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CHAPTER 4
RESEARCH ANALYSIS AND OUTCOME
4.1 Research Object
4.1.1 Company Profile
Mulia Mart is a minimart established in 2012. At the beginning, Mulia Mart
only opens in Yogyakarta. After a while, they open new branches in Bandung and
then Jakarta. Mulia Mart started off with a concept of mini traditional market. They
initially sell vegetables, fruits, meat and other traditional dairy while also sells daily
needs as all market does.
Because of the bad market responses, in 2014 Mulia Mart changed the initial
concept to become a mini mart in general. Until today, Mulia Mart have been selling
daily needs and other product in general like drinks, snacks, and cigarettes.
The company has a vision of becoming the affordable minimart for all element of
society, especially for the lower-middle class. The mission that the company have
is to serve customers more flexibly just like in traditional market, and also to build
a good relation with customers.
4.1.2 Job Roles and Descriptions
Mulia Mart didn’t provide organizational structure, but did provide job
descriptions of the roles in Mulia Mart. They are:
39
No. Role Job Description
1. Store Head Supervise items that will be sold
Regulate shifts for all employee
Supervise performance
Responsible for the general operations.
2. Cashier Keeping the computer and printer working
well
Book the sales
Make the calculation of sales
3. Clerk Keeping the display and storage items tidy
Doing the control function to all items
Serves customers and give the information
needed.
4.2 Inventory Control in Mulia Mart
Inventory control in Mulia Mart is not good enough. Any activity regarding
inventory is dependent to Mulia Mart’s store head. Sometimes it is just depending
to the storehead’s instinct to decide the number of items that will be ordered on
every period. That means Mulia Mart has not applied the right calculation method
for their inventory control.
Mulia Mart applies naïve approach or ordering periodically with the same
quantity every month. The fact the store is run by the store head without any
sufficient knowledge had caused the inventory control managed poorly. Inventory
ordering is not followed by safety stock setting so sometimes the product can be
unavailable at the store. This would affect the income of Mulia Mart and the cost
incurred would be big because Mulia Mart could not cope with the demand level.
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The facts show how ineffective the inventory control exist in Mulia Mart.
Thus, a good inventory control needs to be implemented to give the best benefit to
Mulia Mart. Below is the table that shows the frequency and quantity of inventory
ordering in Mulia Mart:
Table 4.1 Mulia Mart sales data 2017
Product
Total
Sales
(unit)
Order
Frequency
in a year
Quantity
per
order
(unit)
Total
Order
(unit)
Final
Inventory
(unit)
KAPAL API
MIX 25gr
21,913 24 1000 24000 2087
SAMPOERNA
MILD 16
21,285 22 1000 22000 715
PUCUK
HARUM
JASMINE
350ml
15,403
15 1200 18000 2597
Indomie
Goreng
15,277 36 520 18720 2723
COFFEMIX
SACHET 20gr
11,392 30 400 12000 608
Total 85270 8730
Source: Interview Result
4.2.1 ABC Analysis in Mulia Mart
As minimarket in general, Mulia Mart have thousands of kinds of products
like food, beverage, medicine, stationary, toiletries and etc. The kind of product that
is very impactful to the company is the fast-moving product whereas the product is
fast to be sold and doesn’t need to much time to keep in the storage. The product
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kinds which are classified as fast-moving product are food and beverage. To limit
the research, 20 most-impactful items have been chosen to become this research
object, and they are:
No Item (I) Item Sold
(D) Price (p)
1 Kapal Api Mix 25gr 21913 11500
2 Sampoerna Mild 16 21285 22500
3
Pucuk Harum Jasmine
350ml
15403 3500
4 Indomie Goreng 15277 2200
5 Coffeemix Sachet 20gr 11392 11000
6 Luwak White Coffee 20gr 11331 12900
7 Aqua 600ml 11303 3300
8 Beras Jeruk per 1 liter 9614 12000
9 Aqua 1500ml 8348 5500
10 VIT 600ml 8177 3000
11 Telor Ayam 7747 1600
12 VIT 1500ml 7639 5000
13 Indomie Soto 7605 2200
14 Frisian Flag Krimer 42gr 7603 7800
15 Indomie Kari Ayam 7567 2150
16 Gudang Garam Filter 12 7390 14000
17 Aqua Galon Refill 19 liter 7191 18000
18 Tolak Angin Cair 5933 10000
19 Nestle Pure Lite 600ml 5467 3300
20 Bear Brand 189ml 5425 5000
From the twenty products, a classification will be made using ABC method
to see which product can be classified as class A, class B or class C. Besides, it will
also be determined which products are categorized as fast, moderate and slow-
moving product. The result could be seen below:
42
No Item (I) Number
Sold (D)
% from
total
revenue
Cumulative
Percentage
ABC
Category
1 Sampoerna Mild 16 21285 26.7 40.8 A
2 Kapal Api Mix 25gr 21913 14.1 14.1 A
