How to use the inventory ABC analysis tool
ABC analysis exists so that you stop managing every SKU with the same effort. Items are ranked by revenue contribution, a cumulative share is built down the list, and the result splits into three bands: frequent counts and safety stock for A, routine attention for B, and minimal administration for C.
The cut-offs here are fixed at 70% and 90% cumulative, and grading uses the cumulative share before the item is added. If the running total has not yet reached 70% the item is A; if it has not reached 90% it is B; everything after that is C. Judging on the share before the item means a single product carrying 80% of revenue still lands in A rather than being pushed out by its own size.
Item names are copied into the table as plain text and never enter the arithmetic; a blank name becomes a row number. Shares and cumulative shares are rounded to one decimal, and the class is decided from exactly those displayed figures, so the grade in the table always matches the numbers next to it. Usage volume or gross margin can replace revenue as long as every row uses the same measure.
Frequently asked questions
Items are ranked by revenue and a running cumulative share is built. An item is A when the cumulative share before adding it is still under 70%, B when it is under 90%, and C after that. Grading on the share before the item guarantees the top seller always lands in A.
Yes, the arithmetic is identical. Just keep every item on the same basis, and pick one measure deliberately, because ranking by margin promotes a very different set of items into A than ranking by revenue does.
Not on this ranking alone. C can contain range fillers and accessories that get bought alongside A items, so check turnover and margin before cutting anything from the assortment.