Economic Order Quantity Method Applied in Family Business Food Seasoning Industry Inventory Management

Abstract

This home industry produce food seasoning that will later distributed to larger food industry. They mixed several raw materials that will become a food seasoning with many kind of flavor. One of their biggest challenge is their raw materials availability. There are times where the company faces the raw materials stock out condition, which make them have to stop production and failed to deliver their customer order on time. This situation will lead to customer dissatisfaction and further, they could lost their market. In order to prevent those risk happen in the future, applied a well manage raw materials method will helps. To determine the right number of inventory can be attained through several methods. This research used Economic Order Quantity (EOQ) method to settle this issue. It is possible for the company to maintain the inventory with low budget and also at the same time ensure that their production will not be lack of raw materials. This company provides 14 kind of food seasoning to market. From previous data analysis using Pareto Chart, discovered that two of their food seasoning product contribute 88% of their sales. Those two products are Salt and Mono Sodium Glutamate (MSG). There are three raw materials needed to produce MSG, which are salt, malto, and ajiplus. By focusing to maintain the right level inventory of the raw material to produce salt and Mono Sodium Glutamate (MSG), this company improve their raw material availability. Based on analysis using Economic Order Quantity (EOQ) method, to meet the needs of production of Mono Sodium Glutamate (MSG) and Salt , the order amount for salt is 61.68 tons, 28.77 tons of Ajiplus, and 30.2 tons of Malto. To ensure continuity of production, the required safety stock of the company are 1.02 tons of salt, 236.02 kg of Ajiplus, and 269.74 kg of Malto. Through this research, we can suggest to the company to make a review about the raw material purchasing policy, so that inventory level is not too high, but the risk of running out of raw materials and also excess raw materials still can be minimized