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JOSS:
Journal of Social Science
ANALYSIS OF SPARE PARTS INVENTORY PLANNING AND
CONTROL TO IMPROVE COST EFFICIENCY AT PT MANUNGGAL
JAYA MAKMUR
Rikhi Nugroho, Tukhas Shilul Imaroh
Mercu Buana University, Indonesia
Email: [email protected], [email protected]
KEYWORDS
Cost efficiency,
Activity Based
Costing (ABC)
analysis method,
Economic Order
Quantity (EOQ)
method, Periodic
Oder Quantity
(POQ) method,
and Lot-For-Lot
(LFL) method.
ABSTRACT
PT Manunggal Jaya Makmur is one of the companies engaged in the
transportation and contracting-based sector that provides integrated
services from the start point to the end. In addition, it is also engaged
in the repair of heavy equipment such as mixer trucks, dump trucks,
colt diesel, and repair of other heavy equipment. In supporting the
company's activities, PT. Manunggal Jaya Makmur implements a
strategy for supplying raw materials and spare parts. In its operational
activities, PT. Manunggal Jaya Makmur is still constrained by the
overstock problem which ultimately causes a buildup of goods. In this
study, material classification was carried out using ABC Theory
analysis. Then the methods used in planning and controlling inventory
management are the POQ and EOQ methods. After getting the results,
the methods used during the research will be compared with the
methods that have been applied so far in the company to find out the
most effective methods to be applied in cost efficiency and work
productivity and can maximize the profits received by the company.
Based on the analysis carried out, the cost of calculating the total
inventory of spare parts using the EOQ method was Rp. 205,513,000,
the LFL method was Rp. 274,141,349 and the POQ method was Rp.
273,502,120. So, from these data, it can be concluded that the most
optimal total cost of inventory is the EOQ method to produce greater
profits and minimize overstock.
INTRODUCTION
Production planning and inventory control at the company are shown in activities when
planning and controlling materials entering the production system (raw materials, auxiliary
materials), flowing in the production system (components, subassembly), and exiting the
production system (finished products, spare parts) so that market demand can be met
effectively and efficiently (the right quantity, the right delivery time and minimum production
costs) (Dedrizaldi et al., 2019).
Inventory management seeks to achieve a balance between shortage and excess inventory
in a planning period that contains the risk of uncertainty, involving a number of coordination
activities between inventory and production and consumption activities at a number of process
stages and related locations. Well-designed inventory management can minimize total costs
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and improve service levels. This is because, by managing the right inventory, the company will
achieve both at once.
Inventory control is a quantitative control method with strong financial implications. In
some companies, inventory control is one of the most significant techniques for directly
controlling marketing, production, purchasing, and financial policy relationships. Difficulties
in inventory control systems may be affected by fragmented practices due to inadequate
procedures for operational standards . Organizing inventory items into groups and taking
control of similar inventory policies for items in each group can solve the problem of inefficient
inventory control policies. Companies with inventory-related material issues have low
inventory turnover ratios. Strong internal control system over financial reporting. Under the
provision of decentralized control, the inventory held at the outlet level is very different from
the aggregate inventory at each producer level and in this respect, they are similar. Inventory
management methods can help practitioners to improve the company's service delivery to
ensure a steady flow of materials. Contribute the elements that matter most to inventory system
performance, and recognize strengths and weaknesses of inventory management strategies. As
a result, it is remarkable to investigate and explore the weaknesses of inventory management
in organizations. Very little work has been done to investigate the inventory control of discrete
enterprises. Empirical work revealed that strong inventory control has the ability to shape
company performance due to the costs associated with inventory as storage costs, inventory
costs, ordering costs, and relevant costs at a minimum level (Ahmedet al., 2021)
Inventory management is one of the most important activities in a company. The
inventory is very important to be managed so that the company's effectiveness and efficiency
goals can be achieved. In inventory management, if the control is not good, it will cause
conditions that cause an increase in costs in a company. If there is too much inventory, the
company will experience losses because it has to bear damage and storage costs, costs from
interest embedded in inventory, warehouse costs, maintenance costs, administration, insurance,
and others. If the inventory is too small, it will also cause losses due to the amount of inventory
that cannot meet capacity so that the production process can stop and result in backorders.
In this study, the author will conduct research at PT. Manunggal Jaya Makmur. PT.
