Documentation

SkuBrain 101

ABC Analysis

In the previous topic we saw that replenishment policies are used to control how skuBrain calculates inventory replenishment recommendations as well as when it will consider products overstocked.

By default, skuBrain projects have only one replenishment policy, which specifies a service level of 80% and that items are overstocked when you are holding more than 200% of the stock you need.

This policy is called a Universal Policy, since it is used when calculating replenishment recommendations for all of the items that you sell.

However, in the replenishment settings you’ll notice an ABC switch. This is turned off by default but you can flip this switch on to enable ABC Planning. When ABC planning is enabled, skuBrain will classify the products that you sell as Class A, Class B or Class C, which correspond to your best selling, next best (average) selling and worst selling products (respectively). Separate replenishment policies can then be assigned to each different product class.

By default, products are classified as A, B or C according to their sales volumes: units sold. However it’s also possible to classify products by revenue: units sold x sales price, or profit: units sold x (sales price - cost price).