ABC analysis

Not every product deserves the same attention. If you rank your products by how much they matter, usually by yearly sales value or by how often they are picked, a small group at the top accounts for most of the result, a large group at the bottom for very little, and a middle group sits in between. Splitting them into those three groups, A, B and C, is called ABC analysis.

A common rule of thumb is that around a fifth of products make around four fifths of sales, but your own split may differ, so measure it. The cut-offs are yours to choose: for example A for the products that together make 80% of sales, B for the next 15% and C for the last 5%.

Use the groups to spend effort where it pays: the best locations and the tightest control for A (see slotting), more frequent counting (see cycle count) and more safety stock; looser control for C. Redo it once or twice a year, because products move between groups.