ABC analysis

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ABC analysis

ABC analysis is used in both B2C and B2B logistics to create priorities and thus efficiency in the warehouse by organising goods according to relevance, value and turnover. Procurement logistics or product procurement and placement are prioritised according to economic importance for the company instead of volume or quantity. The Pareto principle - also known as the 80/20 rule - forms the basis of ABC analysis: 20% of the effort forms 80% of the results. Accordingly, in the warehouse 20% of the items would generate 80% of the goods movements, while 80% of the products would be responsible for the remaining 20% of the movements.

Transferred to ABC analysis, the classification of items is as follows:

  • A-goods
    In terms of quantity, A-goods account for only 20% of stock, but they are handled most frequently. This strategic importance is also clear in economic terms: the company has invested the most budget for these goods and generates 80% of its turnover with them. The top priority should therefore always be sufficient stock coverage.

The group of A-goods also includes those items that ensure smooth processes in the company. This circumstance is also a reason to subject them to strict inventory controls with frequent or even permanent stocktaking. Furthermore, A-goods are usually placed where they can be easily and directly reached by employees, as well as close to the goods issue docks.

  • B-goods
    B-goods are handled frequently on average. In terms of quantity, they usually account for 30% of stocks. Their relevance as well as their value is lower compared to A-items, as they are replenished less quickly. Furthermore, it is important to observe whether B goods could potentially move up into the A category or down into the C category. For B-items, the minimum or maximum stock rule can be applied and a comprehensive, continuous stock control and order placement, as with A-items, is not necessary. In addition, B goods are placed in the warehouse at a medium height and with less direct access than is the case with A goods.

  • C-goods
    C-goods account for about 50 % of the stock in storage. They create the least customer demand, as well as a large quantity of items with small inventory values, and are the least demanded by customers. C-goods are not strategic items, so they can be managed in a very resource-efficient way. Safety stocks can ensure their replenishment. C-goods only need to be accessed occasionally, so they are usually placed high up or in harder-to-reach areas, and furthest away from shipping docks. Moreover, since their demand is very low, consider whether it is worthwhile to spend part of the budget on stocking C items. 

Mike Schubert und Raimund Bergler

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