ABC analysis: the eighty-year-old idea your stockroom still needs

Sort your products by the revenue they produced in the last twelve months. In almost any shop, the pattern is the same: the top slice — call it 20% of products — produces the overwhelming majority of the money. A middle band contributes usefully. And then there is a long, long tail of products that each sold a handful of times and collectively barely matter.

ABC analysis is nothing more than naming those three groups — A, B, C — and then treating them differently on purpose. It has been around since the 1940s. It has survived because it works, and because almost nobody actually does it.

The point is not the labels. It is the unequal treatment.

Most owners give every product roughly equal attention, which means the products that pay the rent are managed with the same care as the products that gather dust. ABC flips that:

A items — never run out, never guess. These deserve real reorder points based on how fast they actually sell and how long your supplier actually takes. A stockout on an A item is a genuine emergency: it is the one shelf gap your regulars will notice. Count them often. Watch them weekly.

B items — rules, not attention. Sensible reorder quantities, reviewed quarterly. They should mostly run themselves.

C items — decide, don't drift. The tail is where cash goes to hibernate — we showed the mechanics of that in The cash frozen on your shelves. For each C item the honest question is: does this earn its shelf space, serve a customer who also buys A items, or should it be cleared and never reordered? Any answer is fine. No answer is how stockrooms fill up.

The version that fits a small shop

You do not need software to start — a spreadsheet sorted by twelve-month revenue with two lines drawn across it is a legitimate ABC analysis. Where software earns its place is in keeping it alive: products drift between classes as seasons turn and tastes change, and last year's A item quietly becoming a C item is precisely the kind of slow-motion change human attention misses. Kauzio recalculates that ranking continuously and treats a class change as a signal worth telling you about — because your attention is the scarcest resource in your business, and this is, at root, a system for spending it where the money is.

One hour, one spreadsheet, two lines. Start there.