3 Luwak White Coffee 20gr 11331 8.2 60.8 A
4 Aqua Galon Refill 19 liter 7191 7.2 94.2 A
5 Coffeemix Sachet 20gr 11392 7.0 52.6 A
6 Beras Jeruk per 1 liter 9614 6.4 69.3 A
7 Gudang Garam Filter 12 7390 5.8 87.0 A
8 Tolak Angin Cair 5933 3.3 97.5 A
9 Frisian Flag Krimer 42gr 7603 3.3 80.3 A
10 Pucuk Harum Jasmine 350ml 15403 3.0 43.8 A
11 Aqua 1500ml 8348 2.6 71.8 A
12 VIT 1500ml 7639 2.1 76.0 B
13 Aqua 600ml 11303 2.1 62.9 B
14 Indomie Goreng 15277 1.9 45.6 B
15 Bear Brand 189ml 5425 1.5 100.0 B
16 VIT 600ml 8177 1.4 73.2 B
17 Nestle Pure Lite 600ml 5467 1.0 98.5 B
18 Indomie Soto 7605 0.9 77.0 C
19 Indomie Kari Ayam 7567 0.9 81.2 C
20 Telor Ayam 7747 0.7 73.9 C
After that, the above products are categorized based on how it moves:
No Item (I) Number
Sold (D)
% from
total
item
sold
Cumulative
Percentage Category
1 Kapal Api Mix 25gr 21913 10.8 10.8 fast moving
2 Sampoerna Mild 16 21285 10.5 21.2 fast moving
3 Pucuk Harum Jasmine 350ml 15403 7.6 28.8 fast moving
4 Indomie Goreng 15277 7.5 36.3 fast moving
5 Coffeemix Sachet 20gr 11392 5.6 41.9 fast moving
6 Luwak White Coffee 20gr 11331 5.6 47.4 fast moving
7 Aqua 600ml 11303 5.6 53.0 fast moving
8 Beras Jeruk per 1 liter 9614 4.7 57.7 fast moving
9 Aqua 1500ml 8348 4.1 61.8 fast moving
10 VIT 600ml 8177 4.0 65.8 moderate moving
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11 Telor Ayam 7747 3.8 69.6 moderate moving
12 VIT 1500ml 7639 3.8 73.4 moderate moving
13 Indomie Soto 7605 3.7 77.1 moderate moving
14 Frisian Flag Krimer 42gr 7603 3.7 80.9 moderate moving
15 Indomie Kari Ayam 7567 3.7 84.6 moderate moving
16 Gudang Garam Filter 12 7390 3.6 88.2 slow moving
17 Aqua Galon Refill 19 liter 7191 3.5 91.7 slow moving
18 Tolak Angin Cair 5933 2.9 94.7 slow moving
19 Nestle Pure Lite 600ml 5467 2.7 97.3 slow moving
20 Bear Brand 189ml 5425 2.7 100.0 slow moving
Total 209145 100
Finally, ABC classification and movement category are combined becomes:
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No Item (I) Item Sold
(D) Item Sold Percentage % from total revenue
Cumulative
Percentage ABC Category Moving Category
1 Sampoerna Mild 16 21285 10.5 14.1 14.1 A Fast moving
2 Kapal Api Mix 25gr 21913 10.8 26.7 40.8 A Fast moving
3
Luwak White Coffee
20gr
11331 5.6 3.0 43.8
A Fast moving
4
Aqua Galon Refill 19
liter
7191 3.5 1.9 45.6
A slow moving
5 Coffeemix Sachet 20gr 11392 5.6 7.0 52.6 A Fast moving
6 Beras Jeruk per 1 liter 9614 4.7 8.2 60.8 A Fast moving
7
Gudang Garam Filter
12
7390 3.6 2.1 62.9
A Slow moving
8 Tolak Angin Cair 5933 2.9 6.4 69.3 A Slow moving
9
Frisian Flag Krimer
42gr
7603 3.7 2.6 71.8
A moderate moving
10
Pucuk Harum Jasmine
350ml
15403 7.6 1.4 73.2
A Fast moving
11 Aqua 1500ml 8348 4.1 0.7 73.9 A Fast moving
12 VIT 1500ml 7639 3.8 2.1 76.0 B Moderate moving
13 Aqua 600ml 11303 5.6 0.9 77.0 B Fast moving
14 Indomie Goreng 15277 7.5 3.3 80.3 B Fast moving
15 Bear Brand 189ml 5425 2.7 0.9 81.2 B Slow moving
16 VIT 600ml 8177 4.0 5.8 87.0 B Moderate moving
17 Nestle Pure Lite 600ml 5467 2.7 7.2 94.2 B Slow moving
18 Indomie Soto 7605 3.7 3.3 97.5 C Moderate moving
19 Indomie Kari Ayam 7567 3.7 1.0 98.5 C Moderate moving
20 Telor Ayam 7747 3.8 1.5 100.0 C Moderate moving
Total 207.685 100 100
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From the 20 products listed, 4 products will be selected to be analyzed on its inventory
control. The criteria for selecting 4 products is by looking at the greatest revenue contribution
(A class) of the fast-moving category. Revenue percentage means the percentage of the revenue
generated from an item from the total revenue the company has. The higher percentage an item
has means that the item is very powerful towards the company’s inventory cost, by quantity or
by the price.
From the assumption stated, 4 products are selected below:
1. Kapal Api Mix 25gr
2. Sampoerna Mild 16 f
3. Luwak White Coffee 20gr
4. Coffeemix Sachet 20gr
4.2.2 Inventory Cost Analysis
Inventory cost is a cost incurred by a firm for procurement. In a retail or merchandising
company, inventory cost includes order cost and storage cost.
Order cost
Inventory order that Mulia Mart does is done periodically, accordingly to the agreement
between supplier and Mulia Mart. The supplier differs for each product, and they are:
1. Kapal Api Mix 25gr – PT Fastrata Buana
2. Sampoerna Mild 16 – PT HM Sampoerna tbk.
3. Luwak White Coffee 20gr – PT Fastrata Buana
4. Coffeemix Sachet 20gr – PT Fastrata Buana
Mulia Mart does the ordering periodically, so there are no telephone bills incurred as a
part of the cost. The delivery is at the supplier’s service so Mulia Mart also doesn’t have any
46
delivery cost, including insurance and tax. The only cost incurred is salesman cost, for doing
all the checking and recording. The salesman cost is at Rp 10,000/order. This goes along with
the frequency of order of each product.
