ABC Tutorial Customer

8/3/2019 ABC Tutorial Customer

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ABC Softwork

2010 ABC Softwork. All rights reserved.


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This tutorial will walk you through your first ABC analysis, inwhich you will learn to classify customers based on twoparameters. It takes approximate 10 min to complete thetutorial, which will take you through the following:

A conceptual understanding of the ABC classificationmethodPart 1

Step by step guide to create a double ABC analysis oncustomersPart 2

Conclusions - Part 3

Our starting point is the demo data set named demodata.abc.Find it from your welcoming e-mail and double-click the abc-file.

If you have not created a test data set as a part of the downloaddemo flow, please visithttp://static.abcsoftwork.com/freetoobtain one.
http://static.abcsoftwork.com/freehttp://static.abcsoftwork.com/freehttp://static.abcsoftwork.com/freehttp://static.abcsoftwork.com/free


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Understanding ABC classification starts by understanding the80/20 rule, also known as Paretos rule.

Basically, the rule outlines a phenomenon known throughout theworld of business:

80% of a companys sale is generated by 20 % of itscustomers

Meaning that time, money and resources spend on the remaining80 % of the customers create very little value.

The Pareto 80/20 rule has evolved into a handy method ofdividing any type of items into three different categories basedon how well they perform: A, B and C, also known as ABCclassification.

The method separates The critical few, and the trivial many:

As being the most important: Few customers

representing your core business with a high impact onyour button line, generating 80 % of your sales

Bs being less important: Customers generating 15 % ofyour sales

Cs being least important: The majority of your customersare slow movers generating close to nothing of yoursales.

CUSTOMERS CUSTOMERS


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Several ABC classifications can be performed in order to map the

behaviour of customers, customers and suppliers.

However, the traditional single ABC analysis will only provide asnapshot of the current situation based on one parameter, e.g.,sales.

If you wish to have a better understanding of your customers,more advanced mapping techniques are required.

A customer buying 100 times a month might generate the sameas a customer buying only 4 times a month however single

ABC analysis cannot separate these two customers for you.

Variations in sales:

A: Profitable customers

B: Less profitable customers

C: Least profitable customers

Variations in frequency:

A: Customers buying often

and regularly

B: Customers buyingregularly, but less frequently

C: Customers buyingirregularly and rarely


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Double ABC classification allows you to combine two single ABCcategorisations in one. Hence, you are able to classify any typeof item based on two parameters, instead of one.

Map your entire customer portfolio in the powerful double ABCgrid, by dividing it into the nine different categories, and adjustyour management control accordingly.

Some characteristics of the four corners:

AA customers are, in this example, the customers thatgenerate most of your sales - and are buying mostfrequently.

CC customers are defined as the least profitable ones,

buying rarely.

AC customers define the group of customers who arebuying less frequently, with a high impact on your sales

CA customers are buying often, but are less profitable.


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Once you have categorized your items, you may start optimising

your current management policies:

Make policies so you spend most of your time and resources onyour AA customers. This particular group often accounts for lessthan 8% of your entire customer portfolio, however, it generatesmore than 50% of your sales.

Review your CC customers, often they account for less than 5%

of your sales. If you dont differentiate your resources, you areprobably spending 50% of your time and resources on optimizingless than 5% of your sales labelled CC.

The ABC Analyzer is flexible. Create any type of analysis basedon the parameters present within your data set.

Use any type of parameter to categorize your data:

Sales Value Gross Profit Cost value Order Lines

..and even more

CUSTOMERS


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You are about to perform your first double ABC analysis andcategorize your customers based on sales and frequency.

In order to perform the analysis you will be using three of theseven tabs present within the ABC Analyzer:

Overview Graph MyAnalysis

The tabs provide you different views of your data and based onthe information obtained, conclusions and guidelines formanaging your customers can be made.

Well return to these in part 3 of this guide.

Go to your inbox, find your welcoming e-mail and double-clickthe file customers.abc. ABC Analyzer opens.


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The ABC interface consists of alarge workspaceplaced in thecenter of the screen. Above sevenworkspace tabsprovide access to

different views of your data.

The controlspanel to your rightrelates to the current workspacetabOverview. Each tab hasunique controls allowing you tointeract with your data.

The box labeled Totalin theworkspace area shows you the

total number of customers in yourdata set:

These are the customers you areabout to classify into nine differentcategories, based on theparameters you choose.

