inventory control by analyzing the economic order quantity ... · keywords:-abc analysis, forecast,...

Volume 4, Issue 1, January – 2019 International Journal of Innovative Science and Research Technology

ISSN No:-2456-2165

IJISRT19JA148 www.ijisrt.com 428

Inventory Control by Analyzing the Economic Order

Quantity (EOQ) Method to Reduce Low & Off

Production

Luqman Arif 1), Hasmznnd Zusi 2 , Erry Rimawan 3) Magister Management, Mercu Buana University

Abstract:- The company in an effort to increase revenue

in the condition of world oil prices down now is to

prevent the rate of decline in production due to low & off

production. Based on existing low & off data from 2013 to

2017 shows a fairly high upward trend, from 10% to

15%. While the maximum target of the company for the

low & off rate is 8%.

From the background of these problems, it is seen

that the cause of the high low & off production is because

the supply material to replace damaged equipment is not

available (stock out). This research aims to provide an

alternative solution to the problem of inventory about

optimum stock and saving inventory costs and can offer

policies for inventory systems that are implemented in the

company so as to reduce low & off production.

The results of the study using the EOQ method,

ABC analysis and calculation of inventory material

forecast obtained EOQ prices, order frequency, safety

stock, ROP, maximum inventory and total inventory cost

(TIC). From the results of the calculation of Total

Inventory Cost (TIC) carried out by the company with

the existing method and the calculation of total inventory

cost (TIC) using the EOQ model, there is a difference in

numbers, which means saving inventory costs by the

company Rp. 776,443,130 or 190% of the EOQ model on

in 2016 and Rp 810,884,069 or 212% of the EOQ model

in 2017, as well as Rp 810,884,069 or 212% of the EOQ

model in 2018

From the research it was concluded that the

calculation of the EOQ method by considering the

assumptions in the study can be used as one of the

methods for planning optimal material inventory control

so that there is no problem of lack of stock material which

will have an impact on high & low production wells. The

company is looking at reviewing existing forecasts and

seeing trends in material usage, so that the optimum stock

of material used is obtained.

Keywords:- ABC Analysis, Forecast, EOQ, Order

Frequency, Safety Stock, ROP, Maximum Inventory, Total

Inventory Cost (TIC).

I. INTRODUCTION

The company in an effort to increase revenue in the

condition of world oil prices down now is to prevent the rate

of decline in production due to low & off production. Based

on existing low & off data from 2013 to 2017 shows a fairly

high upward trend, from 10% to 15%. While the maximum

target of the company for the low & off rate is 8%.

From the background of these problems, it is seen that

the cause of the high low & off production is because the

supply material to replace damaged equipment is not

available (stock out). This research aims to provide an

alternative solution to the problem of inventory about

optimum stock and saving inventory costs and can offer

policies for inventory systems that are implemented in the

company so as to reduce low & off production.

II. BASIC THEORY

A. Wells and Low & off Production Production Systems In general, the stages of production of wells in stages or

methods of production are divided into two, namely:

Natural flow stage (Natural Flowing).

Production pipe strings (production strings) used in

producing wells in natural blast are:

Tubing (production pipe)

Tubing packers with casing

Artificial lift stages, among others, include common

methods:

Gas lifts

Suction pump (Sucker Rod Pump)

Submergible Pump

Low & off production is a parameter used to observe

the production performance of wells to the potential of wells

in normal conditions. The definition of operational low & off

terms includes:

Low is a lack of production (against potential) in the

condition of wells that are still in production.

Off is a lack of production (according to potential) in the condition of a well die / downtime stop production.

http://www.ijisrt.com/


ISSN No:-2456-2165


Low & off is the average potential per month reduced by

the average monthly production.

B. ABC Analysis

Bandaru, Aslam, Ng and Deb (2015) ABC clarification

or often referred to as ABC analysis is a clarification of a

group of materials in a declining arrangement based on the

cost of material use per time period (the price per material

unit multiplied by the volume of use of that material over a

certain period ) The commonly used time period is one year.

With the ABC method, inventory is grouped into three

major groups, where this benchmark is distinguished by the

level of capital absorption of an item, 3 groups, namely:

Group A.

This group is items that absorb capital in a large

percentage. The types of goods in this group amount to 15-

25% of all types of goods available, and absorb capital of 70

- 80% of all capital embedded in the inventory.

Group B.

The group of items that absorb capital is 15-20% of the

total capital and the amount of goods itself is 30-40% of the

total number of goods available.

Group C.

The group of goods that absorb capital is 5 - 10% of the

total capital, and the number of goods covers 40% of all

existing goods.

C. Forecasting

Forecasting is an estimate of the level of demand

expected for a product or several products in a certain period

of time in the future. Therefore, forecasting is basically an

estimate, but using certain methods of forecasting can be more than just one estimate. Three uses of forecasting

include:

Determine what is needed for plant expansion.

Determine advanced planning for existing products to be

done with existing facilities.

Determine short-term scheduling of existing products to

be worked on based on existing equipment.

Judging from the nature of the predictions that have

been compiled, the forecasting can be divided into two types,

namely:

Qualitative or technological forecasting, namely forecasting based on past qualitative data. The existing

forecasting results depend on the person who compiled it,

because the forecasting is largely determined by intuition

thinking, judgment (opinion) and the knowledge and

experience of its constituents.

Quantitative forecasting, namely forecasting based on

quantitative data in the past. The forecasting results are

made depending on the method used in the forecasting. A

good method is a method that provides possible values of

differences or deviations

Quantitative forecasting methods are divided into two

main types of forecasting models, namely:

Periodic series models (time series), namely forecasting

methods based on the use of pattern analysis of

relationships between variables that will be estimated

with time variables, which is a time series.

Causal model, namely: Forecasting method based on the

use of pattern analysis of the relationship between other

variables that influence it, which is not time called the

correlation or causal method.

Forecasting techniques in outline can be grouped into 2,

namely:

Time Series Method (Time Series)

Broadly speaking, the time series method can be

grouped into:

Averaging Method

The methods included, among others:

Simple Average

Single Moving Average Double Moving Average

Smoothing method (smoothing)

Used in conditions where the weight of data in one

period is different from the data in the previous period and

forms an Exponential function commonly called Exponential

smoothing.

