European Journal of Operational Research 177 (2007) 344–353

www.elsevier.com/locate/ejor

Production, Manufacturing and Logistics

A simple classifier for multiple criteria ABC analysis

Wan Lung Ng *

Department of Management Sciences, City University of Hong Kong, Tat Chee Avenue, Kowloon Tong, Hong Kong

Received 21 July 2005; accepted 27 November 2005

Available online 8 February 2006

Abstract

To have an efficient control of a huge amount of inventory items, traditional approach is to classify the inventory
into different groups. Different inventory control policies can then applied to different groups. The well-known ABC
classification is simple-to-understand and easy-to-use. However, ABC analysis is based on only single measurement
such as annual dollar usage. It has been recognized that other criteria are also important in inventory classification.
In the paper, we propose a simple model for multiple criteria inventory classification. The model converts all criteria
measures of an inventory item into a scalar score. The classification based on the calculated scores using ABC principle
is then applied. With proper transformation, we can obtain the scores of inventory items without a linear optimizer. The
model can be widely applied to inventory managers with minimal backgrounds in optimization.
Ó 2006 Elsevier B.V. All rights reserved.

Keywords: Inventory; Multiple criteria analysis

1. Introduction

In an organization even with moderate size, there may be thousands of inventory stock keeping units. To
have an efficient control of these huge amount of inventory items, traditional approach is to classify the
inventory into different groups. Different inventory control policies can then applied to different groups.
ABC analysis is a well known and practical classification based on the Pareto principle. For example,
Group A inventory items are those making about 70% of company’s business but only taking up 10%
of inventory. They are critical to the functioning of the company. Group B inventory items are those rep-
resenting about 20% of company’s business and taking about 20% of inventory. Group C items are those
representing only 10% of company business but taking up about 70% of inventory.

*
Tel.: +852 27888591.
E-mail addresses: wanlung.ng@cityu.edu.hk, mswlung@cityu.edu.hk

0377-2217/$ - see front matter Ó 2006 Elsevier B.V. All rights reserved.
doi:10.1016/j.ejor.2005.11.018
 W.L. Ng / European Journal of Operational Research 177 (2007) 344–353 345

ABC analysis is simple-to-understand and easy-to-use. However, traditional ABC analysis is based on
only single measurement such as annual dollar usage. It has been recognized that other criteria, such as
inventory cost, part criticality, lead time, commonality, obsolescence, substitutability, number of request
per year, scarcity, durability, reparability, order size requirement, stock-ability, demand distribution and
stock-out penalty, are also important in inventory classification. Research literatures on decision tools
for multi-criteria inventory classification (MCIC) has been developed in the past 20 years. A cross-tabulate
matrix methodology by Flores et al. [1] was proposed for bi-criteria inventory classification. However, the
methodology becomes complicated when extending to involve more criteria. As pinpointed by the authors
in [2], the scale of the problem when involving three or more criteria become unmanageable. Multi-variate
technique of cluster analysis is an approach to group items with similar natures together. A solution pro-
cedure blending clustering analysis and operations constraints for inventory classification was proposed in
[3].
Multi-criteria decision-marking tools like analytic hierarchy process (AHP) have been proposed to
MCIC [2,4]. However, AHP requires subjective judgment when making pair-wise comparisons. Sophisti-
cated meta-heuristics like genetic algorithm (GA) and artificial neural networks (ANN) have been applied
on the problem [5,6]. These meta-heuristics are too complicated to applied and difficult to be understood by
the inventory managers. A very recent attempt by Ramanathan [7] is to develop a weighted linear optimi-
zation model to the problem. The basic concept of model in [7] is closely similar to the concept of data
envelopment analysis (DEA). The model first converts all criteria measures into a scalar score which is a
weighted sum of measures under individual criteria. To avoid the subjectivity on the weight assignments,
the weights are generated by a DEA-like linear optimization. The classification is then performed by group-
ing the items based on the scores generated. However, a linear optimization is required for each item. The
processing time can be very long when the number of inventory items is large in scale of thousands of items
in inventory.
In this paper, we would like propose an alternative weight linear optimization model for the MCIC
problems. The mathematical formulation is presented in Section 2. In Section 3, a transformation technique
will be introduced which simplifies our formulation and we can obtain the solutions of weights even without
a linear optimizer. Sensitivity analysis is discussed in Section 4. An illustration is provided in Section 5 with
comparisons to the result from traditional approach and recent approach by Ramanathan [7]. Short con-
clusions and recommendations are given in Section 6.

