negative adjustment values beyond which adjustments are held for approval.
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Define Parameters
Starting Count Sequence: Enter the sequence number to use as the starting number in the next count
sequence generation, each count is assigned a sequence number
Maximum Days Before Late: Enter the number of workdays that can pass from the count generation
date before a scheduled count is late, Count sequences not recorded within this number of days are marked
as late counts in the Inventory Management work area
Maximum Recounts: Enter the maximum times an out-of-tolerance count is automatically assigned recount
status.
If the recorded quantity exceeds the system quantity beyond the allowed tolerance, the count is automatically
sent for recount without needing the inventory manager's intervention. If the recounts exceed the specified limit
and the deviation still surpasses the tolerance, the count is then sent for approval.
Manual Counts Allowed: Select this check box to enable unscheduled counts by users.
Count Zero Quantity: Select this check box to generate blank count sequences for items with zero on-hand
quantities.
Display Suggested Quantity: Deselect this check box to enforce blind counting. Blind counting ensures that
actual physical counting is performed.
Serialized Items Allowed: Select this check box to generate count sequences for serial controlled items.
Serial Numbers per Count:
Multiple: You can include multiple serial numbers in one count sequence.
One: Generate a separate count sequence for each serial number.
Serial Number Adjustment
Adjust if possible: If a serial number discrepancy exists between the count quantity and system
quantity, or if the entered serial numbers don't correspond to the serial numbers already in the
specified location, adjustments are attempted if the adjustment variance and value are within
tolerances.
Review all adjustments: Send all serial adjustments for approval.
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Define Classes and Items
Add Number of Counts per Year for Each Class
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Create Automatic and Manual Cycle Count
1- Manual Count
Click on manage cycle count
Click on Generate Count Schedules
After the process is succeeded click on Generate Count Sequences
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Click on the Infolet or Record Count Sequences
Click on the total Number
Record quantities and Click on submit
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Click on the Infolet or approve Count Sequences
you can Approve, Reject or recount line or More
After clicking on submit the count is done
2- Automatic schedule
Run the two scheduled processes from the Scheduled Processes work area.
1. From the Scheduled Processed work area, run the Generate Count
Schedules process.
2. From the Scheduled Processed work area, run the Generate Count
Sequences process.
Note: You must schedule these processes to run simultaneously and at the same frequency
defined in the Schedules section of the Cycle Count Definition field. For example, if the value
for the cycle count definition frequency is Daily, you must schedule these two processes to run
daily as well.
Run the full cycle count job set from the Scheduled Processes work area. This job set
runs three sequential scheduled processes:
1. Generate Count Schedules 2. Generate Count Sequences 3. Cycle Count Listing Report