The methods included, among others:

Single Exponential Smoothing

Double Exponential Smoothing one parameter from Browns

Double Exponential Smoothing Two Parameters from

Holt

Linear Regression

D. Inventory

According to Assauri (2008), the notion of inventory in

this case is as an asset which includes goods belonging to the

company with the intention to sell in a normal business

period, inventory of goods which are still under construction

/ production process, or raw material inventory waiting for its use in a production process.

The causes of inventory are as follows (Kusuma, 2009):

Mechanism of fulfillment upon request.

The desire to reduce uncertainty

The desire to speculate is aimed at gaining big profits

from future price increases.



ISSN No:-2456-2165


While according to Rangkuti (2007: 15) the inventory

function can be divided into 3:

Decoupling function is inventory that allows companies

to meet customer demand without depending on suppliers.

Economic Lot Size Function

Anticipation Function, If the company faces fluctuations

in demand that can be predicted and predicted based on

past experience or data, namely seasonal demand.

According to Indrajit and Djokoparnoto (2005: 47),

inventory demand systems are divided into 3, namely:

Independent request system is the type of demand for a

free item, meaning that it does not depend on the time or number of requests for other goods. Such requests are

usually uniform and relatively more orderly. In an

independent request system like this, the calculation

models for the number of re-orders include:

The booking system is fixed, in this system for every time

the order ordered is always fixed. The most popular

model is the EOQ model (Economic Order Quantity).

Pile production system, this system is oriented to the

production of goods in certain piles. A fairly popular

model is the EPQ formula (Economic Production

Quantity), ROT (Runout Time Method), AROT

(Aggregate Runout Time Method).

Fixed periodic system, this system is used to calculate or

review inventory re-ordering based on a fixed time

schedule. There are several models developed in this

system, including EOI (Economic Order Interval).

Minimum-maximum system, this system adheres to the

understanding that the minimum amount of inventory

should be carried out to ensure the continuity of the

company's operations, but also needs to be set to

maximize the amount of goods not controlled in an

uncontrolled manner.

Dependent demand systems are types of goods whose

time or amount are not free to stand alone, but depend on

the time or number of requests for other goods. The most

famous ordering model in this system is MRP (Material

Requirement Planning).

Demand system with its own characteristics, in this

system the demand for goods despite the nature of

certainty, but the amount, time and frequency of use has

its own pattern, which changes in a certain period of time,

sometimes - sometimes regularly and sometimes -

irregularly. Nenes, G. (2010) usage patterns that are repeated every year (seasonal) or every few years

(cyclical), and there are patterns of usage that are

completely irregular.

E. Method of Economic Order Quantity (EOQ)

EOQ (Econimc Order Quantity) is the number of orders

that can minimize total inventory costs, optimal purchases.

To find out how much total material is still to be purchased in

each purchase to cover the needs for one period. To be able

to achieve these goals, the company must fulfill several

factors regarding the supply of raw materials. The factors are: Estimated usage, management must be able to make

estimates of raw materials to be used in the production

process in a period.

Price of material, The price of raw materials is the basis

for compiling the calculation of how much company

funds must be prepared for investment in terms of the

supply of raw materials.

Inventory costs, According to Rangkuti (2017: 16) costs

related to inventory include:

Inventory Cost (Holding Cost or Carrying Cost).

Ordering costs or purchase costs (ordering costs or procurement costs).

Manufacturing costs or set-up costs.

Costs of running out or lack of material (shortage costs)

a. Actual usage

b. Waiting time, lead time is the time needed (which occurs)

between when ordering raw materials and the arrival of

the raw material itself.

c. Material purchasing mode.

d. Safety stock, is an additional inventory that is held to

protect or maintain the possibility of a stock out. Safety

inventory in Slamet (2007: 72) is the amount of minimum material inventory that must be owned by the company to

maintain the possibility of delays in the arrival of raw

materials, so there is no stagnation. The amount of safety

stock is determined by the formula:

Safety stock (SS) = (SF x SD) ……………. (1)

Where:

SS = Safety Inventory.

SF = 1.28 (calculation of 90% SL).

D = average demand for goods for a certain period. σD = demand deviation standard (Calculated by formula).

e. Reorder (reorder point) is the time or certain time the

company must order raw materials again, so that the

arrival of the order is right with the end of the raw

material purchased, especially with the EOQ method.

Determination or determination of the reorder point must

pay attention to the factor-factor as follows:

Use of materials for a period of time to get ingredients.

The amount of safety stock.

The reorder point formulation in Slamet (2007: 72), is

as follows:

ROP = (LT.AU) + SS ……………………… (2)

Where :

ROP = the point of reorder.

LT = lead time.

AU = average usage for a certain period



ISSN No:-2456-2165


SS = safety stock / safety stock

f. Calculating Maximum Inventory

Maximum inventory can be calculated using the

following formula:

MI = SS + EOQ ……………………………. (3)

Where :

MI = Maximum inventory.

SS = Safety Stock

g. To get the optimal amount of material purchases every

time a booking with a minimum cost according to Slamet (2007: 70) can be determined by the Economic Order

Quantity (EOQ) and Reorder Point (ROP). To determine

the number of orders that are economical according to the

EOQ method are:

Order frequency according to Deanta's exposure in

Rifqi (2012: 40) can be described as follows:

Where:

EOQ = number of orders that are economical / economic

order quantity D = request / use of goods for a certain period (unit)

S = booking fee for each message

H = storage cost per period per unit

h. TIC (Total Inventory Cost), In calculating total inventory

costs, it aims to prove that with the optimal amount of raw

material purchases, calculated using the EOQ method will

be achieved with a minimum total inventory cost. Total

Inventory Cost (TIC) can be formulated as follows:

Where:

TIC = Total Inventory Cost.

S = Message Fee. H = Save Cost.

Di = Request.

Ci = Price per unit

Qi = EOQ

III. METHODOLOGY

A. Types of research

This research method is descriptive method.

