abc-xyz-segmentation

Topics in the source

• ABC-XYZ Segmentation
• Required data
• Workflow
• Pitfalls to check explicitly
• Output format

Value tells you where the money is. Variability tells you whether forecasting, buffering or restructuring can work. Never output a classification without the policy consequences. Per-SKU demand history (sku, period, qty) covering 12+ periods, plus unit value (unitprice or cost). Without unit value, ABC degrades to a volume ranking - say so and ask for prices before presenting conclusions about money. 1. ABC on annual value. Rank by annual consumption value; cumulative 80% = A, next 15% = B, rest = C. Report the actual concentration found (e.g. "15 SKUs = 80%"), not the folklore 20/80. 2. XYZ on variability. CV = std/mean of period demand per SKU. Defaults: X = 1.0. These are conventions - check the CV histogram for natural breaks and state the thresholds used. SKUs with structural zero periods (intermittent) belong in Z regardless of CV arithmetic; mean-based CV understates their risk. 3. Build the 9-box with SKU counts AND value share per cell. Value share is what makes managers act. 4. Attach the policy per cell (adapt wording to context): A-X: tight forecasting pays; low buffer, frequent review, automate replenishment A-Y: forecast + healthy buffer; investigate variability drive

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