Stop Treating All Items the Same: Free ABC/XYZ Segmentation for D365FO

Most companies in Dynamics 365 Finance & Operations still manage inventory the same way — treating every item equally.

That’s expensive.

The real game-changer is ABC/XYZ Classification — a completely free and open-source feature that automatically segments every item by two critical dimensions:

• ABC → How valuable is the item? (based on actual usage value)
• XYZ → How predictable is the demand? (using the proven SBC method)

When you combine them, you get a powerful 3×3 planning matrix that tells you exactly how to manage each group.

Practical Strategy:

• AX → Kanban, VMI, tight control
• AZ → Strong candidate for Make-to-Order or consignment
• CZ → Consider not stocking — source on demand

1. Go to: Inventory management > Periodic tasks > Inventory optimizer > ABC/XYZ Classification
2. Leave Site blank (all sites), set 12-month look-back, tick “Delete and regenerate”
3. Run the batch (best scheduled monthly)
4. Open the Inventory Health Dashboard to see the full 3×3 matrix, KPIs, and Pareto chart

This is the foundation of the Inventory Optimizer suite — all features are free, open source, and run natively inside D365FO.

GitHub Repository: → https://github.com/forgestock/mrpassessment

Full User Training Guide is included.

Next in the series: MRP Exception Advisor (smart prioritization of supply problems)

If you work with D365FO, I highly recommend giving this a try.

What’s your biggest inventory or MRP challenge right now? Drop a comment below — happy to discuss.

D365FO #Dynamics365 #SupplyChain #InventoryManagement #MRP #ABCAnalysis #OpenSource #InventoryOptimization

Originally published at https://www.linkedin.com.