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- Title
Multi-Criteria ABC Inventory Classification: With Exponential Smoothing Weights.
- Authors
Jamshidi, Hossein; Jain, Ajeet
- Abstract
The ABC analysis is a well known and practical classification of inventory items based on the Pareto principle. The purpose of ABC analysis is to classify the inventory into different groups of A, B, or C, according to importance based on measure of a criterion. Traditionally, the classification of inventory into the A, B, or C categories have generally been based on dollar value per unit multiplied by annual usage rate, commonly known as dollar usage. In recent years, several multi criteria inventory classification technique has been introduced. Apart from unit price and usage, other criteria like leadtime, number of hits, average per hit, ordering cost, scarcity, durability, substitutability, reparability, commonality, criticality etc. has been taken into consideration. In this paper we are addressing multicriteria ABC inventory classification and a methodology to standardized each criterion and weight them for classification. The weight for each criterion is based on simple exponential smoothing weight assignments. With inclusion of weight for each criteria and normalizing the data a score is obtained for each item and the classification is done based on the normalized score. The procedure to standardize the criterion and weight is easy to understand by inventory managers.
- Publication
Journal of Global Business Issues, 2008, Vol 2, Issue 1, p61
- ISSN
1931-311X
- Publication type
Academic Journal