ABC Analysis for Inventory Management!

23/07/2026
11:03

reading time : 2 min

Lucie Monnot

Content Marketing Manager

Using ABC analysis for inventory management allows you to maximize efficiency and reduce costs. By segmenting items according to their value and impact, companies can prioritize efforts and resources. Discover in this article how to automate these analyses, maintain data flexibility, and apply ABC to cycle counting.

What is ABC analysis?

Definition of ABC analysis

ABC analysis is an inventory management technique that classifies items into three categories (A, B, and C) based on their relative importance.

Category A items typically represent a small proportion of items in stock, but a large share of the total inventory value. Category B items are of medium importance, while Category C items represent the majority of items in stock but a low total value.

The importance of the ABC method for your inventory

The ABC method is essential for effective inventory management. It allows companies to focus their efforts and resources on the most critical items (Category A), thereby ensuring optimal availability and reducing the opportunity costs associated with stockouts. By classifying items, managers can also better plan replenishment levels and optimize inventory costs. This approach contributes to better resource allocation, reduced storage costs, and an overall improvement in inventory management.

The categories of ABC analysis

Category A – High-value products

Category A products are important for a company, as they represent approximately 70–80% of the total inventory value, despite their low quantity (around 10–20% of items).

These products require rigorous management, including accurate forecasting, continuous inventory monitoring, and optimal sourcing strategies to avoid stockouts. Companies must also invest in quality control and risk management systems to minimize the financial losses associated with these valuable items.

Category B – Medium-value products

Category B products, representing approximately 15–25% of the total inventory value and around 30% of items by quantity, occupy an intermediate position in terms of management. They require regular but less intensive monitoring than Category A products.

Management strategies include:

maintaining sufficient stock levels to meet demand without overloading storage capacity,
periodic reviews of stock levels and orders to optimize costs and availability.

Category C – Low-value products

Category C products represent only approximately 5% of the total inventory value, but make up a large proportion (around 50%) of items by quantity. The management of these products should be efficient but low-intensity.

Companies can use simplified methods, such as bulk orders to reduce management costs or automated replenishment systems. The goal is to minimize the time and resources devoted to these products while ensuring their availability to maintain continuity of operations.

How to carry out an ABC analysis?

ABC analysis is an inventory management method that classifies items according to their importance. Here are the steps to carry out an ABC analysis:

Step 1: Collect inventory data

Gather accurate information on each item in your inventory, including quantities and unit costs.

Step 2: Calculate the total value of each item

Multiply the quantity of each item by its unit cost to obtain its total value.

Step 3: Calculate the total inventory value

Add up the total values of all items to obtain the overall inventory value.

Step 4: Determine the percentage value of each item

Divide the total value of each item by the total inventory value, then multiply by 100 to obtain the percentage.

Step 5: Classify your inventory items

Classify items into three categories:

A: The most valuable items, representing approximately 70–80% of the total inventory value, but only 10–20% of items.

B: Items of intermediate value, representing approximately 15–25% of the value and 30% of items.

C: The least valuable items, representing approximately 5% of the value, but 50% of items.

Step 6: Plan follow-up actions

Establish management strategies for each category. For example, for Category A items, you can implement rigorous monitoring and lower stock levels, while Category C items may require less control.

How to carry out an ABC analysis?

Of course, there are tools available to make implementing ABC analysis easier.

CMMS software

CMMS (Computerized Maintenance Management System) software consists of maintenance management tools that allow you to track and manage equipment, spare parts, and work orders. They often include features for carrying out ABC analysis, thereby helping to optimize procurement and inventory management by taking into account the criticality and frequency of use of items. This software also offers integration capabilities with other enterprise systems for unified and efficient asset and inventory management.

Inventory management software

ERP (Enterprise Resource Planning) systems integrate inventory management modules that automate ABC analysis. This software offers advanced features for tracking stock movements, generating reports, and visualizing product categories.

Spreadsheets

Spreadsheets such as Excel or Google Sheets can be used to perform ABC analysis. They allow you to sort data by value, calculate cumulative percentages, and visualize results through charts. These tools are also generally free, but may be limited in terms of functionality.

Inventory management systems

Specific inventory management systems incorporate ABC analysis functions to help optimize inventory management. These tools offer detailed analyses and recommendations to improve stock turnover.

To conclude, here are our best tips to ensure an effective implementation of ABC analysis.

Best practices for implementing ABC analysis

Automating ABC analyses

Automating ABC analyses optimizes inventory management by using specialized software. These tools analyze sales and consumption data in real time to automatically classify items into Category A, B, or C. Automation:

reduces human errors,
improves efficiency,
allows for frequent reassessment of inventory.

It thus ensures that management decisions are always based on up-to-date information.

The importance of flexibility and data updates

Flexibility in ABC analysis is necessary to adapt to changes in demand, market trends, and company priorities. Regularly updating data makes it possible to reflect these changes, ensuring that items are correctly classified. Companies should incorporate periodic reassessment processes to adjust ABC classifications, which helps maintain accurate and relevant inventory management.

As you can see, ABC analysis is essential for effective inventory management. Automating the analysis, regularly updating data, and integrating ABC into cycle counting are essential practices. By following these recommendations, you can optimize your inventory management and improve your overall performance.

Frequently Asked Questions

FAQ – The Most Frequently Asked Questions About Nomadia

Why Choose Nomadia?

As France’s leading publisher of Smart Mobility SaaS solutions, Nomadia supports more than 175,000 field professionals every day. Our solutions are easy to use, quick to deploy, and deliver significant and immediate return on investment.

Drawing on the expertise of both a software publisher-integrator and a consulting firm, Nomadia’s teams provide tailored support, from data consulting to the deployment of mobile devices. Finally, our technical support team is available 24/7 to assist you.

Who Are Nomadia Solutions Designed For?

Nomadia solutions support the digital transformation of all mobile professionals: field sales representatives, delivery drivers, technicians, auditors, healthcare workers, inspectors, service providers, security patrol officers, experts, and more.

Whether for SMEs or large enterprises, our solutions adapt to businesses of all sizes and across all industries.

How Much Does It Cost?

Nomadia Delivery offers transparent and flexible pricing, which primarily depends on the number of users (for example, planners and dispatchers) rather than a fixed cost per parcel.

Thanks to this model, you can control your delivery costs based on the number of resources (users) involved in route management, providing great flexibility to adjust your subscription according to the size of your fleet and your operational needs.

Is It Compatible with My Current ERP System?

Yes! Nomadia Delivery has been designed to integrate quickly and easily into your existing environment thanks to our powerful and secure APIs. Our solution is compatible with most ERP systems on the market. API integration enables the automatic synchronization of your transport orders, customer orders, and customer information, ensuring smooth and error-free delivery tracking. The solution also offers user-friendly import capabilities with data validation controls, as well as export options in multiple customizable formats.

Is It Suitable for Our Delivery Volume?

Yes, Nomadia Delivery is ideal for companies that manage a high volume of deliveries and want to optimize their routes, create balanced territories for their drivers, and ensure precise tracking of every parcel. Nomadia Delivery adapts to fleets of all sizes!

Can Multiple Warehouses or Depots Be Managed?

Yes, our solution allows you to manage multiple warehouses or depots. It centralizes data and optimizes routes or service operations for each of them.

Is There a Limit to the Number of Stops in Route Optimizations?

No, there is no strict limit to the number of stops in route optimizations. Our solution can handle large volumes of stops and quickly calculate optimized routes.

Read our latest articles: