INVENTORY MANAGEMENT POLICY TO MINIMIZE EXPECTED INVENTORY TOTAL COST OF SEASONAL PRODUCTS WITH KNOWN PRICE INCREASE AT PT X

• Main Author: Benyamin Wijaya (NIM: 29115640), Yoshua
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/31778
• Institution: Institut Teknologi Bandung

PT X is a leather goods manufacturer located in Bandung Regency. PT X wants to seize more investment opportunity for their expansion. The problem that slowed down their expansion process is their inventory management policy. The current inventory management policy often stockpiling or cause a shortage in the production process. The stockpiling situation prevent PT X from using their capital for more investment opportunity because their capital is in the form of raw materials stocks. The shortage situation on the other hand, always cause delayed completion date and could decrease customers trust in PT X capability to handle their orders. Other than that, both situations incurred costs that will accumulate over time, the stockpiling situation inflate holding cost in the form of inventory investment and backorder cost will inflate the stock out cost. Both inventory investment and stock out cost can be categorized as opportunity cost and have a snowball effect over time. Beside stockpiling and backordering situation, PT X also faced a known price increase situation for every raw material every year. Without proper inventory management policy, PT X could miss the opportunity to generate savings from the moment before the price increase happened in the future. <br /> <br /> <br /> The problem exploration process identified that PT X has a seasonal demand pattern. The high season demand has a characteristic of higher demand average (almost twice the demand of low season) with relatively stable demand (lower standard deviation than low season’s). The low season demand characteristics are lower average demand with higher standard deviation that cause high fluctuation. The seasonal demand situation needs to be addressed by the inventory management policy because of their different characteristics require different policy.This research uses Current Reality Tree (CRT) to find the root cause of PT X’ problem. The root cause of PT X’ problem is their inefficient inventory management policy that fails to accommodate proper inventory stock level for different season, demand transition policy, and the known price increase situation savings. These failures could limit the investment opportunity For PT X and cause bad long-term effects on customer’s trust. <br /> <br /> <br /> The proposed inventory management policy based on the T-model offers two alternatives ordering method, individual and joint order. The proposed inventory management policy also addresses the seasonal demand transition both from high to low season and vice versa. Other than that, the proposed inventory management policy also generates a suggestion in the known price increase situation that can help PT X’ production department to decide whether to make a special quantity order or not with the indicator of cost savings. The business solution also comes with the comparison of the current inventory management system and the proposed inventory management system.The comparison indicates that the proposed inventory management system outperforms the current inventory management system especially in terms of cost saving. The proposed inventory management policy could generate an estimate of 668,876,453 Rupiahs in cost saving from addressing all of the situation that PT X faced (the seasonal demand, demand transition, ordering method, and known price increase).