This tutorial will guide you through your first 80/20 Analysis, and introduce you to your new

strategic tool:
ABC Analyzer.

Manual updated October 2015

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The building blocks of 80/20 Analytics rests upon the idea that “some products are more important than others”. So,
when you are doing business, some products will contribute more to your business than others.

Your economic success is defined by your ability to focus your time and your resources on the critical few products
generating the bulk of your income, instead of focusing equally on all products.

Your 10 most important

products
generate the bulk of your income
Revenue from your remaining
9990 less important products

ABC Analyzer divides your products into nine basic categories based on their behavior (Orderlines/Pick) and economic
impact on your business (Turnover). All products are automatically labeled with an ABC-code, matching the ABC
category they belong in.

The theory and analytical methods are described in Why only 8 % of your products matter1.

Understand the ABC analysis in 2 minutes

Image you are doing a classic ABC analysis and divide your products into three categories depending on turnover:
”Good, less good and not that good”.

Y: Turnover
 A products are responsible for 80 % of your turnover
 B products are responsible for 15 % of your turnover
 C products are responsible for 5 % of your turnover A B C

X: Number of products
You will have few A-products, a bit more B-products and a lot of C-products.

1 Direct link: http://blog.abcsoftwork.com/2014/08/abc-analysis-why-only-8-of-your-products-matters/

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Combine two ABC analyses
Now, you have divided your products into three categories: A, B and C based on your turnover – but you are not done
yet! Image, you are doing one more ABC analysis – this time using order lines or picks. Combine the two simple
analyses and you will get a double ABC analysis!

Y: Turnover Y: Order lines/Pick

+
A B C A B C

X: Number of products X: Number of produtcs

Say hello to the double ABC

Visually, we have divided your products into 9 ABC categories using “Order lines/Pick” and “Turnover”. The products
in each ABC category have their own distinct behavior and impact on your business.

AA-products are your few, but

AC-products are very profitable,
most important products. They
but sold rarely – often irregularly.
are very profitable and sold
frequently.

More than half of your products

CA-products are sold all the time, are CC, they account for close to
but are not very profitable. nothing and are rarely sold.

Your core business is defined by your AA-products

After the two analyses, each product is granted an ABC code consisting of two letters: One from each analysis.

 AA-products: If a product scores an “A” in turnover and an “A” in orderliness/pick, it is an “AA” product. This
code makes it one of your most important products!
 CC-products: The same happens if a product does bad and only scores a ”C” in turnover and a ”C” in
orderliness/pick. It will be labeled “CC”. Do not spend too much time on this product since it is not that
important!

On top of the classic 9 ABC categories, you will encounter extra categories for “New products”, “Dead products” and a
few more.
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Find the welcome mail – all you need is here.

1) Download ABC Analyzer

Download ABC Analyzer. Use the download link in your welcome email, or go here:
http://abcsoftwork.com/support/download

2) Get demo data

In the welcome mail there also link to download demodata. Get it there, or here:
http://files.abcsoftwork.com/download/Welcome_to_ABC_Analyzer_data

3) Insert your license key

In the welcome mail there’s a license key.

First time you open ABC Analyzer it will ask for it. Your license key is valid 30 days from the day you received
the welcome mail.

Write us on [email protected] if you got started a bit late – we can easily prolong/reactivate it.

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Open the demo data in ABC Analyzer

Hopefully, you recognize the 9 ABC categories from the double ABC matrix on page 3.

What you see:

 9686 products arranged in the 9 ABC categories

 577 are AA products, they define your core business

You’ve got 9686

products in total

The AA-category contains

577 products

Spend a moment investigating the AA-products. Use the controls at the top.

Choose “Turnover 12 mth (Euro)”. Now,

turnover per category is on display. How much
do you make on your AA-products?

Turnover for AA = 6.767.457 euro

Turnover (in total) = 15.559.444 euro

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How important are AA-products?
The AA-products account for a large part of your
turnover. But how large, compared to all your
products?

Clicking the “%”-button next to the dropdown.

You see that the 577 AA-products account for 55 % of

your turnover

By now, you’re aware how important your AA-products are. Imagine what will happen to your profit if you run out of
them. It’s crucial to avoid back orders in this category!

Identify back orders on AA

Begin by looking at the total number of back orders using the drop down.

You’ve got 1657 back orders on AA-products

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 1657 are a lot of back orders.

