Improvement of the Coal Inventory Management System Using the Economic Order Quantity Method

A Case Study of PT Petrokimia Gresik

DOI

10.2991/978-94-6463-008-4_130How to use a DOI?

Keywords

Inventory; Coal; Economic Order Quantity

Abstract

In a business, inventory is frequently known as a source of contention. PT Petrokimia Gresik (PKG) is PT Pupuk Indonesia’s (Persero) subsidiary, an agro-industry company that the government always requires to meet national fertilizer supply to ensure food security and perform more efficient and cost-effective cost savings, through more efficient and economical use of facilities and infrastructure, including inventory management. At PKG, one of the most crucial inventory management issues is coal inventories, which have lately experienced a price increase of more than 200%. The trend of global coal prices has climbed to 2 times higher since 2021. The price of coal in Indonesia has risen from Rp. 500,000 per ton to Rp. 1,500,000 per ton, not to mention the world’s current state of war, the Russian invasion of Ukraine, which has increased fuel prices worldwide, including coal, which is in high demand by utility companies in Indonesia. While PT Petrokimia Gresik must continue to produce despite rising coal prices, inventory must be managed to achieve the lowest possible cost. Adopting the Economic Order Quantity (EOQ) method to improve the coal inventory management system needs to be considered. EOQ is an old theory, but we believe it is still relevant today. We will compare the company’s current coal inventory management to the EOQ method regarding efficiency, efficacy, and expenses associated with reordering, storage, and other factors. The study concludes that PKG’s coal supply system is relatively good, although there is still potential for improvement. The inventory management policies that are in place still refer to the prior period’s experience. Several causes contribute to coal overstock and understock issues, including a coal supply planning system that is not yet optimal. The proposed future improvement is to employ the Economic Order Quantity (EOQ) approach, which can save Rp 684,000,000 per year (average) in inventory expenditures. This demonstrates that the EOQ approach can save 6.7% per year in costs.

Copyright

© 2023 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Download article (PDF)

TY  - CONF
AU  - Stefanus Ardian Satwika
AU  - Nida Tsuroya
PY  - 2022
DA  - 2022/12/05
TI  - Improvement of the Coal Inventory Management System Using the Economic Order Quantity Method
BT  - Proceedings of the 19th International Symposium on Management (INSYMA 2022)
PB  - Atlantis Press
SP  - 1046
EP  - 1055
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-008-4_130
DO  - 10.2991/978-94-6463-008-4_130
ID  - Satwika2022
ER  -