Descriptive research method because researchers not only

provide an overview of the phenomena that exist, but also

explain the relationship, and get the meaning and

implications of a problem you want to solve

B. Variable Measurement

Researchers use inventory control by using EOQ, where

quantities will be ordered, order frequency, safety stock,

ROP, maximum inventory, and TIC (Total Inventory Cost)

C. Population and Samples

The population is 72 items (material) production strings

namely tubing, sucker rod and artificial lift (down hole

pump) which consists of rod pump and ESP while the sample

is historical material demand data, material price data,

material ordering data lead time, holding cost component,

and ordering costs from 2016 - 2017.

D. Method of collecting data

To collect data used method:

Interview or interview method, namely: by conducting direct interviews with competent company employees,

namely with warehouse assistant manager and staff with

minimum 3 years work experience.

Documentation, namely the method of collecting data

through existing documentation, namely from the system

data (SAP), is expected to obtain usage data components

(spare parts), for the waiting time (lead time), number of

orders, ordering costs, storage costs obtained from

interviews.

IV. HASIL DAN PEMBAHASAN

A. Material Inventory Grouping

From the data of the quantity (quantity) of inventory

and the price per unit of the existing inventory in the

company using ABC analysis, the classification of inventory

material is obtained into three groups of inventory materials

as in table 1.



ISSN No:-2456-2165


inventory

group investment value (Rp)

% investment towards

cumulative investment

% inventory against

cumulation %cumulative

A 26,156,494,437 62% 8% 8%

B 11,447,171,417 27% 15% 24%

C 4,412,172,840 11% 76% 100%

Total 42,015,838,693

Table 1:- Classification of ABC analysis needs

The inventory group A material which will be the basis

of the research calculation of forecasting (forecast) material usage for 2016 - 2017 and one year in the future namely

2018. Material group A as listed in table 2.

Table 2:- Material supplies for group A to be analyzed

B. Results of Optimum Forecast Analysis of the Company

In this study, the forecasting method used for material

use is the Moving Average (with variations 1,2,3,4 and 5

months), Exponential Smoothing, and Exponential

Smoothing With Trend with data for 24 months (2016 -

2017). The results are as follows;

Table 3:- Optimum Forecast Method Test

Based on the results of processing the above material

use with Ms. Excel 2016, the best forecasting method is the Moving Average variation of 3 Months, with MAD 474;

MSE 944,483; and MAPE 1.61.

Then, for forecasting the use of each material in 2016 to

2018 it will be calculated using the Moving Average method

which has the smallest error value based on the existing

calculations in accordance with table 3

C. Material Use in 2016-2017 and Permit for Use in 2018

Material usage during 2016 and 2017 can be seen from the table below.

Table 4:- 2016 Material Use Tables.

Table 5:- 2017 Material Use Tables

From the two tables of usage above and by using the

Moving Average forecasting method by calculating using

Ms. Excel 2016 will get the usage forecast for each material

for the next 12 months in 2018 which can be seen from the

graphs below.

Material Deskripsi Material

A ROD,SUCKER,MLD,3EA STEALTH-XL,D,3/4 X25'

B ROD,SUCKER,MLD,3EA STEALTH-XL,D,7/8 X25'

C SUCKER ROD, SIZE 3/4 IN, 25 FT, D

D SUCKER ROD, SIZE 7/8 IN, 25 FT, D

E TUBING, 2.7/8 IN, J-55, 6.5 PPF, EUE, R2

F BALL & SEAT 1.3/4IN FLAT CARBIDE SEAT



ISSN No:-2456-2165


Graph 1:- Prognosis of Use of Material A

From Graph 1, the usage of material A (ROD, MLD,

3EA STEALTH-XL, D, 3/4 X25 ') has decreased in the end

of 2016, there is no use even in 2017 but it starts to be used at

the end of 2017 which is quite large so cause the trend to rise

and then stabilize in the range of +/- 600 EA for use in 2018. This condition is caused by the absence of stock or use due to

production wells that are shut in (dead) a little and there are

changes in design in the production strings to reduce the low

number & off.

Graph 2:- Prognosis of Use of Material B

For the use of material B (ROD, MLD, 3EA

STEALTH-XL, D, 7/8 X25 ') in 2016 until 2017 there is no

use in 2017 but it starts to be used at the end of 2017 which is

quite large causing a trend to rise and then stable in the range of +/- 600 EA for use in 2018 as shown in graph 2. This

condition is caused by the absence of stock or use due to

production wells that are shut in (dead) a little and there are

changes in design in the production strings to reduce the low

number & off.

Graph 3:- Prognosis of Use of Material C

From Graph 3, the usage of material C (SUCKER

ROD, SIZE 3/4 IN, 25 FT, D) has decreased in the end of

2016, there is no use even in 2017 but starting to use at the

end of 2017 is only small enough to cause no the trend rose

and was stable in the range of +/- 4 EA for use in 2018. This

condition was caused by the use of production wells which were shut in (dead) a little and there was a change in design

in the production strings to reduce the low & off rate.

Graph 4:- Prognosis of Use of Material D

From Graph 4, the usage of material D (SUCKER

ROD, SIZE 7/8 IN, 25 FT, D) has decreased in the end of

2016 from around 400 - 300 EA to 50 EA and there is no use

in 2017 causing no trend there was no increase in usage even

in 2018. This condition was caused by the use of production

wells which were shut in (dead) a little and there was a

change in design in the production strings to reduce the low

& off rate.



ISSN No:-2456-2165


Graph 5:- Prognosis of Using Material E

From Graph 5, the usage of E material (TUBING, 2.7 /

8 IN, J-55, 6.5 PPF, EUE, R2) decreased in the end of 2016, the initial usage ranged from 400-600 EA to 200 EA but

began to increase usage at the end 2017 is large enough to

cause a trend to rise and then stabilize in the range of +/- 800

EA for use in 2018. This condition is caused by the absence

of material stock and usage due to production wells that are

high shut-off so that the numbers are low & off in 2016 it

was quite high and there was a change in design in the

production strings to reduce the number of low & off in the

next year.