Manunggal Jaya Makmur is one of the companies engaged in the repair of heavy equipment
such as mixer trucks, dump trucks, colt diesel and other heavy equipment repairs. In supporting
its corporate activities, PT. Manunggal Jaya Makmur implements a strategy of inventory of
raw materials and spare parts. This is done to minimize the risk of uncontrollable material
inventory that can harm the company. Even so, in its operational activities, PT. Manunggal
Jaya Makmur is still constrained by overstock problems which eventually cause a buildup of
goods. This can be seen in figure 1 which shows the inventory of raw materials in the company
has increased or decreased or fluctuated unsteadily which causes inventory to overstock and
sometimes experience shortages in meeting market needs.
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Figure 1
Usage and Production Demand Graph 2021-2022
Source: Primary data, 2022
The condition of the stock of goods that is too excessive will certainly have a negative
impact on the income and profits received by the company if it is not balanced with balanced
sales figures. Sales themselves are one of the important factors that determine much of the least
profit or profit received by the company. If there is too much stock while the sales figure is
fairly small, this will bring losses to the company and the profit figures received will be less.
Figure 2
Production Cost Graph at PT. Manunggal Jaya Makmur for January-May 2022 Period
Source: Primary Data, 2022
In figure 2 sourced from PT. Manunggal Jaya Makmur can be concluded that production
costs throughout January to May experience fluctuations or unstable increases and decreases.
Throughout January, the production cost of goods needed reached Rp 2,986,113,039. While in
February production costs reached Rp 3,656,367,542. The highest production cost itself
occurred in May which reached Rp 3,986,648,433. FENOMENJow production costs incurred
are too large while sales figures are relatively small, the company will certainly experience
losses because it has to cover the production costs that have been incurred. Net SalesAtPT.
Manunggal Jaya Makmur for January-May 2022 Period
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Figure 3
Net Sales Chart at PT. Manunggal Jaya Makmur for January-May 2022 Period
Based on the sales chart, it can be seen if the sales figures of PT. Manunggal Jaya
Makmur from January to May also experienced increases and decreases or fluctuations.
Throughout January, the total sales obtained by PT. Manunggal Jaya Makmur is IDR
8,753,426,604. Meanwhile, in February total sales at the company fell to Rp 8,548,607,284. In
the period from January to May, the highest total sales occurred in May amounting to Rp
10,196,518,723. If the sales figure at the company has decreased while the stock of goods
owned by PT. Manunggal Jaya Makmur is not managed properly, this condition will have a
negative impact on the income and profits received by the company. Manunggal Jaya Makmur
for January-May 2022 Period
Figure 4
Graph. Net Profit at PT. Manunggal Jaya Makmur for January-May 2022 Period
The chart data above explains the net profit received by PT. Manunggal Jaya Makmur, it
can be concluded that the profits obtained by the company have also increased and decreased
unsteadily. During the month of January net profit obtained by PT. Manunggal Jaya Makmur
amounted to Rp 3,567,313,565, while the highest profit was obtained in the month of Rp
4,599,448,954. One of the factors that affect the size of the income received by the company
is management, planning, and inventory management. If the management of planning and
managing the inventory of goods owned by the company does not run well and causes the
inventory of goods to be uncontrolled or overstocked while the sales figure at the company is
relatively small, this will have a negative impact on the revenue received by the company.
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Based on the phenomenon experienced by PT. Manunggal Jaya Makmur can be
concluded that in the company's operational activities, planning management and inventory
management have an important role in the survival of a company. The better the management
of planning and controlling goods owned by the company, it will minimize the number of
hoarding goods, increase the efficiency of production costs and work productivity, reduce
losses received by the company and increase profits or profits received by the company.
Conversely, if a company has an unstable system of managing planning and controlling goods,
this can trigger an increase in production costs due to hoarding stock and losses experienced
by the company if the sales flow does not run smoothly. What is meant by production costs
here is the total spent to fulfill the stock of goods needed in operational activities and meet
client demand.
Spare parts themselves are necessary to ensure the proper functioning of important
equipment of many companies, and as such, spare parts play a central role in the operation of
these companies. Manufacturers and service providers alike need to keep parts in their
inventory to minimize the financial and commercial costs (due to loss of reputation) of
downtime. However, parts are usually expensive, and storage costs can also be quite high.
