Abstract

Since the conventional ABC inventory classification has major drawback that it takes consider only single criterion as the annual spending to classify inventory items. This leads to incorrect classification of inventory. As a matter of fact, there are many criteria involved in the decision making of inventory classification. This study proposes a multi-criteria inventory classification (MCIC) model to categorize the general spare part inventories based on ABC classification fundamental. A cement company in Thailand is used as a case study. The inventory classification criteria composed of unit cost, quantity usage per annual, annual spending, lead-time, number of potential suppliers and product life cycle. In this study Shannon’s Entropy method is employed to calculate the object weights of inventory classification criteria. Subsequently, TOPSIS is used to sort and classify the spare part items. In addition, a comparison between the conventional ABC classification and the proposed MCIC model was performed to demonstrate the differences between the two approaches. The findings of this study could help logistics managers responsible for inventory management make rational decisions on inventory classification.