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# What is XYZ Analysis?

Smartpedia: XYZ analysis is a three-step process in materials management that classifies goods, merchandise, services, etc. according to their consumption.

## Classification of articles according to consumption

The XYZ analysis is a procedure in business administration or materials management in which articles – i.e. goods, services, etc. – are classified according to their regularity of turnover. Classification is based on past consumption values in three stages:

• X stands for constant consumption, i.e. products that are sold, used or consumed constantly.
• Y stands for strongly fluctuating consumption, e.g. for products that are sold, used or consumed most frequently due to seasonal factors, a trend or boom, or an event.
• Z stands for irregular consumption.

## The findings of a XYZ Analysis

The findings of the XYZ analysis – also known as RSU analysis for regular, seasonal, unsteady – are important for stock planning, the timely production of articles or the procurement of goods. The classes are calculated using a coefficient of variation, which results from the mean value of the consumption and a standard deviation:

• For X usually a coefficient of variation is used from 0 to 25%,
• for Y between 25% and up to and including 50%,
• and for Z over 50%.

In addition, XYZ analysis makes it possible to combine withdrawal behavior over time (how often items are sold, used, or consumed within a specified time frame) and quantity fidelity – how high was the consumption per item call-off. This can result in statements such as X-X (the goods are regularly consumed in constant quantities) or X-Y (the goods are regularly consumed with strongly fluctuating quantities).

## The combination of XYZ and ABC Analysis

The XYZ analysis is also performed in combination with the ABC analysis.

The result is:

• The combinations A-X, B-X, C-X, A-Y and B-Y are suitable for just-in-time procurement. B-Y could also be procured via stock procurement.
• The combinations A-Z and B-Z are difficult to forecast, so that organisations have to find a compromise between expensive warehousing, costly ordering and the risk of delivery bottlenecks.
• The effort for C-Z should be minimised. Here, too, a compromise must be found between stock levels and procurement costs.

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Here you will find additional information from our Smartpedia section:

How does the ABC Analysis work?

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