Multiple Criteria ABC Analysis

Abstract

Prioritising items for management attention has been advocated in operations management for a long time, normally using ABC analysis (inventory control). This focuses attention on the “A” category items to maximise managerial effectiveness. Empirical evidence shows that this is a reasonable rule for allocating scarce resource‐management time but presents difficulties when the manager has to take more than one important dimension of a situation into account. A joint criteria matrix is put forward within the ABC framework and an industrial application given. The joint criteria matrix has practical utility provided ranking on some scale of measurement is realistic. The appropriate number of categories must be defined by the user. Combining criteria will probably require different analytical approaches, e.g. goal programming or heuristic approaches. Utilisation of the matrix by managers can provide an explicit method for taking a range of criteria into account in the development of inventory policies.