Therefore, the inventory of spare parts is very necessary because if the amount of inventory is
smaller than the number of damaged parts, it will cause heavy equipment to be unable to
operate. This will cause huge losses. Vice versa, if the amount of spare parts inventory in the
warehouse is too large, it will cause losses such as the company's capital investment (Delvika,
2016).
Production planning and inventory control at the company are also influenced by several
factors. For example, logistical factors. Logistics is an effective and efficient management
process of the flow and storage of raw materials, inventories and finished goods to meet the
needs of consumers (Adhiningrat, 2017). The shipping factor is also one of the things that affect
production planning and inventory control. There are several things that need to be considered
in choosing a freight forwarding service, ranging from the selection of expedition services that
offer timely estimation of goods, have a wide area coverage, safe goods to their destination,
provide tracking features that are easy to track, and have the best shipping rates. Improper
selection of shipping services can cause many adverse effects that will be received by the
company and affect greater handling costs (Lubis et al., 2019).
The selection of supplier partners is also an important factor in production planning and
inventory control. Because not a few suppliers are careless in supplying production needs.
Therefore, before establishing cooperation, it is better if the company pays attention to several
factors in choosing a supplier partner or supplier of goods. Starting from quality factors,
quantity factors, consistency factors, and price factors (Kwartama et al., 2008). In addition, the
company must also be careful in supplying the spare parts needed by the company. Some
factors that need to be considered in the selection of spare parts include the availability of spare
parts needed, the price of spare parts, partners, and spare parts lead time. Selection of bad and
unqualified spare parts will have a negative impact and losses on the company.
In this study, material classification will be carried out with ABC Theory analysis. Then
the methods used in managing inventory planning and control are POQ and EOQ methods.
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After getting the results, the methods used during the study will be compared with the methods
that have been applied in the company. Through this comparison, it will be known which
method plays an optimal role in planning and managing inventory. Thus the company can
reduce the accumulation of goods, minimize losses, increase cost efficiency and work
productivity, and can maximize the profits received by the company. From these problems, the
researcher wants to conduct a study entitled "Analysis of Planning and Control of Spare Parts
Inventory to Increase Cost Efficiency at PT. Manunggal Jaya Makmur".
METHOD RESEARCH
This research included quantitative descriptive research. In this study, the population
consisted of all dump truck spare parts in PT. Manunggal Jaya Makmur. In the study of
sampling using purposive sampling techniques. Data collection techniques carried out by
researchers to obtain primary and secondary data are using the following data collection
techniques: Field Research, Observation, and Interview .
RESULT AND DISCUSSION
Data Analysis Results
Spare Parts Classification
Here is the table of classification of spare parts based on ABC analysis:
Table 1
Material Classification CategoriesAssification Materials
No.
Types of
Spare
Parts
Value
Volume
(amount)
Total
(Value*
Amount)
Group
1
AF
IDR
17,670,000
45
IDR
795,150,000
A
2
AXLE
IDR 973,000
41
IDR 39,893,000
B
3
AN
IDR 234,000
101
IDR 23,634,000
C
4
BF
IDR
12,897,000
17
IDR
219,249,000
A
5
BS
IDR 833,000
36
IDR 29,988,000
B
6
BN
IDR 177,000
160
IDR 28,320,000
C
7
CF
IDR
12,767,000
10
IDR
127,670,000
A
8
.CS
IDR 791,000
43
IDR 34,013,000
B
9
CN
IDR 191,000
691
IDR
131,981,000
C
TOTAL
1.144
IDR
1,240,947,000
-
Source: Company primary data 2021-2022
In the table above, it is a table regarding the classification of spare parts from PT.
Manunggal Jaya Makmur, this research is based on ABC analysis, later to find out the amount
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of investment from the company. After grouping according to the ABC method, the following
results were obtained:
1) Group A
Cumulative funds are required for procurement up to Rp 1,142,069,000
Total types of spare parts in groups of 72 types
2) Group B
Cumulative funds are required up to IDR 103,894,000
Total types of spare parts in groups of 120 types
3) Group C
Cumulative funds are required up to IDR 183,935,000
Total types of spare parts in the group of 952 types
The grouping results according to ABC analysis can be illustrated with a graph as below:
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Figure 5
Spare Parts Distribution
The next step is to classify the group of spare parts according to the cumulative
percentage amount. The results of data processing using the ABC classification method from
each spare part item calculation can be classified into groups A, B, and C according to the
amount of cumulative investment value. The results of data processing using the ABC
classification method can be concluded as follows:
Table 2
ABC Analysis Based on Spare Part Investment Value
No.
