ABC-XYZ classification functionality introduced in SCM 7.0, enhancement package 2 comprises two broad capabilities:

• Mathematical variance- and value-based calculation through an SAP standard report to classify products in ABC and XYZ combination pairs based on sales history data
• Use of the ABC-XYZ classification value for optimum statistical forecasting method selection from assigned composite forecast profile 

The product planning objects are dually classified based on volume or value (ABC) and sales demand volatility (XYZ). A-class products have high volume or value compared with C-class products, whereas X-class products are with minimum variability (coefficient of variance) compared with Z-class products that have high variability of historical sales quantity. This ABC-XYZ classification is stored internally in APO (refer to the sidebar, “Some ABC-XYZ Classification Tips”) at the defined planning level and is available in the Selection Profile shuffler selection option to select suitable planning or characteristics value combinations. This ABC-XYZ classification is also used for selection of a best-suited statistical forecasting model, resulting in improved forecast accuracy without the need for user intervention. 

For using ABC-XYZ classification there are two prerequisites:

1. Activate business function SCM_APO_FORECASTING_1 in the APO system
2. Set up SAP NetWeaver Business Client (NWBC) if it is not already set up

To activate the business function SCM_APO_FORECASTING_1 in the APO system, execute transaction code SFW5, and in the screen that appears, click the ENTERPRISE_BUSINESS_FUNCTIONS folder (not shown) to scroll down to the business function. Select the check box under the Planned Status column and then click the Activate Changes button to initiate activation of the business function (Figure 1). Once the business function is successfully activated, the Planned Status changes to Business func. remains activated; this message means the status is non-reversible. 

Figure 1

Activate the SCM_APO_FORECASTING_1 business function in the switch framework

Setting up the SAP NWBC is Basis administrator activity. Essentially, it requires activation of relevant Webdynpro Services accessed using transaction code SICF. ABC Classification Service DP_CLASS_APP is available under menu path default_host > sap > bc > webdynpro > sapapo (Figure 2). When the service is not activated, it is grayed out. In the screen shown in Figure 2, the DP_CLASS_APP service is activated. To confirm that this service is activated, you can select the service (e.g., DP_CLASS_APP) and in the drop-down menu, right-click where the Activate Service option is grayed out while Deactivate Service is available.

Figure 2

Service activation under webdynpro/sapapo for ABC-XYZ classification details

Additionally, the SAP_SCM_FCS_PLN_EXP_2 role or the SAP_SCM_FCS_PLN_STD_2 role needs to be assigned to the user ID who will access ABC-XYZ classification and related functionality through NWBC (Figure 3). Your Basis  security team does this role assignment.

Figure 3

Roles assignment to user ID for NWBC user interface

Upon activation of the SCM_APO_FORECASTING_1 business function, new entries are available in the SAP Easy Access screen. Follow menu path Advanced Planning & Optimization > Demand Planning > Environment > Current Settings > Specify Planning Levels for ABC/XYZ Classification > Environment. You have options for the following new entries:

• Demand Planning Worklist
• ABC/XYZ classification and forecast optimization
• Display ABC/XYZ classification results

The user ID needs to be assigned to one of the following roles for accessing the DP worklist. This is a new SAP NWBC user interface used in ABC-XYZ classification management and display of the output:

• DP Expert (SAP_SCM_FCS_PLN_EXP_2)
• DP Administrator (SAP_SCM_FCS_PLN_ADM_2)
• DP Planner (SAP_SCM_FCS_PLN_STD_2)

Here are the steps required for ABC-XYZ classification:

1. Specify planning levels
2. Assign a planning level to a planning area
3. Define ABC-XYZ analysis profiles in the Demand Planning Worklist
4. Define a classification profile in the Demand Planning Worklist
5. Execute an ABC-XYZ classification report
6. Review results in the Demand Planning Worklist

You need to define two planning levels: one for ABC and another for XYZ classification with suitable characteristics from the planning area. The same planning level can be used, such as a product-only characteristic. To create the planning levels access IMG Configuration from transaction code SPRO and follow menu path APO > Supply Chain Planning > Supply Chain Planning > Demand Planning > Basic Settings > Specify Planning Levels.

In the screen that appears, select the Planning Level folder and populate the Planning Area for which Planning Level is required and Planning Level field with name of the Planning Level as shown in Figure 4. Add a description of the Planning Level and click the save icon.

