ABC Analysis Tool

What Is ABC Analysis?

ABC analysis is the operational application of the Pareto principle to inventory: roughly 20% of SKUs drive 80% of value, and those SKUs deserve disproportionately more attention. You rank every item by annual value (revenue, cost, or any other measure of importance), then group them into three tiers — A, B, and C — so that the highest-impact items get the tightest controls, cycle counts, service levels, and supplier engagement, while the long tail gets lighter-weight management.

The Default Thresholds

The textbook defaults are A = top 80% of cumulative value, B = next 15%, C = bottom 5%. The item-count split is usually something like 15–20% A-items, 25–35% B-items, and 45–60% C-items — but the actual distribution is highly sensitive to the shape of your sales data. A concentrated assortment (grocery meat case) might have 5% of SKUs in tier A; a long-tail assortment (hardware store) might have 30% in tier A. The calculator exposes both thresholds so you can tune to your own curve.

Using ABC Results

Typical policy decisions per tier: A-items get weekly cycle counts, tight 98–99% service levels, direct buyer attention, and frequent supplier reviews. B-items get monthly cycle counts and standard 95% service levels. C-items get quarterly counts, 90% service levels, and are candidates for SKU rationalization. Pair this tool with the Safety Stock Calculator to size buffers per tier and the EOQ Calculator to size replenishment quantities.

Beyond Annual Value

Classic ABC uses annual sales dollars. Variants include ABC by annual cost (for safety stock capital planning), by unit volume (for warehouse slot assignment), by margin dollars (for merchandising focus), or multi-criteria scores. Whatever the input metric, the tool treats it as a single numeric value — load whichever column best represents the decision you're trying to make. For automated ABC refreshed nightly from live ERP or POS data, alongside safety-stock recalculation and buyer alerts, learn about custom reporting, integration services, or get in touch.