### What is ABC Analysis

- ABC Analysis is an inventory categorisation technique based on the Preto-rules (20%/80%)
- ABC Analysis divides an inventory into three categories
- “A items” – 20% of the items accounts for 70% of the annual consumption value of the items
- “B items” – 30% of the items accounts for 25% of the annual consumption value of the items
- “C items” – 50% of the items accounts for 5% of the annual consumption value of the items

### How to use ABC Analysis

- Classify products/customer/problems based on their contributions
- Better prioritise time, focus, investment to the most important content

### How to do

- Get the products data
- Sort the products based on their value (e.g., Revenue, Cost, Purchases)
- Calculate the cumulative sum of the value
- Calculate the percentage cumulative sum of the value
- Classify into 3 groups
- "A" group for the product that has percentage of cumulative sum from 0% to 70%
- "B" group for the product that has percentage of cumulative sum from 70% to 95%
- "C" group for the product that has percentage of cumulative sum from 95% to 100%

Classification percentage can be change based on your use-cases.