ABC analysis is the separation of products into three groups by their contribution to revenue or profit. Group A is small in number but produces most of the revenue; group C is crowded but contributes little. It is the fastest way to decide where to put stock investment, ad budget and supply priority. Its value grows as the catalogue grows.
Running the analysis on revenue alone is misleading; high revenue can mean low margin. An ABC analysis run on contribution margin often produces a completely different list, and the real decision should rest on that list. Items in group C are not cut automatically: some are basket fillers, some are entry products. It should be refreshed quarterly rather than once a year; products change groups at season transitions. Positioning group A close to the picking point in the warehouse shortens preparation time.
Running the analysis on revenue alone is misleading; high revenue can mean low margin. An ABC analysis run on contribution margin often produces a completely different list, and the real decision should rest on that list. Items in group C are not cut automatically: some are basket fillers, some are entry products. It should be refreshed quarterly rather than once a year; products change groups at season transitions. Positioning group A close to the picking point in the warehouse shortens preparation time.
Running the analysis on revenue alone is misleading; high revenue can mean low margin. An ABC analysis run on contribution margin often produces a completely different list, and the real decision should rest on that list. Items in group C are not cut automatically: some are basket fillers, some are entry products. It s…
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