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#Finale inventory product categories software#
Keep in mind that while most inventory planners can calculate these values manually, any inventory management software that supports ABC analysis should be able to calculate these values for you automatically. This should give you the percentage of your total inventory value that can be attributed to each item.Ĭumulative value = (product inventory value / total inventory value) x 100 Calculate each item’s cumulative value by dividing the product’s inventory value by the total inventory value, then multiplying by 100. Sort products (within your Excel spreadsheet or whatever tool you’re using) from highest usage value to lowest.ĥ. Total inventory value = product 1 usage value + product 2 usage value + etc.Ĥ. Calculate your total inventory value* by adding all the individual usage values for your products. Find the usage value of each item by multiplying the number of units sold by the total cost per item.ģ. While many businesses opt to use annual consumption value (which analyzes the amount and cost of products sold within the past year), you could choose to look at sales for just the past month or quarter-the choice is yours.Ģ. Determine the time period for your analysis. It’s time to start figuring out how each of your products contribute to your business.
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This can get inflated and overcomplicated very quickly, especially if multiple people within your organization have a say over how products get prioritized. But that means every time you reclassify your items (which we recommend doing regularly), you need to compare your classification to your list of exceptions and adjust. Now, you can create a list of products that are exceptions to your ABC classification. You may need to temporarily treat that item as an A-level item, but your system would de-prioritize tasks for that item because it’s technically a C-level product. So let’s say a manufacturing issue forces you to immediately reorder all your stock on a C-level item. It also doesn’t account for items that would normally be class B or class C items but need to be temporarily treated as class A items. For starters, classifying items by their usage value means new items (with no sales data to draw from) have zero usage value. This ensures that your class A items get the most attention, so you’re less likely to run out of safety stock on your highest-value products.ĪBC classification also helps make your stock management process more efficient, since your inventory planner knows exactly which items to focus on to minimize your costs and maximize your profit.ĪBC inventory can be somewhat limited, however. When you use ABC analysis, you can easily prioritize management tasks for the items that have the biggest impact on your business. This ensures that the most important, A-level items in your inventory remain tightly controlled, which minimizes loss. Once items are assigned to a category, inventory managers can prioritize their tasks (like reordering, cycle counting, and supply chain supervision) based on the importance of the item. This category is the largest of the three, but it makes up the smallest portion of your business’s total inventory value.