Inventory & Supply Chain Analysis

ABC Analysis Calculator

Classify your inventory items into A, B, and C categories based on their annual consumption value (or any other metric). Enter your items and their values, and get instant Pareto-based classification.

Pareto Principle (80/20 Rule)

Items (sorted desc)ValueCumulative %A (≈80%)B (≈15%)C (≈5%)

Add Items

NameValueAction
Item A5,000.00
Item B3,000.00
Item C1,000.00
Item D500.00
Item E100.00
Pro Tip

ABC analysis is most effective when performed on annual consumption value (price × annual usage). For service parts, use criticality instead of value.

Add your items and click Analyze to see the classification.

Engineering Code

Python
def abc_analysis(items):
    # items: list of dicts with 'name' and 'value'
    sorted_items = sorted(items, key=lambda x: x['value'], reverse=True)
    total = sum(item['value'] for item in items)
    cum_pct = 0
    result = []
    for item in sorted_items:
        cum_pct += (item['value'] / total) * 100
        if cum_pct <= 80:
            category = 'A'
        elif cum_pct <= 95:
            category = 'B'
        else:
            category = 'C'
        result.append({
            'name': item['name'],
            'value': item['value'],
            'percentage': (item['value'] / total) * 100,
            'cumulative': cum_pct,
            'category': category
        })
    return result

items = [
    {'name': 'Item A', 'value': 5000},
    {'name': 'Item B', 'value': 3000},
    {'name': 'Item C', 'value': 1000},
    {'name': 'Item D', 'value': 500},
    {'name': 'Item E', 'value': 100}
]

result = abc_analysis(items)
for r in result:
    print(f"{r['name']}: value={r['value']}, pct={r['percentage']:.1f}%, cum={r['cumulative']:.1f}%, category={r['category']}")

Technical Explanation: ABC Analysis (Pareto Principle)

ABC Analysis is an inventory management technique based on the Pareto Principle (80/20 rule). It categorizes items into three classes – A, B, and C – based on their contribution to total consumption value (or other metrics).

  • A‑Items: High‑value items that represent roughly 70‑80% of total value, but only 10‑20% of total quantity. These require tight control, frequent review, and accurate forecasting.
  • B‑Items: Intermediate in value and quantity, typically 15‑20% of value and 20‑30% of quantity. Moderate control is sufficient.
  • C‑Items: Low‑value items that represent only 5‑10% of value but 50‑60% of quantity. They need simple, loose control (e.g., bulk ordering).

How to Use the Calculator

  1. Add items: Enter a product name and its annual consumption value (or cost) in the input fields, then click Add.
  2. Repeat for all items you want to classify.
  3. Click Analyze to see the classification.
  4. The table shows each item’s value, percentage of total, cumulative percentage, and assigned category (A, B, or C).
  5. A summary displays the total number of items, total value, and the value share of each category.
Note: The default thresholds are: A ≤ 80% cumulative, B ≤ 95% cumulative, C > 95%. You can adjust these thresholds in the code if needed.

Real-World Engineering Cases

Retail Inventory Optimization

A large retailer analyzed 10,000 SKUs using ABC analysis. They found that 15% of SKUs (A‑items) accounted for 78% of sales. By focusing on A‑items for replenishment and promotions, they reduced stockouts by 30% and increased inventory turnover.

Engineering Lesson

ABC analysis helps prioritize resources on the most valuable items, improving operational efficiency and profitability.

Hospital Supplies Management

A hospital used ABC analysis on medical supplies. They discovered that 10% of items (e.g., surgical gloves, syringes) accounted for 70% of procurement costs. By negotiating better contracts for these A‑items and using just‑in‑time delivery, they cut inventory holding costs by 20%.

Engineering Lesson

Even in healthcare, categorising supplies by value enables better budget allocation and reduces waste.

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Frequently Asked Questions

What is ABC analysis used for?

ABC analysis is used in inventory management to classify items based on their importance. It helps businesses allocate resources, set control policies, and optimize stock levels according to the value of each item.

How are the categories (A, B, C) determined?

Items are sorted in descending order of their value. Cumulative percentages of total value are calculated. Typically, A‑items are those that make up the first 80% of cumulative value, B‑items the next 15%, and C‑items the remaining 5%. These thresholds can be adjusted.

Can I use this for anything other than inventory?

Yes. ABC analysis can be applied to any set of data where you want to prioritise items by impact – for example, customer segmentation (by revenue), supplier performance (by spend), or even personal tasks (by importance).