Throughout my years of primary and secondary education, I often heard comments about how a fellow student “screwed up the curve by getting a high grade on the test.” Ten years after graduation, I’m finding that the concept of weighted distribution is still practical and relevant.
We’ve all seen “New and Best Selling” as a sort option from a favorite retailer. Did you know that weighted distribution enables a company to determine those results?
Now I am going to throw you a math problem, but don’t let it scare you! I’ll break everything down into simple addition and multiplication. Take a look at your previous 9 months of sales records, and then separate them out by time periods:
- Time Period 1: Count orders by product in the past 3 months
- Time Period 2: Count orders by product for previous quarter (3-6 months ago)
- Time Period 3: Count orders by product for quarter before (6-9 months ago)
Time Period 1 will be most important because it represents your most recent sales. Time Periods 2 and 3 carry less importance because they are no longer as relevant – perhaps they include an older version of a product that has been discontinued or replaced by a newer style.
Our next step is to apply a weight to each time period.
- Weighted Time Period 1: Multiply all the totals in Period 1 by 50%
- Weighted Time Period 2: Multiple all the totals in Period 2 by 35%
- Weighted Time Period 3: Multiply all the totals in Period 3 by 15%
Add all weighted time periods and sort by the largest weight first.
As a last step, separate the results into 3 categories:
- Top (A Products)
- Middle (B Products)
- Low (C Products)
Based on this weighted model, you now have insight into which products are your “New and Best Selling products,” where you should put your marketing dollars, and how to better manage your inventory.
I’ll give an example of a time that we used this ABC product/inventory report for a client. A technology client of ours markets their sample products to engineering companies and researchers in order to get their products in prototypes. As such, they give out thousands of samples a week through a site that Harte Hanks created and now manages and enhances (I am actually a software engineer on that project).
The client requested that we evaluate how to obtain more organic search traffic by applying search engine optimization to the site. Based on Internet research, I created a list of tasks to accomplish SEO, and one of the top is to create an XML site map that allows web crawlers to easily identify all products.
The web crawlers/spiders have sophisticated algorithms designed to filter out pages where content appears duplicated. Since my client’s products are in many cases very similar, there are many similar models being filtered and never showing up when searched on google.com. Just yesterday, we had no hits from yahoo.com and one from bing.com. Products that are searchable at google.com are often not popular items.
I applied the ABC report to the product list to help populate priority in the XML site map as defined by this spec so that web crawlers would give higher priority to my client’s top shipping products and make them searchable. By applying ABC, we realized that out of the 33,000 available products on the website, 600 products represented 1/3 of sales, so we prioritized those. The code release is happening now, and we expect to see SEO impact shortly.
The ABC product/inventory report has many uses in business, such as making sure customers can easily navigate to “New and Best Selling” products, marketing hot selling items, supply chain management and inventory management to account for hot selling items, and the management of seasonal sales changes. Just like in school, a curve (and weighted distribution) can be a business’ best friend.