ABC Analysis
Classify inventory items by consumption value, optionally add XYZ demand variability, and decide where tighter stock control will have the greatest impact.
Why use this tool?
Use this tool when you need to decide which items deserve the most control, review effort, replenishment attention, or demand variability review.
ABC ranks items by consumption value for the chosen analysis period. Optional XYZ classifies items by how stable or variable their monthly usage/demand is.
Load the sample data to see item names, unit costs, and monthly usage quantities. ABC-only mode can also use a direct consumption value column.
AX items are high-value and predictable. AZ items are high-value but volatile, so they usually need closer planning and safety stock review.
1. Data Import
Prepare your inventory analysis file
Upload an Excel or CSV file with a header row and one row for each inventory item or SKU.
- Item Identifier / Name
- A unique SKU, item code, or item name used to identify each inventory record.
- ABC Value Fields
- Provide either a direct Consumption Value column, or Quantity Used and Unit Cost columns so ATH can calculate value.
- Monthly Usage for XYZ
- For ABC + XYZ, add separate monthly usage, sales, consumption, or demand columns. At least 3 populated months are required; 6-12 months gives stronger guidance.
ABC-only example: Item-001 | 18600
ABC + XYZ example: Item-001 | 15.50 | 110 | 125 | 118 | ...
Drag & drop your Excel (.xlsx, .xls) or CSV here
Or click to browse files from your computer
Choose ABC only for value ranking. Choose ABC + XYZ when you also have monthly usage, sales, consumption, or demand quantities. You can use fewer than 12 months, but more history gives a more reliable XYZ result.
Consumption value is the total item value over the analysis period. If you have quantity used and unit cost, the tool can calculate it.
Map Your Columns
Monthly Usage / Demand Columns
Map the months available in your file and leave missing months as Not used. The tool ignores blank months, sums entered monthly quantities for ABC value, and uses the entered monthly pattern for XYZ variability.
2. Quick Manual Entry
| Item / SKU | Consumption Value | Delete |
|---|
3. Parameters & Settings
Start with the defaults: X up to 0.25 for predictable demand and Y up to 0.50 for moderately variable demand. Anything above the Y threshold is classified as Z.
If your items naturally fluctuate a lot, widen the thresholds. If demand is usually stable and you want tighter control, keep the thresholds lower. Use more months of history before changing thresholds for seasonal or irregular items.
Total Evaluated Value
£0.00
Class A Count / Value %
0 (0%)
Class B Count / Value %
0 (0%)
Class C Count / Value %
0 (0%)
Pareto Principle Visualization (ABC Curve)
Classification Analytics Output Table
| Rank | Item/SKU Identifier | Consumption Value | Individual % Share | Cumulative % | ABC Class |
|---|
About ABC and XYZ Analysis
ABC analysis ranks inventory by consumption value for a chosen analysis period. This value is usually calculated as quantity used, sold, consumed, or demanded multiplied by unit cost. Class A usually contains the few items that drive most value, Class B covers the middle band, and Class C captures the remaining long tail.
XYZ analysis adds a second view: demand predictability. It uses monthly quantities to measure variability. X items are relatively stable, Y items are moderately variable, and Z items are highly variable or irregular.
How the calculation is done
- ABC-only mode calculates each item's consumption value using either a direct value column or quantity used x unit cost.
- ABC + XYZ mode sums the entered monthly usage/demand quantities, then multiplies that quantity by unit cost.
- Items are sorted from highest value to lowest value.
- Each item receives an individual percentage share of the total value.
- A running cumulative percentage is calculated across the sorted list.
- Items are classified as A, B, or C based on the cumulative thresholds selected in Settings.
- When XYZ is enabled, the tool calculates coefficient of variation from monthly quantities and assigns X, Y, or Z.
High-value items that usually need tighter control and frequent review.
Moderate-value items that benefit from routine monitoring.
Lower-value items where simpler controls often make sense.
Guidance
Before You Apply Policies
Check that item names, quantities, unit costs, and monthly values represent the same analysis period. Poor source data can make the classification look more precise than it is.
Use the result alongside lead time, supplier constraints, shelf life, substitution risk, minimum order quantities, and service-level expectations before changing replenishment rules.
Re-run the analysis when price, demand, sourcing, or lifecycle conditions change. Items can move between classes as business conditions shift.
How to Read ABC-XYZ
A, B, and C show where inventory value is concentrated. This helps prioritise management attention and working-capital review.
