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

11.7.2 Scenario: The ABC-XYZ Analysis and its Use in Materials Management

Intended learning outcomes: Explain the combined ABC-XYZ classification. Describe its use in materials management. Identify the appropriateness of Kanban control as the result of an ABC-XYZ analysis.



This scenario refers to Subsections 11.2.2 and 11.2.3.

The so-called ABC-XYZ analysis bases upon a combined ABC-XYZ classification. It allows decision making as to the appropriate method of materials management for individual items. Mark the areas (items) in the matrix in Figure 11.7.2.1 for which Kanban control would be appropriate. Explain the reasoning behind your answer.

Fig. 11.7.2.1       Combined ABC-XYZ classification.

Solution:

The prerequisite for the Kanban technique is continuous demand along the entire value chain. X items are particularly suitable for production in a Kanban system. For the Y group, A items should not be controlled by Kanban, for their consumption value is high, and fluctuating demand leads to lower stock-inventory turnover and thus longer storage time. For the same reason, Kanban control is as a rule not appropriate for Z items, whereby an exception can be made for C items, as carrying costs for C items may be lower than the costs of a more expensive control technique.




Course section 11.7: Subsections and their intended learning outcomes

  • 11.7.5 Scenario: Effectiveness of the Order Point Technique

    Intended learning outcomes: Explore the changing shape of the inventory curve for continuous and less continuous demand.

  • 11.7 Scenarios and Exercises

    Intended learning outcomes: Calculate examples for the ABC Classification. Disclose the ABC-XYZ analysis in materials management. Differentiate between safety stock variation and demand variation. Determine batch size depending on stockout costs. Assess the effectiveness of the order point technique.