ABC analysis applies the Pareto principle to inventory: a small number of "A" items typically account for ~70–80% of annual consumption value, "B" items a moderate share, and many low-value "C" items the rest. Control policies, counting frequency, and safety stock are then tiered by class.
It lets planners concentrate tight control, frequent reorder-point review, and accurate forecasting on the items that drive cost, while applying simple rules to the long tail.