Algorithm for implementing ABCXYZ analysis

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How to perform ABC and XYZ analysis? To do this, follow the steps described below.

Determining the purpose of the research.

There is no point in conducting fronk oil email list ABCXYZ analysis just for the sake of it. This tool is used to increase sales. The specific purpose of the analysis can be formulated in different ways:

Compiling a list of key clients and studying their needs in detail.

Increase your income from every transaction.

Improving interaction with suppliers.

Optimization of product range.

Selecting objects for analysis:

number of points of sale;

number of clients in the database;

number of orders for a given period.

Defining parameters for ABCXYZ analysis.

For the ABC component:

sales volume for the period;

profit for the period;

total number of orders for the period.

For the XYZ component:

regularity of sales.

Calculation of the cumulative total based on the ABCXYZ analysis parameters.

Marking objects into categories depending on their share in the result.

The result of the work should be a matrix that clearly combines customer categories, thus forming 9 groups for analysis.

Matrix

AX is the group with the highest consumer value, stable demand and excellent predictability;

AY - a group with high cost to the consumer, but variable demand and a lower forecasting indicator;

AZ - high cost to the consumer, but at the same time irregular demand and the impossibility of making a sales forecast;

BX is a group with an average consumer value, the goods have a stable demand that is easy to predict;

BY is a group with an average consumer value, but demand is unstable and more difficult to predict than in the previous category;

BZ - average cost to the consumer, but sales are difficult to predict due to unstable demand;

CX is a group with low consumer value, stable demand and excellent sales predictability;

CY is a group with low consumer value, but unstable demand, which makes it difficult to forecast sales;

CZ - low consumer value, irregular demand and inability to predict sales.

The resulting matrix allows for a cross-analysis of the customer base not only by sales volumes, but also taking into account the stability of their orders.

The resulting matrix

The strategy for groups AX, AY, BX, CX should be aimed at their retention and development. If possible, customers from these groups should be transferred to a higher level. Products from these categories have a stable demand, so such products should always be available.

The solution for AZ clients should be a deeper analysis of the situation. Such customers bring irregular profits to the company. It is important to understand what causes unstable demand and correct the mistakes. AZ clients, if successful, can move to AX and AY groups.

The strategy for the CZ group should be strict: it is better to suspend cooperation with such clients, so as not to waste the resources of sales managers on such customers.

Based on the results of ABCXYZ analysis of products and customers, you will be able to determine the reasons for unstable demand and decreased profits for certain product categories. When entering a new market, you will also be able to prepare and analyze customer needs to expand your product range.

In conclusion, we emphasize that intuitive business management, without taking into account objective indicators, is fraught with a decrease in profits and loss of market share. Competitors who analyze sales volumes and demand stability in time will significantly outpace you and take away a significant share of your potential profit.

The task of the owner or hired top manager is to correctly distribute resources taking into account the demand and characteristics of goods and customers. In this light, conducting ABCXYZ analysis is especially relevant for online stores.

If you approach the issue of supplies, promotion and sales in a comprehensive manner, then it is the systemic approach to organizing business processes that will support the development of the company. Optimization of sales and expenses, timely adjustment of the budget are the components of successful business management. ABCXYZ analysis allows not only to monitor the current situation, but also to make forecasts for future periods. This data allows the company's resources to be distributed as efficiently as possible.