Summary
This article looks at the purpose of an ABC Class code, what it tells the user and how it is assigned.
Applies To
All items in StockIQ
Process
The ABC class code associated with an item helps give you a quick idea about how important an item is in your inventory, by calculating how much activity is on the part. In StockIQ, your service level goal is usually associated with a particular ABC class code, and that ultimately determines what your safety stock levels will be. A' items are your most important, 'B' slightly less important, and so on. In StockIQ you can choose to have between 3 (A through C) and 5 (A through E) as your normal ABC classes.
ABC classes are assigned by StockIQ automatically, on the refresh frequency that you configure in the Class Settings Groups page. ABC classes are generally based on volume type measures, such as hits, COGS, sales, margin, and so on. This differs from XYZ Classes, which are based on a volatility measurement.
Tip: If your business is more customer & service level focused, select measures like Hit Frequency and Quantity Sold to determine classing. If you are more profit or growth focused, choose measures like Revenue or Margin. You can combine these factors by percentages you decide.
X Class
A special class, "X", is used for items that have essentially no movement, no usage, and are pretty much dead stock. A 50% service level is assigned to these items when using StockIQ's built in service level management.
For example, if you are classifying by hits, X class items are those that have no hits.
Also, depending on your class settings, items with non-stock order policies can also be automatically assigned to X-class, even if they do have some activity in your classing measure.
NOTE: Items that come from the ERP with an inactive order policy, e.g. "Do Not Order", "Obsolete", "Replaced" and similar will also be automatically assigned to "X" class. This means that it is possible to see some non-zero hits/qty sold/revenue/etc. numbers for X-class assignment when looking in the stratification detail screen.
N Class
A second special class, "N", is used for items that are new, according to the threshold set in the Inventory Limits page. You can specify a target service level for new items, to give them a chance to succeed or fail while new, before they are subject to normal classing criteria.
Tip: Use the ABC and XYZ codes to help with your SKU rationalization process via the Stratification Detail page in StockIQ.