Inventory
ABC analysis
ABC analysis prioritizes items by economic contribution and separates high-impact A items from B and C items.
Also known as
ABC classification
Direct answer
What is ABC analysis?
ABC analysis prioritizes items by economic contribution and separates high-impact A items from B and C items. It prevents teams from treating every SKU equally. A items need tighter forecasts, more frequent reviews, and closer availability control.
Formula
Item contribution = sales volume × value per unit
Practical example
Twenty percent of SKUs generate 80 percent of contribution margin. Those items become class A and are monitored daily.
What teams should remember
ABC analysis prioritizes items by economic contribution and separates high-impact A items from B and C items.
It prevents teams from treating every SKU equally. A items need tighter forecasts, more frequent reviews, and closer availability control.