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Understand the ABC analysis in 2 minutes

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Imagine you are doing a classic ABC analysis and divide your products into 3 categories depending on turnover:

  1. Good (A)
  2. Less good (B)
  3. Not that good (C)"

You will likely have few A-products, a bit more B-products and a lot of C-products. Many companies experience that: 

  • Good (A) products are responsible for 80 % of your turnover
  • Less good (B) products are responsible for 15 % of your turnover
  • Not that good (C) products are responsible for 5 % of your turnover
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Combine two ABC analyses

Now, you have divided your products into three categories: A, B and C based on your turnover – but you are not done yet! Imagine, you are doing one more ABC analysis – this time using order lines or picks. Combine the two simple analyses and you will get a double ABC analysis!

 

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Say hello to the double ABC

Visually, we have divided your products into 9 ABC categories using “Order lines/Pick” and “Turnover”. The products in each ABC category have their own distinct behavior and impact on your business

 

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Your core business is defined by your AA-products

After the two analyses, each product is granted an ABC code consisting of two letters: One from each analysis.

  • AA-products: If a product scores an “A” in turnover and an “A” in orderliness/pick, it is an “AA” product. This code makes it one of your most important products!
  • CC-products: The same happens if a product does bad and only scores a ”C” in turnover and a ”C” inorderliness/pick. It will be labeled “CC”. Do not spend too much time on this product since it is not that important!

On top of the classic 9 ABC categories, you will encounter extra categories for “New products”, “Dead products” and a few more.

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