What is the ABC analysis?
The aim of ABC analysis in logistics is to optimize warehousing. The most important factors are: Storage costs, storage value, physical storage, stock level, quantity share, turnover share, etc.
The method is based on a three-stage classification (ABC classification) of the products or goods in the warehouse. The principle of ABC analysis is very simple. However, the effort required to prioritize and decide on each item requires high resources to carry out the allocation to the ABC classes. This is also the biggest disadvantage of ABC analysis. The value determined is always a compromise.
The ABC analysis is very important in every warehouse.
The goods are distributed or accumulated in the warehouse according to various priorities (routes, total value, customer, category, etc.). The proportions must be determined correctly before distribution.
The presentation of quantities (usually as a percentage) is based on the data collected using various tools. Today's IT systems offer clear advantages. There are no limits to creativity here. 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 suitable picking methods (such as Pick-to-Light, Voice Picking, Pick-by-Point, etc.).
History of ABC analysis
The general ABC analysis was developed by a 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.
