Increase Efficiency of Inventory Management By EOQ Model and Silver-Meal: Case Study of Automotive Industry

Abstract

The objectives of this research are 1) To study the suitable purchase method of the studied company. 2) To analyze the proper amount of orders for the products in order to reduce the cost of ordering products. 3) To compare the inventory costs before and after applying EOQ Model and Silver-Meal techniques.

In the research process, the researchers have studied 200 items of industrial equipment and auto parts of the studied company (Unable to disclose company name). The tools used for analysis are the EOQ Model and Silver-Meal techniques. The researchers have used the ABC Classification Analysis theory to categorize the product group according to the priority of each item using data from 1 January 2021 to 31 December 2021. According to the theory, there are 3 groups of inventories, namely Group A: 54 items, Group B: 65 items, and Group C: 81 items. After that, the researchers have taken the inventory of group A to calculate the Variability of Coefficient (Variability Coefficient: VC) and have found that there are 53 items that have Variability of Coefficient < 0.20 which show that the product demand pattern is consistently stable. Therefore, they are suitable for EOQ Model technique. However, there is one item from the inventory that has Variability of Coefficient > 0.20 which shows that the product demand pattern is unstable. Therefore, it is suitable for Silver-Meal technique.

By applying the EOQ Model technique, we could reduce the total cost of inventory to 919,190.50 baht and by applying the Silver-Meal technique, we could reduce the total cost of inventory to 6,851.50 baht. If we apply both techniques, we could reduce the inventory cost up to 925,562.88 baht equivalent to 52.32 percent of the current cost.