Why 4-Dimension for Inventory Management?

Multi-Dimensional Analysis – Need and Advantages

Viewing Inventory data based on Value and Consistency in demand may not suffice. There may be other parameters or dimensions that inventory can have. Consistency of demand can also be computed based on number of orders and not just quantity. More number of orders means items are more consistent and les number of orders means items are less consistent. Also analysis based on number or orders are easy to compute compared to Standard Deviation and Co-efficient of Variation. Therefore it is easy to add two more dimensions based on count of orders and consistency of orders and this may be called as ‘abc’ and ‘xyz’ analysis as against ‘ABC’ and ‘XYZ’.

ABC analysis is done for order values and XYZ analysis is done for consistency of order quantities. By introducing ‘abc’ to represent total order lines and ‘xyz’ for consistency of orders the 2-dimensional inventory analysis may be extended to 4-dimension adding a fresher perspective to the existing inventory management system in place. The key to the 4-Dimension analysis may be summarised as

ABC Total Order Value
XYZ Consistency of Order Quantities
abc Total Number of Order Lines
xyz Consistency of Orders