All products are automatically categorized (A, B or C) based on margin and sales order lines.
- A - Fast-selling-products, high return
- B - Middle category
- C - Low sales, low margin, new products
With these categories, you can determine a purchasing strategy based on delivery reliability in general settings. The categories are determined on the basis of the available data from the past 365 days. The categories are updated every night, and when you change the general settings of the categories.
By default, the products are classified on the basis of the total margin in the past year. We rank the products based on:
margin (ytd) = number of times sold (ytd) x gross margin
The gross margin is determined based on the current purchase- and sales price.
It is also possible to categorize products by the number of sales order lines or by revenue. If you want to use this, let us know via chat or email at firstname.lastname@example.org. We will aid you with this change.
The products with the highest margin in the past year that provide 70% of your total annual return will be classified in category A. The products with the lowest margin that provides the lowest 5% of your total return will be classified in category C.
- If you have a product that is sold frequently and has high margins, the product will be classified in category A.
- If you have a product that is sold very little but has high margins it will be classified in category C.
It is not possible to manually divide products into categories. You can, however, adjust the gross margin, so that a product ends up in the desired category sooner or later.
If you choose to classify your products based on the number of sales order lines, we will rank the products based on:
number of times sold (ytd)
Note: this is not the same as the total number of products sold. We look at the number of times a product returns on a sales order. A sales order line of 20 pieces, therefore, carries the same weight as a sales order line of 1 piece.
We recommend using this setting if you want to optimize purchasing based on operational conditions. For example, because the warehouse is getting full, or because the number of orders is getting too large.
If you choose to classify your products on the basis of turnover, we will rank the products on the basis of:
turnover (ytd) = number of times sold (ytd) x sales price
We recommend that you use this setting when the purchase price of products fluctuates strongly or has inconsistent availability. Or when you want to classify your stock based on financial performance.
Purchase rule option
In addition to the standard category determination, it is possible to set a purchasing rule. This ensures that products remain classified in the C category until they have a minimum number of sales rules. If you want to use this, please let us know. We set this up for you.
If you have set a Sell Order Threshold of 5 and the desired service level for category C to 0, then a product that has less than 5 sales lines will not be kept in stock.
When the purchase rule is in effect, a product must have sold enough and meet the other condition. When the product meets both rules, it can become a B product.