Article classification: Classification of products according to clear criteria
How important are certain goods and commodities? The answer to this question is not clear per se; after all, it depends on individual factors. With the help of procedures such as the ABC analysis goods or articles can be classified, i.e. arranged and categorized according to different criteria important for the enterprise.
ABC analysis as the basis for item classification: This is how it is classified
Unlike typical inventory management or the consideration of stored goods, ABC analysis is about identifying goods and commodities 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 expense is associated with 80 percent of the result. A few, just 20 percent of the items, are responsible for a significant portion of the business success.
And so an article classification takes place according to ABC analysis:
- So-called A-goods usually comprise about 20 percent of the inventory 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 not, under any circumstances, come into the realm of inventory shortages.
- The so-called B-goods are classified as those items that make up about 30 percent of the inventory and have an average turnover rate. Typically, the minimum/maximum inventory rule is applied here, i.e., less stringent inventory control combined with consistent commissioning. Your position in the warehouse is at medium height.
- The third group in the ABC analysis or the article classification covers so-called C-goods, which usually make up 50 percent of the stock. These are many different items with small inventory values for which there is usually little demand. They are located in peripheral areas or areas of the warehouse that are difficult to access; moreover, they are usually stored only to the extent of a safety stock.
