Inventory Policy Design of FMCG Products to Minimize Total Inventory Cost Using Continuous Review (r, Q) at PT ABC

Abstract

T ABC is a start-up company that provides an online shopping platform with a variety of daily necessities,
one of products offered is Fast Moving Consumer Goods (FMCG). The main problem faced by PT ABC
was the total inventory cost that exceeded the budget by 82%. This was caused by the lack of standard
inventory policy calculation. To overcome this problem, a proposed inventory policy needs to be designed
to obtain the optimal value of reorder point, order quantity, and safety stock. Before designing the inventory
policy, inventory classification was conducted using ABC analysis. Then proceed with designing inventory
policy using the continuous review method (r, Q) to minimize total inventory cost. After that, a Decision
Support System (DSS) was designed based on the results of the proposed inventory policy using Microsoft
Excel-VBA. This research resulted the optimal value of reorder point, order quantity, and safety stock were
obtained for 42 products in category A with diverse values. Based on the proposed inventory policy, the total
inventory cost decreased by 11% or Rp281.770.103/year from the existing total cost. Then, the DSS was
successfully designed to assist decision makers in implementing the proposed inventory policy. Although it
had been successfully minimized, the total cost of the proposed inventory still exceeded the budget. This
was because the current budget had not considered all components of inventory costs, even the budget for
purchasing costs with an order quantity of as much as the number of demands was not sufficient.