What is the ABC analysis?

The ABC analysis is a business tool used to categorize items based on shared characteristics, such as value or frequency of access. In controlling, items are classified by value, whereas in warehouse operations, they are grouped by picking frequency.
It’s particularly useful in intralogistics, where a relatively small planning effort can produce significant efficiency gains.

Items are typically divided into:

• A-items: high-frequency
• B-items: medium-frequency
• C-items: low-frequency

However, classifications can be customized based on a company’s needs and extended beyond three categories.
This method can also be applied to customers, suppliers, projects, and even personnel, enabling classification based on value, sales volume, or internal relevance.

Objectives of the ABC analysis

The primary goal is to make warehouse management more efficient. Storage locations should reflect picking frequency, reducing inefficient workflows and focusing on high-impact areas. It also helps process large data sets and justify prioritization with clear rationale.

Origin of the ABC analysis

The ABC analysis was first introduced in a 1951 article by a manager at General Electric, inspired by the Pareto 80/20 principle. The aim was to achieve more effective inventory management, reduce costs, increase profits, and improve planning efficiency.