Inventory planning
XYZ Analysis
By the Supply Chain Manager team · Updated October 16, 2026
XYZ analysis classifies SKUs by how predictable their demand is, using the coefficient of variation: X is steady, Y is variable and Z is erratic.
Where ABC measures value, XYZ measures volatility. A common split uses the coefficient of variation (CV) of demand: X for CV up to 0.5, Y for 0.5 to 1.0 and Z above 1.0. Thresholds vary between businesses and depend on the time bucket used.
How to calculate XYZ analysis
CV = Standard Deviation of Demand ÷ Mean Demand X: CV ≤ 0.5 Y: 0.5 < CV ≤ 1.0 Z: CV > 1.0
XYZ analysis example
Illustrative numbers: a cleaning product selling 50, 55, 48 and 52 a week has a CV well under 0.5 (X). A spare part selling 0, 0, 30 and 2 a week has a CV above 1 (Z). The first suits automatic replenishment; the second needs an intermittent-demand method or a minimum-stock policy.
Why XYZ analysis matters for distributors
Combining XYZ with ABC tells you where automation is safe (AX, BX) and where a planner should stay involved (AZ). It also explains why one forecasting method rarely fits a whole range.
Common XYZ analysis mistakes
- Calculating CV on daily data for slow items, which makes almost everything look erratic.
- Treating Z items as forecastable with standard smoothing methods.
XYZ analysis in Supply Chain Manager
Supply Chain Manager uses the same X, Y and Z bands (CV ≤ 0.5, ≤ 1.0, above 1.0) on its Forecast Accuracy matrix, alongside ABC classes.
Open the live demoExamples on this page use made-up round numbers to show the calculation. They are not benchmarks or results from real businesses.