Graph 6 shows that the use of F material (BALL & SEAT 1.3 / 4IN FLAT CARBIDE SEAT) has decreased in

the end of 2016 with initial usage ranging from 20-30 EA to

5 EA but has begun to increase usage at 30 EA in early 2017

and has decreased to 10 EA at the end of 2017, causing a

stable trend in the range of +/- 8 EA for use in 2018. This

condition is caused by the absence of material stock and

usage due to production wells that are shut in (dead) high so

that the low & off rate in 2016 was quite high and there was a

change in design in the production strings to reduce the

number of low & off in the next year.

Graph 6:- Prognosis of Use of Material F

From the results of forecasting (forecast) with the

moving average method with a 3-month series seen from graphs 1 - 6 for all materials experienced an increase in

forecasting usage in 2018. There is only material C

(SUCKER ROD, SIZE 3/4 IN, 25 FT, D), material D

(SUCKER ROD, SIZE 7/8 IN, 25 FT, D), and material F

(BALL & SEAT 1.3 / 4IN FLAT CARBIDE SEAT) which

experienced a downward trend and even for material D in

2017 and 2018 not there is use of existing tables and graphs.

D. EOQ Material Calculation and Order Frequency

For the calculation of EOQ (economic order quantity)

and order frequency of each material in 2016-2017, it will

use data from ordering costs and holding costs for each material as in table 6 & table -7.

The price of EOQ is obtained by Formula as follows:

Order Frequency Prices are obtained with the following

formula:

With the same method and formula, the results of the

calculation of EOQ and ordering frequency for 2016-2018

each material can be displayed and seen in tables-8, 9 and

table-10.

E. Calculation of Material Safety Stock Inventory for 2016-

2018

The price of Safety stock is obtained with the Safety

stock equation = (safety factor x standard deviation)

Data Material A is known as follows:

Average Usage = 113

Standard deviation = 173

Service level = 90% (data used as an assumption)

Service Factor = 1.28 (calculation of 90% SL)



ISSN No:-2456-2165


From the data above, the Safety stock of material A can

be known by the existing formula, namely: Safety Stock = safety factor x standard deviation

= 1.28 x 173

= 222 EA

So our 90% service level needs a safety stock of =

(serfive factor x std dev), which is equal to 222 with an

average usage of 113 EA. With the same method and

formula, the results of the calculation of the safety stock

usage for 2016-2017 each - each material can be displayed

and seen in table-11 and table-12. While for 2018 can be seen

in table-13.

F. Reorder Point (ROP)

Calculations for determining the reorder point (ROP)

can be calculated using the following equation:

ROP = Safety Stock + (Lead Time x needs per day)

From the existing data the lead time of each material is

assumed to be the same, that is equal to 60 days.


Safety Stock = 222 Lead Time = 60

Daily Use = 1.355 / 365 (for 1 year)

From the data above, ROP material A can be known by the

existing formula, namely:

So the re-order price (ROP) of material A is equal to

445 EA, which means that a re-order will be made when material A has reached 445 EA in 2016.


usage re-calculation (ROP) for 2016-2017 each material can

be displayed and seen in tables-14 and table-15. while for

2018 can be seen in table 16.

G. Maximum Inventory Calculation (Maximum Inventory)

The maximum inventory is needed by the company so

that the amount of material inventory in the Warehouse does

not exceed the investment budget or capital set so there is no waste on operational budget costs and capital costs. To find

out the maximum inventory size (maximum inventory), use

the formula in the equation as follows, namely:

Maximum Inventory = Safety Stock + EOQ


Safety Stock = 222

EOQ = 478

From the data above, maximum inventory material A

can be known by the existing formula, namely:

Maximum inventory = Safety Stock + EOQ

= 222 + 478

= 700 EA

So the maximum inventory price of material A is 700

EA, which means that there will be no re-order when material

A has reached 700 EA or the maximum inventory for

material A is 700 EA in 2016.

With the same method and formula, the results of

calculating the maximum inventory (maximum inventory) usage for 2016-2017 each - each material can be displayed

and seen in tables 17 and 18. While for 2018 can be seen in

table 19.

H. Calculation of Material Total Inventory Cost (TIC)

To obtain the minimum total cost of material inventory,

a comparison between the calculation of material inventory

costs and the EOQ method is needed with the calculations

made by the company so far. This is done to find out how

much the total cost of material inventory is saved at the

company.

Calculation of total inventory costs according to the

EOQ method will be calculated using the Total Inventory

Cost (TIC) formula, the equation used in calculating the

Total Inventory Cost (TIC) and in rupiah as follows:

Where the Message Fee (S), Material Usage (D),

Economict Order Quantity (EOQ), Savings Cost (H), and Price of unit (Ci).


Message Fee (S) = 15,000,000

Usage (D) = 1,355

EOQ = 478

Cost of Save (H) = 10%

Unit price (Ci) = 1,777,552

From the data above, the total inventory cost (TIC) of

material A can be known by the existing formula, namely:

With the same method and formula, the calculation of

the total inventory cost (TIC) used by the company using the



ISSN No:-2456-2165


EOQ method for the period 2016-2018, as shown in tables

23, table 24, and table 25.

From the table, the smallest total inventory cost (TIC)

in 2016 is material B because it has the lowest usage of Rp.

7,842,947. While in 2017 D material has the lowest total

inventory cost (TIC) of Rp. 6,415,608. For 2018, D material

has the lowest total inventory cost (TIC) and even zero

because there is no use.

I. Calculation of Total Inventory Cost (TIC) Existing

Methods 2016-2018

While the calculation of total inventory cost (TIC)

carried out by the company so far will be calculated using the average inventory available in the company using the

following formula:

TIC = {(Inventory average x H) + (S x F)}.

Data needed for calculations are average inventory,

save costs, message costs, number of months.


Average Inventory = 113

Cost of saving (H) = 177.755

Message Fee (S) = 15,000,000 Number of Months (F) = 12

From the data above, the total inventory cost (TIC) of

material A can be known by the existing formula, namely:

TIC = {(Inventory average x H) + (S x F)}

= {(113 x 177,755) + (15,000,000 x 12)}

= Rp. 200,071,502


calculation of the total inventory cost (TIC) used by the

company with the existing method for the period 2016-2018, as shown in tables 26, table 27, and table 28.