2. Problem formulation

Consider an inventory with I items and these items are to be classified based on J criteria. The measure-
ment of the ith item under the jth criteria is denoted as yij. As in [7], we would like to convert the multiple
measures into a singe score of an item. We assume all criteria measures are positively related to the score of
an item. If there is a negatively related criterion, transformation such as taking negativity or taking recip-
rocals can be applied for conversions. Inspired by a multi-criteria decision model in [8], we propose an alter-
native weighted linear optimization model. In our model development, we firstly transform all measures to
ij y min fy g
i¼1;2;...;I ij
comparable base. The treatment in [2] using transformation maxi¼1;2;...;I fy ij gmini¼1;2;...;I fy ij g
can be adopted to con-
vert all measurement in a 0–1 scale for all items. Another pre-processing procedure we needed is the deci-
sion maker has to rank the importance of criteria. Although this involves certain degree of subjectivity, this
is a far weaker requirement than that in AHP. Pair-wise comparisons in the AHP require a decision maker
to specify not only the direction of preference (e.g. criterion 1 is more preferable than criterion 2) but also
degree of preference (e.g. equal importance, weak preference, essential preference, demonstrable preference,
absolute preference, etc). We require only ranking rather than specifying a precise degree or magnitude.
346 W.L. Ng / European Journal of Operational Research 177 (2007) 344–353

To facilitate the inventory classification under multiple criteria, we define a non-negative weight wij
which is the weight of contribution of performance of the ith item under the jth criteria to the score of
the item. We assume the criteria are ranked in a descending order such that wi1 P wi2 P    P wiJ for
all item i. The score of the ith item (denoted as Si) is expressed as a weighted sum of performance measures
under multiple criteria. A weighted linear optimization model is shown as the following for each item i:
X
J
ðP1Þ max Si ¼ wij y ij ð1Þ
j¼1

X
J
s.t. wij ¼ 1; ð2Þ
j¼1

wij  wiðjþ1Þ P 0; j ¼ 1; 2; . . . ; ðJ  1Þ; ð3Þ

wij P 0; j ¼ 1; 2; . . . ; J ð4Þ
Constraint (2) is a normalization constraint. Constraint (3) is to ensure the sequence of ranking of criteria
(i.e. wi1 P wi2 P    P wiJ). Owing to the constraint (2), the weights obtained when the model solved are
normalized weights. The values of the weights are always within the range of 0 and 1. In addition, the total
sum of all weights is always equal to 1. The use of normalized weights has several advantages for interpre-
tations. All scores Si (i = 1, 2, . . . , I) are always within a scale of 0–1 as all measures yij are in 0–1 scale. The
value of the weight of a particular criterion is equal to the proportion of the importance of such criterion
out of total importance of all criteria. All partial scores are in a comparable base when both weights and
measurement are normalized.
Similar to the DEA-like model proposed by Ramanathan in [7], the weights in our proposed model are
endogenous. The weights are automatically generated when the model is optimized. This differs from other
methods such as AHP in which weights are specified exogenously. The two approaches are different in con-
cepts. For AHP methods, the weights are firstly calculated based on the pair-wise comparisons of all cri-
teria. The weights obtained are common to all items in the inventory population. These weights form a
specific function (e.g. linear function) which is located at the ‘‘center’’ of all inventory items. Certainly,
the resulting function by AHP is not a regression line which obtains the weights based on least-square
method. This centered line of AHP obtains coefficients by eigenvalues implied by the subjective pair-wise
comparisons. The overall score of an item is the ‘‘expected’’ score based on the pre-specified ‘‘centered’’
function line. In this sense, the scores obtained by AHP is parametric in concept as the evaluation function
line was parametrically specified before scoring.
In contract, our proposed model as well as the DEA-like model obtain the weights endogenously. The
scores and values of the weights will be generated automatically when the linear programming models
solved. We do not require pre-specified values of weights. The model automatically calculates the weights
of each criterion with such each item can achieve the maximal score. The score of an item is the ‘‘maximal’’
score based on the optimization model. The proposed model is non-parametric in concept as no parametric
functions are pre-defined before the scoring.

