Integration of demand forecasts in ABC‐XYZ analysis: practical investigation at an industrial company

Purpose – Item classification based on ABC‐XYZ analysis is of high importance for strategic supply and inventory control. It is common to perform the analysis with past consumption data. In this context, the purpose of this study is to test the hypothesis that an integration of demand forecasts can improve the performance of item classification, in particular the performance of ABC‐XYZ analysis. Design/methodology/approach – For the study, real data of an industrial enterprise in the mechanical engineering sector (focal company) were analyzed and evaluated. Findings – The study shows that a comprehensive data analysis of the focal company can recommend a specific implementation of the ABC‐XYZ classification. In contrast to the classic method of making the ABC‐XYZ analysis based on consumption data only, the approach developed in this paper offers considerable advantages. These are quantifiable in respect to an assumed optimal reference classification. Originality/value – The evaluation of the results is very promising and applicable to other branches besides mechanical engineering.