Multi attribute inventory classification in an electronic firm

The objective of the inventory management is to make decision regarding the appropriate level of inventory. However in practice; it is impossible for all inventory items to be controlled with equal precision especially in electronics companies which are working with thousands of different inventory items. Hence, electronic firms need to classify inventory items. Traditional ABC analysis is the most widely used technique in inventory classification. Classification by ABC analysis technique is based on pareto approach. According to this approach, items which leads to a high volume of investment includes a low amount of units. ABC analysis considers two criteria which are unit price and annual usage. In order to make more reliable classification, besides unit price and annual usage it is required that other criteria should be taken into account like lead time, availability. Therefore in the literature the tendency for multi criteria methods has increased. In this thesis, it is decided to be used TOPSIS (Technique for Order Preference by Similarity to Ideal Solution) method which is among multi criteria methods, integrated with Analytic Hierarchy Process and ABC Analysis, to solve the inventory classification problem in an electronic firm. Criteria which affect the problem are set by three purchasing experts and a production planning engineer who are experts in their field. To calculate weights of criteria which constitute the input of TOPSIS, Analytic Hierarchy Process is employed. After the establishment of full ranging with TOPSIS, classification is set with pareto approach which is taken into consideration by classic ABC analysis. Results of multi criteria ABC analysis method and traditional ABC analysis method compare with each other. The obtained results by multi criteria ABC analysis are more effective, workable and useful because of the problem as it exists in reality considered as a multi-criteria.