ABC inventory analysis Model - Model Results

ABC inventory analysis

Since ABC inventory analysis divides items into 3 categories, let's analyze these categories by checking the Model Results. The results consist of 3 tabs: ABC Summary, Pareto Chart, and Details Tabs.

If we take a look at the ABC Summary Tab, we can see two pie charts - on the first one we can see the percentage of items in each category, while on the other one we can see the total value (revenue) of each category.

In the picture above, we can see that 22.65 % of the items belong to category A and they represent 78.58% of the total value, meaning, the biggest profit comes from the items in category A!

Pareto principle

The ABC analysis, also called Pareto analysis, is based on the Pareto principle, which says that 80% of the results (output) come from 20% of the efforts (input). The Pareto Chart is a combination of a bar and a line graph - it contains both bars and lines, where each bar represents an item/entity in descending order, while the height of the bar represents the value of the item/entity. The curved orange line represents the cumulative percentage of the item/entity.

There is a long list of benefits from including ABC analysis in your business, such as improved inventory optimization and forecasting, reduced storage expenses, strategic pricing of the products, etc. With Graphite, all you have to do is upload your data, create the desired model and explore the results. Enjoy! 🙂