Lets have a look at the Top Menuplaced above the workspace area.


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Link to learning videoshttp://static.abcsoftwork.com/videos/

The Top Menu Tab namedCategorizationwill be referred toas the Categorizer.

Click the button to your far leftlabelled Method and choose

Double now you have definedthe type of analysis you are aboutto perform.

From Fields parameters choosethe two parameters you wish touse when categorizing yourcustomers:

Vertical (Parameter 1):Sales Value

Horizontal (Parameter 2):Sales order lines

Click Categorize to execute thecategorization.

The categorizer allows you tospecify your categorisation even

further.

Please refer to our online learningvideos for more information aboutthe different categorizationprinciples and targets.
http://static.abcsoftwork.com/videos/http://static.abcsoftwork.com/videos/http://static.abcsoftwork.com/videos/


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Once you have clicked Categorizenine different boxes correspondingto the nine categories in the double

ABC classification emerge.

All of your customers areautomatically divided into theseboxes based on the targets youhave chosen.

The five red boxes displaycustomers generating 80% of yoursales. This is equivalent to thevalue for Red in the categorizer

Target box. Target always refersto the vertical parameter SalesValue.

The 3 green boxes containcustomers generating 15% of yoursales etc.

The number in each box indicateshow many customers it contains,e.g., 600 customers have been

identified as AA customers.


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Click the tab labelled Graph toobserve your data using the visualrepresentation.

Each dot represents a customer.

Data are plotted according to yourparameters in the Top Menunamed Categorization.

We have chosen to categorizeusing Sales Value as the Verticalparameter and Sales order lines asthe Horizontal parameter. This isalso shown on each axis in the

Graph.

A customer in the upper left corner,the AA category, hasHighSales

Value andHighSales Order Lines.

A customer in the lower left corner,the CAcategory, has Low Sales

Value and High Sales Order Lines.


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If you wish to zoom in your graphsimply hold down your mousebutton and drawn a square.

Try zooming in on your AAcustomers. These customers areyour most profitable ones, henceyou want to keep a close eye onthem.

To view customer details, click on adot. A pop-up window will showyou the specific data related to thiscustomer.

Close the pop-up.

To zoom out, right click on thescreen and choose zoom out


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Click the tab labelled MyAnalysisto gain a detailed view of yourdata.

Once you click it, youll find thenine-grid in the upper left corner.

This grid shows the same as theOverview.

Check Show ID percentage andanother nine-grid will appear to theright. This grid shows thepercentage of customers in eachcategory.

From the categorization you arenow able to read that 600customers equal 8% of your entirecustomer portfolio.


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The MyAnalysis allows you tocompare different attributes of yourcustomers.

Use this tab to observe yourcustomers based on severaldifferent parameterssimultaneously:

Click the dropdown menu in thecontrol panel to your right, choose

Sales Value and check Show IDpercentage.


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Now the sales value for eachcustomer category is displayed.

Observe that the 600 customersgenerate sales of 84.292.830,meaning that 8% of the customerportfolio generates 54 % of thesales value.

The MyAnalysis allows you to viewyour data using up to four differentparameters simultaneously.

If you wish to see how your

customers perform in relation tofrequency, choose Sales OrderLines from the dropdown menu.


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Congratulations!

By now you have performed your very first ABC analysis usingABC Analyzer.

- You have learned to categorize your customers based ontwo parameters, and are able to apply other parameters

free of choice

- You have identified the most profitable customers andcan easily communicate your findings using the Overviewand Graph

- You have gained a full overview of your customers whichenables you to differentiate management policiesaccordingly

- By categorizing your data you have taken an importantstep towards understanding your business based on facts- not emotions

- ABC Analyzer has provided you with a fact-based startingpoint for prioritizing your time, money and resources

If you are curios to learn more about the ABC Analyzer and thedouble ABC classification method - visit our Learning Center athttp://static.abcsoftwork.com/learning

Your ABC Demo includes all features of the ABC Analyzer and willrun for another 14 days. However, the ABC Demo is limited to

read ABC-files only. If you wish to import Excel-, txt-, cvs- orxml-files, upgrade your ABC Demo to ABC Analyzer for 950Euros.

We offer all new users a special support package:

- File conversion: E-mail us a sample of your Excel file andwe will create your first .abc-file ready to import to ABC

Analyzer

- Remote Assistance to ensure 100% success with yourfirst data import

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