Spare
Parts
Group
Number
of Spare
Parts
Percentage
of Number
of Spare
Parts
Investment
Value
Percentage
of
Investment
Value
1
Group A
72
6,29%
IDR
1,142,069,000.00
79,87%
2
Group B
120
10,48%
IDR
103,894,000.00
7,3%
3
Group C
952
83,21%
IDR
183,935,000.00
12,86%
Total
1.144
100%
100%
Lot Sizing Method
The technique in determining the size of the inner lot for one level by assuming
unlimited capacity can be classified using five ways, namely (Baroto, 2002):
1) Fixed Order Quantity (FOQ)
2) Lot-For-Lot (LFL)
3) Fixed Period Requirement (FPR)
4) Economic Order Quantity (EOQ)
5) Period Order Quantity (POQ)
There is no standard formula used by PT. Manunggal Jaya Makmur to determine how
many replacement parts orders should be placed. Order quantity is affected by stock levels and
incidents when certain machine parts are damaged. Since there is a possibility that the order
0
20
40
60
80
100
120
0 20 40 60 80 100 120
Kumulatif Dana (%)
Kumulatif Barang (%)
Grafik Distribusi Sparepart
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price will go up if the order is placed in small batches or if the order is too much, the storage
cost will go up, this problem can result in waste. So, to find out the optimal number of orders
in each order of spare parts at PT. Manunggal Jaya Makmur must be calculated using various
optimal ordering methods, namely the Lot-ForLot (LFL), Economic Order Quantity (EOQ),
and Period Order Quantity (POQ) methods.
The amount of spare part fees is adjusted to an annual interest rate of 12% money.
Transportation fees, administration fees, product inspection fees, loading and unloading fees,
and telephone fees are included in domestic and international booking fees.
Lot-For Lot (LFL) Method
There is no storage of spare parts with the lot for lot system because purchases are made
according to the number of orders needed. There are no storage costs as the company uses the
LFL approach in this regard and orders only the required quantity of parts. Illustration of how
the LFL method can be used to determine the overall cost of inventory.
- US spare parts:
The total cost of U.S. spare parts inventory is:
TC = 41× IDR 187,000 + 0
TC = IDR 7,667,000
- AN Spare Parts:
The total cost of AN spare parts inventory is:
TC = 101× IDR 187,000 + 0
TC = IDR 18,887,000
- BF spare parts:
The total cost of BF spare part inventory is:
TC = 17× IDR 187,000 + 0
TC = IDR 3,179,000
- BS spare parts:
The total cost of BS spare parts inventory is:
TC = 36 × IDR 187,000 + 0
TC = IDR 6,732,000
- BN spare parts:
The total cost of BN spare parts inventory is:
TC = 160× IDR 187,000 + 0
TC = IDR 29,920,000
- CF spare parts:
The total cost of CF spare parts inventory is:
TC = 10× IDR 187,000 + 0
TC = IDR 1,870,000.00
- CS spare parts:
The total cost of CS spare parts inventory is:
TC = 43× IDR 187,000 + 0
TC = IDR 8,041,000
- CN spare parts:
The total cost of CN spare parts inventory is:
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TC = 691× IDR 187,000 + 0
TC = IDR 129,217,000
From this calculation, the total inventory cost of all spare parts is Rp. 205,513,000
Economic Order Quantity (EOQ) Method In conventional inventory systems, the EOQ
approach is often used to determine lot sizes. This method has a fixed lot size. Lots are
determined using the following formula based on ordering costs and storage costs:
In the EOQ method, the lot size is fixed.
