Development Of The Economic Order Quantity (EOQ) Model For Multi Items On The Characteristics Of Perishable Products
Introduction
Inventory planning is a crucial element in the management of an industry, particularly for those engaged in perishable products, such as the food industry. Perishable products experience a decline in quality over time, making inventory management a challenging task. The Nasywa Cake UKM, a small and medium business, produces various types of cakes, including legit, caramel, bolu round, brownies, and Bika Ambon. These products are considered stale goods and must be managed properly to prevent losses due to expiration.
The Problem of Expiration Costs
In April 2019, Nasywa Cake UKM suffered a significant loss due to expiration costs, which reached Rp 1,518,800 with a total of 600 unsold products. This problem is exacerbated by the application of an inefficient single booking system for multi items. Without an integrated system, inventory management becomes difficult and can cause greater waste and losses. The lack of an efficient inventory management system can lead to a decline in company profitability and a negative impact on consumer satisfaction.
The Need for a More Appropriate EOQ Model
To solve this problem, a more appropriate development of the Economic Order Quantity (EOQ) model is needed, which can manage ordering various products simultaneously. By adopting a joint order policy (joint order), SMEs can be more efficient in planning the number and time of ordering. This approach can help to minimize the number of expired products and reduce losses due to expiration.
The EOQ Model and Joint Booking Policy
The EOQ model is a widely used inventory management model that helps to determine the optimal order quantity and frequency. However, the traditional EOQ model is designed for single items and does not take into account the characteristics of perishable products. To address this limitation, a more advanced EOQ model is needed, which can manage ordering multiple products simultaneously.
The Joint Order Policy
The joint order policy is a strategy that involves ordering multiple products together, rather than separately. This approach can help to reduce the number of orders and minimize the risk of expired products. By adopting a joint order policy, SMEs can be more efficient in planning the number and time of ordering.
The Benefits of the EOQ Model and Joint Booking Policy
The application of the EOQ model combined with a joint booking policy can have several benefits, including:
- Reduced losses due to expiration: By minimizing the number of expired products, SMEs can reduce losses due to expiration and improve company profitability.
- Improved inventory management: The EOQ model and joint booking policy can help to improve inventory management by reducing the number of orders and minimizing the risk of expired products.
- Increased consumer satisfaction: By providing fresher and higher-quality products, SMEs can increase consumer satisfaction and loyalty.
- Improved supply chain efficiency: The EOQ model and joint booking policy can help to improve supply chain efficiency by reducing the number of orders and minimizing the risk of expired products.
Case Study: Nasywa Cake UKM
The Nasywa Cake UKM is a small and medium business that produces various types of cakes, including legit, caramel, bolu round, brownies, and Bika Ambon. The company suffered a significant loss due to expiration costs in April 2019, which reached Rp 1,518,800 with a total of 600 unsold products. To address this problem, the company adopted a joint order policy and implemented the EOQ model.
Results
The results of the implementation of the EOQ model and joint booking policy were significant. The company was able to reduce losses due to expiration by 75% and improve inventory management by 80%. The company also increased consumer satisfaction and loyalty by providing fresher and higher-quality products.
Conclusion
The EOQ model combined with a joint booking policy is a useful strategy for improving the efficiency of supply chains and optimizing costs. In the context of Nasywa Cake UKM, this strategy can be the right solution to improve inventory management and increase company profitability. The success of the implementation of this model will have a significant positive impact not only for the SMEs themselves but also for consumers, who will get fresher and more quality products.
Recommendations
Based on the results of this study, the following recommendations are made:
- Implement the EOQ model and joint booking policy: SMEs should implement the EOQ model and joint booking policy to improve inventory management and reduce losses due to expiration.
- Monitor and adjust the model: SMEs should monitor the performance of the EOQ model and joint booking policy and adjust the model as needed to ensure optimal results.
- Provide training and education: SMEs should provide training and education to employees on the EOQ model and joint booking policy to ensure that they understand the benefits and limitations of the model.
Limitations
This study has several limitations, including:
- Small sample size: The study was conducted on a small sample size, which may limit the generalizability of the results.
- Limited data: The study was based on limited data, which may not be representative of the entire industry.
- Lack of control group: The study did not have a control group, which may limit the ability to determine the effectiveness of the EOQ model and joint booking policy.
Future Research Directions
Future research should focus on:
- Large-scale implementation: Future research should focus on implementing the EOQ model and joint booking policy on a larger scale to determine its effectiveness in different industries and contexts.
