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ABC-XYZ Analysis

ABC-XYZ Analysis combines sales, revenue, or profitability classification (ABC) with demand variability classification (XYZ), resulting in categories such as AX (high value, stable) or CZ (low value, unpredictable).

Why It Matters

•Adds a forecasting dimension to the traditional ABC.
•Helps differentiate predictable high-value SKUs from volatile ones.
•Useful for planning safety stock and replenishment effort.
•Still does not incorporate capital efficiency or cycle time into evaluation, and does not differentiate products within classes.

Connection to Capital

A SKU may be highly valuable and predictable yet still inefficient if it requires too much working capital relative to its financial return.

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