Biphasic ABC analysis & XYZ analysis
Often, a simple ABC analysis is not enough. Then you can refine the grouping with subgroups, e.g. Aa, Ab, Ac or A1, A2, etc. If you want to examine the profitability of the products, you also need cost information, and in this case you can for example combine the ABC analysis with an XYZ analysis looking at logistics costs or a similar analysis.
So titles can be categorized using more than one criterion using ABC analysis. For instance, combining sales volume and sales margin (my-coverage = sales revenue - variable costs) in order to learn about the importance of the items for the business is an example of practical classification. After all, a product that sells well and moves quickly could have a low price or a thin profit margin, in which case it would be less significant than a product with a lower volume but a higher price and a wider profit margin.
For the two-stage ABC analysis, the categorization criteria can be, for instance, sales volume and sales margin. In this instance, the titles are categorized in accordance with the sales volume and the sales margin, and a classification in accordance with the following two criteria is obtained:
Aa, Ab, Ac, Ad Ba, Bb, Bc, Bd Ca, Cb, Cc, Cd Da, Db, Dc, Dd
The objects can be arranged in a grid to show classification. The reciprocal relationships of the items in the same category are also visible when the items are arranged in the grid, taking into consideration their mutual location both horizontally and vertically. The significance of several categories to the firm can also be demonstrated through color codes.
For instance, XYZ analysis examines the logistical costs of various goods. ABC (Activity Based Costing) calculations can be used to calculate the costs associated with product order-delivery, storage, and handling (such as inspection, unpacking, repacking, etc.). The basic idea is the same as in the ABC analysis, namely that group X products account for 50% of the logistical costs associated with all inventory items, etc. You can also examine the quantity of cost-producing events in the XYZ analysis, such as the quantity of sales and receiving events or the processing time needed. Further cost details are not required in this instance.
A comparable grid is produced when ABC analysis is merged with it, just like in the two-step ABC analysis. Similar to the two-step ABC analysis, the components are arranged on the horizontal axis, but the vertical axis now displays logistical costs. The logistical costs of an item increase with its position on the grid. Items that account for 50% of the logistical costs are in the X group.