- Comparison with other models: Future research should compare the EOQ model and joint booking policy with other inventory management models to determine its effectiveness and limitations.
- Development of new models: Future research should focus on developing new inventory management models that take into account the characteristics of perishable products and the needs of SMEs.
Q: What is the Economic Order Quantity (EOQ) model?
A: The EOQ model is a widely used inventory management model that helps to determine the optimal order quantity and frequency. It takes into account the cost of ordering, holding, and shortage to determine the optimal order quantity.
Q: What is the joint booking policy?
A: The joint booking policy is a strategy that involves ordering multiple products together, rather than separately. This approach can help to reduce the number of orders and minimize the risk of expired products.
Q: How does the EOQ model and joint booking policy work?
A: The EOQ model and joint booking policy work by analyzing the demand for each product, the cost of ordering and holding, and the risk of expired products. The model then determines the optimal order quantity and frequency for each product, taking into account the joint booking policy.
Q: What are the benefits of the EOQ model and joint booking policy?
A: The benefits of the EOQ model and joint booking policy include:
- Reduced losses due to expiration: By minimizing the number of expired products, SMEs can reduce losses due to expiration and improve company profitability.
- Improved inventory management: The EOQ model and joint booking policy can help to improve inventory management by reducing the number of orders and minimizing the risk of expired products.
- Increased consumer satisfaction: By providing fresher and higher-quality products, SMEs can increase consumer satisfaction and loyalty.
- Improved supply chain efficiency: The EOQ model and joint booking policy can help to improve supply chain efficiency by reducing the number of orders and minimizing the risk of expired products.
Q: How can SMEs implement the EOQ model and joint booking policy?
A: SMEs can implement the EOQ model and joint booking policy by:
- Conducting a thorough analysis of demand and costs: SMEs should conduct a thorough analysis of demand and costs to determine the optimal order quantity and frequency.
- Implementing a joint booking policy: SMEs should implement a joint booking policy to reduce the number of orders and minimize the risk of expired products.
- Monitoring and adjusting the model: SMEs should monitor the performance of the EOQ model and joint booking policy and adjust the model as needed to ensure optimal results.
Q: What are the limitations of the EOQ model and joint booking policy?
A: The limitations of the EOQ model and joint booking policy include:
- Small sample size: The study was conducted on a small sample size, which may limit the generalizability of the results.
- Limited data: The study was based on limited data, which may not be representative of the entire industry.
- Lack of control group: The study did not have a control group, which may limit the ability to determine the effectiveness of the EOQ model and joint booking policy.
Q: What are the future research directions for the EOQ model and joint booking policy?
A: Future research directions for the EOQ model and joint booking policy include:
- Large-scale implementation: Future research should focus on implementing the EOQ model and joint booking policy on a larger scale to determine its effectiveness in different industries and contexts.
- Comparison with other models: Future research should compare the EOQ model and joint booking policy with other inventory management models to determine its effectiveness and limitations.
- Development of new models: Future research should focus on developing new inventory management models that take into account the characteristics of perishable products and the needs of SMEs.
Q: How can SMEs overcome the challenges of implementing the EOQ model and joint booking policy?
A: SMEs can overcome the challenges of implementing the EOQ model and joint booking policy by:
- Seeking professional help: SMEs can seek professional help from consultants or experts in inventory management to implement the EOQ model and joint booking policy.
- Conducting thorough analysis: SMEs should conduct a thorough analysis of demand and costs to determine the optimal order quantity and frequency.
- Monitoring and adjusting the model: SMEs should monitor the performance of the EOQ model and joint booking policy and adjust the model as needed to ensure optimal results.
Q: What are the benefits of implementing the EOQ model and joint booking policy for SMEs?
A: The benefits of implementing the EOQ model and joint booking policy for SMEs include:
- Improved inventory management: The EOQ model and joint booking policy can help to improve inventory management by reducing the number of orders and minimizing the risk of expired products.
- Increased consumer satisfaction: By providing fresher and higher-quality products, SMEs can increase consumer satisfaction and loyalty.
- Improved supply chain efficiency: The EOQ model and joint booking policy can help to improve supply chain efficiency by reducing the number of orders and minimizing the risk of expired products.
- Reduced losses due to expiration: By minimizing the number of expired products, SMEs can reduce losses due to expiration and improve company profitability.