ABC

ABC:

In AGR you can now control your own ABC calculations in line with the high level technique, originating from the 80/20 Pareto principle, which is based on the following rule of thumb principles:

  • 80% of revenues return 20% of item numbers
  • 15% of revenues return 30% of item numbers
  • 5% of revenues return 50% of item numbers

To set up your ABC classifications: click on the: gearwheel > Settings > ABC.

ABC grouping:

Here you have the option of calculating ABC across all SKU‘s ( if nothing is chosen) Or select one or two of the following:

  1. Location (Seperate ABC analysis for each location).
  2. Item group level 1 (Seperate ABC analysis for each item group).

Consider that in AGR you can link the desired service level to the SKU‘s ABC classification.

  • Should the demand pattern differ between warehouses and /or stores, then grouping by location is a good idea.
  • Would you like to make sure that all item categories have a split between a high and low service level within the item group, then grouping by the item group will ensure that service level split.

Phase in and Phase out: giving a confidence factor for new items and dead items can help with keeping safety stock in the right places.

ABC Classification:

Here the user can choose one or two metrics from 6 standard possibilities: AGR recommends, to use, and calculates by default on:

  1. Cost of goods sold
  2. Number of sales lines, Because these two metrics will categorise items depending on their impact on both holding cost and service level. Which is relevant when calculating the necessary safety stock, set by the confidence factor.

Confidence factor linked to the ABC analysis

The goal here is to set the safety stock level. The challenge is to keep the right amount of stock to cover the predictable sales forecast and the unpredictable variations in customer demand, over the SKU‘s order period. AGR enables you to simplify the management of inventories consisting of large numbers of distinct items. By classifying first on ABC key metrics and from there, link the desired service level through the confidence factor. Hereby, giving your SKU‘s that deliver the biggest impact to your bottom line and most frequently bought by customers a higher service level than the least important SKU‘s.

From here, AGR takes care of calculating the individual SKU‘s demand uncertainty via the standard deviation from the underlying forecast to find the minimal stock investment needed to keep your customers happy. Any changes made in the ABC settings, can be run instantly by clicking on the „Run ABC to apply“ else it will be updated overnight, so make sure any changes you have made, you are happy with before leaving the ABC settings page. To keep things simple and transparent, AGR has grouped the ABC‘s into importance levels. Either a two dimension ABC analysis will classify 9 results into three importance groups. Or a single ABC will simply be given an importance level for each.

In the blue navigation bar under Items and Reports you can find your ABC items by selecting the column ‘ABC’ in addition to the importance ranking and six general ABC columns showing all ABC parameters, simply there for your information, benchmarking and analysis.


In the item card the importance ranking is visible as a label, and if clicked the user will see item specific ranking from all ABC parameters as well as the ABC importance metrics used.