Not all inventory deserves the same attention — yet most warehouses still manage every SKU as if it carries the same risk and value. This is one of the biggest hidden causes of working-capital loss, slow picking, and excess stock. ABC inventory analysis addresses this by clearly indicating where time, space, and money should be allocated.
Rather than spreading effort evenly, ABC inventory management concentrates resources on the SKUs that actually drive revenue, service levels, and cash flow.
What is ABC Inventory Analysis?
ABC analysis of inventory is a method of ranking SKUs based on their business impact — usually a combination of sales value, usage frequency, and revenue contribution.
It groups items into three classes:
|
Class |
% of Items |
% of Inventory Value |
Nature |
|
A |
10–20% |
70–80% |
High value / fast moving |
|
B |
20–30% |
15–25% |
Medium importance |
|
C |
50–60% |
5–10% |
Low value/ slow moving |
This form of ABC classification in inventory management reveals a critical truth: a small number of SKUs control most of the warehouse’s financial and operational impact.
- A-items need precision, visibility, and tight control.
- C-items need cost-efficient storage and simple handling.
- B-items sit between the two
Why ABC Analysis in Inventory Matters in Warehousing
Without ABC inventory management, warehouses fall into inefficient patterns:
- High-value items get stored next to dead stock
- Fast movers are buried behind slow-moving SKUs
- Pickers walk longer distances for critical orders
- Stock counts take too long and miss the riskiest items
When everything is treated equally, the warehouse becomes slow, expensive, and error-prone.
With ABC classification in inventory management:
- A-items are placed close to dispatch and high-speed pick zones
- B-items get moderate control and accessible storage
- C-items move to high-density or bulk locations
This reduces travel time, protects revenue-critical inventory, and prevents over-control of low-value stock.
How WMS Enables ABC
A modern WMS makes ABC inventory analysis automatic and continuous.
Instead of manually assigning classes, the system:
- Analyzes order frequency, velocity, and sales value
- Applies ABC analysis of inventory at SKU and location level
- Reclassifies products as demand shifts
- Aligns storage layout, pick paths, and cycle-count rules accordingly
For example:
- A fast-selling SKU that becomes a top revenue driver is promoted to A-class
- A slow-moving item drops to C-class and is moved to cheaper storage
This allows ABC inventory management to stay aligned with real demand, turning the warehouse from a reactive operation into a data-driven system.
Conclusion
ABC inventory analysis brings structure to what is otherwise chaotic inventory management. By using ABC analysis of inventory, warehouses gain clear visibility into which SKUs deserve the most attention, space, and control. Instead of spreading effort evenly across thousands of items, ABC inventory management ensures that time, money, and resources are focused where they generate the highest return.
With Pyrops WMS, this becomes a living, automated system. Pyrops WMS continuously applies ABC inventory analysis using real-time movement and sales data, dynamically reclassifying SKUs as demand changes. If you want to reduce picking time, gain tighter control over your inventory, and overall have smooth functioning operations, reach out to us now!