ABC inventory analysis sorts your products into three classes by how much they matter, so you spend your attention where it pays off. It's the Pareto principle applied to stock: a small share of your SKUs drives most of your revenue.
The three classes
- A — vital few. Roughly the top 20% of SKUs that drive around 70–80% of revenue. Never let these stock out.
- B — the middle. The next ~30% of SKUs, contributing perhaps 15–25% of revenue. Steady, routine management.
- C — trivial many. The remaining ~50% of SKUs that add only a small share of revenue. Keep them cheap and simple to manage.
How to run an ABC analysis
- List every product with its annual sales value (units sold × price, or byCOGS/profit if you prefer).
- Sort from highest to lowest value.
- Add up the cumulative % of total value down the list.
- Draw the lines: top ~80% of value = A, next ~15% = B, last ~5% = C.
Out of 300 SKUs, you might find 45 A-items make 78% of revenue, 90 B-items make 17%, and 165 C-items make just 5%. That tells you exactly where to put your forecasting and buying effort.
Manage each class differently
- A — tight forecasting, frequent reviews, healthy safety stock, priority on reorder points.
- B — periodic review, standard rules.
- C — order in bulk, review rarely, or discontinue dead stock to lift turnover.
Why it matters
You can't watch every SKU with equal care. ABC analysis makes sure a stockout never happens on the products that actually pay the bills, while you stop over-investing time and cash in the long tail.
Prioritise automatically
Foreshelf ranks your products by sales and flags the ones that need action first — so your A-items get watched closely without you building a spreadsheet. Pair it withforecasting methods to plan each class well.