Analysis: Inventory and Abc Analysis Essay

Submitted By Khazan-Homayon
Words: 5056
Pages: 21
Open Document
Hindawi Publishing Corporation
Journal of Industrial Engineering
Volume 2013, Article ID 827274, 7 pages http://dx.doi.org/10.1155/2013/827274 Research Article
Multiple Criteria ABC Analysis with FCM Clustering
Gulsen Aydin Keskin1 and Coskun Ozkan2
1
2

Department of Industrial Engineering, Faculty of Engineering, Kocaeli University, Umuttepe Campus, 41380 Kocaeli, Turkey
Department of Industrial Engineering, Faculty of Engineering, Yildiz Technical University, 34349 Istanbul, Turkey

Correspondence should be addressed to Gulsen Aydin Keskin; gaydin@kocaeli.edu.tr
Received 13 August 2012; Revised 29 October 2012; Accepted 12 November 2012
Academic Editor: Josefa Mula
Copyright © 2013 G. Aydin Keskin and C. Ozkan. is is an open access article distributed under the Creative Commons
Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
e 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. e 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. e 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. erefore, it is easy to lose control of managing the materials. Inventory classi�cation using ABC analysis is one of the most widely used techniques in organizations. 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].
e classi�cation 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 signi�cant �nancial loss. For example, class C items with long lead time or class A items prone to obsolescence may incur
�nancial losses due to a possible interruption of production and/or huge inventory levels. erefore, it has been proposed that multicriteria ABC classi�cation, such as lead time, criticality of a stockout of the item, the rate of obsolescence, the scarcity, substitutability, and order size requirement of the item, can provide a more comprehensive managerial control and to take other important criteria into consideration [2, 4,
5].
Complex computational tools are needed for traditional multicriteria ABC classi�cation. One of them is the matrixbased methodology. At this methodology, a joint criteria matrix is developed in the
Show More

Related Documents: Analysis: Inventory and Abc Analysis Essay

Essay on ABC Notes

Activity Based Costing (ABC) Activity Based Costing (ABC) (K. Rowland Atiase) Activity Based Costing (ABC) I. Introduction II. ABC Overview III. Motivation for ABC (& ABM) IV. Goals of ABC V. Steps in ABC VI. How Many Cost Drivers Should Be Used? VII. Factors Relevant for Cost Driver Selection VIII. Traditional versus ABC Systems IX. ABC & Business Process Analysis (BPA) X. ABC, Product (Service) Line Profitability & Customer Costing (CC) System Activity Based Costing (ABC) I. Introduction Activity-Based…

Words 1561 - Pages 7

accounting review Essay

assumption(Entity will continue to exist indefinitely); The historical cost assumption(Assets recorded at purchase price); The stable-monetary-unit assumption(Need a unit or scale of measurement). Assets: Economic resources, Produce future benefit E.g. Cash, Inventory, Accounts receivable, Property, plant, and equipment. Liabilities: Outsider claims, Debts payable to others (creditors) e.g. Account payable, Long-term debt. Owner’s equity: Insider claims, Represents ownership by stockholders e.g. Paid-in debt,…

Words 1956 - Pages 8

Supply Chain Management and Efficient Consumer Response Essay

PRE-SESSIONAL COURSE: STAGE 5 Management Studies Pathway Final Written Assignment Question Number: Full question 3 Describe the symptoms of poor inventory management. Critically discuss the methods and techniques for improving inventory management, making reference to one of the following sectors: Option selected: c) supermarkets Student Name: Wang Yue Student ID number: 201017067 Group number: Management 14 Group Tutor Sarah Spicer 5th September 2014 Declaration The work contained…

Words 1926 - Pages 8

ABC Inventory Classification System

of Orders Delivered in Full - ABC Inventory Classification System The ABC inventory classification system is: o 'A'…

Words 799 - Pages 4

Essay on Wilkerson Company Case

are the most profitable product, with a 41% actual gross margin, ranking the top among the three products of Wilkerson. Exhibit #2. Product Profitability Analysis Based on ABC After examining the production costs through ABC, we found that flow controllers are actually the least profitable product of the company. Specifically, under ABC accounting, flow controllers (which have the least production volume), consume the most receiving & production control, engineering, and packaging & shipping…

Words 2110 - Pages 9

The Importance Of Environmental Management

costing analysis, investment appraisal or business analysis and performance management. A. Activity-based costing (ABC) Green competitiveness has become a critical factor to support corporates’ sustainable development nowadays. With this, a number of stakeholders have begun to focus on corporates’ environmental activities as a well performed environmental accounting could be a very valuable management communication tool. According to Cooper and Kaplan (1988), the activity-based costing (ABC) system…

Words 824 - Pages 4

Importance Of Inventory Management

1. Introduction to managing inventory Inventory is defined as assets that are intended for sale and service. The objective of inventory management is to meet customer needs while keeping inventory costs at reasonable level to produce a profit for the firm (Mercado, 2007). It usually involves stock replenish time and quantity of orders between customer demand and the amount of inventory they keep. It has also strike to control tight inventory level together with its associated cost ; holding costs…

Words 1113 - Pages 5

ACC 381.101: Exam 2 Study Guide

Short Problems Day 2: Problems – 4 problems– scaled to reflect 60% of the Exam 2 grade One problem from each chapter Content: What are inventoriable costs? Period costs? Be able to calculate: mfg. cost per unit; operating (period) cost per unit; inventory value; COGS; etc. Be able to calculate the total cost of production at a certain level of activity. Be able to calculate the total cost at a different level of production hint: be sure you understand how to handle fixed costs when going from one…

Words 388 - Pages 2

Essay about Acct. 551 Final Project

statements of ABC Company have been prepared in agreement with current accounting rules and regulations, and are compliant under GAAP. ABC Company is a parent company, and all reporting rules and regulations have been adhered to in the reporting of ABC Company's subsidiaries. ABC Company and all subsidiaries use the same accounting methods. Individual columns that do not total within the financial statements and related data are due to differences in rounding. Note 2: Inventory The ABC Company values…

Words 1055 - Pages 5

Objective: Balance Sheet and Abc Valve Plant Essay

implementation of a the security plan for ABC Valve Plant is to ensure effective procedural, administrative, technological and physical safeguards for protecting the personal information of the plant. Purposes The purpose of the __________ is to: Safeguard the security and confidentiality of ABC Valve Plant. Protect against any reasonably foreseeable threats or hazards to the security of ABC Valve Plant Protect against unauthorized access to, or use of ABC Valve Plant in a manner that creates…

Words 556 - Pages 3