Inventory management for sweetener : A case study of powder beverage industry

Abstract

The objective of this research is to formulate the inventory model of Sweetener, which was the main raw material and a higher average value per month in the company. The amount of raw material order depends on consider the forecast customer demand and the minimum order quantity of raw material. The overestimation of raw material consumption leads to increase inventory, ordering costs and holding costs. From the study of raw material consumption in the past, it was found that the raw material consumption was normal distribution. Consumptions of the raw material was fi rst forecasted by a Time Series Forecasting model and Box-Jenkins method. Then, a forecasting model that minimized the mean absolute deviation was selected. Finally, the selected inventory models were utilized to fi nd the most economic order quantity, ordering period, and the appropriate ordering frequency of the raw material. The results indicated that average inventory and average total cost (ordering cost and holding cost ) was reduced to 60.58 percent and 20.14 percent respectively.