What is ABC analysis in SAP (SRD-SRM - SRM-Supplier Relationship Management)?

SAP Term: ABC analysis

• Component: SRD-SRM

• Component Name: SRM-Supplier Relationship Management

• Description: An evaluation of objects that have been classified according to their level of importance.

AnswerBot for ERP

• Key Concepts: 
  ABC analysis is a method used in SRM-Supplier Relationship Management (SRM) to categorize suppliers based on their importance. It is based on the Pareto principle, which states that 80% of the effects come from 20% of the causes. In ABC analysis, suppliers are divided into three categories: A, B, and C. A-level suppliers are the most important and account for the majority of the value, B-level suppliers are moderately important and account for a smaller portion of the value, and C-level suppliers are least important and account for a small portion of the value. 
  
  How to use it: 
  ABC analysis can be used to prioritize supplier relationships and allocate resources accordingly. It can also be used to identify potential areas for cost savings or improvement. For example, if a company has identified that its A-level suppliers are not providing the best value, it can focus its efforts on finding better alternatives. Additionally, ABC analysis can be used to identify potential areas for collaboration or joint ventures with suppliers. 
  
  Tips & Tricks: 
  When using ABC analysis, it is important to consider both qualitative and quantitative factors when assigning supplier categories. Qualitative factors such as reliability, quality of service, and customer service should be taken into account when assigning supplier categories. Additionally, it is important to regularly review supplier categories as supplier performance may change over time. 
  
  Related Information: 
  ABC analysis is closely related to other methods such as Vendor Rating Analysis (VRA) and Vendor Performance Analysis (VPA). VRA is used to evaluate supplier performance over time while VPA is used to compare different suppliers in terms of cost, quality, delivery times, etc. Additionally, ABC analysis can be combined with other methods such as Total Cost of Ownership (TCO) or Life Cycle Costing (LCC) to further optimize supplier relationships.