%0 Journal Article
%T Multiple Criteria ABC Analysis with FCM Clustering
%A Gulsen Aydin Keskin
%A Coskun Ozkan
%J Journal of Industrial Engineering
%D 2013
%I Hindawi Publishing Corporation
%R 10.1155/2013/827274
%X 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. 1. Introduction Inventory control is a well-known problem in operations research. Several models have been developed to solve inventory problems. In business, companies have hundreds of different types of materials. Therefore, it is easy to lose control of managing the materials. Inventory classification using ABC analysis is one of the most widely used techniques in organizations. ABC classification allows an organization to separate stock keeping units (SKUs) into three groups: A, the most important; B, important; and C, the least important. The purpose of classifying items into groups is to establish appropriate levels of control over each item [1, 2]. The major advantage of ABC analysis is the easiness of use and simplicity to understand. The items are classified according to the annual use value, which is the product of annual demand and the average unit price [3]. The classification of items into A, B, and C groups has generally been implemented according to one criterion. For inventory items, the criterion is frequently the annual dollar usage of the item. However, it has been generally recognized that the traditional ABC analysis has a serious drawback that may inhibit the effectiveness of the procedure in some situations. Using one criterion only may create problems of significant financial loss. For example, class C items with long lead time or class A items prone to obsolescence may incur financial losses due to a possible interruption of production and/or huge inventory levels. Therefore, it has been proposed that multicriteria ABC classification, such as lead time, criticality of a stockout of the item,
%U http://www.hindawi.com/journals/jie/2013/827274/