3. Solution scheme

The proposed model (P1) is a linear optimization model. Certainty, one can solve a series of linear opti-
mization for all inventory items. However, this requires a linear optimizer available for decision maker. In
addition, the processing time can be very long especially when number of inventory items is large. In this
section, we adopt a transformation to simplify our model. The simplified model can be easily solved with-
out a linear optimizer.
 W.L. Ng / European Journal of Operational Research 177 (2007) 344–353 347

Denote
uij ¼ wij  wiðjþ1Þ ; i ¼ 1; 2; . . . ; I and j ¼ 1; 2; . . . ; ðJ  1Þ ð5Þ
and
uiJ ¼ wiJ ; i ¼ 1; 2; . . . ; I. ð6Þ
The constraints (2) and (3) are equivalent to the following:
X
J
juij ¼ 1; i ¼ 1; 2; . . . ; I ð7Þ
j¼1

and
uij P 0; i ¼ 1; 2; . . . ; I and j ¼ 1; 2; . . . ; J . ð8Þ
One can verify by the expanding the summation in the left-hand-side of (7) and substituting (5) into
XJ
juij ¼ ui1 þ 2ui2 þ 3ui3 þ    þ JuiJ ð9Þ
j¼1

¼ ðwi1  wi2 Þ þ 2ðwi2  wi3 Þ þ 3ðwi3  wi4 Þ þ    þ J ðwin Þ ð10Þ

XJ
¼ wij . ð11Þ
j¼1
PJ
Since j¼1 wij ¼ 1 for all i = 1, 2, . . . , I. Eq. (7) holds.
Denote also
X
j
xij ¼ y ik ; i ¼ 1; 2; . . . ; I. ð12Þ
k¼1

The score Si of the ith item be expressed in terms of uij and xij for j = 1, 2, . . . , J,
X
J X
J
Si ¼ wij y ij ¼ uij xij . ð13Þ
j¼1 j¼1

We can verify Eq. (13) by substituting (5) and (12) into the right-hand-side of (13) and expand the
summation.
!
XJ X
J 1 X
j X
J
uij xij ¼ ðwij  wiðjþ1Þ Þ y ik þ uiJ y ik
j¼1 j¼1 k¼1 k¼1

¼ ððwi1  wi2 Þy i1 Þ þ ððwi2  wi3 Þðy i1 þ y i2 ÞÞ þ ððwi3  wi4 Þðy i1 þ y i2 þ y i3 ÞÞ þ   

þ ððwiðJ 1Þ  wiJ Þðy i1 þ y i2 þ    þ y iðJ 1Þ ÞÞ þ wiJ ðy i1 þ y i2 þ    þ y iJ Þ
¼ ðwi1 y i1  wi2 y i1 Þ þ ðwi2 y i1 þ wi2 y i2  wi3 y i1  wi3 y i2 Þ
þ ðwi3 y i1 þ wi3 y i2 þ wi3 y i3  wi4 y i1  wi4 y i2  wi4 y i3 Þ þ   
þ ðwiðJ 1Þ y i1 þ wiðJ 1Þ y i2 þ    þ wiðJ 1Þ y iðJ 1Þ  wiJ y i1  wiJ y i2      wiJ y iðJ 1Þ Þ
þ ðwiJ y i1 þ wiJ y i2 þ    þ wiJ y iJ Þ
¼ wi1 y i1 þ wi2 y i2 þ    þ wiJ y iJ
XJ
¼ wij y ij .
j¼1
348 W.L. Ng / European Journal of Operational Research 177 (2007) 344–353

In addition, we have the following for all item i:

X
J
wij ¼ uik ; j ¼ 1; 2; . . . ; J . ð14Þ
k¼j

Since uij P 0, j = 1, 2, . . . , J, we retain the non-negativity constraint for all wij.

