Article classification: Classification of products according to clear criteria
How important are certain goods and commodities? The answer to this is not clear per se, as it depends on individual factors. With the help of methods such as ABC analysis, goods or articles can be classified, i.e. categorized according to various criteria that are important for the company.
ABC analysis as the basis for item classification: how to classify
In contrast to typical warehouse management or the analysis of stored goods, ABC analysis involves the identification of goods and merchandise based on their economic relevance. The basis for the business analysis is the so-called Pareto principle (also: 80/20 rule), according to which 20 percent of the expenses are associated with 80 percent of the result. Just a few, 20 percent of the articles, are responsible for a significant share of the business success.
This is how articles are classified according to ABC analysis:
- So-called A-goods generally comprise around 20 percent of the warehouse stock and are also the goods with the highest turnover rate. They account for 80 percent of sales and are therefore strategically very important. They are typically placed in low storage areas and are subject to continuous inventory controls, as they have a significant impact on the company’s success. The consequence of such an item classification is that A-goods should under no circumstances come into the area of stock shortages.
- The so-called B-goods are classified as items that make up around 30 percent of the stock and have an average turnover rate. Typically, the minimum/maximum stock rule is applied here, i.e. less stringent stock control in conjunction with consistent commissioning. They are positioned in the warehouse at medium height.
- The third group in the ABC analysis or item classification includes the so-called C-goods, which generally make up 50 percent of the stock. These are many different items with a low stock value for which there is usually little demand. They are located in peripheral areas or areas of the warehouse that are difficult to access, and are usually only stored to the level of a safety stock.
