ABC Inventory Classification
Enter SKU names and annual revenue values. Items are ranked and classified into A (top 70%), B (next 20%), C (bottom 10%) automatically.
| Rank | SKU | Annual Rs | % Total | Cumulative | Class |
|---|
What Is ABC Analysis?
ABC analysis classifies inventory by value contribution. Class A items (typically 10-20% of SKUs) generate 70-80% of revenue and need tight controls. Class B items are the middle tier. Class C items are numerous but low-value, manageable with simpler systems.
Worked Example
A distributor carrying 40 SKUs runs this tool and finds the top 8 SKUs (20% of the count) generate 74% of annual revenue, these become Class A with weekly cycle counts and tight reorder tracking. The next 12 SKUs (30%) contribute 18% of revenue and become Class B, reviewed monthly. The remaining 20 SKUs (50%) contribute only 8% of revenue but still need Class C treatment, since a stockout on even a low-value spare part or packaging item can halt a production line.
Common Mistakes to Avoid
- Classifying by unit cost instead of annual revenue contribution, which misses high-volume, low-cost items that still matter a great deal
- Treating every Class C item as unimportant, when a stockout on one C item, such as a critical spare part, can still stop production
- Never re-running the analysis, so classifications go stale as product mix and demand shift over the year
- Applying the same safety stock and review policy to every class instead of tightening controls only where the value concentration is highest