Figure 4

Enter values for the planning level

Now click the Planning Characteristics folder (Figure 5). Enter a sequence number in the Seq. No. column (e.g., 1) and the characteristics value (e.g., 9AMATNR) available in the Planning Area under Characteristics. Click the save icon. This action defines a planning level with characteristics in it. In my example, the PRODUCT planning level has  only one characteristic (9AMATNR) assigned to it. It is possible to assign multiple characteristics, but that means ABC-XYZ classification is executed at a detailed planning level instead of just at the product planning level.

Figure 5

Enter values for the planning characteristics

After creating the planning levels, you assign ABC and XYZ planning levels to the DP planning area. To complete this step, execute transaction code SPRO and follow menu path Advanced Planning and Optimization > Supply Chain Planning > Demand Planning > Basic Settings > ABC/XYZ Classification. Click the execute icon beside Specify Planning Levels for ABC/XYZ Classification.

The screen now displays your Planning Area to which ABC and XYZ planning levels need to be assigned. I assign to both entries the PRODUCT planning level that I created earlier (Figure 6). 

Figure 6

Configuration for planning level management and assignment to planning area

Note that it is possible to have a detailed planning level at the product-customer-location level as shown in Figure 7. In such a case, ABC-XYZ classification would not be at the product level, but at the product-customer-location combination level.

Figure 7

Alternate assignment of detailed planning level to planning area

Step 3. Define ABC-XYZ Analysis Profiles in the DP WorkList

To complete this step, you first need to access the Demand Planning Worklist. Execute transaction code /SAPAPO/DP_WORKLIST or follow menu path Advanced Planning and Optimization > Demand Planning > Environment. The Demand Planning Worklist opens a web browser screen as shown in Figure 8. To create a new ABC and XYZ analysis profile, click the New button. 

Figure 8

The Demand Planning WorkList showing ABC-XYZ configuration

In the next screen (Figure 9) populate the Planning Area, ABC Analysis Profile, and Source Key Figure, and ABC Classification Criteria fields. In the ABC Classes section, enter suitable threshold values (absolute quantity or percentage value) for A, B, and C classes. You may add your own class (e.g., D) by clicking the Add Class button or remove existing classes by clicking the Delete Class button.

Figure 9

Demand Planning Worklist and ABC Analysis Profile management

The different ABC classification criteria options are:

• Usage Value in %
• Usage Value
• Number of Objects in %
• Number of Objects

I recommend that you provide percentage values if the number of planning combinations is not known in advance, if there are too many, or if they could change in count. Start with the Number of Objects in % option. This option assigns the a % of total planning levels to the A class, the b % to the B class, and the c % to the C class based on the source key figure (for example, sales history total volume). 

Create a new XYZ analysis profile similarly with one of four XYZ classification criteria in the same Demand Planning Worklist transaction. In the Demand Planning Worklist screen, click the New button (refer back to Figure 8):

• Variance in % Steps
• Variance Coefficient
• Number of Objects in %
• Number of Objects

For example, when you use the Number of Objects in % option, x % of the total planning levels are assigned to the X class, y % to the Y class, and z % to the Z class based on the thresholds by an ascending order of the coefficient of variance calculated based on the source key figure, such as sales history quantity (Figure 10).

Figure 10

XYZ Analysis Profile maintenance

Step 4. Define a Classification Profile in the Demand Planning Worklist

To complete this step, execute transaction code /SAPAPO/MC96B or follow menu path Advanced Planning and Optimization > Demand Planning > Environment. In the Classification Profile screen (Figure 11), you need to assign the newly created combination of the ABC classification profile and the XYZ classification profile to the planning area. 

Figure 11

Classification Profile management in the Demand Planning Worklist

After you complete this step, the initial setup of ABC-XYZ classification and associated forecast optimisation processes is finished. The next step is actual execution of ABC-XYZ classification. Before I describe that step, however, I outline the logic for it in the sidebar, “Logic for ABC-XYZ Classification” and discuss forecast optimization features in the sidebar, “Forecast Optimization Using ABC-XYZ Classification.”

To execute an ABC-XYZ classification report, follow menu path Advanced Planning and Optimization > Demand Planning > Environment > ABC/XYZ Classification and Forecast Optimization or execute transaction code /SAPAPO/ABC_XYZ.

In the Source section of the screen that appears (Figure 12), specify the Planning Area, Planning Version, and Selection Profile for Planning Objects to be classified along with Classification Profile (a combination of ABC and XYZ Classification Profile) to be used.

