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Integrated inventory ranking system for oilfield equipment industry

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Purpose: This case study is motivated by the subcontracting problem in an oilfield equipment and service company where the management needs to decide which parts to manufacture inhouse and which parts to purchase from suppliers when the capacity is not enough to make all required parts. A higher level quality can be achieved for the parts manufactured in house and the lead time can also be well controlled. Currently the company is making subcontracting decisions based on management’s experience. Design/methodology/approach: Working with the management, a Decision Support System (DSS) is developed to rank parts by integrating three inventory classification methods considering two quantitative factors including cost and demand, and one qualitative factor based on management experience. The proposed integrated inventory ranking procedure will make use of three classification methods: ABC based on cost, FSN based on demand, and VED based on management experience. Findings: An integration mechanism using weights is developed to rank the parts based on the total priority scores. The ranked list generated by the system helps management to identify the most critical parts to manufacture in-house. Originality/value: The integration of all three inventory classification techniques, covering both quantitative and qualitative factors, into a single system is a unique feature of this research. This is important as it provides a more inclusive, big picture view of the DSS for management’s use in making business decisions.



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