Optimal Order Quantity and Inventory Classification Using Clustering

Clustering is the process of analyzing data to find clusters of data objects that are similar in some sense to one another. Some research studies have also extended the usage of clustering concept in inventory management. Yet, not many research studies have considered the application of clustering approach on determining both optimal order quantity and loss profit of frequent items. In this paper, ordering policy of frequent items in each cluster is determined and inventory is classified based on loss rule in each cluster. This helps inventory manager to determine optimum order quantity of frequent items together with the most profitable item in each cluster for optimal inventory control. An example is illustrated to validate the results.