Pareto, 1896
Vilfredo Pareto observed that about 80 percent of Italy's land belonged to 20 percent of the population. ABC analysis applies that same principle to stock.
Right stock, no overfill
Small-shop stock control rests on three named methods: Ford W. Harris published the economic order quantity formula at Westinghouse in 1913, ABC analysis applies Vilfredo Pareto's 1896 observation that about 80 percent of Italy's land belonged to 20 percent of its people, and Taiichi Ohno built kanban at Toyota in the late 1940s. This page turns them into an ABC class table, a worked reorder-point and EOQ calculation, and a weekly routine.
This is not a catalogue, a supplier list or a software pitch — it is a working method you can apply to your own shelf.
Scroll the strip sideways — 6 cards.
Vilfredo Pareto observed that about 80 percent of Italy's land belonged to 20 percent of the population. ABC analysis applies that same principle to stock.
Ford W. Harris of Westinghouse published the EOQ formula Q = sqrt(2 × D × S / H). It is the basis for sizing an order by hand.
Taiichi Ohno developed kanban at Toyota, modelled on how supermarkets restock shelves. The card is a physical reorder point.
A ten-pack of Wrigley's chewing gum was scanned at a Marsh supermarket in Troy, Ohio, on 26 June 1974. Scanning is what makes rolling counts affordable.
Choose 6 or 12 months as your no-movement threshold and apply it to every class. Class C items clear first.
Count a small share of items each week instead of everything once a year. A items get the highest frequency.
Classify · Compute · Count
Sort every item by annual usage value and let the Pareto split tell you where counting effort belongs.
ABC analysis applies the Pareto principle, named after the Italian economist Vilfredo Pareto, who in 1896 observed that about 80 percent of Italy's land belonged to 20 percent of the population. The same shape shows up in a small shop: a short list of items carries most of the value.
Class A is typically about 10–20 percent of items covering 70–80 percent of annual usage value. Class B is the next 20–30 percent of items, and class C is the remainder. Annual usage value is units sold per year multiplied by unit cost — one number per item, computed once.
Once the bands exist, counting follows the bands. Cycle counting counts a small share of items on a rolling schedule instead of one annual count, and A items are counted most often. That is the whole point of the classification: effort lands where the money is.
| Item | Typical value | Where it comes from | What you do with it |
|---|---|---|---|
| Class A share of items | 10–20% of items | ABC sort by annual usage value | Count most often, watch reorder point weekly |
| Class A share of value | 70–80% of annual usage value | ABC sort by annual usage value | Carry the tightest safety stock |
| Class B band | Next 20–30% of items | ABC sort by annual usage value | Count monthly, moderate safety stock |
| Class C band | The remainder | ABC sort by annual usage value | Count quarterly, longest dead-stock watch |
| Dead-stock window | 6 to 12 months | No-movement report | Mark down, bundle or return |
| Reorder point | Daily demand × lead time + safety stock | Sales record and supplier terms | Order when stock crosses this level |
| EOQ order size | Q = sqrt(2 × D × S / H) | Annual demand, order cost, holding cost | Size every order from this figure |
Each method has a named origin and a date, and each answers one part of the stock question.