ABC-XYZ Inventory Segmentation
A two-axis segmentation that separates value from predictability so policy can be differentiated.
By SupplyChain.management · Last updated
Definition
ABC-XYZ segmentation classifies items by value contribution (ABC) and demand variability (XYZ) to produce nine groups with distinct inventory policies.
Why it matters
Differentiated policy is the single highest-leverage inventory change most organisations can make without new systems.
Example
AX items get tight coverage and frequent review; CZ items get make-to-order or minimal stock; AZ items get the largest buffers and the most planner attention.
How to interpret it
If every segment ends up with the same coverage target, the segmentation is not being used.
How to improve it
Refresh segmentation quarterly, define review frequency and coverage rules per cell, and automate policy application where possible.
Common mistakes
Segmenting once, then never linking the result to actual replenishment parameters.