Despite increasing pressure to reduce working capital across many industries, many multinationals still set their safety stock targets as a number of weeks of demand depending on an item’s ABC/XYZ- segment, ignoring important aspects like lead time and replenishment quantities. This leaves room for improving costs, customer service and working capital. This article explains how to set up ABC/XYZ-segmentation in the right way and how to successfully implement inventory policies and service level differentiation in your organization. A real- life case study of a manufacturer of cargo securing systems is used to highlight best practices and the benefits gained.

From Issue: Third-Party Planning — A Revolution for the Field?
(Summer 2024)

How to do ABC/XYZ Properly for Better Inventory Optimization