ABC analysis sorts your stock by how much money flows through each item in a year, its usage value: units used times what one costs. A items are the few that carry most of the value, C items the many that carry little, and B items sit between. The point is attention: count the A items often, set their reorder points carefully and watch their prices, and spend less time on the rest. In the example below, a snack maker with 16 ingredients and packaging items finds that 6 of them, 38% of the items, carry 83% of the $48,158 a year it spends, and that its 18-cent pouches are an A item while $6-a-pound cinnamon is a C. Below is the usage value, the classes, what to do with each, what ABC misses, and a free template.
The short version
- Usage value = units used in a year × cost a unit.
- Rank items by usage value and add up the shares from the top.
- Common cutoffs: A until 80% of the value, B until 95%, C for the rest.
- Count A items weekly, B monthly, C quarterly.
- Set A items' reorder points carefully and watch their suppliers' prices.
- Cheap items can still stop production; mark those separately.
- TaroStack keeps each item's usage in its batch records, ready to export for this sheet. More below.
Usage value
Sea Grape Snacks, a made-up granola bar and trail mix maker in St. Petersburg, Florida, I use in these examples, lists last year's usage:
| Item | Used a year | Cost a unit | Usage value | Share | Running share | Class |
|---|---|---|---|---|---|---|
| Almonds | 2,400 lb | $5.20 | $12,480 | 25.9% | 25.9% | A |
| Printed pouches | 40,000 | $0.18 | $7,200 | 15.0% | 40.9% | A |
| Honey | 1,800 lb | $3.40 | $6,120 | 12.7% | 53.6% | A |
| Dark chocolate chips | 1,200 lb | $4.80 | $5,760 | 12.0% | 65.5% | A |
| Rolled oats | 6,000 lb | $0.85 | $5,100 | 10.6% | 76.1% | A |
| Dried cranberries | 900 lb | $3.90 | $3,510 | 7.3% | 83.4% | A |
| Pumpkin seeds | 500 lb | $4.10 | $2,050 | 4.3% | 87.7% | B |
| Shipping cartons | 1,500 | $1.10 | $1,650 | 3.4% | 91.1% | B |
| Coconut oil | 600 lb | $2.60 | $1,560 | 3.2% | 94.3% | B |
| Labels | 40,000 | $0.03 | $1,200 | 2.5% | 96.8% | B |
| Brown sugar | 700 lb | $0.90 | $630 | 1.3% | 98.1% | C |
| Vanilla extract | 160 oz | $1.80 | $288 | 0.6% | 98.7% | C |
| Cinnamon | 40 lb | $6.00 | $240 | 0.5% | 99.2% | C |
| Packing tape | 60 rolls | $2.50 | $150 | 0.3% | 99.5% | C |
| Sea salt | 80 lb | $1.50 | $120 | 0.2% | 99.8% | C |
| Parchment sheets | 2,000 | $0.05 | $100 | 0.2% | 100.0% | C |
An item is A while everything worth more than it adds up to less than 80% of the total, so the item that crosses 80%, the cranberries, is still an A; B runs to 95%, and C is the rest. The template does this without sorting. Pouches cost 18 cents and are the second-biggest item because 40,000 go out a year; cinnamon costs $6 a pound and is a C because 40 pounds last the year.
The classes
| Class | Items | Share of items | Usage value | Share of value |
|---|---|---|---|---|
| A | 6 | 37.5% | $40,170 | 83.4% |
| B | 4 | 25.0% | $6,460 | 13.4% |
| C | 6 | 37.5% | $1,528 | 3.2% |
The textbook picture is 20% of the items carrying 80% of the value. A small maker with a short list won't match it exactly, and doesn't need to: the cutoffs are a convention, and 70% or 75% for A works too if it gives a list short enough to watch closely.
What to do with each class
| A | B | C | |
|---|---|---|---|
| Count | Weekly | Monthly | Quarterly |
| Reorder point | Set from lead time and usage, checked often | Set once a season | Order in bulk, keep extra |
| Supplier prices | Checked every delivery | Checked quarterly | Checked yearly |
A short count of six A items every Friday catches the gaps that cost money while they're small; how to run those small counts is in cycle count form. For A items, a reorder point from real lead times and a little safety stock keeps money from sitting on the shelf without running out; the arithmetic is in safety stock formula. A 5% price rise on almonds is $624 a year, on sea salt $6, so the almond supplier's invoices are the ones to read closely; a supplier price tracking template shows the creep.
What ABC misses
Usage value says where the money is, not what can stop the kitchen. Parchment sheets are the smallest item on the list, and without them no bars get baked; labels are a B, and a missing label holds up a whole shipment. So mark the cheap items that would stop production and keep a generous stock of them whatever their class. Perishable items need watching by date, not by value: a C item that goes stale is still thrown out. And usage changes: a new product line or a busy season moves items between classes, so rerun the analysis once a year, or each season if sales swing.
Get the template
Download the ABC analysis template. Type each item with what you used in a year and its cost a unit. It works out the usage value, the share, the share of everything worth more, the class against cutoffs you set, and how often to count it, with a summary by class. No sorting needed. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.
Where this stops working
Sixteen items today, forty after the new line, usage that has to be added up from a year of batch sheets, and prices that change every delivery. A sheet can't add up what each batch used, show this month's price against last year's, or remind you to count the almonds on Friday.
How TaroStack does it
TaroStack keeps each item's usage in its batch records, ready to export.
Usage from the batches. Each product is a recipe, so recording a batch takes its ingredients and packaging off stock at what you paid; a year's usage by item is in the records, and every list exports to CSV for this sheet.
Counting and reordering. Counts are done on a phone, even with no signal, and the differences show in dollars before they're posted, so a short count of the A items takes minutes. The reorder list works in days of cover against each supplier's lead time.
And the prices. A price-creep report per supplier shows whose prices are rising, which matters most for the A items.
| The job | Spreadsheet | In TaroStack |
|---|---|---|
| A year's usage by item | Add up the batch sheets | The batch records, exported |
| Friday count of the A items | Clipboard and retyping | Counted on a phone, differences in dollars |
| Almonds before they run out | A reorder point on paper | The reorder list, in days |
| Whose prices are rising? | Noticed on the invoice | Price creep by supplier |
Recipes, batches, counting and the reorder list are on every plan, from $49 a month. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.