ABC/XYZ analysis is a method of grouping planning objects (characteristic value combinations, SKUs) based on their value (revenue or sales volume) and dynamics of consumption or sales. There are lots of assumptions for each categorization. 2. Be realistic about the resource and time demands required for implementation. When it comes to stock or inventory management, ABC analysis typically segregates inventory into three categories based on its revenue and control measures required: A is 20% of items with 80% of total revenue and hence asks for tight control; B is 30% items with 15% revenue; whereas ‘C’ is 50% of the things with least 5% revenue and hence treated as most liberal. Regardless of the strategy pursued by ABC, XYZ's best strategy is to produce a high level of output, and for that reason producing a high level of output is a dominant strategy for XYZ. Suppose organizations ABC or XYZ adopt a dominant strategy. Let us understand the dominant strategy with the help of the example given in Table-1. During the analysis, the planning objects are assigned one of the classes of ABC and XYZ simultaneously. This article is part 1 of a 3 part series on ABC Inventory Analysis. ABC analysis can be used for different purposes. optimization like ABC, XYZ, FSN, SDE, VED, HML etc. Vilfredo Pareto, a renowned economist, has propagated this theory almost a century ago that 80% of the wealth in any society is held by 20% of its people.This principle got international acclaim as Pareto Principle or 80:20 Rule. Create a robust business case with a … After making a list of these critical spare parts, you can break them into priority categories using the ABC and XYZ analysis methods. It has also been applied to various other business and economic situations.. Check to ensure that systems and processes can be adapted to ABC/XYZ before embarking on the change. Based ABC-analysis – is the famous Pareto principle, which states that 20% of efforts give 80% of the result. For the analysis of the assortment of goods, «prospects» of clients, suppliers, debtors are used methods ABC and XYZ (rarely). This value can be sales, profits, or other measure of importance. Dominant and Dominated Strategies: A dominant strategy is the one that is best for an organization (player) and is not influenced by the strategies of other organizations (players). ABC and XYZ analysis in Excel with example of calculation. Roughly 10 percent to 20 percent of inventory items account for … The ABC XYZ classification thus provides a framework for developing and refining inventory management strategies by classifying products according to their sales volume (ABC) but also according to their uncertainties (XYZ). Base the business case on data that’s reliable. Part 1 introduces the concept of ABC classification.. 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