Material Planning with ABC Classification, Min-Max Method, and Continuous Review System Method at PT XYZ

IJIEM (Indonesian Journal of Industrial Engineering & Management) Vol 5 No 1 February 2024, 137-147 Available online at:http://publikasi.mercubuana.ac.id/index.php/ijiem IJIEM (Indonesian Journal of Industrial Engineering & Management) ISSN (Print) : 2614-7327 ISSN (Online) : 2745-9063 Material Planning with ABC Classification, Min-Max Method, and Continuous Review System Method at PT XYZ Farhan Jezando Wardana, Muhammad Imron Zamzani, Arini Anestesia Purba* Department of Industrial Engineering, Kalimantan Institute of Technology, Jl. Soekarno-Hatta Km. 15, Karang Joang, Balikpapan, Kalimantan Timur 76127 Indonesia ARTICLE INFORMATION A B S T R A C T Article history: Received: 24 August 2023 Revised: 2 October 2023 Accepted: 9 November 2023 Category: Research paper Keywords: Material planning ABC classification Min-max method Continuous review system method Supply chain management DOI: 10.22441/ijiem.v5i1.22661 PT XYZ is a petrochemical manufacturing company that produces industrial raw materials. This company has a stock of inventory materials in its warehouse. The background of this research is based on the company's need to optimize raw material inventory management to ensure the smooth running of the methanol production process and prevent overstock and stock of material. This study analyzed company SAP data, which showed a high average overstock level in CR1-B2-C01 storage during 2018-2022. Forty materials were overstocked, and 22 materials were out of stock. This shows the urgency to classify priority inventory materials, determine the research results in minimum and maximum quantities of materials, and determine reorder points. The research methods used include the ABC classification to classify inventory priorities, the Min-Max method to calculate the minimum and maximum amount of material, and the Continuous Review System method to determine reorder points and the amount of inventory to be provided. Data on purchases and usage of Parker O-Lube and O-Ring Parker materials in CR1-B2-C01 storage during 2018-2022 are used as a basis for planning material requirements. The research results found that by applying the ABC classification, the Min-Max method, and the Continuous Review System method, the company can optimize the management of CR1-B2-C01 raw materials. In investing in raw materials, companies can reduce the risk of unnecessary costs, minimize damage to goods, and prioritize the optimal use of storage space. *Corresponding Author This is an open access article under theCC–BY-NC license. Arini Anestesia Purba E-mail: 1. INTRODUCTION Inventory in a company is essential in maintaining a balance between demand and supply of needed goods. However, if the list is not managed correctly, it can lead to wasted high storage costs, sub-optimal use of storage How to Cite: Wardana, F. J., Zamzani, M. I., & Purba, A. A. (2024). Material Planning with ABC Classification, Min-Max Method, and Continuous Review System Method at PT XYZ. IJIEM (Indonesian Journal of Industrial Engineering & Management), 5(1), 137-147. https://doi.org/10.22441/ijiem.v5i1.22661 137 IJIEM (Indonesian Journal of Industrial Engineering & Management) Vol 5 No 1 February 2024, 137-147 space, risk of running out of stock, and difficulty caring for and maintaining goods. Therefore, effective inventory control is significant for companies, especially in manufacturing (Atnafu & Balda, 2018). PT XYZ is a petrochemical manufacturing company that produces industrial raw materials. This company has stock material inventory in its warehouse. As a manufacturing company in the industrial sector, PT XYZ also faces challenges in managing its supplies. A previous study conducted by Atnafu and Balda (2018)found that excess inventory (overstock) can lead to wastage of resources and unwanted costs. It can also affect the company's cash flow and risk causing damage or loss of goods. Therefore, effective inventory control is needed to ensure the efficiency of total inventory costs and more optimal order planning. In the interpretation of the company's SAP (System Application and Product in Data Processing) data, it can be seen in Picture 1 that the material in CR1-B2-C01 storage during 2018–2022 has a higher average overstock material level compared to 1239 other types of material storage, where out of 70 materials, 40 materials are overstocked and 22 materials that are out of stock, which means the level of urgency for priority grouping for material inventory, minimum and maximum quantities of material, and determination of reorder points must be carried out immediately to avoid overstock or out. Of stock materials in the spare parts warehouse. In the context of PT XYZ, CR1-B2-C01 storage is one of the materials storage that needs special attention. This storage contains Parker O-Lube and Parker O-Ring materials essential in the petrochemical industry. However, inventory management in this storage is not optimal and is still experiencing overstock and out-of-stock problems. In addition, PT XYZ also does not have an optimal inventory planning system to determine the right amount of inventory and when orders should be placed. Therefore, this study aims to develop better inventory planning for CR1-B2-C01 storage at PT XYZ. Figure 1. PDCA based improvement. Source: https://www.innovationservices.philips.com/ First, this study aims to classify the priority of raw material stock materials in CR1-B2-C01 storage using ABC classification analysis. Second, determine the amount of stock material ordered based on minimum and maximum inventory according to budget requirements using the Min-Max method. Third, determine the optimal number of orders 138 and order intervals using the Continuous Review System method. By achieving these goals, PT XYZ will be able to increase efficiency in its inventory management, reduce unnecessary costs, and minimize the risk of stockouts or excessive storage buildup. Based on the literature review, effective IJIEM (Indonesian Journal of Industrial Engineering & Management) Vol 5 No 1 February 2024, 137-147 inventory control is very important in the manufacturing industry. Previous research by Atnafu and Balda (2018)showed that excess inventory can lead to waste of high storage costs and other costs such as ordering costs and stockout costs. Therefore, this research is expected to contribute to developing science in inventory control, especially in the context of PT XYZ. In conclusion, effective and efficient inventory control is important in maintaining the company's smooth operations. As a manufacturing company in the industrial engineering sector, PT XYZ faces challenges in managing its inventory, especially in storage CR1-B2-C01. This study aims to develop better inventory planning using the ABC classification, Min-Max, and Continuous Review System methods. It is hoped that this research can benefit PT XYZ in increasing the efficiency and effectiveness of inventory con (...truncated)