Choosing the best categorization

Choosing the right categorization for your product or customers portfolio

Several of our customers and experienced users of ABC Analyzer are combining the two categorization principles: ‘Percentage’ and ‘Actual values’), when working with segmentation in ABC Analyzer.

The benefits:

  • You know exactly the limits defining your categorization throughout the year (easy to communicate).
  • You will not experience incidents where one fast-moving product, becoming an AA-product, push down existing AA products or visa versa. If you choose to use ‘Percentage’ as your categorization principle throughout the year this can happen even  though the AA product still has the same cost value and demand.

This is how you do:

Every year, you begin by creating the “Grand Segmentation” by using the 80-15-5 rule  and the categorization principle ‘Percentage’. Secondly, you will identify the exact limits (categorization principle ‘Actual values’) defining the 9 double-ABC-categories. The rest of the current year the categorization is based on the identified actual values.

How to find the ‘actual values’?

  1. Investigate your “Grand Segmentation” by looking in MyAnalysis.
  2. Look at ‘minimum’ and ‘maximum’ values in each box of the standard matrix. Identify the actual values defining the A-products. Consider if the limits are meaningful or adjust it a bit.
  3. Use these actual values as limits in a new categorization

Classify before you act! With a relevant segmentation you can start looking at your products differentiated. Optimizing your use of time resources and optimizing the creation of value.