Wholesale inventory software techniques – ABC Analysis

How you manage your wholesale inventory software is crucial for small to medium sized businesses for whom stock mismanagement can be costly.

Implementing the right techniques for small business stock control plays a big role in this. Last week we explored the pros and cons of the First in First Out (FIFO) method. In this week’s blog, we take a look at how ABC Analysis works.

What is ABC Analysis?

ABC Analysis is a technique used to manage and categorise different stock items.

Here’s how it works.

ABC Analysis divides your inventory into three categories:

A – stock items with very tight control and accurate record keeping in place

B – stock items with fairly tight control and fairly accurate records in place

C – stock items with the simplest controls possible and minimal record keeping in place

Why use ABC Analysis?

Integrating this technique with your wholesale inventory software is a way to identify the stock items that have a significant impact on your overall inventory cost. ABC Analysis helps wholesale businesses to identify the level of management, control and reporting required by categorising stock according to value.

Not all stock items are of equal value so this method allows that the most valuable items have the strictest controls in place.

An example of this is a mobile phone and accessories wholesale business. Their category A stock items will be the latest model, new to market mobile phone. Category B items will be other models of mobile phone that are not new to market. Category C items will be mobile phone accessories.

Further information

At Foresiight, we’ve been partnering with businesses across Australia for over 30 years to implement our leading wholesale inventory software ProfiitPlus. Find out more about ProfiitPlus and small business stock control.