ABC analysis


ABC analysis is a method to classify and structure a company’s resources in terms of their impact on the company. This analysis is a decision-making tool and can be used by any type of business.

At the heart of ABC analysis is the Pareto principle, which states that 20% of all goods provide 80% of turnover. In relation to ABC analysis, the Pareto rule might sound like this: reliable control of 20% of positions allows for 80% control of the system, be this the product range or clients.

In general, ABC groups are categorized as follows:

Group A – controls 80% of total turnover. According to the Pareto principle, for an average company this group comprises 20% of items or clients.

Group B – controls 15% of total turnover. In general, this would include 21% to 51% of products or clients.

Group C – controls the remaining 5% of turnover. This has the least effect on the operation of the company’s products and customers.

At the same time, it is possible to establish concrete percentages in another way: if you think that you do not need 20% for group A (the most influential group) but only 10% instead. The percentages of the remaining groups are distributed accordingly.

Using this method, it is possible to identify those groups of goods (or clients) clearly enough who are most involved in the activities of the enterprise, or to solve the opposite problem identifying those products (clients) with the least effect on the company.

Mycroft Assistant lets you conduct ABC analysis (clustering objects into groups) for items and clients. And it does this not within a general paradigm of work within the solution, without affecting the result of ABC analysis in a separate report, but instead working with the analysis result as if it were an ordinary group.

In the profile settings, users for products and clients are invited to select the basic distribution of objects into ABC groups: this might be the “Sum” (the sum of all sales) or the “Quantity” (number of transactions); and percentages by which these are classified as ABC groups.

To define the settings for ABC groups, go to “Settings”, and in the section that opens up, click on the “ABC groups” tab.

Settings abc group

Separately, it is important to note that the user can conveniently choose the period for the analysis and display of ABC groups. You can choose between the “For the last time” and “For the year” options. Go to “Settings” in the “General” section to select this:

View of abc groups

If you select “For the last period”, the analysis objects will be distributed by groups according to the data received for the last period selected (day, week, month, year). When selecting a period, the objects in ABC groups change with the period selected: for a month there might be some items in group A, but for a week others might appear instead.

When you set “For the last year”, the analysis objects will be distributed by groups according to the data received for the last 12 months and will not change regardless of the selected period.

ABC groups in Mycroft Assistant are processed as follows: for goods and clients, groups are displayed in corresponding subsections, as when selecting the object to analyze:

Client abc groups

… just as when expanding sales into their constituent components, the selection of components is as follows:

Sales by client abc group

For ABC analysis an advanced functionality is available to ABC groups: you can view an expanded layout of the percentage by group composition; see the layout for the products or clients that are part of this group by the selected sales object. You may be able to answer the question “Which products does the client buy the most from group B?” by selecting the client as your analysis object, moving over to group B and obtaining a layout by group percentages.

But that’s not all: just as with ordinary groups, working with ABC groups you can obtain the sales history for this group (or for any number of selected groups) simply by ticking the box next to them. And on the panel below the groups, the solution will show you the history of sales for number 1199 items and “Group B” in an ABC group (for example) to this particular client. The standard selection of goods and groups is also available.

More generally, if you asked the question “What are the products most purchased by Group C clients?” Mycroft Assistant will be able to answer this question in two clicks.

In the left panel, select “Clients” and “Groups”, and tick Group C.

Sales in client abc group C

In the right panel, the solution will show the sales history for this group. Now scroll down to see the products that Group C clients are purchasing and in which percentages:

Sale items in client abc group C

Let’s see which managers work the most with clients in this group. To do this, simply click the “Managers” button:

Sale managers in client abc group C

Thus, unlike other solutions, using the Mycroft Assistant ABC analysis is simple and straightforward. The ABC analysis in this task makes it possible to obtain information regarding inefficient use of resources, allowing you to make management decisions to reduce costs, improve efficiency, and grow your business.

Know more:

— Demand forecasting – information about it you can find HERE

— Sales analysis – information about it you can find HERE ;

— Planning – information about it you can find HERE and HERE ;

If you want to get started with the Mycroft Assistant – where we have implemented everything necessary for you to work effectively, simply sign up HERE and follow the provided instructions.