- US spare parts:
Data required :
a. Total usage in a period of 1 year (D = 41)
b. One-time spare part booking fee (S = Rp. 187.000,00)
c. Storage Cost of spare parts (h = 12%)
d. Price of goods per unit (US = Rp. 937.000)
The US spare parts for each order are as follows:
Then the result of EOQ is 11.68 units/message
The total cost of spare part inventory is calculated using the formula:
TC
= 187,000 + 0.12
TC = IDR 1,313,556.67
- AN Spare Parts:
Data required :
a. Total usage in a period of 1 year (D = 101)
b. One-time spare part booking fee (S = Rp. 187.000,00)
c. Storage Cost of spare parts (h = 12%)
d. Price of goods per unit (AN = Rp. 234.000)
AN spare parts for each order are as follows:
Then the result of EOQ is 36.67 units/message
The total cost of spare part inventory is calculated using the formula:
TC
= 187,000 + 0.12
TC = IDR 1,029,939.46
- BF spare parts:
Data required :
a. Total usage in a period of 1 year (D = 17)
b. One-time spare part booking fee (S = Rp. 187.000,00)
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c. Storage Cost of spare parts (h = 12%)
d. Price of goods per unit (BF = Rp. 12.897.000)
BF spare parts for each order are as follows:
Then the result of EOQ is 2.02units/message
The total cost of spare part inventory is calculated using the formula:
TC
= 187,000 + 0.12
TC = IDR 3,137,140
- BS spare parts:
Data required :
a. Total usage in 1 year period (D = 36)
b. One-time spare part booking fee (S = Rp. 187.000,00)
c. Storage Cost of spare parts (h = 12%)
d. Price of goods per unit (BS = Rp. 833.000)
The BS spare parts for each message are as follows:
Then the result of EOQ is 11.6units/message
The total cost of spare part inventory is calculated using the formula:
TC
= 187,000 + 0.12
TC = IDR 1,607,760
- BN spare parts:
Data required :
a. Total usage in a period of 1 year (D = 160)
b. One-time spare part booking fee (S = Rp. 187.000,00)
c. Storage Cost of spare parts (h = 12%)
d. Price of goods per unit (BN = Rp. 117.000)
BN spare parts for each order are as follows:
Then the result of EOQ is 65.3units/message
The total cost of spare part inventory is calculated using the formula:
TC
= 187,000 + 0.12
TC = IDR 916,607
- CF spare parts:
Data required :
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a. Total usage in 1 year period (D = 10)
b. One-time spare part booking fee (S = Rp. 187.000,00)
c. Storage Cost of spare parts (h = 12%)
d. Price of goods per unit (CF = Rp. 12.767.000)
CF spare parts for each order are as follows:
Then the result of EOQ is1.5units/message
The total cost of spare part inventory is calculated using the formula:
TC
= 187,000 + 0.12
TC = 2,467,040
- CS spare parts:
Data required :
a. Total usage in a period of 1 year (D = 43)
b. One-time spare part booking fee (S = Rp. 187.000,00)
c. Storage Cost of spare parts (h = 12%)
d. Price of goods per unit (CS = Rp. 791.000)
CS spare parts for each message are as follows:
Then the result of EOQ is13.02units/message
The total cost of spare part inventory is calculated using the formula:
TC
= 187,000 + 0.12
TC =1,235,518.46
- CN spare parts:
Data required :
a. Total usage in a period of 1 year (D = 691)
b. One-time spare part booking fee (S = Rp. 187.000,00)
c. Storage Cost of spare parts (h = 12%)
d. Price of goods per unit (CN = Rp. 191.000)
CN spare parts for each order are as follows:
Then the result of EOQ is106.19units/message
The total cost of spare part inventory is calculated using the formula:
TC
= 187,000 + 0.12
TC =2.433788.30
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From this calculation, the total inventory cost of all imported spare parts amounted to
Rp. 274,141,349
Period Order Quantity (POQ) Method
Hansa (2015) asserts that the POQ approach involves regular orders or purchases with a
fixed distance between each order. The steps for working on POQ are as follows:
a. Calculate EOQ
b. Use EOQ to calculate booking frequency per year (N)
- US spare parts:
Saving Fee:
TC = 41× IDR 187,000
TC = IDR 7,667,000
Message fee:
Total inventory cost/year = storage cost + message cost = Rp. 7,667,000+ = Rp.
