[FR] The ABC method for your stock: is it the right one?

As you well know, to ensure good stock management, all warehouses need a storage method that is adapted to their needs.

In the world of logistics, one method seems to be used more than any other: the ABC method.

But is it the best method for your own supply chain?

Here we take a look at the ABC method for stocks, its benefits for your supply chain, and the key equipment you need to ensure optimum stock levels at all times.

What is the ABC storage method?

The ABC method is a stock classification method based on Pareto’s law – also known as the 80-20 law. According to this law, 20% of the efforts made produce 80% of the results.

Applied to stock management, Pareto’s law becomes the ABC method. It is assumed that 20% of goods in stock represent 20% of movements.

To follow the ABC method, you need to classify the products in your stock into three different categories:

• A products are those with the highest turnover in the warehouse (i.e. those most frequently purchased by your customers). They generally represent 20% of the total quantity in stock, and generate around 80% of your company’s income.
• B products are those with an average turnover rate, and generally represent 30% of stocks.
• C products are those that leave the warehouse the least often (and are therefore the least ordered by customers). They generally account for 50% of stocked items. They also provide a safety stock, which limits the risk of stock-outs.

In short, the ABC method enables stocks to be optimised and controlled according to the strategic value of each product for your company.

When should you use the ABC method for your stocks?

It makes sense to use the ABC method to organise your warehouse if you have flagship products that you often have to prepare and ship.

Your supply and replenishment strategy is also optimally managed thanks to this method, since you keep an optimal level of stock, with the quantities needed to satisfy your customers.

It’s also an ideal storage method if you want to optimise your storage space and the physical flows of your operators in the warehouse. Depending on their different categories, your products will be positioned in different areas of your warehouse.

A” products are placed closest to the order picking area, as they are the ones most often “picked” by operators. On the other hand, C products are the least easily accessible, as they are subject to a lower turnover rate.

Thanks to this storage system, you can speed up the picking phase, and therefore your order preparation rate.

However, there are other storage methods that may be more interesting for your business:

• The FIFO (First In – First Out) method, which literally means “first in – first out”, involves storing products that have been in stock for a long time as close as possible to the packing space. This method is ideal for perishable finished products and raw materials with a use-by date, to avoid wastage (and therefore stock-outs).
• The LIFO (Last In – First Out) method is the reverse of the FIFO method, and gives operators easy access to the most recent products in the storage area. It’s perfect if your business is highly seasonal, with new products arriving and leaving more quickly than others.

It’s up to you to choose the best method for the value of the stock you manage, and the type of goods stored in your warehouse on a daily basis.

The essential equipment for optimum stock management

Whichever storage method you use, remember to buy the equipment you need to organise your warehouse properly and ensure optimum stock monitoring.

• Your Warehouse Management System (WMS ) is a stock management software package that enables you to monitor stock rotation, deliveries, inventories and supply requirements in great detail. In larger companies, the WMS is often integrated with another type of software: ERP, which also incorporates functions for monitoring cash flow, orders and accounting.
• The choice ofracking depends on the weight of your goods. For example, epoxy steel shelving can store lighter loads, while galvanised steel shelving can store heavier products.
• Your bins enable you to organise your shelving and store your products in bulk. They should be chosen according to the type of product you are storing. For example, spout bins are ideal for easy access to products during picking.
• Your storage boxes(drawer trays or storage bins) should be stackable to save storage space. Choose reusable plastic rather than cardboard for maximum protection of goods and to be environmentally responsible.
• Your hand trucks, trolleys and rolls will make handling in the warehouse easier. Some are designed for the order-picking phase, like the constant-level trolley (which always remains at the same height whatever the load on it) or the basket trolley.
• Your pallet trucks are invaluable for transporting pallets around the warehouse with ease. Choose your pallet truck according to the environment you use it in, the lift height you need and the weight of your goods.

With this overview of the ABC method and other possible stock management methods, you’re ready to ensure ideal stock and supply management. It’s now up to you!