The smallest total inventory cost (TIC) in 2016 is

material B because it has the lowest usage of Rp.

180,068,346. While in 2017 D material has the lowest total

inventory cost (TIC) of Rp. 180,000,000. For 2018, D

material has the smallest total inventory cost (TIC) of Rp.

180,000,000 because there is no use.

To compare the total inventory cost (TIC) of the EOQ

method with the total inventory cost (TIC) of the existing method material and the amount of savings generated during

the period 2016-2017, and 2018 can be seen in table-29,

table-30, and table- 31.

In tables-29, table-30, and table-31 show that in 2016

there is a difference in value between the total inventory cost

(TIC) from the calculation of the existing method with the

calculation of the EOQ method of Rp. 776,443,130 or 190%

greater than the TIC value calculated by the EOQ method.

Whereas in 2017 there is a difference in value between the

total inventory cost (TIC) from the calculation of the existing method and the calculation of the EOQ method of Rp.

810,884,069 or 212% greater than the TIC value calculated

by the EOQ method. While in 2018 there was a difference in

value between the total inventory cost (TIC) from the

calculation of the existing method and the calculation of the

EOQ method of Rp. 609,244,112 or 91% greater than the

TIC value calculated by the EOQ method.

From the explanation of the difference in TIC value

between the calculation of the Existing method and the EOQ

method it can be called the savings value obtained by the

company.

V. CONCLUSION

Calculation of the EOQ method by considering the

assumptions in the study can be used as one of the

methods for planning optimal material inventory control

so that there is no problem of lack of stock material which

will have an impact on high & low production wells.

The detailed calculation of the EOQ value, order

frequency, safety stock, ROP and maximum inventory

can be seen in tables 20, table 21, and table 22. From the results of the Total Inventory Cost (TIC)

calculated by the company with the existing method and

the calculation of the Total Inventory Cost TIC using the

EOQ model, there is a difference in numbers which

means that the company's inventory cost is IDR

776,443,130 or 190% of the EOQ model. in 2016 and Rp.

810,884,069 or 212% of the EOQ model in 2017, and Rp.

810,884,069 or 212% of the EOQ model in 2018. This

can be seen in tables 29, table-30, and table 31.

REFERENCES

[1]. Indroprasto, Suryani,Ema. 2012. “ Analisis Pengendalian

Persediaan Produk Dengan Metode EOQ menggunakan

Algoritma Genetika untuk mengefisienkan Biaya

Persediaan”. Jurnal Teknik ITS Vol 1.

[2]. Jaggi, Chandra K., and Mittal,Mandeep. 2011.

“Economic Order Quantity Model for Detoriarating

Items with Imperfect Quality.”, Journal Operation

Research Mathematical Sciences, Vol. 32. No. 2-107-

113.

[3]. Maimun, A.2008. “Perencanaan Obat Antibiotik

berdasarkan Kombinasi Metode Konsumsi dengan analisis ABC dan Reorder point terhadap nilai

Persediaan dan Turnover Ratio di Instalasi Farmasi RD

Darul Istiqomah Kaliwungu Kendal”. Tesis. Universitas

Diponegoro.

[4]. Manaf, A.M., Akib, M. and Kusmiyati, K.2016.

“Analisis Penilaian Persediaan Pada PT. Putra Wirawan

Gas Kendari”. Jurnal Akutansi.1(1).



ISSN No:-2456-2165


[5]. Matsuyama, Keisuke. 2007. “The General EOQ Model

with Increasing Demand and Cost” . Journal of the Operation Research Society of Japan. Vol 44, No.2.

[6]. Yu lin, Tien. 2011. “An Economic order quantity model

with screening errors, returned cost, and shortages under

quantity discounts”. Journal of business management.

Vol 5(4), pp 1129-1135.

[7]. Mathew,Aju. 2013. “Demand Forecasting For Economic

Order Quanitity in Inventory Management”.

International Journal of Scientific and Research

Publications, Volume 3. Issue 10.1-6.

ATTACHMENT

Table 6:- Table of Material Usage, Prices Per EA, Booking

Fees and Storage Costs in 2016

Table 7:- Table of Material Usage, Prices per EA, Booking

Fees and Storage Costs in 2017

Table 8:- EOQ Calculation and Frequency of Orders in 2016

Table 9:- EOQ Calculation and Frequency of Ordering 2017

Table 10:- EOQ Calculation and Frequency of Bookings in

2018

Jumlah Harga/EA Total Harga Pesan Simpan

EA Rp Rp Rp Rp

ROD,SUCKER,

MLD,3EA

STEALTH-

1,355 1,777,552 2,408,582,348 15,000,000 177,755

ROD,SUCKER,

MLD,3EA

STEALTH-

10 2,050,394 20,503,940 15,000,000 205,039

SUCKER ROD,

SIZE 3/4 IN, 25

FT, D

1,293 1,290,000 1,667,970,000 15,000,000 129,000

SUCKER ROD,

SIZE 7/8 IN, 25

FT, D

1,861 1,372,001 2,553,293,861 15,000,000 137,200

TUBING, 2.7/8

IN, J-55, 6.5

PPF, EUE, R2

2,733 2,101,442 5,743,240,986 15,000,000 210,144

BALL & SEAT

1.3/4IN FLAT

CARBIDE SEAT

109 2,110,812 230,078,508 15,000,000 211,081

Biaya Pemakaian

2016

Item PartTahun

Jumlah Harga/EA Total Harga Pesan Simpan

EA Rp Rp Rp Rp

ROD,SUCKER,

MLD,3EA

STEALTH-

XL,D,3/4 X25'

1,615 1,777,552 2,870,746,480 15,000,000 177,755

ROD,SUCKER,

MLD,3EA

STEALTH-

XL,D,7/8 X25'

1,623 2,050,394 3,327,789,137 15,000,000 205,039

SUCKER ROD,

SIZE 3/4 IN, 25

FT, D

40 1,290,000 51,600,000 15,000,000 129,000

SUCKER ROD,

SIZE 7/8 IN, 25

FT, D

10 1,372,001 13,720,008 15,000,000 137,200

TUBING, 2.7/8

IN, J-55, 6.5

PPF, EUE, R2

3,376 2,101,442 7,094,466,757 15,000,000 210,144

BALL & SEAT

1.3/4IN FLAT

CARBIDE SEAT

95 2,110,812 200,527,140 15,000,000 211,081

Tahun Item Part

Pemakaian Biaya

2017

Tahun MaterialPemakaian

EAEOQ

Freq.

