Optimization of Raw Material Inventory using Always Better Control (ABC) Analysis and Economic Order Quantity (EOQ) Method Approach in the Warehouse of a Bolt Manufacturing Factory in Indonesia

Abstract

There is a problem in the raw material procurement process at the Contractor Company, such as running out and excess stock of raw materials, as well as difficulties in determining how many raw materials to order that meet the company's economic value. Running out of raw material stock results in delays in production activities, while excess raw material stock can fill warehouse capacity, thereby increasing storage costs. To overcome this problem, research was carried out using a quantitative descriptive method to determine the level of production cost efficiency and production effectiveness level in order to achieve optimization of raw material supplies using Always Better Control (ABC) Analysis and the Economic Order Quantity (EOQ) Method at Bolt Companies. ABC analysis plays a role in determining which raw materials have the highest level of demand and the EOQ method plays a role in determining the amount of raw materials to be ordered in order to meet the company's economic value. The research results show that the combination of ABC Analysis and EOQ Method can reduce ordering costs and raw material inventory. There are 4 items out of 10 raw material items that are included in Category A or the most prioritized category. From the results of calculations using the EOQ method, the Bolt Company can save total orders and raw material inventory (TIC) in the period January to December 2023 amounting to IDR 2,147,403,-.