Product Ranking Method and Breakpoint Rules

Use the Product Ranking program to compare the activity of a product against all other products within the same price line, a group of price lines, or all price lines. Ranking methods for your product files depend on your company’s needs. After you have determined the ranking methods and breakpoints, you can generate the Product Ranking Report.

You can use different ranking methods at different branches. You can use all of these methods or just the ones that meet your company's needs.

Entering ranking methods in a descending order of importance is most effective, because the Inventory Inquiry window only displays the rank corresponding to the first three ranking methods. Descending order displays the highest percentage of products first.

In addition, the Suggested P/O report only displays the rank corresponding to the first two ranking methods for a product that is listed on the report. If the items are listed in descending order, then the most needed items display as purchasing suggestions.

Note: The system allows user-defined product ranks, if you need to map a specific character or number to a product rank.

Incorporating Breakpoints

After you decide what kind of methods to rank products with, then determine the percentage you attach to a Rank ID. After identifying what you want to track for each ranking, you need to decide how to break your products into groups for each rank you identified.

For example, consider that you rank 100 percent of your products. You can set Rank IDs to track product issues, or methods, as follows:

Ranking methods are typically specified in a descending order, however this is not required.  

The following percentages reflect the normal industry convention for ranking breakpoints called the 80/20 rule. This rule says that 20 percent of your products accounts for 80 percent of your sales:

When the ranking program runs, the system selects those products that meet the selection criteria specified for price lines and stock/nonstock items. After items are selected then the products are ranked for each specified ranking method according to the ranking breakpoints defined. For example, using the methods defined above, a product could have an A rank due to Hits, but a C rank due to Dollar Demand. View the ranking by individual product on the Product Ranking Maintenance window from Product Maintenance.

Note: Normally, the system compares product activity within a price line. If the ranking is done globally, the system compares each product’s activity against the activity of all other products, regardless of price line.  

Individual versus Collective Ranking

Indicate whether to rank the products Individually or Collectively.

If you rank individually, product amounts within each branch are considered separately from every other branch when calculating product ranks.

If you rank collectively, product amounts for all branches are combined before calculating product ranks. If ranked collectively, products then would be assigned the same rank in each of the branches selected.

Global versus Non-Global Ranking

When creating a new Ranking ID, you have the option of selecting how you want the program to rank the products: globally or non-globally. The default entry is No.

If set to No, items are ranked with respect to the products in the same price line. Select No if you want items to be compared within the same price line for specific purposes, such as markup on slow moving items.

If set to Yes, products are ranked with respect to all other selected products, regardless of price line. For example, if you selected Moen and Delta price lines, products within the Moen price line are ranked against the products in the Delta price line. Use Price Lines function to update this list. Select Yes if you are looking at overall inventory analysis. In addition, when the ranking method displays for the indicated branch on the Ranking window from Price Line Maintenance *Global* displays with the indicated rank.

Changing Product Ranking

You can manually change product ranking for any of your branches when necessary. For example, a customer purchased a large volume of a D-ranked product in one day, turning the product into an A-ranked product. You can manually change the rank back to D to reflect the product's true sales volume. Use the Product Rank Maintenance window to make manual changes. For more information about changing ranks on products, see Changing Product Ranking.

Using a Template

We recommend using the 80, 15, 4, and 1 template, which is the normal industry convention for ranking breakpoints. This convention reflects the 80/20 rule, that says 20 percent of your items account for 80 percent of your sales.

With these breakpoints, the items that contribute to the top 80 percent of the value, or the top 20 percent of your items, of the ranking category are A items. The items that comprise the next 15 percent are B items. The items that make up the next 4 percent are C items and the items that contribute to the last 1 percent are D items.  You cannot go over 100% because anything greater than 100 percent has no rank. See the example below.

After specifying a new template name, the default numbers are cleared. Enter the same or other numbers that reflect your ideas about ranking breakpoints. You can assign up to seven ranks. The total of the percentages should not exceed 100. Anything greater than 100% has no rank.

We recommend that you use all the product ranking methods in the order that best suits your company's needs.  However, when using multiple Ranking IDs, be consistent with the order of the ranking methods.

An Example

Five ranking methods and ranking breakpoints have been selected in the example below.

See Also:

Product Ranking Information Uses

Product Ranking Overview