ABC Analysis with Overstock Focus

mark599704
Jul 15
5 min read

Inventory is very important for every business. It helps in running the business smoothly. But having too much inventory is a big problem. This is called overstock. Overstock increases storage costs. It also blocks your money.

To solve this problem, businesses use ABC Analysis. This method helps in knowing which items are more important. It also helps in reducing overstock. Dynamic Distributors use ABC Analysis to manage their inventory. They make sure that they don’t keep extra or useless stock.

What is ABC Analysis?

ABC analysis is a way to manage inventory. It helps you group items by how important and valuable they are to your business. This method helps you focus more on items that cost more and are more important.

There are three main groups:

Category A:

These items are very few in number but very high in value. For example, 20% of items may be worth 70–80% of your total inventory value. These items are the most important. You should check and control them often.

Category B:

These items are in the middle. About 30% of items make up 15–25% of the inventory value. They need some control, but not as much as Category A.

Category C:

These are the most items but have the least value. Around 50% of items may only be worth 5–10% of the total value. These items need the least attention and can be managed simply.

How ABC Analysis Helps Manage Overstock

Better Use of Money

ABC analysis puts more money into important items (A). It cuts spending on less important items (C). This stops money from getting stuck in extra stock.

Improved Planning and Reordering

When you know which items matter most, you can plan better. You can reorder at the right time. This helps avoid stock that doesn’t sell.

Smart Stock Reduction

Extra C items can be spotted easily. You can offer discounts, make bundles, or run sales. This clears up space in the warehouse.

Better Use of Time and Effort

Warehouse and buying teams can focus on A and B items. They don’t waste time on low-value items. This makes work easier and faster.

Lower Risk of Loss

Too much stock can go bad or become useless. This happens with seasonal or perishable items. ABC analysis helps match stock to real demand and sales.

Strategies for Overstock Reduction Using ABC Analysis

Having too much stock is a common problem. It increases storage costs and reduces cash flow. ABC analysis helps by sorting items based on how much value they give. This makes it easier to take the right steps. Here’s how ABC analysis can help reduce overstock:

1. Check Extra Stock in B and C Items

C items are low in value but are often overstocked.

What to do:

Find slow-selling C items. Stop buying them often.
Watch B items that sell at odd times. Lower their reorder levels.
Use sales data to plan better and avoid buying too much.

2. Use Different Reorder Plans for Each Group

Each ABC group needs a different plan.

A Items (High Value, Low Quantity):

Buy in small amounts, but more often.
Keep strict control to save money.

B Items (Medium Value and Demand):

Use flexible order sizes.
Check sales trends often.

C Items (Low Value, High Quantity):

Use just-in-time or remove some items.
Reorder less often and only when needed.

3. Improve Your Demand Forecasting

Good forecasting helps avoid too much stock.

Study past sales, seasonal trends, and what customers like.
Match your forecasts with ABC groups.
Stop or remove C items that don’t sell at all.

4. Set Stock Turnover Goals for Each Group

Turnover shows how fast stock is sold.

A Items:

Keep low stock but sell fast to save cash.

B Items:

Keep stock balanced with demand.

C Items:

Try to sell fast. Use sales or bundles to clear stock.

5. Do Inventory Checks by Category

Regular checks help find hidden overstock.

A Items:

Count often because they are valuable.

B and C Items:

Do spot checks to find slow or extra stock.
Make a report schedule to track slow-moving items early.

6. Cut Down Low-Selling Products

Too many SKUs can cause extra stock.

What to do:

Check the sales speed of C items.
Remove old, repeat, or unused items.
Bundle slow items with best-sellers to clear them.

7. Work with Suppliers to Lower Risk

Good supplier deals help control stock.

Ask for smaller order sizes for C items.
Try consignment or vendor-managed stock deals.
Ask for shorter lead times to match real demand.

8. Use Software to Do ABC Automatically

Doing ABC by hand takes time and may have errors.

Use smart tools to:

Reclassify items using live data.
Spot items with too much stock and low sales.
Add ABC reports in your monthly reviews.

9. Match Stock with Sales and Business Goals

Only buy what supports your business.

Talk to marketing and sales teams.
Plan stock around sales or seasons.
Don’t guess-buy C items unless you are sure,

10. Use ABC with Other Methods

ABC works better with other tools.

Try XYZ Analysis (based on demand stability):

AX: High value, steady demand - manage closely.
CZ: Low value, random demand - maybe stop them.

Use FSN Analysis (Fast, Slow, Non-moving):

Track how fast items move in all ABC categories.

Technology and Tools Supporting ABC Analysis

Today, many software tools help with ABC Analysis. These tools can sort items into A, B, and C groups. They give alerts when stock is too high. This helps in making fast decisions.

Reports can be made weekly or monthly. This helps check which items need attention. Software also helps reduce errors.

Dynamic Distributors uses smart systems to manage inventory. Their tools find overstock quickly. The system also gives advice on what to do. This saves money and keeps stock levels right.

Conclusion

ABC Analysis is a great tool for managing inventory. It shows which products matter most. It also helps control overstock.

With ABC Analysis, companies can make better decisions. They can avoid wasting space and money. Dynamic Distributors is a great example. They use this method to manage their stock. Their system helps them reduce extra items and stay organized.

ABC Analysis with an overstock focus makes business smarter and stronger.

Want to Buy or Sell Overstock Products?

If you're looking to sell your overstock or buy discounted overstock items, we can help! At Dynamic Distributors, we specialize in bulk purchasing and resale of excess inventory across a wide range of categories, including:

Whether you want to clear excess stock or source quality products at a lower cost, we offer fast, reliable solutions.