What is ABC analysis?
The aim of ABC analysis in logistics is to achieve optimal warehousing. The most important factors are: storage costs, storage value, physical storage, inventory, quantity share, sales share, etc.
The method is based on a three-stage classification (ABC classification) of products or goods in the warehouse. The principle of ABC analysis is very simple. However, the effort required to prioritize and make decisions about each item requires considerable resources in order to carry out the division into ABC classes. This is also the biggest disadvantage of ABC analysis. The value determined is always a compromise.
ABC analysis is very important in every warehouse.
The goods are distributed or accumulated in the warehouse according to various priorities (walking distances, total value, customers, category, etc.). Before distribution, the shares must be determined correctly.
The representation of quantities (usually in percent) is based on data collected using various tools. Today's IT systems offer clear advantages. There are no limits to creativity here. Despite the technology, parts of the ABC analysis must be done using common sense. This task is a continuous process of analysis and improvement.
ABC analysis in the warehouse also helps with decisions on selecting the appropriate picking methods (such as pick-by-light, Voice Picking, Pick-by-Point, etc.).
History of ABC analysis
The general ABC analysis was developed by renowned Italian economist Vilfredo Pareto (1848 to 1923). H. Ford Dickie, a manager at General Electric, further developed the method in the 1950s and applied the results in the field of materials management.
