A simple classifier for multiple criteria ABC analysis

Abstract

To have an efficient control of a huge amount of inventory items, traditional approach is to classify the inventory into different groups. Different inventory control policies can then applied to different groups. The well-known ABC classification is simple-to-understand and easy-to-use. However, ABC analysis is based on only single measurement such as annual dollar usage. It has been recognized that other criteria are also important in inventory classification. In the paper, we propose a simple model for multiple criteria inventory classification. The model converts all criteria measures of an inventory item into a scalar score. The classification based on the calculated scores using ABC principle is then applied. With proper transformation, we can obtain the scores of inventory items without a linear optimizer. The model can be widely applied to inventory managers with minimal backgrounds in optimization.