Assessment of inventory class performance utilising inventory turn and days on hand

Abstract

Inventory performance is typically based on individual SKU rather than on class of SKUs. This research evaluates ABC inventory classes for performance based on class inventory turn. Multiple multi-criteria inventory control (MCIC) models are used to classify 47 stock-keeping units into A, B, and C categories and their ABC classes' annual performance evaluated for each model. The results show that A-class consistently has highest turns than B and C classes. For the eight models evaluated all but the R-model show higher turns for A class than both B or C class. B and C classes turn inventory relatively the same number of times with the exception of the R-model. The R-model turns C-class inventory higher than A-class or B-class inventory contrary to ABC principles. The results show that inventory classification can be limited to A and B classes instead of the numerous classes sometimes recommended and practiced in many firms.