ABC analysis is one of those techniques that sounds boring until you try it once � and then you can't imagine running a warehouse without it.
The 80/20 rule for stock
Roughly 20% of your SKUs will generate 80% of your revenue. Another 30% will generate 15%, and the remaining 50% will scrape together the last 5%. ABC analysis splits those into three groups so you can focus your time and capital correctly.
Running your first analysis
- Export 12 months of sales by SKU.
- Multiply units sold by margin to get annual contribution.
- Sort high to low.
- Mark the top 20% as A, the next 30% as B, the rest as C.
What to do with each class
- A items: tight reorder thresholds, frequent cycle counts, premium bin locations near dispatch.
- B items: standard reorder, monthly cycle counts.
- C items: long reorder cycles, quarterly cycle counts, deep-storage bin locations.
Most cloud WMS platforms can run ABC reports in a single click. VasKem includes it.