![]() PRO TIP: Find your STR in the Percentage of Inventory Sold report inside your Shopify back-end. “By categorizing products based on their value and usage, you have greater insight into what slow-moving products you're losing money from, so you can discount them and make room for more profitable products.” An ABC analysis is a great way to uncover that because “it ensures you know exactly what products are on the shelves and in your warehouse,” Jara Moser, digital marketing manager at Shopventory says. It makes sense to invest in products that return the most revenue for your store. You don’t want there to be an opportunity for someone to visit your store, be unable to buy a best seller, and leave empty handed. They turn up expecting items to be in stock.īy identifying your grade A inventory, you can put processes in place to make sure you never run out of grade A stock. Chances are, customers have the same expectations for your store. Imagine your frustration if you visited their restaurant at lunchtime and they didn’t have any fries to go with your McChicken sandwich. You’ll also see your worst-performing products, and know not to order large quantities of them (which will likely eat up storage fees). Use your open-to-buy budget on those-they have the most potential to earn money for your business. How are you going to predict how many units you’ll sell over the next month? Since we don’t have telescopes to see into the future, historical data is the next best thing.Īn ABC analysis shows your top performing products. James Khoury, CEO at Zendbox The benefits of ABC analysis for inventory management Better inventory controlĭemand forecasting is notoriously difficult. Separating your inventory into these three categories will give you a good indication of what items you need to stock more, and which items you need to reduce stock value. It’s easy for Shopify merchants-just go to the reports section in your dashboard to pull an ABC analysis by product report. The ABC method is one of the many ways you can do that. And when perishable products expire, there’s no salvaging them, even at discounted rates.īusinesses need to regularly analyze inventory if they want to ensure long-lasting success. Unnecessary holding costs in the form of warehousing, insurance, and labor suck money from your bottom line. Storage fees are increasing by the year, so it’s important to make the most of it. All together, retailers miss out on $1 trillion every year due to stockouts alone.īut you don’t want to buy too much-keeping dead or slow moving stock is a drain financially. Selling out of in-demand products could mean missing future sales-disappointed shoppers will likely seek items from your competitors, where they may become repeat customers. Inventory management means striking a balance between having products available and minimizing the cost of inventory. Likewise, it’s nearly impossible to know which products to avoid when you’re purchasing blindly or based on intuition. It’s difficult to know which products to purchase so you can meet future demand without having an excess of leftover stock. Inventory investment optimization is a challenge for any business. C grade brings very little value to your business and should be deprioritized as much as possible. You might also call this slow moving or dead stock. C grade represents the specific inventory that accounts for the remaining 5% of your revenue. B grade can often fluctuate between an A grade and C grade. B grade is middle-of-the-road inventory that accounts for the next 15% of your revenue, and should be treated as such. As your most valuable inventory, it should be protected and prioritized as much as possible. A grade represents the specific inventory-in many cases, only a small percent of the total-that accounts for 80% of your revenue. This is your best performing inventory: the money maker. It classifies your inventory using three categories based on total revenue: Inventory ABC classification is based on the Pareto principle, also known as the 80/20 rule. It gives you greater inventory control and profitability by helping you identify the products that make-and cost-your business the most money. ABC inventory management best practicesĪn ABC analysis is a technique you can use to identify your best and worst performing inventory over a certain period of time. Abcd shirt how to#How to use ABC analysis for cycle counting.The benefits of ABC analysis for inventory management. ![]()
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