Implementing the ABC analysis

ABC analysis is a method of identifying and classifying items, based on their impact, into three regions: A, B, and C. It's an extension of the 80-20 rule, also known as the Pareto principle, which states that for many events, roughly 80 percent of the effects come from 20 percent of the causes. In one definition of ABC analysis, the top 20 percent of the causes, the important part, are further divided into two subgroups: A (the top 5 percent) and B (the subsequent 15 percent), and the 80 percent of effects they contribute to into segments of 30 percent and 50 percent. These are the ratios we're going to use in this recipe. There are, of course, other definitions like 10/20/70. It really depends on the user needs ...

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