Pemesanan

ROD,SUCKER,MLD,3EA

STEALTH-XL,D,3/4 X25'1,355 478 2.83

ROD,SUCKER,MLD,3EA

STEALTH-XL,D,7/8 X25'10 38 0.26

SUCKER ROD, SIZE 3/4

IN, 25 FT, D1,293 548 2.36


IN, 25 FT, D1,861 638 2.92

TUBING, 2.7/8 IN, J-55,

6.5 PPF, EUE, R22,733 625 4.38

BALL & SEAT 1.3/4IN

FLAT CARBIDE SEAT109 124 0.88

2016


EAEOQ

Freq.

Pemesanan

ROD,SUCKER,MLD,3EA

STEALTH-XL,D,3/4 X25'1,615 522 3.09

ROD,SUCKER,MLD,3EA

STEALTH-XL,D,7/8 X25'1,623 487 3.33

SUCKER ROD, SIZE 3/4 IN,

25 FT, D40 96 0.41


25 FT, D10 47 0.21

TUBING, 2.7/8 IN, J-55, 6.5

PPF, EUE, R23,376 694 4.86

BALL & SEAT 1.3/4IN


2017


EAEOQ

Freq.

Pemesanan

ROD,SUCKER,MLD,3EA

STEALTH-XL,D,3/4 X25'6,556 1,052 6.23

ROD,SUCKER,MLD,3EA

STEALTH-XL,D,7/8 X25'6,853 1,001 6.84


25 FT, D53 111 0.48


25 FT, D0 0 0.00

TUBING, 2.7/8 IN, J-55, 6.5

PPF, EUE, R29,478 1,163 8.15

BALL & SEAT 1.3/4IN


2018



ISSN No:-2456-2165


Table 11:- Calculation of Safety Stock Usage in 2016

Table 12:- Calculation of Safety Stock for Use in 2017

Table 13:- Calculation of the Use of Safety Stock in 2018

Table 14:- Calculation of Ordering Returns (ROP) for Use in

2016

A B C D E F TOTAL

JAN 0 0 367 168 123 0 658

FEB 0 4 89 18 314 0 425

MAR 0 0 160 256 189 3 608

APR 0 0 569 274 40 18 901

MAY 192 0 106 375 204 29 906

JUN 130 0 0 142 241 8 521

JUL 426 0 0 34 344 14 818

AUG 483 0 1 184 550 20 1,238

SEP 0 0 0 342 675 8 1,025

OCT 0 0 0 5 27 6 38

NOV 124 0 0 59 0 3 186

DEC 0 0 0 4 26 0 30

113 0 108 155 228 9 613

1,355 4 1,292 1,861 2,733 109 7,354

173 1 182 134 215 9 390

90% 90% 90% 90% 90% 90% 90%

1.28 1.28 1.28 1.28 1.28 1.28 1.28

222 1 233 171 275 12 499

SERVICE LEVEL

SERVICE FACTOR

SAFETY STOCK

TOTAL

PEMAKAIAN TYPE MATERIALTAHUN BULAN

2016

AVERAGE

STD DEV

A B C D E F TOTAL

JAN 0 0 0 0 121 31 152

FEB 0 0 0 0 29 5 34

MAR 0 0 0 0 310 11 321

APR 0 0 0 0 289 11 300

MAY 0 0 0 0 172 6 178

JUN 0 0 15 0 61 1 77

JUL 123 0 0 0 165 3 291

AUG 12 0 0 0 15 10 37

SEP 15 4 0 0 0 2 21

OCT 10 5 25 0 46 0 86

NOV 1,098 1,447 0 0 1,837 7 4,389

DEC 357 167 0 0 331 8 863

135 135 3 0 281 8 562

1,615 1,623 40 0 3,376 95 6,749

321 416 8 0 504 8 1,227

90% 90% 90% 90% 90% 90% 90%

1.28 1.28 1.28 1.28 1.28 1.28 1.28

411 533 10 0 646 11 1,572

TAHUN BULANPEMAKAIAN TYPE MATERIAL

2017

AVERAGE

TOTAL

STD DEV

SERVICE LEVEL

SERVICE FACTOR

SAFETY STOCK

A B C D E F TOTAL

JAN 488 540 8 0 738 5 1,779

FEB 648 718 3 0 969 7 2,344

MAR 498 475 4 0 679 7 1,662

APR 545 577 5 0 795 6 1,928

MAY 563 590 4 0 814 6 1,978

JUN 535 547 4 0 763 6 1,856

JUL 548 572 4 0 791 6 1,921

AUG 549 570 4 0 789 6 1,918

SEP 544 563 4 0 781 6 1,898

OCT 547 568 4 0 787 6 1,913

NOV 546 567 4 0 786 6 1,910

DEC 546 566 4 0 785 6 1,907

546 571 4 0 790 6 1,918

6,556 6,853 53 0 9,478 75 23,015

39 55 1 0 66 0 158

90% 90% 90% 90% 90% 90% 90%

1.28 1.28 1.28 1.28 1.28 1.28 1.28

50 70 2 0 85 1 202

SERVICE LEVEL

SERVICE FACTOR

SAFETY STOCK

STD DEV

BULANPEMAKAIAN TYPE MATERIAL

2018

AVERAGE

TOTAL

TAHUN


EA

Safety

Stock

Lead

TimeROP

ROD,SUCKER,MLD,3EA

STEALTH-XL,D,3/4 X25'1,355 222 60.00 445

ROD,SUCKER,MLD,3EA

STEALTH-XL,D,7/8 X25'10 1 60.00 3


IN, 25 FT, D1,293 233 60.00 446


IN, 25 FT, D1,861 171 60.00 477

TUBING, 2.7/8 IN, J-55,

6.5 PPF, EUE, R22,733 275 60.00 724

BALL & SEAT 1.3/4IN

FLAT CARBIDE SEAT109 12 60.00 30

