Management of Raw Material Needs and Safety Stock Based on Data Forecast and System Dynamics Modeling

Abstract

For companies engaged in the manufacturing industry, procurement and inventory control are significant and play an important role in productivity within the company. The case study that occurred at XYZ Ltd. was the frequent occurrence of shortage of raw material stock in PVC resin which causes the production process of ceiling panels to stop. To eliminate this shortage of raw materials, material requirement planning and safety stock calculation need to be conducted. Therefore, the methodology of this research is by utilizing forecasting verification to find the best forecast method according to the demand data plot and the forecast result, and combining them with safety stock calculation and a variation of material requirement planning methods to determine the best material requirement planning method to obtain the optimal control, then a model could be created using a system dynamics approach to verify the improvements on the increased productivity and the income before tax by including the material requirement planning and safety stock calculations on the initial system. The result of this research is by using a variety of forecasting methods, the best method to forecast future demands is the additive decomposition method, by using the safety stock formula, the safety stock is obtained which is 2649.136 Kg of polyvinyl chloride resin, by using a variety of material requirement planning calculations methods, the best method is silver meal and least unit cost methods because these methods obtained the same result for a total cost of USD 164.07, and lastly, by using the suggested improvement on the system, the company will have an increase in the level of productivity by 67.906 (40%) and an increase in average income before tax by USD 32.480,52 (28 %).