Kapal Api Mix 25gr, Luwak White Coffee 20gr and Coffeemix Sachet 20 gr are ordered
twice every month, so does Sampoerna Mild 16 but there are some cancelled orders along the
process. The complete picture of the order frequency of each product can be found on the table
below.
Table 4.2 Order Frequency
Product Name Annual Order
Frequency
Salesman Fee
per order (Rp) Order Cost (Rp)
Kapal Api Mix
25gr 24 10,000 240,000
Sampoerna Mild
16 22 10,000 220,000
Luwak White
Coffee 20gr 24 10,000 240,000
Coffeemix Sachet
20gr 24 10,000 240,000
Total Cost 940,000
Source: Interview Result
Along the way, there are some extra order due to the increase of demand. The orders
are happened outside the scheduled periodic order. The orders are happened unintended, so
based on the interview with the store manager, the cost incurred is different. The cost is not
based on the salesman, but it is based on the fuel and distance. Basically, the cost is incurred
to the truck service delivery so it is dependent to the distance of the supplier. The extraordinary
orders are happened a few days before Idul Fitri feast. The details of the cost are as follows:
47
Table 4.3 Additional Order Cost Mulia Mart 2018
Product Frequency
Supplier
Distance
(km)
Fuel Cost
per 10 km
(Rp)
Total Cost
Kapal Api
Mix 25gr - 15 6,550 -
Sampoerna
Mild 16 3 20 6,550 39,300
Luwak White
Coffee 20gr 2 15 6,550 19,650
Coffeemix
Sachet 20gr 2 15 6,550 19,650
Total 7 78,600
Source: data analysis
So, the total order cost in a year will be:
Order cost = 940,000 + 78,600 = Rp 1,018,600
Storage Cost
Storage cost includes storage depreciation cost and electricity cost. The storage value
of Rp 50,000,000 is depreciated for 10 years period. Using straight line depreciation method,
it is calculated that annual depreciation value of the storage is Rp 5,000,000. The products that
are stored inside the storage is only Coffeemix Sachet 20gr. Meanwhile, Sampoerna Mild 16,
Kapal Api Mix 25gr and Luwak White Coffee 20gr are put directly on the display shelves. The
space usage in the storage for Coffeemix Sachet 20gr is 4% of the total storage space. So, the
depreciation value of the storage for Coffeemix Sachet 20gr in a year is Rp 200,000.
The electricity cost incurred in Mulia Mart is for the lamp and beverage fridge and for
the fan usage. The total cost for electricity is Rp 400,000 per month. The estimation of the
detailed cost for electricity is Rp 100,000 for the electricity in the storage, Rp 300,000 for lamp,
fridge and also fan. So the total annual electricity cost in Mulia Mart is Rp 4,800,000.
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The maintenance cost for the display shelves is Rp 20,000/month. The form of the
maintenance is routine cleaning and checking every single week. So the total cost for a year is
Rp 240,000.
Capital cost is a cost that is incurred to get some capital, be it from stock or debt. Mulia
Mart gets their capital cost from bank loan, that will become the investment on inventory. From
the interview, it is known that the interest rate from the Bank is 5% annually.
Table 4.4 Mulia Mart Capital Cost on each of the four products
Product Name Price
(Rp)
Sales
(unit)
Final Stock
(unit)
Average
Stock
(unit)
Inventory
Value (Rp)
Interest
Rate
Capital
cost
(Rp)
Kapal Api Mix
25gr
11500 21913 2087 826 9,499,000 0.05 474,950
Sampoerna
Mild 16
22500 21285 715 935 21,037,500 0.05 1,051,875
Luwak White
Coffee 20gr 12900 11331 669 445 5,740,500 0.05 287,025
Coffeemix
Sachet 20gr 11000
11392 608 450 4,950,000 0.05 247,500
Total 65921 4079 2656 41,227,000 2,061,350
Source: Data analysis
Total storage cost for the 5 products of Mulia Mart can be found in the table below:
Table 4.5 Storage Cost
Storage Depreciation Rp 200,000
Electricity Rp 4,800,000
Maintenance Rp 240,000
Capital Rp 2,061,350
Total Storage Cost
Rp7,301,350
Source: Data analysis
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The total storage cost above is an accumulation of the total storage cost of the four products.
The storage cost per unit can be calculated using this formula:
= 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑉𝑎𝑙𝑢𝑒
𝑇𝑜𝑡𝑎𝑙 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑣𝑎𝑙𝑢𝑒 𝑥 𝑡𝑜𝑡𝑎𝑙 𝑠𝑡𝑜𝑟𝑎𝑔𝑒 𝑐𝑜𝑠𝑡
So, the total storage cost per product can be seen in the table below:
Table 4.6 Storage Cost Per Product
Product Name
Inventory
Value
(Rp)
Storage Cost
(Rp)
Storage
Cost Per
Unit
(Rp)
Final Stock
(unit)
Total Storage
Cost (Rp)
Kapal Api Mix 25gr 9,499,000 1,682,284.03 76.77 2087 160,218.99
Sampoerna Mild 16 21,037,500 3,725,765.9 175.04 715 125,154.6
Luwak White Coffee
20gr 5,740,500 1,016,649.28 89.72 1152
103,357.44
Coffeemix Sachet
20gr 4,950,000 876,650.80 76.95 1436
110,500.2
Total 41,227,000 7,301,350 7136 499,231.23
Souce: data analysis
From the table 4.6, the total storage cost of Mulia Mart in one year is Rp 499,213.23
Total Inventory Cost in Mulia Mart
Based on Mulia Mart’s data, the total inventory cost will be:
Total inventory cost = order cost + storage cost
= Rp 1,018,600 + Rp 499,213.23
= Rp 1,517,813.23
So, the total inventory cost for the four products for the period of January to December
2018 is Rp 1,517,813.23 The huge portion of order cost plays a big role on creating the total
inventory cost. This is caused by the ordering process that Mulia Mart does is not effective.
