Application of Multi-Criteria ABC Inventory Classification Approaches to Gearbox Manufacturing Industry

Abstract

In multi-criteria ABC inventory classification, employing a compensatory approach allows an item with low scores in one or multiple essential criteria to be assigned to a higher category. Therefore, non-compensation must be checked in multi-criteria ABC analysis. This paper applies both compensatory and non-compensatory methods such as Grey Relational Analysis, Evaluation Based on Distance from Average Solution and ELimination Et Choix Traduisant la REalite for multi-criteria inventory classification. The proposed study employs a fuzzy analytic hierarchy processes to evaluate the significance of qualitative criteria and sub-criteria by allocating suitable weights to each of them. Weighting factors associated with various classification criteria are calculated using principal component analysis. Service-cost inventory is studied using empirical data from three multi-criteria inventory classification methods. A sensitivity analysis is conducted to assess the effect of standard deviation and holding cost price uncertainty on inventory performance. The integrated methodology is illustrated through a case study of gearbox manufacturing.