How is ABC analysis in stock used?

    There is no person who has not heard about the famous “Pareto principle” and ABC analysis. For the ignorant, these words are real magic; for those who know, this is a banal tool. Today I propose to talk about using ABC analysis in the warehouse, and to figure out how it can help in managing operations, being part of the WMS (warehouse management system). I’ll mention right away that understanding the term “ABC analysis” for further reading is mandatory.

    With an enlarged sales analysis, ABC analysis can be carried out on a rather large sample: it can be six months, a year, or a high season. When we move to the level of operations, the sample is narrowed to days and weeks, and one of the urgent questions is the question of the parameter that needs to be analyzed. Most experts prefer the volume of stock exits (in cubic meters), someone insists on the frequency of calls (the number of shipment lines for the period in which the product is mentioned), and especially refined natures say that “the most important thing is the amount of sales” (with ) We forget about the refined ones, because this is from the category of multiplying the length of the warehouse by its width and height, and setting the goal of filling at least 80%. But there are also quite fans of their field who, with a gleam in their eyes, broadcast about the inferiority of ABC, and the need for XYZ analysis.

    We note the last option, because in a narrow sample, the XYZ analysis will give us a result close to the ABC analysis in terms of access frequency (although this is far from the same thing). In principle, XYZ can be completely forgotten if we add information on the standard deviation of the series for the period to the frequency analysis (this can be useful to us in the future when calculating the required margin in the set area), but I will tell you more about this later.

    So, the most frequent statement that I have heard in numerous trainings where I managed to visit is “place the goods of group A closer to the gate of shipment, and group C - further.” Let's see why this is in most cases terrible stupidity. For example, take the so-called “ideal warehouse”, where on one side there are docks (gates) for receiving goods, and on the other for shipping, and between them — along the entire room — are front shelves. And suppose that this warehouse only accepts and ships cargo in pallets. We analyze at the level of household logic: the stacker took a pallet with goods of group A, and took it to the shipment dock. The next pallet - group C goods - is put on the shelf closer to the acceptance dock (further from the shipment). Conclusion: the stacker path, which he does during placement and subsequent shipment, in total is equal to a similar path that would be done even with a “chaotic” arrangement at the discretion of the operator of the handling equipment. For particularly boring: the only plus is the reduction in shipment time, but with a clear increase in acceptance time.

    How to get the proper effect? Let's review our warehouse: we will place docks for acceptance and shipment on one front, and we will put racks transversely. Of course, it has ceased to be “ideal”, but now from the acceptance we will carry goods of group A along a short route, and goods of group C along a long route. Similarly, on shipment. So we saved on the runs of heavy equipment.

    Now back to where we started. How did we classify goods according to ABC, and on what basis did we conclude about the placement strategy? If we consider the above example, then the sales volume - in general - will indicate the frequency of calls, because we ship only with whole pallets. Problems begin a little further if the warehouse completes orders with boxes and pieces. Here you will not be able to do with one pass over all statistics - you will need to divide the product flows into “shipping by pallets”, “shipping by boxes” and “shipping by pieces”, and in each flow to conduct your ABC analysis - first of all, according to the frequency of calls. Thus, we will understand which group the goods belong to in the pallet, box and piece stream. And no one is stopping us from placing the pallet stream closer to the shipping dock, but what happens if right below it we place an equally popular piece and box flow? Everything is simple: with an increase in the intensity of the load, equipment and employees will begin to “push” in the same zones, which will lead to a decrease in productivity. That is why, the central alley for pickers is placed further from the shipping gate, and unpopular box and piece stream goods are placed under the popular pallet flow goods, providing an even distribution of the load across the alleys and zones. It makes sense to place group A of the box / piece stream (if they are combined on the same area and the pieces are not placed on a separate level with shelves) to the right and left of the central “picking” alley. Its width should be sufficient so that several pickers can flex freely

    And - I ask you to pay attention - in this case group A of the box / piece stream is not located at all at the shipping docks, as some “logistics gurus” say to us. In addition, I’ll just say that an attempt to make a classic ABC analysis for a multi-nomenclature warehouse of a household appliance retailer (as well as a number of other industry areas) will lead to a complete fiasco: group A can take up 50 percent of the total sample. That is why, this tool should be used exclusively with the mind, and better - in dialogue with professionals.

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