In this way, it is possible to project sales more accurately, which directly influences stock levels and the business's profit margin.
Without excessive expenses, it is possible to maintain an operation that is constantly in the red.
In addition, this type of analysis allows you to always be aware of which products or services are selling the most and whether demand is increasing.
Another key point behind using the ABC curve is that it allows for a more accurate re-evaluation of investments made.
That is to say: what they buy and actually sell, recovering the investment made.
In addition, there is the aspect of negotiation and supplier management.
Since about 80% of your revenue comes from premium products, it makes sense to negotiate better terms for these items.
If the supplier is not willing to accept a possible cost spain whatsapp data reduction, try to explore other avenues of negotiation, such as better payment terms, reduced interest on past debts, or even waived shipping.
Waste reduction
To meet customer needs, as well as achieve significant sales volume and increase profitability, a company must categorize its products based on demand, importance, and profit.
This way, it's easier to understand which products are actually performing and impacting business revenue.
Many times, your operation may rely on one product or another, while several others barely take up any inventory space or represent a very low profit margin.
By applying the ABC curve, it is possible to standardize the supply chain , investing in what is really needed, which reduces purchasing costs and additional stocks.
Sectors in which the ABC curve can be applied
Although it sounds like a largely numbers-based method, the ABC curve has valuable practical application in routine inventory management.
It is a way to structure your strategic vision about the products you sell and the relationship between your revenue and customer demand.
The ABC curve helps businesses in several ways, such as:
Purchasing planning
Once you understand your customers' demand, you can improve your purchasing planning.
By understanding which products to prioritize and which not to, you can spend more time negotiating with suppliers and gain a competitive advantage.
Let us think, for example, of the articles in Group A of the company we mentioned earlier, which sells swimming pools and accessories.
This category is made up of precast pools. Therefore, it is a must-have product. The company cannot stop having it in stock, so it does not run the risk of losing an expensive sale.
This means that purchasing planning must prioritize this element: negotiations with suppliers must be carried out in advance, to ensure that there is never a shortage.
Sales planning
By broadening your perspective on what is truly important to your business, you can restructure your sales planning and invest time and resources in products that truly impact your revenue.
Knowing what these products are gives you the information you need to create relationship strategies with these customers.
Returning to the example of Victor's swimming pool company:
The sale of class B and C products is basically determined by the relationship they maintain with customers.
After all, these are items that are needed sporadically, but not infrequently (in the case of class B), and others are needed periodically, at least monthly (in the case of class C).
It is necessary to work wisely with promotions and other actions that attract customers, to increase their lifetime value (LTV).
Inventory management
With ABC curve analysis, your company minimizes the chances of errors related to inventory control.