X, Y, and Z show whether monthly usage is predictable, moderately variable, or volatile based on coefficient of variation.
Segments such as AX, AY, and AZ combine value and variability so the result can be translated into review priorities.
The generated suggestions are a starting point. Confirm criticality, lead time, and supplier risk before making stock policy changes.
When to Use This Tool
Prioritise SKUs for cycle counts, stock reviews, and demand planning so effort is focused where inventory value is highest.
Use the results to support slotting choices and keep important items in pick locations that are easier and faster to access.
Apply different reorder policies by ABC-XYZ segment and direct supplier conversations toward SKUs with high value, high variability, or both.
Find items that may need tighter control, simpler replenishment, vendor-managed inventory, or consignment stock arrangements.
Who Can Use This Tool?
Use ABC analysis to identify the products that deserve the closest attention, especially when managing many SKUs across stores, marketplaces, or fulfilment channels.
It helps teams focus replenishment, availability checks, and margin protection on items that have the strongest impact on inventory value.
- Plan cycle counts around the items that matter most.
- Support slotting decisions for faster picking and better control.
- Review high-value stock more often without overchecking every SKU.
Apply different reorder policies by class, then use the results to guide supplier reviews, lead-time discussions, and service-level decisions.
- Understand where inventory value is concentrated.
- Target working-capital improvements without treating all stock equally.
- Connect operational controls with cost and cash-flow priorities.
Why ABC Analysis Matters
It separates high-impact items from routine stock, making control effort easier to target.
Priority items can receive more detailed demand review, helping reduce avoidable surprises.
Teams can spend time, analysis, and management attention where the return is strongest.
Clearer priorities help avoid overstocking low-impact items while protecting important ones.
Count frequency can be matched to item importance instead of using one schedule for all SKUs.
Classification changes can highlight items that are growing, declining, or becoming obsolete.
Simple, class-based policies reduce unnecessary checks and make inventory routines easier to run.
Methodology, Assumptions, and Limitations
Notation
qit = quantity for item i in month t, ci = unit cost, vi = item consumption value, V = total consumption value
Consumption value
vi = ci × ∑t=1m qit, or the directly supplied value in ABC-only mode
Value share
pi = vi / V, where V = ∑i=1n vi
Cumulative share
Ci = ∑k=1i pk, after sorting items from highest to lowest consumption value
ABC classification
A when Ci ≤ TA; B through TB; C above TB. The item that crosses the B boundary remains in B.
Monthly mean
x̄i = (1 / m) ∑t=1m qit
Population standard deviation
σi = √[(1 / m) ∑t=1m (qit - x̄i)2]
XYZ variability
CVi = σi / x̄i. X when CV ≤ TX; Y through TY; Z above TY.
The combined segment joins the independently calculated classes, for example A + Z = AZ. Blank months are ignored; entered zero values remain part of the variability calculation.
ABC assumes consumption value is the right prioritisation measure. XYZ assumes monthly usage, sales, consumption, or demand quantities are a useful signal of predictability.
ABC-XYZ classes are a decision aid, not a final policy. Review criticality, lead time, substitution risk, shelf life, service targets, and supplier constraints separately.
FAQ
How often should I run ABC analysis?
Run it monthly or quarterly for active inventory. Fast-moving or seasonal businesses may benefit from running it more often.
Can an item change classification over time?
Yes. Demand, price, supply risk, and lifecycle stage can all move an item between A, B, and C classes.
What does quantity mean in this tool?
For ABC-only mode, quantity means the total quantity used, sold, consumed, or demanded during the chosen analysis period. For ABC + XYZ mode, monthly quantities are used to calculate both consumption value and demand variability.
Is monthly demand the same as quantity sold?
It can be, but it depends on your context. Retail users may use monthly quantity sold. Manufacturing or MRO users may use monthly quantity consumed, issued, or demanded.
Do I need all 12 months for XYZ analysis?
No. The tool uses the months you enter and ignores blanks. Four or five months can be enough for a quick directional view, but 6-12 months is more reliable and 12 months is best when demand is seasonal or affected by recurring cycles.
How does ABC analysis affect cycle counting?
A items are usually counted more often, B items on a regular schedule, and C items less frequently with simpler checks.
What are the thresholds for A, B, and C?
A common starting point is A up to 80% of cumulative value and B up to 95%, with C covering the rest. Adjust these thresholds to fit your business.
Can ABC analysis be used outside physical inventory?
Yes. The same ranking approach can help prioritise customers, suppliers, service parts, support tickets, or any list with measurable value.