Figure 12

The ABC-XYZ classification report input selection screen

The Horizon for ABC Analysis section requires beginning and end dates of the time period to be considered for determining ABC classification. The Horizon for XYZ Analysis and Forecast Optimization section requires a beginning period and an end period along with the periodicity for which you want to run XYZ classification. Normally, the periodicity for the XYZ and ABC analysis horizons is the same.

Finally, in the Selection Actions section, you specify if only classification or forecast optimization is to be carried out. In case of forecast optimization, the forecast key figure and number of future periods need to be provided. This data is used for statistical forecast computation to calculate the error measure and select the most suitable statistical forecast method. Note that there is an option check box to select Forecast Optimization only for objects without assigned forecast profiles so that already assigned profiles are not overwritten.

The ABC/XYZ classification log (Figure 13) displays the number of planning combinations used to generate the ABC-XYZ classification along with runtime. To display this log click the execute icon shown in Figure 12.  

Figure 13

Output of a typical ABC-XYZ classification run

Figure 14

Display of ABC-XYZ classification (count of planning levels for each pair)

The Web Dynpro screen displays data in three sections: Selection Parameters, Classification View in tabular and chart format, and Details View showing each planning level combination with the ABC-XYZ classification pair assigned along with the forecast profile selected from the composite forecast profile assigned in the Classification Profile (Figure 15).

Figure 15

ABC-XYZ classification and forecast assignment results

In this web-browser-based screen, you can change system-determined ABC and XYZ classification values and save your entries by clicking the Set ABC Class and Set XYZ Class buttons. It is also possible to disable forecast optimization for a selected planning object in future forecast optimization runs by clicking the Disable Forecast Optimization button. You can export the ABC-XYZ classification results into Excel format for offline analysis. You can also include the display of value used to determine the ABC and XYZ classification for reference (not present in the default output layout) as seen in Figure 16.

Figure 16

ABC-XYZ classification output display with value used for determination

Now that ABC-XYZ classification is carried out, you can load data in an interactive planning desktop for planning objects (or characteristic value combinations) for a particular combination of ABC and XYZ class values. This is possible in Shuffler selection. After you select Show by Planning Level for ABC – XYZ Classification, in Object Selection enter the ABC- or XYZ-class values in the selection condition. 

Figure 17

Object selection by ABC-XYZ class values in an interactive planning desktop

After you load data in the planning desktop for the selected planning object combinations, switch to the forecast view to display a system-generated master forecast profile and assignment of a univariate or MLR forecast profile as shown in Figure 18. Exiting from this interactive forecast planning screen automatically saves the statistical forecast based on the Univariate Forecast Profile (such as the forecast method and associated parameters). On the other hand, a background run of the statistical forecast for all the planning combinations would also save the statistical forecast based on the Univariate Forecast Profile.

Figure 18

A master forecast profile assigned to a planning level based on ABC-XYZ classification and associated forecast optimization

Some ABC-XYZ Classification Tips 

The ABC-XYZ classification value can be used as key master data element in other APO modules such as Supply Network Planning (SNP) and Production Planning (PP). This functionality is most relevant for an organization’s DP business process. It enhances the statistical forecasting method selection process based on the product classification carried out considering sales history data variance.

From /SAPAPO/TSAREATE table for a given DP Planning Area (PAREAID field), the CLASSTAB field value provides a system-generated classification table (/1APO/ Axxxxxxxxx) as shown in Figure A. 

Figure A

/SAPAPO/TSAREATE table

Further, you can display contents of CLASSTAB table /1APO/A1000001409 obtained from /SAPAPO/TSAREATE table in transaction SE16 as shown in Figure B. This system-generated table contains the entire data for ABC-XYZ class values, the values used to determine ABC-XYZ classes, selection ID with assigned characteristic value of planning level in this case only ABC_9AMATNR. 

Figure B

ABC-XYZ classification value stored in a system-generated table identified from the planning area settings table

The ABC and XYZ classification value for each planning level combination can be further read by a custom program and written to product or product-location master data extra fields. Subsequently, SNP or Production Planning and Detailed Scheduling (PPDS) can use this ABC-XYZ classification value maintained in the product or product-location master data for subsequent planning action.

SAP provides three business add-ins (BAdIs) to enhance standard system behavior:

• /SAPAPO/BADI_DP_ABCXYZ_CHANGE: Change of ABC/XYZ Classes as determined by ABC/XYZ Classification  
• /SAPAPO/BADI_DP_ABCXYZ_FPRFCHG: Change of Forecast Profile Assignment Before Fcst. Optimization
• /SAPAPO/BADI_DP_ABCXYZ_OWNVARI: Define own Variation Coefficient Calculation Logic during XYZ Classification