2016



ISSN No:-2456-2165


Table 15:- Calculation of Return Booking (ROP) for Use of

2017

Table 16:- Calculation of Re-Ordering (ROP) Usage in 2018

Table 17:- Calculation of Maximum Inventory (maximum

inventory) for use in 2016

Table 18:- Calculation of Maximum Inventory (maximum

inventory) for use in 2017

Table 19:- Maximum Inventory Calculation (Maximum

Inventory) Usage in 2018

Table 20:- EOQ Value, Safety Stock, ROP and Maximum

Material Inventory Inventory in 2016


EA

Safety

Stock

Lead

TimeROP

ROD,SUCKER,MLD,3EA

STEALTH-XL,D,3/4 X25'1,615 411 60.00 676

ROD,SUCKER,MLD,3EA

STEALTH-XL,D,7/8 X25'1,623 533 60.00 800


IN, 25 FT, D40 10 60.00 17


IN, 25 FT, D10 0 60.00 2

TUBING, 2.7/8 IN, J-55,

6.5 PPF, EUE, R23,376 646 60.00 1,201

BALL & SEAT 1.3/4IN


2017


EA

Safety

Stock

Lead

TimeROP

ROD,SUCKER,MLD,3EA

STEALTH-XL,D,3/4 X25'6,556 50 60.00 1,128

ROD,SUCKER,MLD,3EA

STEALTH-XL,D,7/8 X25'6,853 70 60.00 1,196


IN, 25 FT, D53 2 60.00 11


IN, 25 FT, D0 0 60.00 0

TUBING, 2.7/8 IN, J-55,

6.5 PPF, EUE, R29,478 85 60.00 1,643

BALL & SEAT 1.3/4IN


2018


EA

Safety

StockEOQ Max Inv

ROD,SUCKER,MLD,3EA

STEALTH-XL,D,3/4 X25'1,355 222 478 700

ROD,SUCKER,MLD,3EA

STEALTH-XL,D,7/8 X25'10 1 38 39


IN, 25 FT, D1,293 233 548 781


IN, 25 FT, D1,861 171 638 809

TUBING, 2.7/8 IN, J-55,

6.5 PPF, EUE, R22,733 275 625 900

BALL & SEAT 1.3/4IN

FLAT CARBIDE SEAT109 12 124 136

2016


EA

Safety

StockEOQ Max Inv

ROD,SUCKER,MLD,3EA

STEALTH-XL,D,3/4 X25'1,615 411 522 933

ROD,SUCKER,MLD,3EA

STEALTH-XL,D,7/8 X25'1,623 533 487 1,020


IN, 25 FT, D40 10 96 106


IN, 25 FT, D10 0 47 47

TUBING, 2.7/8 IN, J-55,

6.5 PPF, EUE, R23,376 646 694 1,340

BALL & SEAT 1.3/4IN


2017


EA

Safety

StockEOQ Max Inv

ROD,SUCKER,MLD,3EA

STEALTH-XL,D,3/4 X25'6,556 50 1,052 1,102

ROD,SUCKER,MLD,3EA

STEALTH-XL,D,7/8 X25'6,853 70 1,001 1,071


IN, 25 FT, D53 2 111 113


IN, 25 FT, D0 0 0 0

TUBING, 2.7/8 IN, J-55,

6.5 PPF, EUE, R29,478 85 1,163 1,248

BALL & SEAT 1.3/4IN


2018

Tahun Material EOQFreq.

Pemesanan

Safety

StockROP

Max

Inv

ROD,SUCKER,MLD,3EA

STEALTH-XL,D,3/4 X25'478 3 222 445 700

ROD,SUCKER,MLD,3EA

STEALTH-XL,D,7/8 X25'38 0 1 3 39


IN, 25 FT, D548 2 233 446 781


IN, 25 FT, D638 3 171 477 809

TUBING, 2.7/8 IN, J-55,

6.5 PPF, EUE, R2625 4 275 724 900

BALL & SEAT 1.3/4IN

FLAT CARBIDE SEAT124 1 12 30 136

2016



ISSN No:-2456-2165






Table 23:- Value of Total Inventory Cost (TIC) of the EOQ

Method in 2016

Table 24:- Value of Total Inventory Cost (TIC) of the EOQ

Method in 2017

Table 25:- Value of the Total Inventory Cost (TIC) of the

EOQ Method in 2018

Table 26:- Value of Total Inventory Cost (TIC) Existing

Method 2016

Table 27:- Value of Total Inventory Cost (TIC) of the

Existing Method of 2017


Pemesanan

Safety

StockROP

Max

Inv

ROD,SUCKER,MLD

,3EA STEALTH-

XL,D,3/4 X25'

522 3 411 676 933

ROD,SUCKER,MLD

,3EA STEALTH-

XL,D,7/8 X25'

487 3 533 800 1,020

SUCKER ROD, SIZE

3/4 IN, 25 FT, D96 0 10 17 106

SUCKER ROD, SIZE

7/8 IN, 25 FT, D47 0 0 2 47

TUBING, 2.7/8 IN, J-

55, 6.5 PPF, EUE, R2694 5 646 1,201 1,340

BALL & SEAT

1.3/4IN FLAT

CARBIDE SEAT

116 1 11 27 127

2017


Pemesanan

Safety

StockROP

Max

Inv

ROD,SUCKER,MLD

,3EA STEALTH-

XL,D,3/4 X25'

1,052 6 50 1,128 1,102

ROD,SUCKER,MLD

,3EA STEALTH-

XL,D,7/8 X25'

