ABC inventory analysis: calculation and interpretation

Step 1

Choose the measure and period

For a consumption-value analysis, multiply units used or sold during the period by unit cost. Use the same period and currency for every product. If you use sales revenue instead, label the report clearly because it answers a different question.

• Choose a representative period such as the last 12 months.
• Collect quantity consumed and unit cost for each product.
• Calculate consumption value using consistent units and currency.

Step 2

Rank products and assign classes

Sort products from highest to lowest value and calculate their share of total value. Use cumulative shares to assign A, B and C groups. The thresholds are policy choices, not fixed rules; select them to fit the review effort your team can sustain.

• Divide each product value by the total.
• Calculate the cumulative share in ranked order.
• Document the class boundaries and the date of the analysis.

Step 3

Turn the classification into review priorities

Use the grouping to schedule more frequent checks for high-value items. Consider operational importance as well: a low-cost component may still stop a sale or production process when unavailable. Refresh classifications when product demand changes.

• Prioritize A items for purchasing review and counts.
• Review critical low-value items separately.
• Recalculate after material changes in demand or costs.

Frequently asked questions