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The fluctuated demand affected Mulia Mart. Mulia Mart couldn’t have the accurate
inventory quantity. That makes it Mulia Mart need the correct forecasting method to forecast
the demand in Mulia Mart for the year 2016 to keep the inventory level stable. An accurate
demand forecast will reduce the overall inventory cost. That’s why a forecasting is needed
throughout the four products for the next one-year period.
4.3 Forecasting of 4 Products
The forecasting for Mulia Mart’s 4 products uses five different methods, which are
Least Square method, Exponential Smoothing, Exponential Smoothing with Trend, Moving
Average Method and Weighted Moving Average method. After all the calculations are done
using the five methods, the one with the smallest Mean Squared Error will be selected. The
data acquired for this analysis is the data from January 2018 to December 2018.
4.3.1 Forecasting of Kapal Api Mix 25gr Mulia Mart
The following table is the sales of Kapal Api Mix 25gr in Mulia Mart during January
2018 to December 2018 period.
Table 4.7 Kapal Api Mix 25gr Sales
Month Sales (unit)
January 2018 2,026
February 2018 1910
March 2018 1626
April 2018 1700
May 2018 1800
June 2018 2009
July 2018 1685
August 2018 1852
September 2018 1826
October 2018 1853
51
November 2018 1700
December 2018 1926
Total 21,913
Source: interview result (2018)
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According to the sales data, the trend graph should look like this:
Figure 4.1 Kapal Api Sales Trend
From the chart, it is known that the sales of Kapal Api have a cyclic trend. The forecasting
method that are used for cyclic trend are Simple Exponential Smoothing (SES), Average
Method and Simple Moving Average. The calculation using the three methods can be found in
appendix section. The calculation using those methods utilizes POM-QM software, where the
software is a tool to do calculations in operations management, including forecasting.
To define which method that will be used, the smallest Mean Square Error are
calculated. The result can be found in the table below:
Table 4.8 Comparison of MAD, MSE, MAPE and Std. Error
Method MAD MSE MAPE Std Error
Exponential Smoothing 127.54 25982.7 7.22% 178.2
Moving Average 116.19 20371.65 6.36% 161.84
Source: data analysis
Based on the table above, the best forecasting method is Moving Average because it
has the smallest error value (MAD, MSE, and MAPE) among all calculated forecasting
0
500
1000
1500
2000
2500
Kapal Api
53
method. Using the Moving Average method, the forecasting for Kapal Api Mix 25gr in 2019
period is as follows:
Table 4.9 Forecasting of Kapal Api Mix 25gr for the 2019 Period
Month Forecast
January 2019 1827
February 2019 1827
March 2019 1827
April 2019 1854
Mei 2019 1746
June 2019 1709
July 2019 1837
August 2019 1832
September 2019 1849
October 2019 1788
November 2019 1844
December 2019 1793
Total Demand of 2019 21733
Source: data analysis
4.3.2 Forecasting of Sampoerna Mild 16 Mulia Mart
The following table is the sales of Sampoerna Mild 16 in Mulia Mart during January
2018 to December 2018 period.
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Table 4.10 Sampoerna Mild 16 Sales
Month Sales (unit)
January 2018 1,778
February 2018 1420
March 2018 1522
April 2018 1529
Mei 2018 1022
June 2018 3289
July 2018 1877
August 2018 1785
September 2018 1698
October 2018 1704
November 2018 1792
December 2018 1869
Total 21285
Source: interview result (2018)
According to the sales data, the trend graph should look like this:
Figure 4.2 Sampoerna Mild Sales Trend
From the chart, it is known that the sales of Sampoerna Mild have a cyclic trend. The
forecasting method that are used for cyclic trend are Simple Exponential Smoothing (SES),
0
500
1000
1500
2000
2500
3000
3500
Sampoerna Mild
55
Average Method and Simple Moving Average. The calculation using the three methods can be
found in appendix section. The calculation using those methods utilizes POM-QM software,
where the software is a tool to do calculations in operations management, including forecasting.
To define which method that will be used, the smallest Mean Square Error are
calculated. The result can be found in the table below:
Table 4.11 Comparison of MAD, MSE, MAPE and Std. Error
Method MAD MSE MAPE Std Error
Exponential Smoothing 317.76 288354.1 17.98% 593.66
Moving Average 410.41 494024.2 19.88% 796.98
Source: data analysis
Based on the table above, the best forecasting method is Exponential Smoothing
because it has the smallest error value (MAD, MSE, and MAPE) among all calculated
forecasting method. Using the Exponential Smoothing method, the forecasting for Sampoerna
Mild 16 in 2019 period is as follows:
56
Table 4.12 Forecasting of Sampoerna Mild 16 for the 2019 Period
Month Forecast
January 2019 1778
February 2019 1778
March 2019 1775
April 2019 1772
Mei 2019 1770
June 2019 1762
July 2019 1778
August 2019 1779
September 2019 1779
October 2019 1778
November 2019 1777
December 2019 1777
Total Demand of 2019 21303
Source: data analysis
4.3.3 Forecasting of Luwak White Coffee 20gr Mulia Mart
The following table is the sales of Luwak White Coffee 20gr in Mulia Mart during
January 2018 to December 2018 period.
