The ABC Method: How to Sort a Catalogue Into Three Classes That Actually Change Something
The ABC method sorts stock into three classes by activity. Learn how to build it from order lines, what each class changes and when to redo it.
By The Juvo team — 11 August 2026
TL;DR: The ABC method splits your catalogue into three classes by how much activity each product generates. A small group of products drives most of the work. Once you know which products those are, you can decide where they sit, how often they’re counted and when they’re restocked. Build it from order lines, not from revenue.
Every catalogue is unequal. A handful of products get picked constantly, a middle group moves steadily, and a long tail sits still for months. The ABC method is simply the act of measuring that inequality and then doing something about it.
It’s one of the oldest ideas in stock control and one of the most misused. Plenty of businesses run the analysis, produce a tidy three-colour spreadsheet, and change nothing. The classification is only worth the effort if each class comes with a different rule attached.
What Is the ABC Method?
The ABC method sorts every product into one of three classes based on how much activity it generates. Class A covers the small group responsible for most of the movement. Class B is the middle. Class C is the long tail that moves rarely.
The split follows the Pareto principle. NetSuite describes the classic version, where roughly 20% of products account for around 80% of sales, with B items covering about 30% of stock and 15% of sales. Your own curve will differ. That’s the point of measuring it rather than assuming it.
Why Order Lines Beat Revenue as the Input
This is where most analyses go wrong. If you rank products by revenue, you get a finance view. If you rank them by how many times someone physically goes to that location, you get an operations view. Cognitops draws the distinction clearly: ranking by sales volume and ranking by pick frequency often produce different results, especially for items sold in bulk but picked rarely.
For warehouse decisions, pick frequency wins, because it’s the number of trips that drives the hours. A cheap item picked forty times a day costs more labour than an expensive one picked twice a month. So count order lines over a full trading period, ideally twelve months, then rank.
What Does the Classification Actually Change?
Three things, and they’re worth naming because a class with no consequence is decoration.
Location comes first. A items belong closest to packing, C items can live at the back or up high. Optioryx reports that velocity-based placement cuts average walking distance by 15% to 30% with no change to picking method. That matters because travel is the largest single component of picking time. Red Stag Fulfillment cites research putting travel at 57% of total pick time.
Counting frequency comes second. A items get checked most often, because they’re touched most often. C items can wait.
Replenishment comes third. A items need tighter reorder points and shorter lead times, since a stockout there is far more expensive than a stockout in the tail.
How Big Is the Prize?
Larger than most teams expect, because the gain compounds across every order. Impact WMS works through a warehouse where unslotted picking averages a thousand feet of travel per pick, and shows how putting A items near dispatch cuts the average pick tour substantially once the fast movers stop being scattered.
The reason this converts into money is that labour is the dominant cost in a distribution centre. Cognitops puts warehouse labour at 50% to 70% of total operating costs. Anything that removes walking removes hours, and hours are the bill.
Is This the Same ABC as the One in Cost Accounting?
No, and it’s worth separating the two before someone brings the wrong spreadsheet to the meeting. Activity-based costing is an accounting technique that allocates overheads to activities in order to work out what a product really costs to make or serve.
The ABC method in logistics classifies stock by movement so you can decide where it sits and how often you check it. Same three letters, different job. They can inform each other, since a product that generates a lot of handling also absorbs a lot of overhead, but they’re separate exercises with separate outputs.
When Should You Run It Again?
More often than most businesses do. Classes drift as products age, launch, sell out or fall off. An analysis built on last year’s curve slowly stops describing the warehouse it was built for, and one industry review notes that infrequent refresh cycles leave operations missing seasonal buying patterns entirely.
A quarterly refresh works for most catalogues, with an extra run before a peak. If you sell seasonally, run it twice: once on the annual curve and once on the season you’re about to enter.
The same discipline serves online brands and B2B suppliers, though the classes look different. Online catalogues tend to have a steep curve and a long tail. Distribution catalogues are flatter, and class A is often defined by contract commitments rather than pure velocity.
At Juvo, classification sits behind how we organise storage and stock management and how we plan picking and shipping for large catalogues, with activity data visible through the client portal. If your catalogue is deep and hard to handle, our guide to managing a high-volume, high-reference catalogue covers the wider picture, and slow-moving stock and storage costs deals with what to do about class C. Ask us to look at your curve.
Frequently Asked Questions
What is the ABC method in stock management?
It’s a way of sorting products into three classes by how much activity each one generates. Class A is the small group driving most of the movement, class B is the middle, and class C is the slow-moving tail.
How do you calculate ABC classes?
Pull at least twelve months of order lines, count how many times each product was picked, rank the list, then cut it into three groups. Use the cumulative share of picks to place the cut-offs rather than fixed percentages.
What is an example of the ABC method?
A retailer with 5,000 references finds that 800 of them account for four fifths of all picks. Those 800 become class A, move to locations nearest packing and are counted monthly. The remaining references are counted far less often.
What are the advantages of the ABC method?
It shortens picking routes, focuses counting effort where errors are most likely, and sets sensible reorder rules by class. It also stops teams treating every product as equally urgent, which is where a lot of wasted effort hides.
Is the ABC method the same as activity-based costing?
No. Activity-based costing allocates overheads to activities for accounting purposes. The ABC method in logistics classifies stock by movement to guide storage, counting and replenishment decisions.