1. What is:
It is a technique that allows classifying which are the vital elements for the company or for a department, whether these are clients, products, suppliers, services etc.
2. What is it used for:
It is used to make a classification, depending on the volume of transactions in terms of quantity, monetary value, etc. as well as the degree of criticality or importance.
3. Benefits:
It allows in an objective way free of subjectivity to classify which are those elements (clients, products, suppliers, services) to which the company or the department must pay more attention either to establish a negotiation, to carry out a survey. This scheme allows making a classification higher than the one known as ABC, which in combination with criticality cannot give a new classification of clients: Platinum, gold and silver, alpha, beta, range products.
4. Limitations and Cautions:
It is easier to establish an amount in terms of number of transactions or monetary value, but not in terms of the degree of criticality or importance that a little subjectivity can create.
5. Application example:
- Classification of clients to assign a mixed portfolio to an account executive Classification of clients for card delivery: platinum, gold, silver Classification of products in inventory for better management Classification of financial products Classification of services provided Classification of internal customers to discriminate negotiation.
6. How it is made:
6.1 ABC classification:
Make an ABC classification by the volume of transactions. Use the instruction for Pareto analysis (See ITSCI 01: 0).
6.2 Classification 123:
From the ABC classification List, each one is identified by its degree of criticality (Importance for the company's image, impact on the activities of the department, problems that could cause the lack of the product, distance from a supplier, (1) if it is sole provider and there are no substitutes, (2) if it is unique but there are substitutes, (3) if it is not unique and there are many substitutes). See list example below.
6.3 Establish the category: the category is established for each client, product or supplier as follows:
Platinum Customers: A1.A2.A3.B1, C1, Gold Customers: B2, B3, C2, Silver Customer: C3 or Alpha Products: A1.A2.A3.B1, C1, Beta Products: B2, B3, C2, Products Range: C3.
|
Name |
ABC |
Criticality |
Category |
7. Tips
For a classification of external customers, the volume of sales or business carried out can be a good way to do the ABC classification, for products in inventory (raw materials, inputs or finished products) both the quantity demanded and its unit price must be considered in a way. that the products are brought to a common monetary unit. In the case of services, it can be either for the value in sales or for the value of contribution to profits.
The degree of criticality, in addition to the aforementioned elements, may be due to the level of importance for the company in the case of customers (Regardless of their purchase volume, it is of interest for the image: for example, if the company wants to deliver cards to preferred customers, it could The President of the Republic has very little volume of transactions, but it is very important for the institution to count him as its first client and to deliver the card.
If a department, in addition to the classification of its clients, wishes to determine a sample size to interview, it can use the following tips:
Instructions for calculating the sample size:
- Size of the universe or size of the population: For example, if you are calculating a sample of residents in a city of 50,000 inhabitants, the universe will be 50,000 Maximum acceptable error: This is the probabilistic accuracy that you want to achieve. It is the statistical accuracy you need to achieve and the level of error you are willing to accept. The range can be between 1% and 20%. Desired level of confidence is used to determine the desired level of certainty for the results. For example, the set reliability level can be 95% or 90%. The desirable level of confidence determines to what extent you need to be sure of the reliability of the results. Normally 95% (1 in 20 probability of error) or 90% (1 in 10% probability of error) is chosen. When all values are set,The result obtained will be the number of cases necessary to have representativeness of the universe or population with the levels of possibility of error and confidence that it established.
Examples: Sample to consider according to the size of the population of employees in a company.
Population size (Universe): 100
Maximum acceptable error
Population size (Universe): 90
Maximum acceptable error
Population size (Universe): 75
Maximum acceptable error
