ABC analysis is a stock-classification technique based on the Pareto principle (the 80/20 rule). It consists of splitting items into three categories according to their annual consumption value (unit price × quantity sold), so as to concentrate management effort where it has the greatest economic impact rather than treating every item uniformly.
In practice, class A items account for roughly 80% of the value for only about 20% of the items: they call for close monitoring. Class B covers about 15% of the value for about 30% of the items, with intermediate control. Class C, finally, brings together the majority of the items (about 50%) for only about 5% of the value: lighter management is enough. These thresholds are orders of magnitude, adjustable to suit the business.
ABC analysis guides many logistics decisions: the frequency of rotating stocktakes (tighter on A items), safety-stock levels, and the calculation of the economic order quantity (EOQ). It is often combined with other dimensions — turnover, criticality, demand regularity — to produce a finer ABC/XYZ analysis.
This value-based prioritisation logic applies to eyeot's Stock module and feeds the management of the Supply Chain.