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ABC analysis for procurement spend

Last updated: 2026-09-17

Published 17 September 2026 · 5 min read

ABC analysis applies the Pareto principle to procurement: a small share of your categories or suppliers accounts for most of your spend. It is the fastest way to decide where to spend your attention, and it takes about twenty minutes on classified data.

The three classes

  • A items — roughly the top 70–80% of spend, typically 10–20% of items. Tight control, individual negotiation, frequent review.
  • B items — the next 15–20% of spend. Periodic review, framework agreements.
  • C items — the last 5–10% of spend, often 50–70% of the item count. Minimise transaction cost, not unit price.

The thresholds are conventions, not laws. What matters is the shape: a small number of things carry most of the value.

How to run it

  1. Take classified spend for twelve months.
  2. Aggregate by whatever you want to manage — Level 2 category, or supplier.
  3. Sort descending by value.
  4. Add a running cumulative percentage of total.
  5. Cut at 80% and 95%. Everything above the first cut is A, between is B, below is C.

That is a sort and one cumulative column. If it takes longer than twenty minutes, the delay is in getting categorised data, not in the analysis.

The mistake almost everyone makes

Running it on suppliers only, and concluding the C class does not matter. It matters enormously — just not for unit price.

C items are where the process cost lives. A GBP 40 order that takes a requisition, an approval, a PO, a delivery note and an invoice can easily cost more to buy than it costs to buy. The A strategy is negotiate harder; the C strategy is stop touching it — catalogues, P-cards, consolidated orders, framework suppliers.

Run it on two axes, not one

ABC by value tells you where the money is. ABC by transaction count tells you where the effort is. The categories that are C by value and A by transaction count are your best process-improvement targets, and they are invisible if you only run the value cut.

ABC and Kraljic together

ABC is quantitative and takes minutes; the Kraljic matrix adds a risk judgement and takes a workshop. Run ABC first to decide which categories are worth the workshop. Doing it the other way round means arguing about risk for categories worth GBP 4,000 a year.

Further reading

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