Thread: Limits for ABC Analysis

Hello,

I have a list of 1066 items, and there is a sold quantity associated with each item (for a total of 238 000 units sold). I want to use the Pareto principle which states that 20 percent of the items generate 80 percent of the sales (i.e. around 213 items are responsible for approximately 190 000 units sold). In inventory management, the Pareto analysis (also referred to as ABC analysis) involves creating three groups -- A, B, and C. The A group consists of the top ~20% of items, while the B and C groups share around 30 and 50 percent, respectively. My problem is that I need a mathematically sound way of setting the optimal percent boundaries between each of the three groups (two boundaries in total), e.g. 27% and 64%.

A single topic I read on the matter mentioned Lorenz curves, but it didn't specify how to extract the exact points from such a curve.

How should I go about tackling this? Any help would be greatly appreciated.

Hey luftkastel.

I am not familiar with the terminology you are using but if you post some kind of outline of your constraints, and target model (i.e the condition you are applying in order to get solution(s)) then I (and other people not familiar with your terminology) can take a look at it.

Originally Posted by chiro

Hey luftkastel.

I am not familiar with the terminology you are using but if you post some kind of outline of your constraints, and target model (i.e the condition you are applying in order to get solution(s)) then I (and other people not familiar with your terminology) can take a look at it.

I agree with him...

NZT