Which of the following is a type of inventory system used to categorize items by importance?

• A. ABC system
• B. Pipeline inventory
• C. Obsolete inventory
• D. Safety stock

Answer: (A)

The method being tested is ABC analysis, which categorizes items by importance based on impact on value or usage. By ranking items into high-value (or high-impact), moderate, and low-value groups, it directs tighter controls, more frequent reviews, and precise records for the most critical items, while allowing looser oversight for the less significant ones. This focus helps optimize inventory investment, reduce carrying costs, and maintain service levels where it matters most. The other concepts describe different ideas: pipeline inventory is stock moving through the production process, obsolete inventory is items no longer usable, and safety stock is extra on hand to guard against uncertainty. That’s why ABC analysis is the best fit for categorizing items by importance.