9,972,020
- AN Spare Parts:
Saving Fee:
TC = 101× IDR 187,000
TC = IDR 18,887,000
Message fee:
Total inventory cost/year = storage cost + message cost = IDR 18,887,000+ = IDR
20,305,040
- BF spare parts:
Saving Fee:
TC = 17× IDR 187,000
TC = IDR 3,179,000
Message fee:
Total inventory cost/year = storage cost + message cost = IDR 3,179,000+ = IDR
16,333,940
- BS spare parts:
Saving Fee:
TC = 36 × IDR 187,000
TC = IDR 6,732,000
Message fee:
Total inventory cost/year = storage cost + message cost = IDR 6,732,000+ = IDR
8,531,280
- BN spare parts:
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Saving Fee:
TC = 160× IDR 187,000
TC = IDR 29,920,000
Message fee:
Total inventory cost/year = storage cost + message cost = IDR 29,920,000 + = IDR
31,619,200
- CF spare parts:
Saving Fee:
TC = 10 × IDR 187,000 + 0
TC = IDR 1,870,000.00
Message fee:
Total inventory cost/year = storage cost + message cost = IDR 1,870,000 + IDR 7,660,200
= IDR 9,530,000
- CS spare parts:
Saving Fee:
TC = 43× IDR 187,000
TC = IDR 8,041,000
Message fee:
Total inventory cost/year = storage cost + message cost = Rp. 8.041.000 + =
Rp.10.081.780
- CN spare parts:
Saving Fee:
TC = 691× IDR 187,000
TC = IDR 129,217,000
Message fee:
Total inventory cost/year = storage cost + message cost = Rp. 129,217,000+ =
Rp.137,135,860 Then the total inventory cost of all spare parts is Rp.
273,502,120
Reorder Point Booking
Reoder Point (ROP) is a level that will indicate when to reorder spare parts. The formula
used is:
Here are the ROP calculation results from AF spare parts:
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= 1,223≈2 units
The following is the ROP calculation result from BN spare parts:
= 4.4≈4 units
Based on the calculation above, it is found that when the spare parts inventory level
reaches 2 units, orders for that type can be placed again, so that the inventory level rises again
to exceed 4 units.
Discussion
ABC Analysis
As a result of the data processing, it can be concluded that there are 72 items in priority
A, 120 items in priority B, and 952 items in priority C among nine different types of parts.
EOQ Analysis
Based on data analysis, it can be said that the EOQ approach produces the lowest total
inventory cost. The company can save CF spare parts inventory costs of IDR 10,439,670,400.
To prevent overstock or stock out, organizations can further optimize their parts inventory by
using EOQ.
Reorder Point Analysis
Furthermore, it is necessary to know the point of reordering, which is used as a
benchmark for reordering goods to suppliers so as not to experience stockout or overstock,
after getting the best method to calculate the number of goods to be ordered. Therefore, by
recording the point of reordering each part, the PPIC/Indenter section can determine the
minimum stock level required to place another order with the supplier, ensuring that the goods
will arrive on time and there will be no overstock or understock.
Inventory Method Analysis
After calculating the inventory costs of all three existing methods. The following is a
recapitulation of the calculation of total inventory costs from the three methods:
Table. Calculation of total inventory of Spare Parts
No. Method Total Inventory Cost
1. LFL IDR 274,141,349
2. EOQ IDR 205,513,000
3. POQ IDR 273,502,120
4. Existing IDR 1,473,330,866
It was found that the EOQ method is the most optimal method in minimizing the total
cost of spare part inventory.
Managerial Implications
This research is expected to provide various benefits for related parties, including:
1. Inventory calculation using the EOQ method can optimize the costs incurred by the
company for production (purchasing spare parts inventory).
2. With the application of the EOQ method, the potential benefits that will be obtained by the
company compared to the benefits obtained when using conventional methods will be
greater with the reduction of costs incurred for fulfilling spare part supplies.
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CONCLUSION
From the discussion above, it was concluded that based on the results of data processing
using the ABC method, for spare parts 72 types of items (6.29%) group A with a budget use of
79.87%, 120 types of items (10.48%) group B with a budget use of 7.26% and 952 types of
items (83.21%) group C with a budget use of 12.86%. The total cost of spare part inventory
using the EOQ method obtained a total CF inventory cost of Rp. 10,439,670,400, the LFL
method of Rp. 1,870,000.00, and the POQ method of Rp. 85,770,000. So that the one that has
the most optimal total inventory cost is the EOQ method.
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Copyright holders:
Rikhi Nugroho (2023)
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JoSS - Journal of Social Science
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