Multi-criteria ABC analysis using artificial-intelligence-based classification techniques

ABC analysis is a popular and effective method used to classify inventory items into specific categories that can be managed and controlled separately. Conventional ABC analysis classifies inventory items three categories: A, B, or C based on annual dollar usage of an inventory item. Multi-criteria inventory classification has been proposed by a number of researchers in order to take other important criteria into consideration. These researchers have compared artificial-intelligence (AI)-based classification techniques with traditional multiple discriminant analysis (MDA). Examples of these AI-based techniques include support vector machines (SVMs), backpropagation networks (BPNs), and the k-nearest neighbor (k-NN) algorithm. To test the effectiveness of these techniques, classification results based on four benchmark techniques are compared. The results show that AI-based techniques demonstrate superior accuracy to MDA. Statistical analysis reveals that SVM enables more accurate classification than other AI-based techniques. This finding suggests the possibility of implementing AI-based techniques for multi-criteria ABC analysis in enterprise resource planning (ERP) systems. (C) 2010 Elsevier Ltd. All rights reserved.