Oct 5, 2024
Background and Problem
The study focuses on Pride Chicken, a subsidiary of PT Citrarasa Utama Abadi, which operates in the food and beverage sector with 102 branches in Bandung. The company faces issues with overstocking and understocking of raw chicken meat. This is a significant problem because chicken meat is a perishable good, meaning its quality declines over time. The company lacks a specific plan for managing this perishable inventory, leading to inefficiencies.
Methodology
To solve the inventory problem, the research used the Economic Period Quantity (EPQ) method. The EPQ model was chosen because it can account for a product's expiration date. The method's goal is to determine the optimal order quantity (Q) and order cycle time (Ts) to minimize total inventory costs.
Forecasting: Data on raw material demand from April 2023 to March 2024 was collected from the company. The data showed a trend pattern (gradual increase and decrease), so three forecasting methods were considered: Single Exponential Smoothing With Trend (SEST), Double Exponential Smoothing With Trend (DEST), and Linear Regression With Time (LR). Using software (WinQSB), Linear Regression With Time (LR) was identified as the most accurate method because it had the lowest error values (MAD, MSE, and MAPE).
Inventory Cost Calculation: The study analyzed various inventory costs, including:
Holding Costs: This included electricity payments, raw material spoilage, and depreciation of freezer boxes. The total cost was calculated as Rp91.03 per chicken per day.
Ordering Costs: This included delivery fees and internet data costs. The total was Rp100,666.67 per order.
Key Findings
The study presented and compared two scenarios for the EPQ model against the company's existing policy.
EPQ with a One-Day Order Cycle: This model resulted in a total annual inventory cost of Rp8,066,545,788. This offered a savings of Rp9,996,363 per year, or a 0.12% reduction in costs, compared to the company's original policy.
EPQ with a Two-Day Order Cycle: This model led to a total annual inventory cost of Rp7,873,409,200. This provided a significant saving of Rp206,177,102 per year, a 2.62% reduction in costs.
The research concluded that implementing the EPQ method, particularly with a two-day order cycle, is more optimal and can lead to substantial cost savings for the company.
Thesis Link: https://drive.google.com/drive/folders/1GHotcdxU7kILxj07aKUetu3h_4ONhyyO?usp=sharing