Open AccessInventory optimization in the cigarette industry
Author(s) -
Ikhsan Siregar
Publication year - 2020
Publication title -
iop conference series. materials science and engineering
Language(s) - English
Resource type - Journals
eISSN - 1757-899X
pISSN - 1757-8981
DOI - 10.1088/1757-899x/801/1/012099
Subject(s) - safety stock , inventory cost , carrying cost , profit (economics) , business , stock (firearms) , order (exchange) , inventory theory , inventory management , inventory valuation , production (economics) , total cost , operations research , perpetual inventory , economic order quantity , inventory turnover , operations management , point (geometry) , economics , marketing , microeconomics , finance , supply chain , profitability index , mathematics , engineering , mechanical engineering , geometry , accounting
The increasing cigarette industry makes cigarette-producing companies continue to make improvements in inventory planning determination continuously in order to improve the effectiveness and efficiency of the company. The company sets the number of production based on a rough estimate of consumer demand in previous periods. This causes an imbalance between the company’s production capacity and the number of demands for consumers. A large accumulation of inventory causes a high carrying cost. The incompatibility in the number of demands with the quantity produced results in the emergence of the other costs so that the company loses the opportunity to get maximum profit. Therefore, it is necessary to analyse the inventory quantity to reduce carrying costs. The company optimizes the inventory quantity based on the concept of the Economic Order Quantity using the quantity of safety stock as a minimum inventory point so that the company can plan the production number in the next periods. The results showed that with the proposed inventory system a total cost savings carrying cost of IDR 722,795,625 obtained.