ABC Inventory Analysis

What this tool does

CM8-270 applies the Pareto principle to your inventory. You enter one row per stock item — what it is, how much of it you used in the last year, what one unit costs — and the tool ranks every item by annual usage value, draws the cumulative curve, and splits the range into classes A, B and C at the cut-offs you set. It then shows where your money actually goes, which items are dead stock, and which high-value items are sitting on the shelf too long.

The point of ABC analysis is not the letters. It is differentiated control: a few items deserve tight management — accurate counts, safety stock calculated properly, real negotiation — and most items deserve almost none, because the cost of managing them carefully exceeds anything careful management could save. Treating every item the same means over-managing the trivial and under-managing the vital, which is exactly what most storerooms do.

Everything runs inside this single file. There is no account, no upload and no network request of any kind — your usage volumes and unit costs, which say a great deal about your business, never leave the computer you are using.

How the classification works

Each item gets one number, the ranking measure:

The items are then ranked from the largest annual usage value to the smallest, and the values are accumulated down the ranking:

The cut-offs are settings, not laws. 80/95 is the common convention and a sensible default; a business with very concentrated spend might use 70/90, one with flat spend 85/97. What you will almost always find, whatever the cut-offs, is the classic asymmetry: something like 10–20% of the items carrying 70–80% of the value, and half the items together carrying a few percent. The ABC curve chart shows exactly how concentrated your version of it is.

Two things the arithmetic does deliberately: an item with zero annual usage value can never be A or B — it has no usage value to contribute — and the classification is always computed across all items, so filtering the register never changes anyone's class.

What to do with each class

The classification earns its keep only when the control policy actually differs by class. A workable starting point:

• Class — Stock control — Counting — Buying effort
• A — Tight — safety stock set from lead time and service level, order quantities reviewed, shortages escalated same day — Frequent — monthly, or continuous cycle counting — High — negotiate price and terms, know the supplier, track the market
• B — Normal min/max or reorder point, reviewed periodically — Quarterly to twice a year — Moderate — tender occasionally, don't agonise
• C — Two-bin, bulk order, generous quantities — running out should be nearly impossible and nearly free to prevent — Rarely — annually is plenty — Minimal — order a year's worth, spend the time saved on the A items

The asymmetry cuts both ways. It is not just that A items deserve more attention — it is that C items deserve less than they usually get. A purchasing clerk placing forty small orders a year for gloves and flap discs is spending real hours to optimise a rounding error. Order C items in bulk, hold generous stock (the carrying cost is trivial), and put the recovered hours into the three items at the top of the curve, where a two-percent price improvement is worth more than everything the C class costs in a year.

The classification table prints a suggested policy against every item, and the register has a column for how each item is controlled today — where the two disagree, that is your to-do list.

Criticality overrides — value is not the only axis

Annual usage value measures financial weight. It says nothing about consequence. A seal kit that costs a few hundred a year sits mathematically at the bottom of the C class — and if the forming press stops without it, and the only supplier quotes six weeks, it is one of the most important items in the building.

That is what the critical override is for. Mark an item critical and it is classified A*: it keeps A-class treatment — safety stock, supplier attention, a place on the review agenda — regardless of its value. Use it for single-sourced items, long-lead spares for bottleneck machines, and anything whose absence stops production or breaches a customer commitment. Use it sparingly: if a third of the register is critical, nothing is.

The obsolete override works the other way — it flags an item out of the classes entirely, as a disposition case rather than a stock item. The tool will not accept the obsolete flag on an item that still shows annual usage, because an item still being consumed is not obsolete.

Dead stock — cash on a shelf

Any item with stock on hand and zero annual usage is flagged as dead stock, and its value is totalled on the tiles. Be honest about what that number is: it is cash that was spent, converted into objects nobody is using, and it is not coming back by itself. It also costs money to keep — space, counting, insurance, and the annual ritual of walking past it.

The disposition options are the same everywhere: use it (can a current product substitute it in?), sell it (a last-time buy to whoever still services the old product), return it (some suppliers restock at a discount), or scrap it and recover the space. The worst option is the default one — leaving it on the shelf because writing it off feels like admitting the mistake. The mistake already happened; the write-off just records it.

Stock cover and the A-class overstock trap

For every item with usage, the tool shows months of stock cover:

Read it against the class. Generous cover on a C item is fine — that is the policy working. Generous cover on an A item is the expensive mistake: A items are where the money is, so months of A-class cover is months of your working capital doing nothing. The attention list flags any A or A* item with more than six months of cover; the usual culprits are an order quantity set years ago, a bulk buy made for a forecast that never arrived, or a quantity discount that looked good until you priced the shelf time.

Items with stock but no usage show no cover figure — dividing by zero usage would pretend dead stock has a runway. They are flagged as dead instead.

Re-running the analysis

Usage changes. Products launch and retire, a customer doubles an order, a cheap component gets a price rise that triples its annual value. Items drift between classes, and a classification done once and framed on the wall quietly becomes wrong. Re-run the analysis quarterly, or after any significant change in the product mix — update the annual quantities and costs, load the register, and check the movers: an item newly arrived in class A needs its controls tightening now, and an item that fell out of A is a chance to loosen up and stop spending effort on it. The date-reviewed column exists so you can see at a glance which rows are stale.

ABC analysis vs the stock register

These are different jobs. A stock register — like the free Stock Inventory Register — is the record of what you have: locations, quantities, movements. A reorder calculation — like the free Inventory Reorder Calculator — works out when and how much to order for a given item. This tool answers a question that sits above both: how hard should each item be managed at all? The output of the ABC analysis feeds the other two — A items get their reorder parameters calculated properly and their register entries counted often; C items get a two-bin card and are left alone. Run the analysis first, then apply the effort where the curve says it pays.

FAQ

Should I use purchase value or usage value? Usage. What you bought in a year is distorted by stocking up and running down; what you consumed reflects the actual flow the controls have to serve. If consumption data is unavailable, purchases over a full year are an acceptable approximation — note it.

What counts as one item? One stock-keeping unit — the thing you order and count as a unit. Do not merge sizes or grades that are ordered separately; their values and lead times differ.

My A class is one item at 60% of value. Is that wrong? No — it is information. Extreme concentration means one item deserves most of your attention, and it usually also means supply risk worth a second source. The curve is telling you about your business, not about the method.

Can an item be A by value and still obsolete? Not with honest data — obsolete means no usage, and no usage means no annual value. If an item shows both, one of the two figures is wrong, and the tool will ask you to fix it.

Do I include the stock quantity and cost of items we no longer sell? Yes — that is exactly how dead stock gets found. Enter the stock and the unit cost with zero annual usage.

Saving your work

Items, settings and the report header are written to this browser's local storage as you type, and the toolbar shows the time of the last save. That storage belongs to one browser on one computer: another browser, a private window, a second machine or a clean-up tool that clears site data will not have it.

Treat Export .json as the real save — one file containing everything, which Import .json restores anywhere. Export CSV gives you the register for spreadsheet work. Reset asks twice, then erases everything this tool has stored. There is no undo. Usage volumes and unit costs are commercially sensitive — treat exports accordingly.

Accuracy & disclaimer

The arithmetic here is simple and shown in full — value, rank, accumulate, cut. Everything that matters sits underneath it: whether the annual quantities reflect real consumption, whether the unit costs are current, and whether the items that can stop your operation have been flagged regardless of their value. A classification built on guessed costs will be confidently wrong.

ABC analysis directs management effort; it does not make stocking decisions, set safety stocks, or judge criticality on its own. This is an analysis and record-keeping aid, not procurement, financial or inventory management advice.