ABC inventory types explained clearly

In the inventory and warehouse context, ABC analysis is a method of classifying items according to their value share of the total stock. All stock items are divided into three classes: A, B and C. A items are the few but very valuable items, B items are of medium importance and C items are very many items with a low individual value. This classification helps to maintain an overview during an inventory and to concentrate on the important stock (A class).

Key figures such as turnover or consumption value of the last period are usually used to categorize the items. All items are sorted according to this criterion - the highest-turnover or most valuable first - and then evaluated cumulatively. Typically, the top ~20% of items contribute around 70-80% of sales or stock value (A category), the next ~30% of items around 15-25% (B category) and the remaining ~50% of items only ~5-10% (C category). These thresholds (e.g. 80/15/5) are guidelines and can vary depending on the company. It is important that the A articles with a high value share, B articles with a medium value share and C articles with a low value share are identified at the end. The classification can be calculated manually or carried out by software as soon as the sales or consumption data for the items is available.

Thanks to the ABC analysis, stocktaking can be planned and prioritized. In concrete terms, this means that A items are counted more frequently and more accurately than B or C items. Companies set up cycle inventories, for example, in which A items are checked monthly or quarterly, while C items are perhaps only checked once a year for the key date inventory are recorded. In addition, you can first count all A-items during the inventory to ensure that no errors occur in the value-critical goods and then process the B- and C-items. The ABC analysis therefore ensures a structured process: Important items first, less important items afterwards. This increases accuracy where it has the greatest impact and reduces the overall effort because not every item has to be treated with the same intensity.

In most cases , yes. The ABC method is particularly useful if your warehouse consists of many different items that vary significantly in value or turnover - which is the case for most companies. Medium-sized and large warehouses in particular benefit from focusing effort and control on the most profitable items. Even in smaller companies, a simple ABC categorization can help to keep an overview. Only in rare cases, where all items have approximately the same value or consumption, does the ABC analysis bring little added value. An example would be a warehouse that only stocks very homogeneous products (such as identical screws or similar consumer goods) - there are practically no "important vs. unimportant" items here because they are all similar. For most warehouses and stores, however, some products have a much higher turnover or value than others. For this reason, ABC analysis is a best practice in inventory management almost everywhere and is an integral part of efficient inventory preparation.