Robustness of the partitions in grouping multi-item inventories

SUMMARY

A recent work obtained closed-form solutions to the.problem of optimally grouping a multi-item inventory into subgroups with a common order cycle per group, when the distribution by value of the inventory could be described by a Pareto function. This paper studies the sensitivity of the optimal subgroup boundaries so obtained. Closed-form expressions have been developed to find intervals for the subgroup boundaries for any given level of suboptimality. Graphs have been provided to aid the user in selecting a cost-effective level of aggregation and choosing appropriate subgroup boundaries for a whole range of inventory distributions. The results of sensitivity analyses demonstrate the availability of flexibility in the partition boundaries and the cost-effectiveness of any stock control system through three groups, and thus also provide a theoretical support to the intuitive ABC system of classifying the items.

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Notes on contributors

VIJAY AGGARWAL

Present address: Department of Industrial Management, Indian Institute of Science. Bangalore 560012 India