What is an ABC analysis?
An ABC analysis is an instrument of business planning and control. It is used to classify objects in terms of their significance for the company. The ABC analysis is based on the Pareto principle, according to which the frequency of events decreases according to the law of diminishing importance. This means that the few objects that make up the largest proportion of the total require the most attention.
In the ABC analysis, all properties are therefore first sorted according to their share of the total value. The first 10% of the objects are then designated as "A" objects, the next 20% as "B" objects and the remaining 70% as "C" objects. Properties are generally allocated to the respective groups on the basis of criteria such as turnover, profit or portfolio. In practice, however, it is often the case that other criteria are also taken into account, such as the strategic importance of a product or the frequency of orders.
The ABC analysis is a very useful tool for classifying the various objects in a company and thus making optimum use of resources.
