An ABC analysis based simply on inventory value will not reflect changes in demand or the frequency with which merchandise moves through the warehouse. In other words, in the same category A we can find items with a very high unit value, but that are sold less frequently, and items with a lower unit value but that are sold very frequently. Similarly, we will have items in category C that, although not very profitable, frequently take part in orders (for example, products C that are usually sold together with products A).
If we focus our warehouse management strategies solely on inventory value, it is clear that there will be C products that, in addition to their low profitability, will present a higher warehouse operating cost, due to participating in a greater number of orders. It is convenient then to have a more efficient classification, for which the ABC/XYZ classification is used.
The ABC/XYZ analysis is an extension of the ABC classification in which product references are grouped, in addition to their inventory value, by their demand patterns. A 3×3 matrix is created where the rows are ABC ranking based on inventory value and the columns are XYZ ranking based on demand variability or number of order lines. In this way, the product references will be classified into nine categories: AX, AY, AZ, BX, BY, BZ, CX, CY and CZ.
It is common for ERP (Enterprise Resource Planning) or WMS (Warehouse Management System) systems to provide functionality to perform ABC and ABC/XYZ classification, or for such functionality to be provided by specialized inventory optimization software that communicates with such systems. .
Typically, less than 8% of the references will correspond to the AX category, which can mean around 50% of the sales. These are the products that have the highest value and at the same time are sold most frequently, presenting a stable demand with little volatility.
Since the AX category products are the most important for the business, the greatest efforts should be focused on them in the negotiation with suppliers, since price variations will have a great impact. In addition, they would be the candidates for Just-in-time logistics, thus reducing stock levels and increasing warehouse profitability without compromising availability for sale.
On the other hand, AZ items that correspond to highly profitable products (because they are in category A) but that are sold less frequently (because they are in category Z), may require higher levels of safety stock, since the irregularity in demand will often imply longer replacement times, but as these are profitable products, out-of-stock situations should be avoided.
Slotting should take this classification into account, placing the items with the highest demand (AX, BX and CX) in better slots, which facilitate picking tasks, and in areas closer to the dispatch area, to reduce the movements of picking operators.
Slotting is not enough to optimize modern warehouses. But thanks to the automated systems of ATOX Technological Solutions, maintenance tasks can be optimized, optimizing their operating costs, while maximizing the use of space.
Disban H automatic dispensers allow automatic order preparation at very high speed. Thanks to their versatility and robustness, they can withstand high workloads.
The ATOX light-guided system streamlines order preparation through pick-to-light operations. As the picking operators are guided by light indicators to the corresponding slots, following an optimized route, the performance of the warehouse personnel is always optimal, both with the SKUs that are frequently served (AX, BX and CX categories) and with the references that are sold more irregularly (AZ, BZ and CZ).
The combination of the intelligent roller transport system with light guidance and automatic dispensing allows different picking strategies to be implemented with maximum efficiency (zone picking, batch picking, wave picking, etc.). This minimizes the distances warehouse operators have to travel. In addition, ATOX roller conveyors have integrated diverters that act as sorters, automatically classifying the merchandise according to the status of the order and its dispatch destination. Together, the maximum operating performance of the warehouse is achieved, thus achieving that the most profitable category A products are served quickly and efficiently, while operating costs are minimized for the least profitable category C products.
In addition to order preparation, it is essential to make the most of the warehouse space, using the most appropriate metal racking systems for each type of merchandise.
For highly profitable and frequently moved palletized merchandise (AX category), automated warehouses with stacker cranes can be implemented. Or metal racks without aisles that provide high density while speeding up forklift operations, such as the Sherpa radio shuttle system or live racking.
For merchandise with less movement, such as category CZ and BZ, storage at height using elevated aisles, or expanding the storage space through mezzanines, manages to make the most of the warehouse space. The combination of these systems with sections of transport by rollers with spirals of descent allows to optimize the space without sacrificing the agility in the maintenance tasks.
With more than 50 years of history and more than 25 years operating internationally, ATOX Storage Systems has acquired great prestige for quality and excellence in customer service. As a manufacturer, ATOX designs and adapts its wide range of storage solutions to the specific needs of each warehouse, advising and accompanying its clients in all phases of the projects. ATOX has helped to optimize the intralogistics profitability of a multitude of warehouses, of various sizes and various business sectors, across several continents.
To optimize your warehouse, do not hesitate to contact us for more information and advice.