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ABC Analysis

ABC Analysis classifies SKUs based on their relative contribution to sales, revenue, or profit, grouping them into A (highest impact), B (medium impact), and C (lowest impact).

Why It Matters

  • •Helps operators prioritize attention and resources.
  • •Highlights products that drive most of the commercial performance.
  • •Commonly used in inventory planning and control.
  • •However, it often does not incorporate capital efficiency or cycle time into evaluation, and does not differentiate products within the same class.

Connection to Capital

A SKU labeled as "A" by revenue may still be a poor investment if it locks capital for too long or yields a low financial return.

Related Terms

ABC-XYZ Analysis Allocation of Capital Contribution Profit

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