Warehouse analysis can take many different shapes and forms as needed, and it can be hard to know exactly what method will work best for your warehouse.

A common type of analysis many warehouses have been turning to these days is ABC analysis. ABC analysis is a simple method of categorizing inventory that divides items up into three distinct categories: A, B, and C.

While the actual categories can vary wildly and become more intricate as needed, the ABC method provides a strong baseline to start separating products and dividing them up into high-level categories that can help keep your warehouse organized.

Think of each level as a different tier, and sort products accordingly:

• A products should be the most high-value, high-margin, and/or have better sales forecasts than others. Products in this category should be reordered more frequently, and a priority needs to be placed on avoiding stock-outs for any item in this category.
• B products benefit from being an intermediary between A and C, with some factors of both. B products should be less important than group A and less tightly controlled, but they can be monitored closely to see if they need to be moved into group A due to a rise in popularity.
• C products are products that don’t move as quickly as groups A or B and don’t offer nearly as much benefit to keeping in stock. These items don’t need to be as tightly controlled as the first two groups, and will likely not be re-ordered nearly as often (if at all).

While sales volume isn’t the most important metric of tracking an item in the warehouse, it can have a big impact on how you organize and track your warehouse overall. Items in the A category, for example, need to be given precedence when it comes to tracking. Give them the priority spaces on your pallet racks, metal shelving, and wire shelving so they can be more quickly retrieved due to the higher number of sales they get.

From there you can work backwards and organize the remaining items—B items should still be accessible but not given as much priority, and you may want to consider giving C-category items their own place to stay away from the more popular items that need to be retrieved and sold more frequently.

This can also help with sales data and analysis. If an item is categorized into C, you can start reviewing your options and seeing what you can do to clearance the item out or return it to the vendor so you’re no longer spending money on storing and tracking it yourself. B items can be considered based on their sales volumes and moved into the other categories as needed.

While ABC warehouse analysis can require some work to set up, it’s a common warehouse practice that can help you sort your items more effectively and better understand where everything should go.