57
Table 4.13 Luwak White Coffee 20gr Sales
Month Sales (unit)
January 2018 924
February 2018 930
March 2018 880
April 2018 950
Mei 2018 1080
June 2018 1120
July 2018 980
August 2018 907
September 2018 800
October 2018 840
November 2018 950
December 2018 970
Total 11,331
Source: interview result (2018)
According to the sales data, the trend graph should look like this:
Figure 4.3 Luwak White Coffee Sales Trend
From the chart, it is known that the sales of Luwak White Coffee have a cyclic trend.
The forecasting method that are used for cyclic trend are Simple Exponential Smoothing (SES),
0
200
400
600
800
1000
1200
Luwak white coffee
58
Average Method and Simple Moving Average. The calculation using the three methods can be
found in appendix section. The calculation using those methods utilizes POM-QM software,
where the software is a tool to do calculations in operations management, including forecasting.
To define which method that will be used, the smallest Mean Square Error are
calculated. The result can be found in the table below:
Table 4.14 Comparison of MAD, MSE, MAPE and Std. Error
Method MAD MSE MAPE Std Error
Exponential Smoothing 74.54 7429 7.89% 95.29
Moving Average 115.26 15946 12.2% 143.19
Source: data analysis
Based on the table above, the best forecasting method is Exponential Smoothing
because it has the smallest error value (MAD, MSE, and MAPE) among all calculated
forecasting method. Using the Exponential Smoothing method, the forecasting for Luwak
White Coffee 20gr in 2019 period is as follows:
59
Table 4.15 Forecasting of Luwak White Coffee 20gr for the 2019 Period
Month Forecast
January 2019 967
February 2019 924
March 2019 930
April 2019 885
Mei 2019 944
June 2019 1067
July 2019 1115
August 2019 994
September 2019 916
October 2019 812
November 2019 838
December 2019 939
Total Demand of 2019 11331
Source: data analysis
4.3.4 Forecasting of Coffeemix Sachet 20gr Mulia Mart
The following table is the sales of Coffeemix Sachet 20gr in Mulia Mart during January
2018 to December 2018 period.
60
Table 4.16 Coffeemix Sachet 20gr Sales
Month Sales (unit)
January 2018 1,240
February 2018 997
March 2018 844
April 2018 920
Mei 2018 887
June 2018 1200
July 2018 833
August 2018 921
September 2018 912
October 2018 800
November 2018 890
December 2018 949
Total 11,392
Source: interview result (2018)
According to the sales data, the trend graph should look like this:
Figure 4.4 Coffeemix Sachet Sales Trend
0
200
400
600
800
1000
1200
1400
Coffeemix
61
From the chart, it is known that the sales of Coffeemix Sachet have a cyclic trend. The
forecasting method that are used for cyclic trend are Simple Exponential Smoothing (SES),
Average Method and Simple Moving Average. The calculation using the three methods can be
found in appendix section. The calculation using those methods utilizes POM-QM software,
where the software is a tool to do calculations in operations management, including forecasting.
To define which method that will be used, the smallest Mean Square Error are
calculated. The result can be found in the table below:
Table 4.17 Comparison of MAD, MSE, MAPE and Std. Error
Method MAD MSE MAPE Std Error
Exponential Smoothing 127.1 26744.43 13.63% 180.8
Moving Average 103.74 18222.59 10.76% 153.07
Source: data analysis
Based on the table above, the best forecasting method is Moving Average because it
has the smallest error value (MAD, MSE, and MAPE) among all calculated forecasting
method. Using the Moving Average method, the forecasting for Coffeemix Sachet 20gr in 2019
period is as follows:
62
Table 4.18 Forecasting of Coffeemix Sachet 20gr for the 2019 Period
Month Forecast
January 2019 880
February 2019 880
March 2019 880
April 2019 1027
Mei 2019 921
June 2019 884
July 2019 1003
August 2019 974
September 2019 985
October 2019 889
November 2019 878
December 2019 868
Total Demand of 2019 11069
Source: data analysis
4.4 Inventory Cost Calculation using EOQ model
In order to get the inventory cost, the first thing that is needed to be figured out is the
right quantity by using EOQ formula. EOQ is Economic Order Quantity, or in the other words;
the optimum one-time order quantity.
In the formula, S stands for setup cost. The fixed-cost in Mulia Mart is the salesman fee
of Rp 10000 per order. H stands for holding cost and it has been calculated in the previous
subsection. D stands for annual demand.
EOQ Kapal Api Mix 25gr
EOQ = √2 𝐷 𝑆
𝐻 = √
2 (21913) (10000)
76.77 = 2389.29 or equal to 2390 units
N stands for the total order made in a year.
63
N = 𝐷
𝐸𝑂𝑄=
21913
2390 = 9.16 or 10 orders in a year.
EOQ Sampoerna Mild 16
EOQ = √2 𝐷 𝑆
𝐻 = √
2 (21285) (10000)
175.04 = 1559.49 or equal to 1560 units
N = 𝐷
𝐸𝑂𝑄=
21285
1560 = 13.64 or 14 orders in a year.
EOQ Luwak White Coffee 20gr
EOQ = √2 𝐷 𝑆
𝐻 = √
2 (11331) (10000)
89.72 = 1589.29 or equal to 1590 units.
N = 𝐷
𝐸𝑂𝑄=
11331
1590 = 7.12 or 8 orders in a year.
