Designing forecasting and service-level-based inventory strategies through product segmentation

In the context of supply chain improvement, segmenting products aligns with demand patterns and contributes to strategic decisions to support better resource allocation, allowing businesses to achieve desirable service levels. This paper provides feasible strategies that strengthen sales forecasting and service-level-based inventory management, emphasizing the ABC/XYZ segmentation to improve the flexibility and responsiveness of the supply chain process in dynamic market environments. This work applies the ABC/XYZ classification to 540 finished goods, revealing that 59% fall into category C, with cluster CZ2 (27%) and CZ1 (25%) predominating. Category B accounts for 23% of items, while category A represents 18%. Based on this segmentation, service-level targets were defined at 95%, 90%, 80%, and 60%, depending on product criticality and demand variability. The results highlight that sporadic demand clusters (CZ1 and CZ2) require demand-driven replenishment, while high-value stable-demand items (AX) benefit from high service levels and statistical forecasting. These findings demonstrate potential improvements in forecast accuracy, inventory responsiveness, and cost-service trade-offs, offering a structured pathway for managers to balance service levels with inventory efficiency. Overall, the segmentation results provide actionable insights for reducing inefficiencies and improving cost-to-serve in dynamic supply chain environments.