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ABC analysis tool
Paste SKUs and their annual value from Excel and classify them into A, B, and C by cumulative share of value. Adjust the cut-offs, see the split, and download the result as CSV. Runs in your browser; nothing is sent or stored.
Result
–
of SKUs are class A, with – of the value
| Class | SKUs | % of SKUs | % of value |
|---|
- SKUs ranked
- –
- Total annual value
- –
Varox classifies SKUs by revenue and sets safety stock per class: try it free.
SKUs by value
| Rank | SKU | Annual value | Share | Cumulative | Class |
|---|
How ABC analysis works
- Take each SKU's annual value: revenue, or units sold × unit cost.
- Sort the SKUs from the highest value to the lowest.
- Work out each SKU's share of the total value and the running, cumulative share.
- Assign classes by cumulative share: A up to 80%, B up to 95%, and C for the rest.
Share = SKU value ÷ total value; cumulative share = the SKU's share + the shares of all SKUs above it
The SKU that crosses a cut-off. This tool keeps a SKU in class A while the SKUs ranked above it make up less than 80% of the value, so the SKU that crosses the line stays in A and class A always covers at least 80%. The common spreadsheet rule, cumulative share ≤ 80%, moves that one SKU down to B instead. Both are in use; they differ by one SKU at each cut-off.
The 80/95 split follows the Pareto idea that a few items carry most of the value. 70/90 and 75/95 are also common. Choose cut-offs that give an A class short enough to review by hand.
Worked example
Ten SKUs with a total annual value of 1,000,000. The tool above is loaded with this list.
| Rank | SKU | Annual value | Share | Cumulative | Class |
|---|---|---|---|---|---|
| 1 | SKU-01 | 420,000 | 42.0% | 42.0% | A |
| 2 | SKU-02 | 230,000 | 23.0% | 65.0% | A |
| 3 | SKU-03 | 120,000 | 12.0% | 77.0% | A |
| 4 | SKU-04 | 80,000 | 8.0% | 85.0% | A |
| 5 | SKU-05 | 50,000 | 5.0% | 90.0% | B |
| 6 | SKU-06 | 35,000 | 3.5% | 93.5% | B |
| 7 | SKU-07 | 25,000 | 2.5% | 96.0% | B |
| 8 | SKU-08 | 20,000 | 2.0% | 98.0% | C |
| 9 | SKU-09 | 12,000 | 1.2% | 99.2% | C |
| 10 | SKU-10 | 8,000 | 0.8% | 100.0% | C |
- A: SKU-01 to SKU-04, 4 SKUs (40%) with 85% of the value. SKU-04 is in A because the three SKUs above it make up 77%, below the 80% line.
- B: SKU-05 to SKU-07, 3 SKUs (30%) with 11% of the value.
- C: SKU-08 to SKU-10, 3 SKUs (30%) with 4% of the value.
A real catalog of thousands of SKUs is usually more skewed than this: class A is a much smaller share of the SKUs, and class C a long tail of items that sell little.
What to do with the classes
- Service levels and safety stock. Stockouts on A items cost the most revenue, so give them the highest service level, for example 98% for A, 95% for B, and 90% for C. Size each buffer with the safety stock calculator.
- Review effort. Check A forecasts and orders by hand every cycle; let rules handle C.
- Cycle counts. Count A items more often than C items.
- Supplier terms. Shorter lead times and smaller minimum orders on A items release the most cash.
- Range review. C items with almost no value are candidates for delisting or make-to-order.
ABC and XYZ
ABC ranks SKUs by value and says nothing about how predictable their demand is. XYZ analysis classifies them by demand variability, usually the coefficient of variation: X for steady demand, Y for variable, Z for sporadic. Combining the two separates valuable, steady SKUs (AX), which are easy to plan and need little buffer, from valuable, erratic ones (AZ), where forecast reviews and safety stock pay off most.
Common mistakes
- Ranking by units instead of value, so a cheap fast mover outranks an expensive item.
- Using less than a year of data, which ranks seasonal products by the season you happened to pick.
- Classifying once and never again. Re-run quarterly, and place new products by hand until they have history.
- Leaving SKUs with no sales out of the list. They still hold stock and belong at the bottom of class C.
ABCD classes in Varox
Varox classifies SKUs by revenue from your sales file, using four classes, A to D. The Delivery Planner then sets safety stock per ABCD class as months of average monthly demand, so your best sellers carry a different buffer from the long tail without setting each SKU by hand. The class bands and the safety months per class are settings you can change.
Safety stock by ABCD class, for every SKU
Upload sales and stock from Excel; Varox classifies your SKUs and plans deliveries with a buffer per class. Free for up to 10,000 active SKUs.
Questions
What are the ABC analysis percentages?
A common default is class A up to 80% of cumulative value, B up to 95%, and C for the remaining 5%. They are conventions, not rules: pick cut-offs that give you an A class small enough to manage closely.
Should ABC analysis use revenue, cost, or units?
Use annual value: revenue, or units times unit cost (consumption value). Units alone rank a cheap fast seller above an expensive item that ties up far more money; they are useful for warehouse slotting, not for planning priority.
How do I do ABC analysis in Excel?
Sort SKUs by annual value from largest to smallest, add a column with each SKU's share of the total, add a running total of that share, and assign A, B, or C with nested IF formulas on the running total. Or paste the two columns into this tool and download the result as CSV.
How often should I update the ABC classification?
Quarterly works for most catalogs, using the last 12 months of value so seasonal SKUs are ranked on a full year. Re-run it after a range change, and give new products a class by hand until they have history.
What is the difference between ABC and XYZ analysis?
ABC ranks SKUs by value; XYZ ranks them by how variable their demand is. ABC tells you where the money is, XYZ how hard each SKU is to forecast. Combined, they form a 3 × 3 matrix from AX (valuable and steady) to CZ (cheap and erratic).