Business Improvement
Control your stock with ABC analysis
Focus your attention on the few items that hold most of your stock value, and free up cash.
- DataItems and usage
- ValueCalculate and sort
- ClassifyA, B and C
- ControlMatch your effort
What you need
- A list of stock items with annual usage and unit cost
- A spreadsheet
Collect your data
Export every item with its yearly quantity used and its unit cost. Use real usage figures rather than estimates where you can.
Calculate annual value
Add a value column, then sort the whole table from the highest value to the lowest. Sorting must come before the next step.
A: Item B: Description C: Annual quantity D: Unit cost E2: =C2*D2Calculate the running share and classify
The 80% and 95% limits below are common starting points, and you can adjust them to suit your business. Change 100 to your own last row.
F2: =SUM($E$2:E2)/SUM($E$2:$E$100) G2: =IF(F2<=0.8,"A",IF(F2<=0.95,"B","C"))Manage each class differently
A items: count often, order carefully and negotiate with suppliers. B items: use normal controls. C items: keep it simple with bulk orders and less frequent counts. Just check for low-value items that could still stop production if they ran out, and treat those as critical.
Repeat regularly
Demand and prices change, so run the analysis again every 6 to 12 months. Stock that has not moved is a separate problem worth reviewing, since it holds cash and takes up space.
Want this set up for your business?
We can plan, build and hand it over to your team.