Let’s find out how many products you need to focus on, to bring down
the number of back orders..

Click report: View products responsible for back orders

Mouse-over “1657” in the AA-category.

Your mouse turns into a “hand”, click the number to view a click report. It contains all the AA-products responsible for
your back orders.

1. 97 AA-products generate the 1657 back orders

2. Click the heading “No. of Back orders” to sort

ascending/ descending

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Damage control: Find AA-products with the most back orders

You’ve sorted the list, and the products with the most
back orders are on top.

Use your mouse to drag a “square.” (The marked area

turns blue)

Notice: Next to your mouse the selected values are

added up.

Instead of focusing on all 97 products, spend your

energy on the Top 17.

AA - Top 17 = 1.209 Back orders

AA - Total = 1657 back orders

3. Drag and see how much the top

products account for

Close the window and return to ”Overview”

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Now, you are familiar with the double ABC analysis and the importance of AA-products – but a double ABC analysis is
not always detailed enough.

What about:

 New products
 Dead products
 Phantom products2
 Buy to order (BTO) 3
 .. or other products you want to handle separately?

You can add extra categories4 to your double ABC, to “match”

your supply chain challenges. Add as many as you like.

For now, let’s look at a custom build categorization

Choose ”ABC Master Categorization

This categorization
contains 9 ABC
categories + 4 extra
categories.

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Phantom: Phantom products only exist as numbers in your ERP system: They have no stock value, and no order lines. Probably,
you have never ordered them, but their product numbers are in your system.
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BTO: ‘Buy To Order’ products are defined as products sold less than 3 times a year. You are not to buy them unless a customer
requests them
4
Direct link: http://blog.abcsoftwork.com/2014/08/identify-dead-products/

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Let’s have a look at “New products” using the graph. Go to the second tab. The tab is black until you click “Draw
graph”.

Each dot represents a product. Click a dot to see the product it represents.

The axes of the graph are defined by the parameters used in

double ABC:

 Horizontal: Order lines 12 months

 Vertical: Cost value 12 months

Click “New” in the data slicer. Now you

only see the new products.

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Spot new products
New products are scattered all over the grid as they perform very differently. They are bright green, as the “New”
category on overview. Use a data slicer to narrow down the products on display.

The “long green tail” which appears in the right bottom corner is all new products with 0 turnover and 0 cost value.
They are not selling at all.

’New items, no sale’ is items, which is less

than 360 days old, and where sold units
12 months is 0.

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Go to the KPI tab. Since you’ve turn on the data slicer in the
previous step, you only see the values for new products.

Press the selected data slice once more to deselect “new

products”, and regain the complete overview.

The KPI shows:

 Item numbers
 Stock value
 Order lines 12 mth

Missing a KPI board?

Click the icon with the tiny green “plus” to add a new KPI

Use the dropdown in the top bar to set the content. You can change the
content of KPI boards when you select them (they turn blue)

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Dataslicers is one of the most useful features in ABC Analyzer.

Use them to highlight a part of your data. E.g. Choose only to see
products from a certain supplier, or a purchaser.

Combine several dataslicers to see exactly the products you want. ”Clear all”-button resets all
your dataslicers. All
Dataslicers turn blue when they’re ON.
markings are removed, and
all your data is visible again

Example. Below you see that the report slicer “New products, no
sales” is ON. Also the purchaser “Andrew” is selected.

= You’ll see “Andrew’s new products with no sales” (he has 28)

2. Choose the columns you

1. Add a new dataslicer want from the dropdown and
press ”Add”

3. Optional: Change
the layout of the slicer.

4. Press ok

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 You have performed your first ABC analysis:

 Identified AA-products, and investigated important back orders

 Created a visual overview of new products using Graph and KPI

 Learned how to use dataslicers

ABC Analyzer can do so much more, it all depends on your mathematic creativity and your data.

The free trial includes free online help

Write Viki Ølgod at [email protected], she’ll answer by mail or set up a screen sharing
session to show you how to investigate your own data.

ABC Analyzer is much more fun to work with when you’re using your own data.

Import data straight from your ERP or via Excel. See a list of recommended columns5
 ABC Analyzer is able to import: .csv, xml, Excel-files and text-files.

Ready to import? Follow the 3 step import guide6

Or visit our selection of online help files:

http://abcsoftwork.com/support/resources

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