• Journal of Korean Institute of Industrial Engineers
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• v.37 no.4
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• pp.358-366
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• 2011

Multi-criteria ABC inventory classification, which aims to classify inventory items by considering more than one criterion, is one of the most widely employed techniques for inventory control. The weighted linear optimization (WLO) model proposed by Ramanathan (2006) solves the problem of multi-criteria ABC inventory classification by generating a set of criterion weights for each inventory item and assigning a normalized score to the item for ABC analysis. However, the WLO model has some limitations. First, many inventory items can share the same optimal score, which can hinder a precise classification of inventory items. Second, the model allows too much flexibility in weighting multiple criteria; each item is allowed to choose its own weights so that it can maximize its score. As a result, if an item dominates the others in terms of a certain criterion, it may be classified into a higher class regardless of other criteria by assigning an overwhelming weight to the criterion. Consequently, an item with a high value in an unimportant criterion and low values in others may be inappropriately classified as class A, leading to an inaccurate classification of inventory items. To overcome these shortcomings, we extend the WLO model by using the cross-efficiency method in data envelopment analysis. We claim that the proposed model can provide a more reasonable and accurate classification of inventory items by mitigating the adverse effect of flexibility in the choice of weights and yielding a unique ordering of inventory items.