The aim of the ABC analysis in logistics is to achieve optimal warehousing. The most important factors are: storage costs, stock value, physical storage, stock on hand, quantity share, turnover share, etc.
The method is based on a three-level classification (ABC classification) of products or goods in the warehouse. The principle of ABC analysis is very simple. However, the effort involved in prioritizing and deciding on each item requires high resources to perform the allocation to the ABC classes. This is also the biggest disadvantage of ABC analysis. The determined value is always a compromise.
The ABC analysis is of great importance in every warehouse.
The goods are distributed or cumulated in the warehouse according to different priorities (routes, total value, customers, category, etc.). Before distribution, the proportions must be determined correctly.
The presentation of the quantities (mostly in percent) is based on the data collected using various tools. IT systems today offer clear advantages. There are no limits to creativity. Despite the technology, the parts of the ABC analysis must be done with common sense. This task is a continuous process of analysis and improvement.
The ABC analysis in the warehouse also helps with decisions on the selection of the appropriate picking methods (such as Pick-to-Light, Voice Picking, Pick-by-Pointetc.).
History of the ABC analysis
The general ABC analysis was developed by a renowned Italian economist Vilfredo Pareto (1848 to 1923). H. Ford Dickie, manager at General Electric, further developed the method in the 1950s and applied the results to the field of materials management.