ABC-XYZ: not every product deserves the same attention
A few products carry most of the money; some sell steadily and others unpredictably. Classifying both ways tells you where to focus.
The 3 × 3 matrix
The big number is the share of sales in each box. Click a box to light up its parts and see what to do with them.
- A parts
- 10 · 25%
- Sales in A
- 81%
- C parts
- 14 · 35%
- Sales in C
- 5%
- Erratic (Z) parts
- 12 · 30%
- Sales that are A and erratic
- 10%
The stage shows a catalogue of 40 spare parts, one bar per part, sorted from the one that sells the most dollars a year to the one that sells the least. The white line adds them up: after the first bar, after the first two, and so on.
Look how fast the white line climbs. In most businesses a handful of parts bring in most of the money. That is the Pareto rule, often called 80/20: about 20% of the products make about 80% of the sales.
ABC puts a name on it. A = the few parts that make up the first 80% of the value. B = the next 15%. C = the long tail of cheap or slow parts that together add up to only 5%.
Variability (XYZ)
Value is only half the story. Two parts can sell the same dollars a year: one sells a little every single week, the other sells nothing for two months and then a big order arrives. The second one is much harder to stock.
XYZ measures that. We take 26 weeks of sales and compare how much they swing with the average. That ratio is the coefficient of variation (CV). X = steady (low CV), Y = it moves around, Z = erratic or lumpy.
The 3 × 3 matrix
Put both together and you get nine boxes. Each box needs a different way of working — how often you review it, how much safety stock it gets, and how much of your planners' time it deserves. Lesson 3 turns each box into an ordering rule.
The 80 / 95 cutoffs and the 0.5 / 1.0 CV lines are common starting points, not laws. Pick lines that give you a manageable number of A items to watch closely — then keep them the same so the classes mean something month after month.
Try this
What to remember
- A few parts make most of your sales. Find them and give them your best attention.
- ABC ranks by value: A = first ~80% of sales, B = next ~15%, C = the long tail.
- XYZ ranks by predictability: the coefficient of variation compares the weekly swings with the average.
- The combination tells you how to manage each part: AX is easy money, AZ needs a human, CZ may not belong in stock at all.
- Re-run the classification every quarter — products move between boxes as the business changes.