In general, ABC classification is an implementation of the 80/20 rule. Succinctly stated, the 80/20 rule says that about 80% of what you care about comes from about 20% of what you have. In other words, if you are a manufacturer of goods, 80% of your sales comes from about 20% of your products. This concept is applicable to sales, inventories, purchasing, and many other areas of business. The most important items are tagged with the A label, which generally represents about 80% of the total dollars spent by a company or received as revenue by a company. B items are not as important as A items and generally represent an additional 10% to 15% of the dollars that are spent or received by a company. Making up the remainder are C items, which are the least important.
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