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Process documentationABC/XYZ Analysis

 

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. During the analysis, the planning objects are assigned one of the classes of ABC and XYZ simultaneously.

Analysis based on value (ABC analysis) can be done by applying Pareto's rule on the value of individual items in a specific time horizon. The analysis ranks planning objects according to their value contributions in terms of sales or contribution margin.

Analysis based on the dynamics of consumption (XYZ analysis) means the calculation of a variance coefficient of consumption or sales in a specific time horizon. For example, a planning object that has the values BY might mean a planning object with medium volume, and trend or seasonal demand.

To use this function, you must activate the business function SCM-APO-FCS, Events and Outliers, Causals, ABC/XYZ Classification (SCM_APO_FORECASTING_1). For more information, see SCM-APO-FCS, Events and Outliers, Causals, ABC/XYZ Classification.

ABC Analysis

You perform an ABC analysis to classify planning objects according to their usage value, or number of objects. During ABC analysis, the system assigns each object one of the following indicators:

  • A - The most value, or given number of objects that produce the greatest value

  • B - Less value, or given number of objects that produce less value

  • C - The least value, or given number of objects that produce the least value

XYZ Analysis

You perform an XYZ analysis to classify planning objects according to the variance in a specific coefficient. During XYZ analysis, the system assigns each object one of the following indicators:

  • X - Very little variation

  • Y - Some variation

  • Z - The most variation

Process

Each of the above groups should be treated differently in forecasting. The system must use a different forecast profile for a planning object with little value and high volatility (CZ), than a planning object with high value and low volatility (AX). The system selects the best forecast profile for each class based on the following process:

  1. You assign two planning levels to the planning area you use for ABC/XYZ classification, one planning level for ABC classification, and one for XYZ classification. The planning level of ABC classification can be an aggregated level compared to the planning level used for XYZ classification.

    In Customizing for Advanced Planning and Optimization, under Start of the navigation path Supply Chain Planning Next navigation step Demand Planning (DP) Next navigation step Basic Settings Next navigation step ABC/XYZ Classification Next navigation step Specify Planning Levels for ABC/XYZ Classification End of the navigation path, you assign planning levels to the planning area you want to work with. You can specify planning levels in Customizing for Advanced Planning and Optimization, under Start of the navigation path Supply Chain Planning Next navigation step Demand Planning (DP) Next navigation step Basic Settings Next navigation step Specify Planning Levels End of the navigation path.

    Caution Caution

    You cannot assign navigation attributes to the planning levels that you want to use in ABC/XYZ classification.

    End of the caution.

  2. You create an ABC analysis profile for classifying your planning objects into A, B, and C classes.

    You can do this on the SAP Easy Access screen, under Start of the navigation path Advanced Planning and Optimization Next navigation step Demand Planning Next navigation step Environment Next navigation step Demand Planning Worklist End of the navigation path, in the ABC Analysis Profiles queries. For more information, see Configuration Settings for ABC/XYZ Classification.

  3. You create an XYZ analysis profile for classifying your planning objects into X, Y, and Z classes.

    You can do this on the SAP Easy Access screen, under Start of the navigation path Advanced Planning and Optimization Next navigation step Demand Planning Next navigation step Environment Next navigation step Demand Planning Worklist End of the navigation path, in the XYZ Analysis Profiles queries. For more information, see Configuration Settings for ABC/XYZ Classification.

  4. After you have specified the criteria based on which the system should segment your planning objects into A, B, C, and X, Y, and Z classes, you define the classification profile, which contains both the ABC and the XYZ analysis profiles, as well as the composite forecast profiles you want the system to use for each class combination.

    You create classification profiles on the SAP Easy Access, under Start of the navigation path Advanced Planning and Optimization Next navigation step Demand Planning Next navigation step Environment Next navigation step Demand Planning Worklist End of the navigation path, in the Classification Profiles queries.

    You create composite forecast profiles on the SAP Easy Access screen, under Start of the navigation path Demand Planning Next navigation step Environment Next navigation step Maintain Forecast Profiles End of the navigation path, on the Composite Forecast Profiles tab page. For more information, see Creating a Composite Forecast Profile.

    You then assign a composite forecast profile that contains forecast profiles that best match the combination of ABC and XYZ classes to each class combination. You can do this on the SAP Easy Access screen, under Start of the navigation path Advanced Planning and Optimization Next navigation step Demand Planning Next navigation step Environment Next navigation step Demand Planning Worklist End of the navigation path, in the All Classification Profiles queries. For more information, see Configuration Settings for ABC/XYZ Classification.

  5. You run the ABC/XYZ Classification and Forecast Optimization report.

    For more information, see ABC/XYZ Classification and Forecast Optimization.

  6. You display the classification results, and change them, if necessary.

    On the SAP Easy Access screen, choose Start of the navigation path Advanced Planning and Optimization Next navigation step Demand Planning Next navigation step Environment Next navigation step Display ABC/XYZ Classification Results End of the navigation path. For more information, see ABC/XYZ Classification Result Display.

  7. You can display the planning objects that belong to the different classes in interactive demand planning, by specifying the XYZ planning level in the Show field of the selection window, and selecting the class you want to display.

    You can also save the selections you create using the different classes and use them in other applications, for example in forecasting, or the Automatic Outlier Detection and Event Generation report.