What is ABC analysis?
ABC analysis ranks inventory items by annual consumption value (usage × unit cost). Typically: A items ≈ 10–20% of items but 70–80% of value; B items ≈ 30% of items and 15–25% of value; C items ≈ 50% of items and about 5% of value.
How to do an ABC analysis
- List every item with its annual usage and unit cost.
- Calculate annual consumption value for each.
- Sort from highest to lowest value.
- Calculate the cumulative % of total value.
- Classify: A up to ~80%, B up to ~95%, C the rest.
How to manage each class
| Class | Control | Counting | Ordering |
|---|---|---|---|
| A | Tight, reviewed weekly | Monthly or cycle counts | Frequent, small, close supplier tie-up |
| B | Moderate | Quarterly | Regular reorder points |
| C | Simple | Twice a year | Bulk, infrequent |
Common mistakes to avoid
- Classifying once and never updating.
- Ignoring critical C items (cheap but essential).
- Using cost alone without usage.
How DOOfy helps
ABC classes change as usage and prices change. AIMOS One recalculates consumption value from live sales and purchase data, so your A items are always the right ones.
Frequently asked questions
What is the difference between ABC and XYZ analysis?
ABC classifies by value; XYZ classifies by demand variability. Combined, they guide both control and forecasting.
Is ABC analysis based on the Pareto principle?
Yes — it applies the 80/20 idea that a minority of items drive the majority of value.