Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

11.2.3 The XYZ Classification and Other Analyses and Statistics

Intended learning outcomes: Explain the XYZ classification. Produce an overview on exception lists.

XYZ classification distinguishes items with regular or even continuous demand (X items) from those with completely irregular, lumpy, or unique demand (Z items). Y items lie between the two extremes.

The decision about the assignment of an item results from analysis of the demand quantities per statistical period. Thus, the dispersion of the demanded quantities is a measure for the classification. For example, for an item in the X class we could require that the deviation from average consumption should not be larger than 5% per week or 20% per month.

Materials management sets its policies according to the XYZ classification. It also determines whether important materials management parameters should be calculated automatically (for example, using forecast data) or set manually.

An exception list contains goods that do not “normally” pass through the company.

Exception lists can be based on inventory transactions, such as

  • Shelf warmers, that is, items that have not moved during a certain number of months
  • Items that do not show a sufficient turnover
  • Items whose inventory value exceeds a particular total

Exception lists serve to sort out items that are in an exceptional state according to a particular criterion. Even in the case of computer supported planning & control systems, users can usually define such exception lists themselves.

We will discuss the entire category of exception messages that affect production and procurement orders in the course of this chapter as well as in Chapter 12.

Course section 11.2: Subsections and their intended learning outcomes