Based on the transformations, we can convert our model (P1) to the following (P2) for all inventory
items:
X
J
ðP2Þ max Si ¼ uij xij
j¼1

X
J
s.t. juij ¼ 1;
j¼1

uij P 0; j ¼ 1; 2; . . . ; J .

The new formulation (P2) has a nice property. The formulation is a linear program in the Canonical form
with only one equality constraint. This implies there is only one optimal solution uij being non-zero and all
others are zero. Furthermore, the only non-zero decision variable (uij > 0) must be equal to 1j due to Eq. (7).
Pj
Hence, the score Si of the ith inventory item can be easily obtained as maxj¼1;2;...;J ð1j k¼1 y ik Þ. Alternatively,
one can obtain the maximal score Si by the dual of (P2). The dual formulation of (P2) is as the following
with dual variable zi:

ðP2 dualÞ min zi

1
s.t. zi P xij ; j ¼ 1; 2; . . . ; J .
j
1
The minimal
1
Pj zi for item i can straightforwardly be obtained as maxj¼1;2;...;J ð j xij Þ which is
maxj¼1;2;...;J ð j k¼1 y ik Þ in terms of decision variable in original problem (P1).
After the transformation, the multiple criteria inventory classification procedure is simple and efficient.
The each inventory item, we perform the following steps on a spreadsheet package.
P
Step 1. Calculate all partial averages, 1j jk¼1 xik ; j ¼ 1; 2; . . . ; J .
Step 2. Compare and locate the maximum among these partial averages. The corresponding value is the
score Si of the ith item.
Step 3. Sort the scores Si’s in the descending order.
Step 4. Group the inventory items by principle of ABC analysis.

The whole process requires no linear optimizer and is easy-to-implement on a common spreadsheet
package which can be handled by decision makers without special training.

4. Sensitivity analysis of ranking orders

The model and classification scheme is simple-to-understand and easy-to-use. However, exogenous
specification of ranking of criteria is required. The results may be dependent on the sequence of user-
 W.L. Ng / European Journal of Operational Research 177 (2007) 344–353 349

defined ranking. One can examine the sensitivity of change to an inventory item score if criteria ranking
changed by studying the position of maximal partial averages locating. Suppose the jth partial average is
the maximal partial averages. When change in ranking does not involve a move of a criteria from
ranked below j to rank higher than j, there is no change to the score of inventory item. Recall that,
uij in model (P2) is the only non-zero decision variable when jth partial average is the maximal. In other
words, we have uik = wik  wi(k+1) = 0 for k < j. These criteria of rank higher and equal to j are equally
important. Any change of ranking involves criteria within this group will not change the score of an
inventory item. On the other hand, we also have uil = wil  wi(l+1) = 0 for l > j. These criteria are
equally important as well (but less important than the former group of criteria). Similarly, any changes
of ranking involving only within this group of criteria will not change the score of an inventory item.
The inventory item score will change only if there is a swap of ranking of criteria between these two
groups.

