What is ABC Analysis?
ABC analysis sorts products into three groups by their share of sales or profit: A for the few that bring most of it, B for the middle, and C for the many that bring little.
Updated
Meaning
English
ABC analysis sorts products into three groups by their share of sales or profit: A for the few that bring most of it, B for the middle, and C for the many that bring little.
Roman Urdu
ABC analysis products ko teen groups me baantti hai: A jo zyada sale ya profit laate hain, B darmiyan wale, aur C jo bohat se hain magar kam laate hain.
Also called ABC classification, Pareto analysis, 80/20 rule.
Example
A grocery store with 3,000 items finds that about 400 of them bring 75% of its gross profit. Those A items get weekly counts and are never allowed to run out; C items are reordered only when nearly finished.
How it works
In most shops a small share of products earns most of the money. ABC analysis makes that visible so effort goes where it matters. Sort products by sales or gross profit for the last few months, then add up from the top: items that make up roughly the first 70 to 80% are A, the next 15 to 20% are B, and the rest are C.
Use it to decide count frequency, safety stock, shelf position and how much negotiation each supplier deserves. Review the groups each season, since a C item in winter can be an A item in summer.
In Nafaa
Nafaa's profit report lists top earners against top sellers by product, category, brand and supplier for any period, which is the list an ABC grouping is built from; Nafaa does not label products A, B or C itself.
Related terms
- Dead Stock
Dead stock is inventory that has not sold for a long time and is unlikely to sell at its normal price.
- Reorder Level
A reorder level is the stock quantity at which a new order should be placed, so stock arrives before the shelf runs empty.
- Gross Profit
Gross profit is sales minus the cost of the goods sold, before rent, salaries, bills and other expenses are taken off.