MINIMIZING FORECASTING ERROR TO REDUCE AIR SHIPMENT COST THROUGH LAST PERIOD DEMAND METHOD AND RE-CALCULATING TOTAL INVENTORY COST BY USING EOQ

Abstract

PT. X is a multinational company that produces automotive component parts. Not only support the local market but PT. X also support the global market. To meet the customer requirement PT. X consider their forecast number for the production activity and ordering materials. The materials are mostly imported and the purchased materials cannot be returned once the company buy it. The existing forecast at PT. X is not goodenough, the stockout and overstock condition in the current forecast often happened. Every stockout condition the company should catch-up the outstanding order by using air shipment mode. This research using the data of actual demand and current forecast from April 2017-September 2018 to calculate the new forecast using time series forecasting. With several consideration to determine the new forecast method, the best method to minimize the stockout and overstock in the company is Last Period Demand method. The number of order frequency in one-year period is decreased, for regulator and rotor it is decreased from 12 to 7 and for stator it is decreased from 12 to 8. And also, the cost for air shipment is decreased from IDR 293,351,429,422 to IDR 292,706,074,190 or equals to IDR 645,355,232 cost reduction.