EOQ Coffeemix Sachet 20gr
EOQ = √2 𝐷 𝑆
𝐻 = √
2 (11392) (10000)
76.95 = 1720.72 or equal to 1721 units.
N = 𝐷
𝐸𝑂𝑄=
11392
1721 = 6.61 or 7 orders in a year.
The next step is to find the total order cost based on the EOQ result that can be seen in
the table below:
Table 4.19 Order cost after applying EOQ in 2018 sales period
Product Name EOQ
(units)
Order
Frequency
Fixed cost for every
order (Rp) Order Cost (Rp)
Kapal Api Mix
25gr 2390 10 10,000 100,000
Sampoerna
Mild 16 1560 14 10,000 140,000
Luwak White
Coffee 20gr 1590 8 10,000 80,000
Coffeemix
Sachet 20gr 1721 7 10,000 70,000
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Total 390,000
Source: Data Analysis
Based on the above calculation, the total order cost after applying EOQ model in 2018
period is Rp 390,000. Meanwhile, the storage cost after applying EOQ model becomes:
Storage Cost = 𝑄
2𝐻
Q stands for optimal quantity (EOQ) and H is the storage cost per unit that has been
calculated before. The storage cost calculation using EOQ model can be seen in the table below:
65
Table 4.20 Storage cost using EOQ model in 2018 period
Product
Name
EOQ
(units)
EOQ/2
(units)
Storage cost
per unit
(Rp)
Storage cost
(Rp)
Kapal Api
Mix 25gr 2390 1195 76.77 91,740.15
Sampoerna
Mild 16 1560 780 175.04 136,531.2
Luwak White
Coffee 20gr 1590 795 89.72 71,327.4
Coffeemix
Sachet 20gr 1721 861 76.95 66,253.95
Total 365,852.55
Source: Data analysis
Based on the calculation above, the acquired storage cost for Mulia Mart in 2018 period
after using EOQ model is Rp 365,852.55. The total inventory cost of Mulia Mart in the 2018
period after using EOQ model is:
Total inventory cost = 𝐷
𝑄𝑆 +
𝑄
2𝐻
= Order cost + Storage cost
= Rp 390,000 + Rp 365,852.55
= Rp 755,852.55
From the calculation above, the total inventory cost for Mulia Mart using EOQ model for the
2018 period is Rp 755,852.55.
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4.5 Inventory Cost Calculation using EOQ model for the 2019 Period
In order to get the inventory cost, the first thing that is needed to be figured out is the
right quantity by using EOQ formula. EOQ is Economic Order Quantity, or in the other words;
the optimum one-time order quantity.
In the formula, S stands for setup cost. The fixed-cost in Mulia Mart is the salesman fee
of Rp 10000 per order. H stands for holding cost and it has been calculated in the previous
subsection. D stands for annual demand.
EOQ Kapal Api Mix 25gr
EOQ = √2 𝐷 𝑆
𝐻 = √
2 (21733) (10000)
76.77 = 2379.46 or equal to 2380 units
N stands for the total order made in a year.
N = 𝐷
𝐸𝑂𝑄=
21733
2380 = 9.13 or 10 orders in a year.
EOQ Sampoerna Mild 16
EOQ = √2 𝐷 𝑆
𝐻 = √
2 (21303) (10000)
175.04 = 1560.15 or equal to 1561 units
N = 𝐷
𝐸𝑂𝑄=
21303
1561 = 13.64 or 14 orders in a year.
EOQ Luwak White Coffee 20gr
EOQ = √2 𝐷 𝑆
𝐻 = √
2 (11331) (10000)
89.72 = 1589.29 or equal to 1590 units.
N = 𝐷
𝐸𝑂𝑄=
11331
1590 = 7.12 or 8 orders in a year.
EOQ Coffeemix Sachet 20gr
EOQ = √2 𝐷 𝑆
𝐻 = √
2 (11069) (10000)
76.95 = 1696.15 or equal to 1697 units.
N = 𝐷
𝐸𝑂𝑄=
11069
1697 = 6.52 or 7 orders in a year.
67
The next step is to find the total order cost based on the EOQ result that can be seen in
the table below:
Table 4.21 Order cost after applying EOQ in 2019 sales forecasting
Product Name EOQ
(units)
Order
Frequency
Fixed cost for every
order (Rp) Order Cost (Rp)
Kapal Api Mix
25gr 2390 10 10,000 100,000
Sampoerna
Mild 16 1690 14 10,000 140,000
Luwak White
Coffee 20gr 1590 8 10,000 80,000
Coffeemix
Sachet 20gr 1721 7 10,000 70,000
Total 390,000
Source: Data Analysis
Based on the above calculation, the forecasted total order cost after applying EOQ
model for 2019 period is Rp 390,000. Meanwhile, the storage cost after applying EOQ model
becomes:
Storage Cost = 𝑄
2𝐻
Q stands for optimal quantity (EOQ) and H is the storage cost per unit that has been
calculated before. The storage cost calculation using EOQ model can be seen in the table below:
68
Table 4.22 Storage cost forecast using EOQ model for 2019 period
Product
Name
EOQ
(units)
EOQ/2
(units)
Storage cost
per unit
(Rp)
Storage cost
(Rp)
Kapal Api
Mix 25gr 2380 1190 76.77 91,356.3
Sampoerna
Mild 16 1561 780.5 175.04 136,618.72
Luwak White
Coffee 20gr 1590 795 89.72 71,327.4
Coffeemix
Sachet 20gr 1697 848.5 76.95 65,292.08
Total 364,594.5
Source: Data analysis
Based on the calculation above, the forecasted storage cost for Mulia Mart for the 2019
period after using EOQ model is Rp 364,594.5. The total inventory cost of Mulia Mart in the
2018 period after using EOQ model is:
Total inventory cost = 𝐷
𝑄𝑆 +
𝑄
2𝐻
= Order cost + Storage cost
= Rp 390,000 + Rp 364,594.5
= Rp 754,594.5
From the calculation above, the total forecasted inventory cost for Mulia Mart using EOQ
model for the 2019 period is Rp 754,594.5.