5. Illustrative example

For illustration purpose, we apply our solution scheme on a spreadsheet package to an inventory clas-
sification problem in literature. Let us consider three criteria: annual dollar usage, average unit cost and
lead time for inventory classification. All the criteria are positive related to the score of the inventory items.
An inventory with 47 items and measurement of performance under each of the criteria considered are
shown in Table 1. Ramanathan [7] applied a DEA-like weighted linear optimization to the same data
set with an additional criterion of critical factor (1, 0.5 and 0.01 for very-critical, moderately critical and
non-critical). However, since this criterion measurement is a categorical data and is not continuous. Linear
optimization model seems not suitable to apply. In our comparison, we do not consider this criterion. We
assume the importance of the criteria is the descending order of annual dollar usage, average unit cost and
lead time.
Table 1 also shows the maximal and minimal measures under each criteria as well as transformed mea-
sures in a scale of 0–1 as suggested in Section 2.
The next step is to calculate the partial averages of the transformed measures of each item and locate the
maximum partial average of each item. Table 2 shows the calculated partial averages and the located max-
imal scores.
Finally, the maximal overall scores are sorted in the descending order and inventory classification is
conducted based on traditional ABC principle. Table 3 shows the classification based on our proposed
model. For comparison purpose, we maintain the same distribution of class A, B and C items as in lit-
erature studies [2,7], i.e. 10 class A, 14 class B and 23 class C. The classification with the three criteria by
DEA-like model in [7] and traditional ABC analysis using annual dollar usage are listed in Table 3 as
well.
Comparing to traditional ABC analysis based on only annual dollar usage, only 28 out of 47 items are
kept in the same classes when ABC classification using proposed model with multi-criteria. In other words,
around half of the inventory items are re-classified by the proposed model. Eight out of the ten group A
items in traditional ABC classification is still classified as group A items when multiple criteria is considered
in proposed model. The other two are re-classified as group B using our model. For the 14 class B items,
only 5 are remained in class B when criteria other than annual dollar usage are considered. Eight of the
class B items are re-classified as C in our proposed model while the remaining 1 is moved up to class A.
For the 23 group C items, 15 are kept as class C. Seven of the class C items are moved up to class B
and one is moved up to class A.
When compared with Ramanathan’s DEA-like multi-criteria classifier, there are 37 out of 47 items
are coincided. For class A items identified by our proposed model, six items are classified as group A
350 W.L. Ng / European Journal of Operational Research 177 (2007) 344–353

Table 1
Measures of inventory items and transformed measures
Item no. Annual Average Lead Annual Average unit Lead time
dollar usage unit cost time dollar usage cost (transformed)
(transformed) (transformed)
1 5840.64 49.92 2 1.00 0.22 0.17
2 5670 210 5 0.97 1.00 0.67
3 5037.12 23.76 4 0.86 0.09 0.50
4 4769.56 27.73 1 0.82 0.11 0.00
5 3478.8 57.98 3 0.59 0.26 0.33
6 2936.67 31.24 3 0.50 0.13 0.33
7 2820 28.2 3 0.48 0.11 0.33
8 2640 55 4 0.45 0.24 0.50
9 2423.52 73.44 6 0.41 0.33 0.83
10 2407.5 160.5 4 0.41 0.76 0.50
11 1075.2 5.12 2 0.18 0.00 0.17
12 1043.5 20.87 5 0.18 0.08 0.67
13 1038 86.5 7 0.17 0.40 1.00
14 883.2 110.4 5 0.15 0.51 0.67
15 854.4 71.2 3 0.14 0.32 0.33
16 810 45 3 0.13 0.19 0.33
17 703.68 14.66 4 0.12 0.05 0.50
18 594 49.5 6 0.10 0.22 0.83
19 570 47.5 5 0.09 0.21 0.67
20 467.6 58.45 4 0.08 0.26 0.50
21 463.6 24.4 4 0.08 0.09 0.50
22 455 65 4 0.07 0.29 0.50
23 432.5 86.5 4 0.07 0.40 0.50
24 398.4 33.2 3 0.06 0.14 0.33
25 370.5 37.05 1 0.06 0.16 0.00
26 338.4 33.84 3 0.05 0.14 0.33
27 336.12 84.03 1 0.05 0.39 0.00
28 313.6 78.4 6 0.05 0.36 0.83
29 268.68 134.34 7 0.04 0.63 1.00
30 224 56 1 0.03 0.25 0.00
31 216 72 5 0.03 0.33 0.67
32 212.08 53.02 2 0.03 0.23 0.17
33 197.92 49.48 5 0.03 0.22 0.67
34 190.89 7.07 7 0.03 0.01 1.00
35 181.8 60.6 3 0.03 0.27 0.33
36 163.28 40.82 3 0.02 0.17 0.33
37 150 30 5 0.02 0.12 0.67
38 134.8 67.4 3 0.02 0.30 0.33
39 119.2 59.6 5 0.02 0.27 0.67
40 103.36 51.68 6 0.01 0.23 0.83
41 79.2 19.8 2 0.01 0.07 0.17
42 75.4 37.7 2 0.01 0.16 0.17
43 59.78 29.89 5 0.01 0.12 0.67
44 48.3 48.3 3 0.00 0.21 0.33
45 34.4 34.4 7 0.00 0.14 1.00
46 28.8 28.8 3 0.00 0.12 0.33
47 25.38 8.46 5 0.00 0.02 0.67
Min 25.38 5.12 1
Max 5840.64 210 7
 W.L. Ng / European Journal of Operational Research 177 (2007) 344–353 351

