As the number of products grows, managing them all with the same effort becomes impractical. That’s where ABC analysis helps. Here is a plain-language guide to this classic method of prioritizing your inventory management by importance.
What is ABC analysis?
ABC analysis is a method of ranking items into A, B and C by their contribution — such as sales or outbound amount — and managing each rank differently.
Behind it is the Pareto principle (the 80:20 rule): the rule of thumb that “most of your sales come from a small portion of your products.” Rather than treating every item alike, ABC analysis concentrates management effort on the items that contribute most.
How to split into A, B and C ranks
The general steps are as follows.
- Tally the outbound amount (or sales / outbound quantity) per product.
- Sort from largest to smallest amount.
- Compute the cumulative ratio from the top down.
- Assign ranks by cumulative ratio (guideline).
| Rank | Cumulative ratio (guide) | Position |
|---|---|---|
| A | top to ~70% | The core of sales. Most important |
| B | ~70–90% | Middle. Manage normally |
| C | ~90–100% | Small contribution. Keep effort low |
The cut-off ratios are guidelines; adjust to your item count and industry.
Management policy per rank
- Rank A (focused management): never run out. Check stock closely, order more frequently, and emphasize demand forecasting.
- Rank B (standard management): manage with standard rules and review periodically.
- Rank C (light management): don’t over-invest effort. Candidates for bulk ordering, trimming stock, or cleanup.
This lets you concentrate limited management effort on high-impact items.
Cautions
- Don’t judge by amount alone: even a rank-C item may be an essential part or a staple complement that you can’t simply cut.
- Review periodically: best sellers shift with season and trend, so don’t fix ranks — update them.
- Looking at it alongside inventory turnover helps you find stagnant stock. → What is inventory turnover
ABC analysis in an inventory management system
The cloud inventory management system “KURAPRO” includes an ABC analysis feature that automatically classifies products into A, B and C from your outbound records and visualizes them — no manual sorting required.
You can also check best sellers and stagnant items in the by-product report (sorted by outbound amount). For details, see Reports and What you can do with KURAPRO.
Summary
- ABC analysis means ranking items A/B/C by contribution and prioritizing management accordingly.
- It is based on the Pareto principle (80:20).
- Rank A gets focused management, rank C light management — put limited effort into high-impact items.
- An inventory system’s ABC analysis feature can classify them automatically.
With KURAPRO, you can visualize best sellers with ABC analysis and by-product reports. Try it now on the free plan.