4.6 Safety Stock and Reorder Point Calculation
Determining safety stock at one’s company has the role of securing inventory. If a
company uses safety stock, they will still have stock available when there’s a delay in the
69
delivery or if the demand is fluctuating. Reorder point means the point where a company must
place an order, because there’s a lead time in delivery so that the company has to anticipate the
possibility of delay in the delivery process of the order, and that’s where reorder point plays
the role. Below is the calculation of the safety stock and reorder point in Mulia Mart:
Kapal Api Mix 25gr
Table 4.23 Standard Deviation & Average Demand calculation of Kapal Api Mix 25gr
Month Sales (d) ƌ ( d – ƌ) ( d – ƌ)2
January 2018 2,026 1826.08 199.92 39,968.01
February 2018 1910 1826.08 83.92 7,042.57
March 2018 1626 1826.08 -200.08 40,032.01
April 2018 1700 1826.08 -126.08 15,896.17
Mei 2018 1800 1826.08 -26.08 680.17
June 2018 2009 1826.08 182.92 33,459.73
July 2018 1685 1826.08 -141.08 19,903.57
August 2018 1852 1826.08 25.92 671.85
September 2018 1826 1826.08 -0.08 0.01
October 2018 1853 1826.08 26.92 724.69
November 2018 1700 1826.08 -126.08 15,896.17
December 2018 1926 1826.08 99.92 9,984.01
Total 21,913 184,258.92
Soruce: Data Analysis
Standar deviation of demand:
𝜎𝑑 = √∑(𝑑 − �̅�)2
𝑛 − 1
= √184259
12 − 1
70
= 130 𝑢𝑛𝑖𝑡𝑠
The company lead time is one day. With 95% of service rate, the z value will be 1.645.
The demand of Kapal Api Mix 25gr for 1 year is 21,913 units, the average working day in a
year is 360 days. So, the average demand level of Kapal Api Mix 25gr is 60.86 unit per day.
Therefore, it can be calculated:
𝜎𝐿 = √𝐿𝑇 𝑥 (𝜎𝑑)2
= √1 𝑥 (130)2
= 130 days
So, the safety stock and the reorder point will be:
𝑠𝑠 = 𝑧 𝑥 𝜎𝐿
= 1.645 x 130
ss = 213.85 units = 214 units
𝑅𝑂𝑃 = (�̅�𝑥 𝐿𝑇) + 𝑠𝑠
= (60.86 x 1) + 214
ROP = 274.86 units = 275 units
That means, Mulia Mart needs to at least have 214 units of Kapal Api Mix 25gr as the
safety stock. If the stock has reached 275 units level, it is suggested that Mulia Mart do the
reordering process.
Sampoerna Mild 16
71
Table 4.24 Standard Deviation & Average Demand calculation of Sampoerna Mild 16
Month Sales (d) Ƌ ( d – ƌ) ( d – ƌ)2
January 2018 1,778 1773.75 4.25 18.06
February 2018 1420 1773.75 -353.75 125,139.06
March 2018 1522 1773.75 -251.75 63,378.06
April 2018 1529 1773.75 -244.75 59,902.56
Mei 2018 1022 1773.75 -751.75 565,128.06
June 2018 3289 1773.75 1,515.25 2,295,982.56
July 2018 1877 1773.75 103.25 10,660.56
August 2018 1785 1773.75 11.25 126.56
September 2018 1698 1773.75 -75.75 5,738.06
October 2018 1704 1773.75 -69.75 4,865.06
November 2018 1792 1773.75 18.25 333.06
December 2018 1869 1773.75 95.25 9,072.56
Total 21,285 3,140,344.25
Soruce: Data Analysis
Standar deviation of demand:
𝜎𝑑 = √∑(𝑑 − �̅�)2
𝑛 − 1
= √3140345
12 − 1
= 535 𝑢𝑛𝑖𝑡𝑠
The company lead time is one day. With 95% of service rate, the z value will be 1.645.
The demand of Sampoerna Mild 16 for 1 year is 21,285 units, the average working day in a
year is 360 days. So, the average demand level of Sampoerna Mild 16 is 59.125 unit per day.
Therefore, it can be calculated:
72
𝜎𝐿 = √𝐿𝑇 𝑥 (𝜎𝑑)2
= √1 𝑥 (535)2
= 535 days
So, the safety stock and the reorder point will be:
𝑠𝑠 = 𝑧 𝑥 𝜎𝐿
= 1.645 x 535
ss = 880.075 units = 881 units
𝑅𝑂𝑃 = (�̅�𝑥 𝐿𝑇) + 𝑠𝑠
= (59.125 x 1) + 881
ROP = 940.125 units = 941 units
That means, Mulia Mart needs to at least have 881 units of Sampoerna Mild 16 as the
safety stock. If the stock has reached 941 units level, it is suggested that Mulia Mart do the
reordering process.
