Inventory Management

ABC Classification

Not all products deserve equal attention. Focus your time on the 20% of SKUs that drive 80% of your revenue.

See How It Works

The Pareto Principle Applied to Inventory

ABC analysis categorizes products based on their contribution to your business over the past 365 days.

A

A Items

Top 80% of value

Your best sellers. Typically 10-20% of SKUs generating most of your revenue.

  • • Count weekly
  • • Higher safety stock
  • • Prioritize replenishment
B

B Items

Next 15% of value

Moderate sellers. Around 20-30% of SKUs with steady but lower contribution.

  • • Count monthly
  • • Moderate safety stock
  • • Standard replenishment
C

C Items

Remaining 5% of value

Long tail. 50-70% of SKUs with minimal revenue contribution.

  • • Count quarterly
  • • Minimal safety stock
  • • Consider discontinuing

Classification Methods

Sales Revenue

Most common method. Classifies based on revenue contribution over 365 days.

Best for: Most businesses where revenue is the primary metric.

Net Inventory Value

Based on inventory movement value (quantity x product cost) over 365 days.

Best for: Focus on working capital tied up in inventory.

Net Inventory Count

Based on quantity movement only, ignoring value. Uses unit counts.

Best for: High-volume operations with similar unit values. Not recommended for multi-UOM.

How to Use ABC Classification

Cycle Count Frequency

Count A items weekly, B monthly, C quarterly. Focus accuracy efforts where they matter.

Safety Stock Levels

Higher safety stock for A items to prevent stockouts. Lower for C items to reduce carrying costs.

Warehouse Placement

A items in prime picking locations. C items in harder-to-reach areas.

Purchasing Priority

Review A item replenishment daily. B weekly. C only when triggered by reorder points.

Setting Up ABC Classification

  1. 1

    Set Default Method

    Navigate to Settings > Products > Defaults. Choose Sales, Net Inventory Value, or Net Inventory Count.

  2. 2

    Run Classification

    System automatically calculates ABC class for each product based on 365-day data.

  3. 3

    Use in Operations

    Filter cycle counts by ABC class. Set up different reorder policies by class. Report on inventory value by class.

Common Questions

How often is ABC classification recalculated?
Fulfil uses a rolling 365-day window. Classifications update as sales data changes. A new product might start as C (no history) and move to A as sales grow. A declining product might move from A to B over time.
Can I override the automatic classification?
Yes. You can manually set ABC class on individual products. This is useful for new products you know will be high sellers, or strategic items that need A-level attention regardless of sales volume.
What about new products with no sales history?
New products default to C class until they accumulate sales history. If you're launching a product you expect to be a top seller, manually set it to A class until the system has enough data to classify it automatically.

Related Features

Cycle Counting

Use ABC classification to prioritize count frequency.

Reorder Points

Set different safety stock levels by ABC class.

Inventory Management

Complete inventory control with real-time tracking.

Ready to prioritize your inventory?

See how Fulfil handles ABC classification and inventory prioritization.

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