1,001 7 70 1,196 1,071

SUCKER ROD, SIZE

3/4 IN, 25 FT, D111 0 2 11 113

SUCKER ROD, SIZE

7/8 IN, 25 FT, D0 0 0 0 0

TUBING, 2.7/8 IN, J-

55, 6.5 PPF, EUE, R21,163 8 85 1,643 1,248

BALL & SEAT

1.3/4IN FLAT

CARBIDE SEAT

103 1 1 13 104

2018


EA

Harga/

EA

Biaya

Pesan

Biaya

SimpanEOQ TIC

A 1,355 1,777,552 15,000,000 10% 478 85,004,394

B 10 2,050,394 15,000,000 10% 38 7,842,947

C 1,293 1,290,000 15,000,000 10% 548 70,738,321

D 1,861 1,372,001 15,000,000 10% 638 87,520,749

E 2,733 2,101,442 15,000,000 10% 625 131,262,039

F 109 2,110,812 15,000,000 10% 124 26,272,334

2016


EAHarga/ EA Biaya Pesan

Biaya

SimpanEOQ TIC

A 1,615 1,777,552 15,000,000 10% 522 92,802,140

B 1,623 2,050,394 15,000,000 10% 487 99,916,807

C 40 1,290,000 15,000,000 10% 96 12,441,865

D 10 1,372,001 15,000,000 10% 47 6,415,608

E 3,376 2,101,442 15,000,000 10% 694 145,888,329

F 95 2,110,812 15,000,000 10% 116 24,527,157

2017


EA

Harga/

EA

Biaya

Pesan

Biaya

SimpanEOQ TIC

A 6,556 1,777,552 15,000,000 10% 1,052 186,984,719

B 6,853 2,050,394 15,000,000 10% 1,001 205,311,882

C 53 1,290,000 15,000,000 10% 111 14,291,536

D 0 1,372,001 15,000,000 10% 0 #DIV/0!

E 9,478 2,101,442 15,000,000 10% 1,163 244,438,717

F 75 2,110,812 15,000,000 10% 103 21,801,078

2018

Tahun MaterialAvg

Pemakaian

Biaya

Pesan

Biaya

SimpanTIC

A 113 15,000,000 177,755 200,071,502

B 0 15,000,000 205,039 180,068,346

C 108 15,000,000 129,000 193,889,000

D 155 15,000,000 137,200 201,277,433

E 228 15,000,000 210,144 227,860,296

F 9 15,000,000 211,081 181,917,319

2016

Tahun MaterialAvg

Pemakaian

Biaya

Pesan

Biaya

SimpanTIC

A 135 15,000,000 177,755 203,922,881

B 135 15,000,000 205,039 207,731,525

C 3 15,000,000 129,000 180,430,000

D 0 15,000,000 137,200 180,000,000

E 281 15,000,000 210,144 239,120,512

F 8 15,000,000 211,081 181,671,058

2017



ISSN No:-2456-2165


Table 28:- Value of Total Inventory Cost (TIC) Existing

Method 2018

Table 29:- The Savings Value of the Total Inventory Cost

(TIC) of the Existing Method and the 2016 EOQ Method

Table 30:- Savings Value of Total Inventory Cost (TIC) of

Existing Methods and 2017 EOQ Method

Table 31:- Value of Savings for Total Inventory Cost (TIC)

of Existing Methods and Method of EOQ 2018

Graph 7:- Total Inventory Cost (TIC) Material A EOQ

Method 2016

Graph 8:- Total Inventory Cost (TIC) EOQ Method Material

A 2017

Graph 9:- Total Inventory Cost (TIC) Material A EOQ

Method in 2018

Graph 10:- Total Inventory Cost (TIC) Material B EOQ

Method 2016

Tahun MaterialAvg

Pemakaian

Biaya

Pesan

Biaya

SimpanTIC

A 546 15,000,000 177,755 277,120,236

B 571 15,000,000 205,039 297,091,352

C 4 15,000,000 129,000 180,567,356

D 0 15,000,000 137,200 180,000,000

E 790 15,000,000 210,144 345,972,859

F 6 15,000,000 211,081 181,320,240

2018


EA

TIC

Perusahaan

TIC

EOQ

SELISIH

Rp

A 1,355 200,071,520 85,004,394 115,067,125

B 10 180,068,346 7,842,947 172,225,399

C 1,293 193,889,000 70,738,321 123,150,679

D 1,861 201,277,433 87,520,749 113,756,684

E 2,733 227,860,296 131,262,039 96,598,257

F 109 181,917,319 26,272,334 155,644,985

1,185,083,914 408,640,785 776,443,130

2016

TOTAL


EA

TIC

Perusahaan

TIC

EOQ

SELISIH

Rp

A 1,615 203,922,881 92,802,140 111,120,741

B 1,623 207,731,525 99,916,807 107,814,717

C 40 180,430,000 12,441,865 167,988,135

D 10 180,000,000 6,415,608 173,584,392

E 3,376 239,120,512 145,888,329 93,232,183

F 95 181,671,058 24,527,157 157,143,901

1,192,875,976 381,991,907 810,884,069

2017

TOTAL


EA

TIC

Perusahaan

TIC

EOQ

SELISIH

Rp

A 6,556 277,120,236 186,984,719 90,135,517

B 6,853 297,091,352 205,311,882 91,779,470

C 53 180,567,356 14,291,536 166,275,820

D 0 180,000,000 0 0

E 9,478 345,972,859 244,438,717 101,534,143

F 75 181,320,240 21,801,078 159,519,163

1,462,072,044 672,827,931 609,244,112TOTAL

2018



ISSN No:-2456-2165


Graph 11:- Total Inventory Cost (TIC) Material B EOQ

Method 2017

Graph 12:- Total Inventory Cost (TIC) Material EOQ

Method B in 2018

Graph 13:- Total Inventory Cost (TIC) Material C EOQ

Method 2016


Method 2017


Method in 2018


Method D in 2016


Method D 2017


Method D in 2018



ISSN No:-2456-2165



Method E 2016

Graph 20:- Total Inventory Cost (TIC) EOQ Method

Material E 2017


Method E in 2018


Method F in 2016


Method F 2017


Method F in 2018


inventory control by analyzing the economic order quantity ... · keywords:-abc analysis, forecast,...

Documents