The Significance of the Integrated Multicriteria ABC-XYZ Method for the Inventory Management Process

Abstract

Inventory optimization in the supply chain is one of the most important goals in logistical business operations given the fact that optimized inventories directly impact the efficiency and profitability of the business.In the contemporary conditions of business processes, the goal of an enterprise's business operations reflects in the maximal reduction in the level of inventories, simultaneously retaining a certain level of services provided, in order for them to become and remain competitive in the market.Understanding the significance of inventories enables optimal uninterrupted business doing, for which reason exactly the ABC-XYZ method, as one of the ways to efficiently manage inventories, is used in this paper.Given the fact that there are limitations to the ABC classification, the limitation to one single criterion and the non-existence of a demand analysis at determining the needed inventories, the problem is overcome by the introduction of the XYZ classification.The merging of the mentioned classifications results in the integrated ABC-XYZ classification model, which can be used, on the basis of a multi-criteria and multidimensional approach, to classify inventories and make a proposal for their optimization.