Inventory glossary

What is XYZ analysis?

XYZ analysis is a way of grouping SKUs by how predictable their demand is.

For a small Shopify store, XYZ analysis tells you where forecasts can be trusted and where they cannot. X-class products let you set reorder points and quantities with confidence. Z-class products need extra buffer stock or closer manual review because any formula-based forecast will be shaky.

Use it alongside ABC analysis, which ranks products by revenue or volume. A product can be high revenue but erratic demand, which means it needs special attention even though it is important. Combining the two tells you which SKUs to automate and which to watch by hand.

Example

A candle store sells 40 units of its lavender candle every week, almost without fail. That is X class. Its pine candle sells 20 to 60 units a week depending on promotions, so that is Y class. Its limited edition pumpkin candle sold 200 units in October and almost none the rest of the year, so that is Z class and needs a different ordering approach than a weekly reorder point.

Common mistakes

  • Treating all SKUs with one reorder rule regardless of how variable their demand is.
  • Classifying a product once and never revisiting it as its sales pattern changes.
  • Confusing XYZ analysis with ABC analysis, when they measure different things and work best together.

XYZ analysis and SteadyShelf

SteadyShelf forecasts demand per variant, so stores can see which SKUs behave like steady X items and which behave like unpredictable Z items when deciding order quantities and timing.

SteadyShelf is launching on the Shopify App Store. Join early access to get the install link first.

Related terms

ABC analysis · Demand variability · Demand forecasting · Safety stock · Intermittent demand

Full inventory glossary

FAQ

What is the difference between ABC analysis and XYZ analysis?

ABC analysis ranks SKUs by value, usually revenue or sales volume, into A, B, and C tiers. XYZ analysis ranks SKUs by how predictable their demand is, into X, Y, and Z tiers. A store often uses both together, for example an AX product is high value and steady, while a CZ product is low value and erratic.

How do I classify a SKU as X, Y, or Z?

Look at the spread of weekly or monthly sales over several months. If sales stay close to the average each period, it is X. If sales swing moderately, it is Y. If sales are irregular, seasonal, or spike unpredictably, it is Z. Some methods use the coefficient of variation of demand to set exact cutoffs, but a visual check of the sales history works for a small store.

Let SteadyShelf do this math for every SKU

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