A fuzzy AHP-DEA approach for multiple criteria ABC inventory classification

Abstract

In order to efficiently control the inventory items and determine the suitable ordering policies for them, multi-criteria ABC inventory classification, which is one of the most common techniques of production and inventory control, is used. In this classification, other criteria in addition to annual dollar usage are taken into account and then the items are classified in three classes with different ordering policies, based on their priority. In this paper, we propose an integrated fuzzy analytic hierarchy process-data envelopment analysis (FAHP-DEA) for multiple criteria ABC inventory classification. The proposed FAHP–DEA methodology uses the FAHP to determine the weights of criteria, linguistic terms such as Very High, High, Medium, Low and Very Low to assess each item under each criterion, the data envelopment analysis (DEA) method to determine the values of the linguistic terms, and the simple additive weighting (SAW) method to aggregate item scores under different criteria into an overall score for each item. The integrated FAHP–DEA methodology is illustrated using a real case study.