The 'ABC' classification system for inventory management primarily differentiates items based on:

The 'ABC' classification system for inventory management primarily differentiates items based on:

• A. Usage frequency
• B. Supplier performance
• C. Dollar value and criticality
• D. Lead time

Answer: (C)

ABC analysis focuses on how much value an item represents in annual consumption and how critical it is to operations. Items that account for the largest dollar value and/or have high impact on production require tighter controls, closer tracking, and more frequent review. That’s why the primary differentiator is dollar value and criticality: it directs management attention to the few items that drive most of the cost and risk, while lower-value or less-critical items receive simpler control. While usage frequency or supplier performance can influence decisions, they aren’t the primary basis for the ABC split.

ABC analysis focuses on how much value an item represents in annual consumption and how critical it is to operations. Items that account for the largest dollar value and/or have high impact on production require tighter controls, closer tracking, and more frequent review. That’s why the primary differentiator is dollar value and criticality: it directs management attention to the few items that drive most of the cost and risk, while lower-value or less-critical items receive simpler control. While usage frequency or supplier performance can influence decisions, they aren’t the primary basis for the ABC split.