Table 2
Partial averages and scores of inventory items
Item no. Annual dollar Average unit Lead time Partial average
usage (transformed) cost (transformed) (transformed)
1 2 3
1 1.00 0.22 0.17 1.00 0.61 0.46
2 0.97 1.00 0.67 0.97 0.99 0.88
3 0.86 0.09 0.50 0.86 0.48 0.48
4 0.82 0.11 0.00 0.82 0.46 0.31
5 0.59 0.26 0.33 0.59 0.43 0.40
6 0.50 0.13 0.33 0.50 0.31 0.32
7 0.48 0.11 0.33 0.48 0.30 0.31
8 0.45 0.24 0.50 0.45 0.35 0.40
9 0.41 0.33 0.83 0.41 0.37 0.53
10 0.41 0.76 0.50 0.41 0.58 0.56
11 0.18 0.00 0.17 0.18 0.09 0.12
12 0.18 0.08 0.67 0.18 0.13 0.31
13 0.17 0.40 1.00 0.17 0.29 0.52
14 0.15 0.51 0.67 0.15 0.33 0.44
15 0.14 0.32 0.33 0.14 0.23 0.27
16 0.13 0.19 0.33 0.13 0.16 0.22
17 0.12 0.05 0.50 0.12 0.08 0.22
18 0.10 0.22 0.83 0.10 0.16 0.38
19 0.09 0.21 0.67 0.09 0.15 0.32
20 0.08 0.26 0.50 0.08 0.17 0.28
21 0.08 0.09 0.50 0.08 0.08 0.22
22 0.07 0.29 0.50 0.07 0.18 0.29
23 0.07 0.40 0.50 0.07 0.23 0.32
24 0.06 0.14 0.33 0.06 0.10 0.18
25 0.06 0.16 0.00 0.06 0.11 0.07
26 0.05 0.14 0.33 0.05 0.10 0.18
27 0.05 0.39 0.00 0.05 0.22 0.15
28 0.05 0.36 0.83 0.05 0.20 0.41
29 0.04 0.63 1.00 0.04 0.34 0.56
30 0.03 0.25 0.00 0.03 0.14 0.09
31 0.03 0.33 0.67 0.03 0.18 0.34
32 0.03 0.23 0.17 0.03 0.13 0.14
33 0.03 0.22 0.67 0.03 0.12 0.30
34 0.03 0.01 1.00 0.03 0.02 0.35
35 0.03 0.27 0.33 0.03 0.15 0.21
36 0.02 0.17 0.33 0.02 0.10 0.18
37 0.02 0.12 0.67 0.02 0.07 0.27
38 0.02 0.30 0.33 0.02 0.16 0.22
39 0.02 0.27 0.67 0.02 0.14 0.32
40 0.01 0.23 0.83 0.01 0.12 0.36
41 0.01 0.07 0.17 0.01 0.04 0.08
42 0.01 0.16 0.17 0.01 0.08 0.11
43 0.01 0.12 0.67 0.01 0.06 0.26
44 0.00 0.21 0.33 0.00 0.11 0.18
45 0.00 0.14 1.00 0.00 0.07 0.38
46 0.00 0.12 0.33 0.00 0.06 0.15
47 0.00 0.02 0.67 0.00 0.01 0.23

items in both models. And 8 out of 14 class B items are matched in both models. While for group C
items, 20 out of 23 items are cross-matching. The difference in classification of the two approaches is
352 W.L. Ng / European Journal of Operational Research 177 (2007) 344–353

