Grading Inventory - ABC Analysis
I've recently become very interested in a type of inventory report called an ABC analysis. Based on the Pareto principle or 80/20 rule, it helps you to grade your inventory according to how each item contributes to overall revenue in a given time.
Dear has a lot to say about ABC analysis for inventory through articles on their blog, how important it is to grade products in such a way and pitching their cloud-based Inventory software as the solution.
Dear appears to be an authority on this topic, yet I can't find any resources that guide me to follow through and do it myself. Nor do I see any reports available to help me do this.
Shopify has recently introduced these reports for online sales, (Shopify users can find it at /admin/reports/abc_analysis_by_product), but I would rather get this report from Dear, so that I can factor in all sales channels (not just online). The key thing I want from this exercise is to be able to grade our inventory items by how much they contributed to overall revenue in a given time, ultimately knowing:
- Which products are A grade - accounting for 80% of our revenue
- Which products are B grade - accounting for 15% of our revenue
- Which products are C grade - accounting for 5% of our revenue
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