ABC analysis of purchasing
Purchasing management

ABC analysis of purchasing

Why use ABC analysis of purchases?

It is essential for a catering establishment to be able to identify the weight of each purchase family in the overall expenditure.

From this point of view, the ABC analysis makes sense, as it allows to estimate and visualize clearly and quickly the main expense items of the company.

What is ABC analysis?

ABC analysis is a management method that allows you to have an overall view of the establishment's expenses. This global vision can then help the manager in his decision making.

The ABC analysis is a management method that provides a picture of the company's situation. It provides answers to questions about sales, which in turn allow targeted measures to be taken for the company's future. The following are the types of questions that an ABC analysis can answer:

ABC analysis in purchasing

ABC analysis comes from the Pareto principle, which explains the following principle:

  • 20% of the purchase categories represent 80% of total expenditure.
  • 30% of the purchase categories, representing 15% of total expenditure,
  • And 50% of the purchase categories represent 5% of total expenditure.

This classification is represented as 3 classes (A, B and C)

In order to identify our A, B and C classes, it is important to follow the procedure below:

  1. Extraction of all purchases
  2. Prioritization of purchases in descending form
  3. Definition in percentage of each supplier on the total amount of purchases
  4. Calculation of the cumulative percentage

According to the following rules we can define 3 classes:

Class A -

These are the 20% of the references that represent 80% of the purchase volume.

These are strategic purchases. They therefore require special monitoring and the smallest percentage gain can result in considerable savings.

It is therefore very important to monitor, negotiate and optimize them.

Class A items must be strictly controlled in stockpiles; they must be stored in safe and secure areas. It is essential to pay attention to the stocks in order to avoid shortages.

Class B -

These are the 30% of references that represent 15% of the purchasing volume. Purchases that can impact the company's productivity. You should also pay attention to this class because it allows you to make significant gains. Although they are not as high a priority as those in class A, they are often easier to negotiate.

Class B items must therefore be monitored in the event that they are upgraded to Class A or Class C.

Class C -

These are the 50% of the references that represent 5% of the purchase volume.

These are marginal and non-recurring purchases. This class represents purchases that have very little financial impact on the company but a large number of references to manage.

This class is therefore very time consuming, although its strategic impact is low. It is not necessary to devote too much time to this category at the risk of neglecting the much more important classes A and B.

For Class C components, the established rule is to order a new unit only when a sale has taken place. This is due to the fact that class C components are subject to both low demand and a high risk of overstocking.

Increase profitability

This ABC analysis of purchases facilitates decision-making and is an important factor influencing the company's strategy or customer offer.

Indeed, it is essential to have an overview of these different classes, which will allow you to make oriented and strategic choices. Combined with the engineering menu, which allows you to respond perfectly to the customer's request, the ABC analysis of purchases guarantees you a gain in gross margin generated by an in-depth management of your raw material costs and a skillful management of your purchases.

Koust allows you to optimise your purchases and increase your profitability by means of these different tools made available to you. And specially designed to meet the needs of restaurant professionals.

Koust

Koust is a management software dedicated to CHR professions.
Koust allows you to optimize the profitability of your establishment.
The idea is simple: better control over quantities and costs by having more control over procurement and production.

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