Table 3
Measures of inventory items under criteria and ABC classifications by different models
Item no. Annual Average Lead Score by ABC classification
dollar usage unit cost time proposed model
Proposed model DEA-like model Traditional
1 5840.64 49.92 2 1.00 A A A
2 5670 210 5 0.99 A A A
3 5037.12 23.76 4 0.86 A A A
4 4769.56 27.73 1 0.82 A B A
5 3478.8 57.98 3 0.59 A B A
10 2407.5 160.5 4 0.58 A C A
29 268.68 134.34 7 0.56 A A A
9 2423.52 73.44 6 0.53 A B A
13 1038 86.5 7 0.52 A A B
6 2936.67 31.24 3 0.50 A A C
7 2820 28.2 3 0.48 B C A
8 2640 55 4 0.45 B B A
14 883.2 110.4 5 0.44 B B B
28 313.6 78.4 6 0.41 B B B
18 594 49.5 6 0.38 B B B
45 34.4 34.4 7 0.38 B B B
40 103.36 51.68 6 0.36 B C B
34 190.89 7.07 7 0.35 B A C
31 216 72 5 0.34 B B C
23 432.5 86.5 4 0.32 B B C
19 570 47.5 5 0.32 B A C
39 119.2 59.6 5 0.32 B B C
12 1043.5 20.87 5 0.31 B A C
33 197.92 49.48 5 0.30 B A C
22 455 65 4 0.29 C C B
20 467.6 58.45 4 0.28 C C B
37 150 30 5 0.27 C C B
15 854.4 71.2 3 0.27 C C B
43 59.78 29.89 5 0.26 C C B
47 25.38 8.46 5 0.23 C C B
21 463.6 24.4 4 0.22 C C B
17 703.68 14.66 4 0.22 C C B
16 810 45 3 0.22 C C C
27 336.12 84.03 1 0.22 C C C
38 134.8 67.4 3 0.22 C C C
35 181.8 60.6 3 0.21 C C C
44 48.3 48.3 3 0.18 C C C
11 1075.2 5.12 2 0.18 C C C
24 398.4 33.2 3 0.18 C C C
36 163.28 40.82 3 0.18 C B C
26 338.4 33.84 3 0.18 C C C
46 28.8 28.8 3 0.15 C C C
32 212.08 53.02 2 0.14 C C C
30 224 56 1 0.14 C B C
42 75.4 37.7 2 0.11 C C C
25 370.5 37.05 1 0.11 C C C
41 79.2 19.8 2 0.08 C B C

because of the newly introduction of ranking in criteria and the schemes of weights generation in
scoring.
 W.L. Ng / European Journal of Operational Research 177 (2007) 344–353 353

6. Conclusions and recommendations

In this paper, a simple model for inventory classification is proposed when multiple criteria are consid-
ered. A weighted linear model is first formulated. The model is easy to understand by inventory managers.
A transformation is then applied on and which induces a simple solution mechanism for calculating a uni-
fied measurement of overall score of an inventory item. The overall score can be easily obtained by some
simple calculations on any commonly available spreadsheet package without any linear optimizer.
One of the limitations of exogenous specification of ranking is the number of criteria. When the number
of criteria under consideration is small, specification of ranking is not a hush requirement. However, when
number of criteria is large, it is not an easy task for decision maker to rank all criteria. Perhaps, some
approaches may be taken to group or steam criteria so as to reduce number of criteria. In addition, the
model can handle only continuous measures. Investigation should be carried on how to transform categor-
ical measurement into continuous so that the model can be adopted directly or how to modify the model to
incorporate categorical measurement. Moreover, the normalization scaling requires the extreme values of
measures. And thus all normalized measures will be affected if the extremes change. Inventory managers
should pay attentions to these extreme measures. An invalid extreme value will lead to misclassification
of the inventory items.

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