application of ahp and abc approximationess for equipment stock modelling

APPLICATION OF AHP AND ABC APPROXIMATIONESS FOR

EQUIPMENT STOCK MODELLING at ÇETİNSAN A.Ş

Prepared by

Rojda GÜRBÜZEngincan SAKYEN

Companies that aim to survive in fierce competition and continue their businesses are profit seeking in order to meet customer demand and decrease costs.

Stock management is one of the important tools to attain these goals. Best stock management can be achieved by having balanced stock according to aims and needs of company.

In this paper, firstly ABC analysis and then AHP analysis to ABC stock classification are applied in a supplier steel manufacturing company. For the classification of stocks, the difference between results of ABC and AHP techniques are compared.

Activities of Çetinsan A.ŞCivil WorksNatural Gas• Gas Stations• Fuel Storage and Distribution Facilities.• Gas Station Canopies.• Underground and aboveground storage tanks.• Industrial Plants.• Pipelines.

Activities of Çetinsan A.Ş

Prefabrication Works• Fabrication and installation of aboveground

and underground storage tanks required capacity and size

Projects • The design of the fuel storage terminals

On-Going Projects

ABC Analysis One of the most important considerations of control is the

value of annual consumption of inventory items in a year. Only a small number of inventory items consume a very

large share of inventory consumption during the year. A little larger number of inventory items covers a

moderate share of annual inventory consumption. A very large number of items just cover a very small

share of annual inventory consumption. These facts gave birth to the concept of ABC analysis.

ABC Analysis Since 75% of the annual consumption of inventory is covered

by only 10% of the items in the inventory, these items deserve highest attention and are classified as ‘A’ items.

Similarly 20% of the items covering 25 % of the inventory investment are B class items

Balance 70% of the inventory items are termed as C class items.

STEPS IN ABC ANALYSISThe steps in computing ABC analysis are:

1.Determine the annual usage in units for each item for the past one-year.

2. Multiply the annual usage quantity with the average unit price of each item to calculate the annual usage in US$ for each item.

3. Item with highest dollar usage annually is ranked first. Then the next lower annual usage item is listed till the lowest item is listed in the last.

4. Table 1 shows ranks of the items according to the annual usage in US$. for 10 items.

5. Arrange the items in the inventory by cumulative annual usage (dollars) and by cumulative percentage. Categorize the items in A, B , and C categories.

Table 1:Determination of ranks by annual usage in TL

Table 1:Determination of ranks by annual usage in TL

Table 1:Determination of ranks by annual usage in TL

TABLE 2:CATEGORIZING THE ITEMS IN ABC RANKING

TABLE 2:CATEGORIZING THE ITEMS IN ABC RANKING

TABLE 2:CATEGORIZING THE ITEMS IN ABC RANKING

Analytic Hierarchy Process

• The first is products was chosen as the alternative for AHP modelling as result of ABC

analysis.

The alternatives for AHP

The alternatives for AHP

The criteries for AHP

Hierarchy tree

Ranking of criteria

Criteria weight

Checking for consistency

Ranking alternatives

• Compare the relative preference with respect to: Criticality

Ranking alternatives

• Compare the relative preference with respect to: Depreciation

Ranking alternatives

• Compare the relative preference with respect to: Lead time uncertainty

Ranking alternatives

• Compare the relative preference with respect to: Price

Ranking alternatives

• Compare the relative preference with respect to: Random demand

Priority vector

Ranking of alternatives

• The Rectifier welding machineis the winner with the highest benefit to we rank it 1st ,

• Then at 2nd position Biopsy machine, • At 3rd Punch machine, • At 4th Submerged machine

Ranking of alternatives

• Compare the relative preference with respect to: Criticality

Ranking of alternatives

• Compare the relative preference with respect to: Depreciation

Ranking of alternatives

• Compare the relative preference with respect to: Price

Ranking of alternatives

• Compare the relative preference with respect to: Random demand

Priority vector

Ranking of alternatives

• The WEA 17-125 QUICK is the winner with the highest benefit to we rank it 1st ,

• Then at 2nd W 26-180 MVT.• At 3rd Welder glove, • At 4th Rubber glove.• At 5th Working clothes,.• At 6th Permanent pen

CONCLUSION• Firstly we classified the data of inventory stock controlling which we

got by ABC. By results of ABC analyzes, the order of importance can be defined but level of importance cannot. We used to AHP to define the level of importance. The groups area classified according to price and using rate with ABC techniques. On the other hand, the two criteria’s are not enough to define level of importance. We have used AHP for our thesis by thinking that the other criteria’s and the effects of managers are important to define to level of importance. Although ABC is classifying the groups depends on only price or cost, we recognize that the experts choice attach more importance the other criteria’s than price-cost. Reason of that choosing cheap material causes hesitancy more maintenance and cost. This truths show as that choosing any option only depends on price of material is not so five.