ABC Analysis & Product Grading
ABC Analysis is a method to categorize your products based on their contribution to your business. This helps you focus energy on what matters most.
Quick Answer
Most businesses follow the Pareto Principle (80/20): Roughly 80% of your revenue comes from just 20% of your products.
ABC Analysis helps you identify these critical products and manage them differently.
Without ABC Analysis
❌ You treat all products equally
❌ You over-allocate time to low-impact items
❌ You risk stockouts on your best sellers
❌ You tie up capital in slow movers
With ABC Analysis
✅ You know which products matter most
✅ You allocate resources efficiently
✅ You prevent stockouts on revenue drivers
✅ You minimize excess inventory on slow movers
The Three Categories Explained
ABC Analysis divides your products into three groups:
A Products: Your Revenue Drivers
What they are:
- Top 80% of revenue/profit contribution
- Usually 15-20% of your total product count
- Your bread and butter products
Examples:
- Best-selling SKUs
- High-margin products
- Core product offerings
Characteristics:
- Fast-moving
- Revenue critical
- Usually consistent demand
- Profitable
Stock Level Strategy:
- Higher safety stock (12-15 days) — prevent stockouts at all costs
- Shorter lead times preferred — more frequent reorders
- More frequent monitoring — daily if possible
Actions to Take:
- Monitor inventory daily
- Never allow stockouts
- Order frequently in smaller batches
- Negotiate better supplier terms
- Invest in product visibility
B Products: Your Stable Middle
What they are:
- Middle 15% of revenue/profit contribution
- Usually 30-40% of your product count
- Steady, reliable sellers
Examples:
- Complementary products
- Seasonal bestsellers
- Niche products with loyal customers
- Supporting SKUs
Characteristics:
- Moderate selling rate
- Predictable demand
- Standard margins
- Regular but not critical
Stock Level Strategy:
- Moderate safety stock (8-10 days) — standard inventory management
- Standard lead times acceptable — not as time-sensitive
- Regular reorder cycles — weekly/biweekly
Actions to Take:
- Monitor regularly (weekly)
- Reorder on standard schedule
- Maintain normal safety stock
- Use data to refine forecasts
- Test promotions to move upward to Grade A
C Products: Your Long Tail
What they are:
- Bottom 5% of revenue/profit contribution
- Usually 40-50% of your product count
- Slow movers or niche items
Examples:
- Discontinued products still in stock
- Low-volume specialty items
- Products being phased out
- Bundle components
Characteristics:
- Very slow-moving
- Unpredictable demand
- Lower margins
- Long shelf life risk
Stock Level Strategy:
- Lower safety stock (3-5 days) — avoid overstock
- Just-in-time ordering if possible — minimize capital
- Longer lead times acceptable — less time-sensitive
Actions to Take:
- Monitor less frequently (monthly)
- Lower safety stock (avoid overstock)
- Consider discontinuing if no sales
- Bundle with A/B products
- Run promotions to move stock
- Evaluate: Keep, discontinue, or promote?
How Synplex Calculates ABC Grades
Synplex uses a weighted categorization system based on your settings.
Step 1: Choose Your Grading Period
Select how far back to look at data:
| Period | Best For | Example |
|---|---|---|
| 7 days | New products, rapid changes | Quick-moving trends |
| 30 days | Standard default (recommended) | Balanced snapshot |
| 60 days | Slower-moving products | Smooths out volatility |
| 90 days | Seasonal analysis | Annual planning |
Recommendation: Start with 30 days for a balanced view.
Step 2: Choose Your Grading Variable
Decide what metric to grade by:
| Variable | Best For | Example |
|---|---|---|
| Revenue | Revenue maximization | Ecommerce stores |
| Profit | Profitability focus | Margin-conscious sellers |
| Quantity | Volume-focused growth | Wholesale/bulk sellers |
Most common: Revenue (chosen by most stores)
Step 3: Set Your Grade Weights
This is the most important step. You decide what percentage of your business each grade represents.
Default Weights (Recommended):
- Grade A: 80% — Top products driving 80% of metric
- Grade B: 15% — Middle products driving 15%
- Grade C: 5% — Bottom products driving 5%
Example (Revenue-based):
Your store generates $10,000 in weekly revenue:
- Grade A (80%) — Products generating $8,000
- Roughly 50 products out of 500 total
- Grade B (15%) — Products generating $1,500
- Roughly 150 products out of 500 total
- Grade C (5%) — Products generating $500
- Roughly 300 products out of 500 total
Can You Customize the Weights?
Yes! Synplex lets you adjust these percentages.
Examples:
- Conservative: A70%, B20%, C10% (tighter focus on top products)
- Aggressive: A90%, B8%, C2% (extreme focus on winners)
- Balanced: A80%, B15%, C5% (recommended)
How to Configure ABC Grading in Synplex
Accessing Insight Settings
- Go to Account Settings (bottom left or top right menu)
- Navigate to Insight Settings tab
- Scroll to Grading section
- You'll see a form with three fields to configure
Step-by-Step Configuration
Step 1: Set Calculation Period
- Click dropdown for Calculation Period
- Choose: 7, 30, 60, or 90 days
- Recommendation: 30 days for most businesses
- Note: Changes take effect the following day
Step 2: Choose Grade By Variable
- Click dropdown for Grade By
- Select: Revenue, Profit, or Quantity
- Most common: Revenue
- Consider your business model and goals
Step 3: Adjust Grade Weights
- You'll see three fields: Grade A, Grade B, Grade C
- Enter percentages (should total 100%)
- Recommended starting point:
- Grade A: 80%
- Grade B: 15%
- Grade C: 5%
- Click Save when done
What Happens Next
Your grades will recalculate by the next day.
