Abstract
The number of stock keeping units (SKUs) possessed by organizations can easily reach quite a few. An inventory management policy for each individual SKU is not economical to design. ABC analysis is one of the conventionally used approaches to classify SKUs. In the classical method, the SKUs are ranked with respect to the descending order of the annual dollar usage, which is the product of unit price and annual demand. The few of the SKUs that have the highest annual dollar usage are in group A and should be taken into account mostly; the SKUs with the least annual dollar usage are in group C and should be taken into account least; the remaining SKUs are in group B. In this study, we proposed fuzzy c-means (FCM) clustering to a multicriteria ABC analysis problem to help managers to make better decision under fuzzy circumstancse. The obtained results show that the FCM is a quite simple and an easily adaptable method to inventory management.
Highlights
Inventory control is a well-known problem in operations research
ABC classi cation allows an organization to separate stock keeping units (SKUs) into three groups: A, the most important; B, important; and C, the least important. e purpose of classifying items into groups is to establish appropriate levels of control over each item [1, 2]. e major advantage of ABC analysis is the easiness of use and simplicity to understand. e items are classi ed according to the annual use value, which is the product of annual demand and the average unit price [3]
The method has a serious drawback that may inhibit the effectiveness of the procedure in some situations. e criterion used in the conventional ABC classi cation is the annual dollar usage, so using one criterion may create problems of signi cant nancial loss [4, 8]. us, the inventory control problem becomes a multicriteria inventory classi cation that has been studied by some researchers
Summary
E number of stock keeping units (SKUs) possessed by organizations can reach quite a few. An inventory management policy for each individual SKU is not economical to design. ABC analysis is one of the conventionally used approaches to classify SKUs. In the classical method, the SKUs are ranked with respect to the descending order of the annual dollar usage, which is the product of unit price and annual demand. We proposed fuzzy c-means (FCM) clustering to a multicriteria ABC analysis problem to help managers to make better decision under fuzzy circumstancse. E obtained results show that the FCM is a quite simple and an adaptable method to inventory management We proposed fuzzy c-means (FCM) clustering to a multicriteria ABC analysis problem to help managers to make better decision under fuzzy circumstancse. e obtained results show that the FCM is a quite simple and an adaptable method to inventory management
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