Do put an equal amount of focus on all of your products? The theory behind ABC Analyzer rests upon the idea that some products are more important than others.
50% of your entire turnover is made up of 8% of your products. ABC Analyzer can help you determine which of your products constitute these important 8%.
This is fundamental since your success is highly dependent on your ability to focus on the few crucial products that define your core business. These are called AA products.
- By safeguarding your AA products you’ve secured your core business
- Even small price adjustments will affect your business dramatically
- Make sure your team know the crucial products by heart
Determining and categorizing: What are A, B and C products?
Based on how well they perform, products can be divided into 3 categories called A, B and C.
- A products are your most important The category contains very few, high-profitable products. They alone generate 80 % of your turnover
- B are less important products This category accounts for approx. 15 % of your turnover.
- C are your “long tail” products They play an insignificant role in terms of income but account for more than half of your product numbers! All together they generate 5 % of your turnover.
urnover is not the only thing that matters!
By dividing products into A, B and C based on turnover you have an idea of the different products’ importance.
Nevertheless, to create and implement a clever supply chain strategy you also need to know how often your products are being sold.
Adding the second “A” to the ABC code
Use the ABC Analysis to divide your products into 3 ABC categories based on Order lines/picks
- A-products account for 80 % of all order lines
- B-products account for 15 % of all order lines
- C-products account for 5 % of all order lines
AA products: If a product scores an “A” in turnover and an “A” in frequency in sales, it gets the ABC code “AA”.
You can create a single ABC Analysis in a regular spread sheet, or use the free version of ABC Analyzer to create a double ABC categorization. The software automatically merges the two single ABC Analysis into a Double ABC and adds an ABC-code to each product.
The Double ABC
All your products are divided into the 9 ABC categories. Each category has a distinct behavior and impact on your business. Use the 9 grid to tune your purchasing strategies to match the different characteristic of each category.
Characteristics of the 4 distinct corner categories:
AA: Focus on the important 8%
Know your products’ turnover and frequency and use your energy on the products that matter - it’s all worth it!