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Inventory ABC Class Generator

Adapted from the Pulse Dashboard fact sheet "Inventory ABC Class Generator", August 2023.

Assigning ABC codes manages inventory by dollar usage over the prior 12 months. Usage means a customer sale or return, a manufacturing component issue — a back-flushed item — or a manual inventory issue or receipt.

Doing it by hand is slow enough that most companies assign classes once, when the item is created, and never revisit them. The ABC Class Generator calculates and sets the class for every purchased or manufactured item.

The classes

Class Share of the prior year's dollar usage
A The top 80% of items by dollar usage
B The next 15%
C The remaining 5%

You can choose different percentages and add a fourth class.

Focus on the A items and you are managing 80% of the year's dollar usage. At one customer with more than 5,000 inventory items, fewer than 110 are class A.

Two settings worth getting right

Calculate ABC classes separately for purchased and manufactured items — the usage patterns are not comparable, so mixing them puts the wrong items in class A.

Make classes uniform across locations. An item that is an A item at your main location should be an A item everywhere, otherwise the same part gets two different replenishment policies.

The calculation itself is documented in How Pulse Dashboard calculates its numbers.

The generator is included in the Inventory Optimization module.

Support & contact

Our team is glad to help with anything from a quick question to a full implementation.