Abstract
The ABC classification problem is approached as a ranking problem by the most current classification models; that is, a group of inventory items is expressed according to its overall weighted score of criteria in descending order. In this paper, we present an extended version of the Hadi-Vencheh model for multiple-criteria ABC inventory classification. The proposed model is one based on the nonlinear weighted product method (WPM), which determines a common set of weights for all items. Our proposed nonlinear WPM incorporates multiple criteria with different measured units without converting the performance of each inventory item, in terms of converting each criterion into a normalized attribute value, thereby providing an improvement over the model proposed by Hadi-Vencheh. Our study mainly includes various criteria for ABC classification and demonstrates an efficient algorithm for solving nonlinear programming problems, in which the feasible solution set does not have to be convex. The algorithm presented in this study substantially improves the solution efficiency of the canonical coordinates method (CCM) algorithm when applied to large-scale, nonlinear programming problems. The modified algorithm was tested to compare our proposed model results to the results derived using the Hadi-Vencheh model and demonstrate the algorithm’s efficacy. The practical objectives of the study were to develop an efficient nonlinear optimization solver by optimizing the quality of existing solutions, thus improving time and space efficiency.
Highlights
To facilitate the successful management of a growing number of stock-keeping units (SKUs), inventory managers have found that inventory classification systems provide essential context for evaluating inventory management
The ABC classification problem is presented as a ranking problem by the most current classification models [1,2,3]; that is, a group of inventory items is represented according to its overall weighted score of criteria in descending order
We presented an extended version of the HV model to improve multi-criteria ABC
Summary
To facilitate the successful management of a growing number of stock-keeping units (SKUs), inventory managers have found that inventory classification systems provide essential context for evaluating inventory management. A conventional ABC study is conducted on the basis of one criterion: the annual dollar usage (value of an item times its annual usage) of SKUs. Under Pareto’s theory, all items are ranked based on a single criterion; within inventory management, dollar usage is the only criterion for managers to classify items into the A, B, and C categories. A number of methods were suggested in order to achieve multi-criteria classification of SKUs. A number of methods were suggested in order to achieve multi-criteria classification of SKUs These methods contribute much to the classification of items and help improve the efficiency and performance of a firm through better inventory management. These approaches contain some shortcomings, such as involving too much subjectivity or being overly complicated. Conclusions and recommendations for future research are offered in the final section
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