Optimizing Stainless Steel Inventory Management: An EOQ-Based Approach

Abstract

Production planning and inventory control is essential to every company in managing all the activities in the company to achieve greater goals and results. In a manufacturing company of stainless-steel product, production planning used team and leader decision based on the purchase order (PO) from customer without safety stock and re-order point. In deciding a basic optimal quantity in production, Economic Order Quantity (EOQ) method to find the basic optimal quantity order when purchasing material or supplying stock with minimize the wasted time and opportunities. Also, to create an emergency supply and pinpoint replenishment material, Safety Stock (SS) and Re-Order Point (ROP) could be the solution. The research scope of problem is focused on finding the optimal order quantity for production planning and inventory control with one of the products in the company as the sample, called item 1018 in a stainless-steel manufacturing company. By using Economic Order Quantity (EOQ) Method, the company could solve all problem regarding to production planning and managing inventory when supply is near stockout situation. The optimal of purchase order for Item 1018 is 145 units with 12 times frequency order. The safety stock for Item 1018 is 74 units and the reorder point is on 242 units. The total cost in table comparison total cost using EOQ and company’s policy show that by using EOQ method, the company could save Rp 13.482.483 in a year. It’s could be concluded with the result the company could use the EOQ, safety stock, and reorder point method to their production planning and inventory management control to monitoring the movement of inventory every day.