Luwak White Coffee 20gr
Table 4.25 Standard Deviation & Average Demand calculation of Luwak White Coffee
Month Sales (d) ƌ ( d – ƌ) ( d – ƌ)2
January 2018 924 944.25 -20.25 410.06
February 2018 930 944.25 -14.25 203.06
March 2018 880 944.25 -64.25 4,128.06
April 2018 950 944.25 5.75 33.06
Mei 2018 1080 944.25 135.75 18,428.06
June 2018 1120 944.25 175.75 30,888.06
73
July 2018 980 944.25 35.75 1,278.06
August 2018 907 944.25 -37.25 1,387.56
September 2018 800 944.25 -144.25 20,808.06
October 2018 840 944.25 -104.25 10,868.06
November 2018 950 944.25 5.75 33.06
December 2018 970 944.25 25.75 663.06
Total 11,331 89,128.25
Soruce: Data Analysis
Standar deviation of demand:
𝜎𝑑 = √∑(𝑑 − �̅�)2
𝑛 − 1
= √89129
12 − 1
= 91 𝑢𝑛𝑖𝑡𝑠
The company lead time is one day. With 95% of service rate, the z value will be 1.645.
The demand of Luwak White Coffee 20gr for 1 year is 11,331 units, the average working day
in a year is 360 days. So, the average demand level of Luwak White Coffee 20gr is 31.475 unit
per day. Therefore, it can be calculated:
𝜎𝐿 = √𝐿𝑇 𝑥 (𝜎𝑑)2
= √1 𝑥 (91)2
= 91 days
So, the safety stock and the reorder point will be:
𝑠𝑠 = 𝑧 𝑥 𝜎𝐿
74
= 1.645 x 91
ss = 149.695 units = 150 units
𝑅𝑂𝑃 = (�̅�𝑥 𝐿𝑇) + 𝑠𝑠
= (31.475 x 1) + 150
ROP = 181.475 units = 182 units
That means, Mulia Mart needs to at least have 150 units of Luwak White Coffee 20gr
as the safety stock. If the stock has reached 182 units level, it is suggested that Mulia Mart do
the reordering process.
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Coffeemix Sachet 20gr
Table 4.26 Standard Deviation & Average Demand calculation of Coffeemix Sachet 20gr
Month Sales (d) ƌ ( d – ƌ) ( d – ƌ)2
January 2018 1,240 949.33 290.67 84,489.05
February 2018 997 949.33 47.67 2,272.43
March 2018 844 949.33 -105.33 11,094.41
April 2018 920 949.33 -29.33 860.25
Mei 2018 887 949.33 -62.33 3,885.03
June 2018 1200 949.33 250.67 62,835.45
July 2018 833 949.33 -116.33 13,532.67
August 2018 921 949.33 -28.33 802.59
September 2018 912 949.33 -37.33 1,393.53
October 2018 800 949.33 -149.33 22,299.45
November 2018 890 949.33 -59.33 3,520.05
December 2018 949 949.33 -0.33 0.11
Total 11,392 206,985.01
Soruce: Data Analysis
Standar deviation of demand:
𝜎𝑑 = √∑(𝑑 − �̅�)2
𝑛 − 1
= √206985.01
12 − 1
= 138 𝑢𝑛𝑖𝑡𝑠
The company lead time is one day. With 95% of service rate, the z value will be 1.645.
The demand of Coffeemix Sachet 20gr for 1 year is 11,392 units, the average working day in
76
a year is 360 days. So, the average demand level of Coffeemix Sachet 20gr is 31.64 unit per
day. Therefore, it can be calculated:
𝜎𝐿 = √𝐿𝑇 𝑥 (𝜎𝑑)2
= √1 𝑥 (138)2
= 138 days
So, the safety stock and the reorder point will be:
𝑠𝑠 = 𝑧 𝑥 𝜎𝐿
= 1.645 x 138
ss = 227.01 units = 228 units
𝑅𝑂𝑃 = (�̅�𝑥 𝐿𝑇) + 𝑠𝑠
= (31.64 x 1) + 228
ROP = 259.64 units = 260 units
That means, Mulia Mart needs to at least have 228 units of Coffeemix Sachet 20gr as
the safety stock. If the stock has reached 260 units level, it is suggested that Mulia Mart do the
reordering process.
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4.7 Total Cost Comparation
From all calculations that have been done in the previous sub-chapter, the total
inventory cost that is incurred by Mulia Mart using the EOQ model can be seen from the graph
below:
Source: Data Analysis
It can be seen from figure 4.1 that the total inventory cost that has been incurred by
Mulia Mart is far too high compared to the cost that will be incurred when the EOQ model is
used. The total inventory cost for the 2018 period that Mulia Mart incurred is Rp 1,517,813.23,
while the total inventory cost incurred using EOQ model will be Rp 777,230.3. From the
difference between the two methods (original and EOQ), it can be calculated that the
application of EOQ model can save Mulia Mart up to Rp 740,582.9 or about 48.79% of the
initial inventory cost.
0 100000 200000 300000 400000
Kapal Api Mix 25gr
Sampoerna Mild 16
Luwak White Coffee 20gr
Coffeemix Sachet 20gr
Kapal Api Mix25gr
Sampoerna Mild16
Luwak WhiteCoffee 20gr
Coffeemix Sachet20gr
EOQ method 191.740 259.300 259.650 259.650
Current system 400218,99 384454,6 363007,44 370150,2
Inventory Cost Comparation
Figure 4.5 Inventory Cost Comparation in Mulia Mart
78
The order cost incurred is far different between the original method used by Mulia Mart
and the EOQ model. The difference is because the order quantity using EOQ model is the
optimized quantity, and that will surely hold the order cost not to be too much. Another perk
using EOQ model is that the storage cost of each product is way cheaper than the original cost
Mulia Mart has been applying. This is because EOQ minimizes the holding/storage cost
because of the quantity ordered is already optimized to be sold accordingly to the consumer’s
demand.