How to ABC Analysis In Excel
ABC Analysis, also known as Pareto analysis or the 80/20 rule, is a technique used to categorize data into different groups based on their significance or impact. In Excel, you can perform ABC Analysis using formulas and sorting. Here’s a step-by-step guide to conducting ABC Analysis in Excel:
Prepare your data: Organize the data you want to analyze in Excel. Ensure that it contains the relevant items and their corresponding values or measures. For example, you might have a list of products and their sales revenue or a list of customers and their purchase amounts.
Calculate the total: Add a column to calculate the total of your measures. For example, if you’re analyzing sales revenue, create a new column to sum up the revenue for each item.
Sort the data: Sort the data based on the calculated totals in descending order (highest to lowest). To do this, select the data range, go to the “Data” tab on the Excel ribbon, click “Sort,” and choose the column with the totals as the sorting criteria.
Calculate cumulative totals: Add another column to calculate the cumulative totals. In the first row of this column, enter the same value as in the corresponding total column. In the second row, use a formula to add the first and second total, and so on, until you reach the last row.
For example, if your totals are in column C and your cumulative totals start in column D, the formula for cell D2 would be: =C2, and the formula for cell D3 would be =C2+C3, and so on.
Calculate percentages: Add another column to calculate the percentages of the cumulative totals relative to the total sum. In the first row of this column, enter the formula =D2/Total_Sum, where “Total_Sum” is the sum of all the values in the total column.
Categorize the data: Based on the calculated percentages, categorize the items into groups. Traditionally, ABC Analysis divides items into three categories: A, B, and C.
Apply conditional formatting: To make the analysis visually more apparent, you can apply conditional formatting to highlight the items in each category. For example, you can use different colors for items falling in the A, B, and C categories.
By following these steps, you can perform ABC Analysis in Excel and gain insights into the significance and impact of different items in your dataset. Remember that the categories A, B, and C will depend on your specific data and the cutoff points you choose for the percentages. Adjust the analysis as needed to suit your requirements.