ABC Analysis

ABC analysis classifies the raw materials based on their consumption during a particular time
period ( usually one year). Depending upon the company to company A B & C items can be as
under

A - Approx 5% to 10% of the Items accounting for 60% to 80% of the consumption value
B - Approx 10 % to 30% of the Items accounting for 10% to 30% of the consumption value
C -Approx 60% to 85% of the Items accounting for 5% to 15% of the consumption value

XYZ Analysis :

XYZ analysis is more used in ralation of the customer demad for FG (finished goods) X is high
demand, Y medium demand, Z very low or exporadic demand

ABC/XYZ Analysis is usede to generate the strategic for the supply and inventory control and
production strategy

High runners are built to JIT

Medium runners are produced to stock or to order

and low runners are built to order

Read more: http://wiki.answers.com/Q/Distinguish_ABC_and_XYZ_analysis#ixzz1JCKjpqIr

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One Response to “What is XYZ Analysis in inventory management?”

1. shuvo says:

August 3, 2010 at 2:41 pm

Resolving total inventory into its constituent parts increases the transparency of stocks by
an order of magnitude. For example, an ABC analysis of stocks allows you to split down
inventory into A, B and C parts in terms of value and quantity. The ABC analysis is
based on the assumption that different materials have different levels of importance for a
company.

An alternative view is provided by the XYZ analysis, which looks at the consumption
flow of stock. As with the ABC analysis, the goods can be classified into groups.
 Both the ABC and XYZ analysis methods can be combined with methods of materials
procurement. A distinction is drawn between the options of case-based procurement,
stock procurement and demand-led procurement.

The analysis of the article structure is rounded off by determining risk groups for
individual materials. The risk classification may sometimes differ from the results of the
ABC analysis and weight article groups differently – thus having a direct effect on
procurement.

The XYZ analysis is a procedure of stock management in the management economics, with which on the
basis empirical experiences, results are usually assigned to a classification by bill explosions or by the
determination by variation and/or fluctuation coefficients of goods and articles concerning its turnover
regularity (consumption and its predictableness).

Articles, which are sold very regularly and in to some extent constant numbers of items (e.g.
Bulbs), are called X-articles, while the Z-class contains such articles, whose sales runs very
irregularly or even stochastically (like e.g. Spare parts). Sometimes the XYZ analysis is called
also RSU analysis, with R for regular, S for and U for irregular.

Classes become summarized as follows:

 X constant consumption, fluctuations are rather rare

 Y stronger fluctuations in consumption, usually for trend-moderate or seasonal reasons
 Z completely irregular consumption

The XYZ analysis in the materials requirement Planning (materials requirements planning), in
addition, in camp planning and in the calculation is used, frequently combined with the ABC
analysis.