Sorted by part, or by color? I think this question is often hard to answer and has to do with the many factors that are involved: quantity, part, space and cost.
The first logical answer anybody gives is to sort by part. If you have 20 pieces of a particular part, it's easy to find the specific color piece with the other same parts. If you only have 2,000 pieces, that breaks down to 100 different parts, it's easy to get a couple drawer bins and sort them out. Doesn't take up much space and the cost of the bins isn't too much. Jump those numbers up to 50,000 pieces and 1,000 different parts, it takse a lot more space to have them sorted by part; and that's not taking into account the cost of the storage containers to store them. We have all seen the LEGO room pictures with walls covered floor to ceiling with storage drawer bins. The cost of the bins starts to rival the cost of the pieces contained within. Along with just having the extra room to have them in ,unless your significant other doesn't mind the bedroom decorated in storage bins. Don't' get me wrong, I think everyone ultimately wants to have that room filled with bins, but the reality is that it's not going to work for the average LEGO collector.
Let's look at the other side of the brick and sort by color. No matter how many pieces you have the number of colors is far fewer than different parts. On average you end up with about 15 primary colors that will cover 98% of your parts. The cost and space to store some tubs isn't so bad. But let's look at trying to find parts you're looking for, and take into account how many parts you have. If you only have 1,000 pieces, and your average piece by color is 70, then it's pretty easy to find the part in the tub. But the more likely scenario is that you have average color count by piece is 3,000 and finding that part is not so easy. Sorting by color doesn't sound like a good idea.
Looking for parts? Sound like we are building something. First let's go with building a set from instruction. With the sorted by part method, it's very easy to find the part you want by finding the right bin. Provided you have you bins arranged in a logical manner to find the right bin/draw with the part you are looking for. Labels make this much easier. With parts sorted by color this quickly becomes a nightmare, unless the set is monochrome and you have less than 100 pieces by color.
Now let's look at building a MOC. Everyone's MOC building process is different. Some draw up a plan, or pre-build it with software. That sounds closer to having instructions to build from, so let's go with the free build method. You have an idea and a color scheme in mind. If your parts are sorted by part, you start pulling pieces that you think you'll want from the drawers and lay them out and start to create. If you think of another piece you want, you go back to the drawers. Again, this process depends on how many pieces you have and the space to store them, so you may end up just pulling out a bunch of drawers to work with. If you sort by color, it's very easy to grab a tub of colors you want to work with and spread out your parts to begin letting the creative juices flow. However, we have to look at the piece count again. Dumping 2,000 orange pieces onto the table to look through is a migraine just waiting to happen, and that's only the first of several colors you wanted to work with. Ugh! However, with a smaller piece count it's not so bad. Easier to find the part you want and cleanup is fast when you are done. Just drop the parts back into their color sorted tub.
Logically sorting by part is the way to go, even if it takes up more space and whatever cost is needed for the storage bins. However, whether sorting by part or color, it keeps coming back to the factor of quantity, with a little bit of space, as the key factor for either methods success. So, let's push the extreme of quantity to see how it affects our decision.
Think about a collection of 500,000 pieces. Sorted by part it's no longer simple to look for a specific colored piece mixed in with a couple hundred pieces. So naturally, you now sort the piece by color too. Wait a minute... sort by piece AND color? That is going to take up even more space to separate them out and even more cost for the storage containers. Now granted we are talking about 500,000 pieces, so space and cost really aren't a deterrent at this point, because you'd need both to get this far anyway. Sorting by color for 500,000 pieces is just madness. You could never find what you are looking for in a giant tub of 30,000 orange pieces.
Sorting by piece and then by color? Sounds logical. But what about sorting by color and then by piece? At 500,000 pieces that's probably the logical way to get them in the bins in the first place. It's a lot faster to sort by color and then sort by part, to put them in the bins. But doesn't sounds a lot like how sorting by color starts out, in a smaller collection?
Let's go back back down to a 50,000 piece collection sorted by color... and then sort by part. Wait, what? But how can you sort a tub of one color by part? Time to think outside the box, or the tub actually. Sorting by part always seems to go down the path of the drawer pull bins, because we see all those cool pictures of the rooms lined floor to ceiling with bins. But remember it's not the average LEGO collector that has those rooms. I think we all seem to forget about our handy little friend the zip-lock bag. We all use them at some point to store pieces, whether it's a set we've taken apart or collecting pieces to build a set we are parting together. So why can you sort out the pieces by color and then sort by part... into zip-lock bags? You don't even have to sort by every part. You could sort by part type: brick, plate, slope, etc. Or even by part size. The options can grow, or shrink, depending on the quantity of pieces. Now building a MOC with color sorted bins sounds like a great way to get all your pieces together.
I think the problem with the question of sorting by part or by color, is that the person answering the question doesn't return with the question of, "How many?" As with anything LEGO, the possibilities are endless, so the answer will vary depending on the situation.
