Track: Supply Chain Management

Abstract

Inventory management is essential for all businesses because raw materials in stock inventories are current assets that require significant investment. Having too few or too many raw materials also creates problems for the company, such as stock-outs, deterioration, or disappearance due to an excessively long storage period. Therefore, this study examines the order quantity of raw materials in group A derived from the ABC classification method of the case study company. The 112 items represent a group of raw materials requiring strict monitoring supervision and having the highest annual inventory turnover value. Then, the Coefficient of Variation (CV) of demand for raw materials used to determine the ordering volume of raw materials was analyzed. Economic Order Quantity (EOQ) method determines the stable demand for raw materials. An unstable demand is determined using two heuristic methods which are Silver-Meal (SM) and Part-Period Balancing (PPB) methods. In addition, safety stock levels were analyzed to avoid shortages. As a result, in comparison to the actual total inventory cost of the company in the case study, the total cost of raw materials in group A decreased by 44.58 percent in 2019, 44.52 percent in 2020, and 45.55 percent in 2021.