Products will show their new ABC grade in:
- Inventory Table (Grade column)
- Product Detail Pages
- Dashboard Insights
- Reports and Filters
Using ABC Grades in Your Inventory Table
Filtering by Grade
| Task | How |
|---|---|
| View Grade A only | Click filter, select "Grade A" — see your top performers |
| View Grade C only | Click filter, select "Grade C" — identify items to discontinue or promote |
Sorting by Grade
- Sort A→Z: Grades A to C (top to bottom)
- Sort Z→A: Grades C to A (bottom to top)
Creating Saved Views
Save these common views for quick access:
- "Grade A - Monitor Daily" — Your revenue drivers
- "Grade C - Slow Movers" — Candidates for discontinuation
- "Grade B - Standard Review" — Regular monitoring
Best Practices for ABC Analysis
Practice 1: Match Your Settings to Your Business
High-volume, low-margin business?
- Grade by: Quantity (focus on volume)
- Calculation period: 30 days
- Weights: A80%, B15%, C5% (standard)
High-margin, lower-volume business?
- Grade by: Profit (focus on margin)
- Calculation period: 60 days (smoother data)
- Weights: A85%, B12%, C3% (tighter focus on winners)
Seasonal business?
- Calculation period: 30 days (captures current season)
- Review: Monthly (grades shift with seasons)
New products frequently added?
- Grade by: Quantity (revenue may not show true demand)
- Calculation period: 7 days (sensitive to new trends)
Practice 2: Act on Your Grades
For Grade A Products:
- Check inventory daily
- Set higher safety stock (prevent stockouts)
- Negotiate better supplier terms
- Invest in product visibility
- Monitor for stockout risk constantly
For Grade B Products:
- Monitor weekly
- Use standard safety stock settings
- Reorder on regular schedule
- Test promotions to move upward
For Grade C Products:
- Monitor monthly
- Lower safety stock (avoid overstock)
- Consider bundling with A products
- Evaluate: Keep, discontinue, or promote?
Practice 3: Review & Refine Quarterly
ABC grades change over time. A product that's Grade A today might be Grade B next quarter.
Every 90 days, ask:
- Are your grades still accurate? (Check if they match your intuition)
- Did your business model change? (Adjust weights if so)
- Do you need shorter/longer lookback? (Change period if needed)
- Should you discontinue C products? (Review for removal)
Real-World Example
Scenario: Apparel store with 300 SKUs
Configuration:
- Calculation Period: 30 days
- Grade By: Revenue
- Weights: A80%, B15%, C5%
Results after one day:
| Grade | Count | % of Inventory | Revenue | Weekly Sales |
|---|---|---|---|---|
| A | 60 | 20% | $8,000/week | 80% of revenue |
| B | 120 | 40% | $1,500/week | 15% of revenue |
| C | 100 | 33% | $500/week | 5% of revenue |
What you see in Inventory Table:
- Grade A: T-shirts, jeans, popular colors
- Grade B: Hoodies, sweaters, seasonal items
- Grade C: Old collections, niche colors, discontinued items
Actions Taken:
- Increase safety stock for Grade A (prevent stockouts on revenue drivers)
- Bundle slow-selling Grade C colors with popular Grade A items
- Discontinue 10 Grade C items with zero sales
- Negotiate faster delivery on Grade A items (suppliers love your volume)
Results after 3 months:
| Metric | Improvement |
|---|---|
| Stockouts reduced | 60% better Grade A monitoring |
| Carrying costs down | 15% less Grade C overstock |
| Revenue increase | 8% better availability + bundle sales |
Common Questions
Q: My grades changed after I updated settings. Why?
A: Synplex recalculates grades daily at midnight. If you changed calculation period or weights, grades update the next day.
Q: Can I grade individual products differently?
A: At the global level, all products use the same settings. However, you can view per-product metrics and manually prioritize if needed.
Q: How do I know if my weights are right?
A: Check your inventory table. Do the Grade A products feel like your real top sellers? If not, adjust.
Q: What if I have 1,000 products? How many will be Grade A?
A: Roughly 20% (your top 80% revenue probably comes from ~200 products). If it seems wrong, you may need different weights or a longer calculation period.
Q: Should I exclude gift cards and promotional items?
A: Yes! Use Synplex's Exclude Products feature so your ABC grades reflect actual sellable inventory.
Next Steps
- Configure your grades in Settings → Insight Settings → Grading
- Review your Grade A products and ensure higher safety stock
- Create a saved view for Grade A products to monitor daily
- Identify Grade C products for discontinuation or promotion
- Check back quarterly to refine your settings
Pro Tip: Combine ABC Analysis with Synplex's alerts. Set up notifications when Grade A products hit Running Low status. This prevents stockouts on your most important revenue drivers.
Related Articles
- Safety Stock Strategy — Set higher safety stock for Grade A
- Product Statuses — Monitor Running Low alerts
- Forecasted Stockout Date — Know when you'll run out
- Global Insights & KPIs — Monitor your business metrics
Questions?
- Review Glossary for term definitions
- Check Safety Stock for grade-specific stock levels
- Contact support@synplex.io with questions