ABC Analysis, also known as “Pareto Analysis,” is a commercial and industrial approach to inventory management. It seeks to identify products that have the greatest potential impact on overall revenue or profit margins by dividing them into three categories: A, B, and C. Category A represents items of highest value or importance, while Categories B and C are of diminishing importance. By managing the items in the A category more closely and carefully, businesses can maximize their profits while still ensuring that they have an adequate supply of items in Categories B and C. With ABC Analysis, businesses can ensure that they have the right stock levels to meet customer needs without stockpiling too much or too little.