JOINT REPLENISHMENT MODEL BASED ON FSN CLASSIFICATION TO REDUCE TOTAL INVENTORY COST

Abstract

Replenishment is one of the processes in wholesale and retail businesses to restore the stocks of goods. In PT.X, the current replenishment method places four orders in a month which totaled around 48 orders in a year that incurred large total inventory cost. The current model does not have a theoretical foundation and just based on trial and error. To optimize the replenishment performance of PT.X, a multi-item replenishment model is proposed. The proposed model is based on FSN classification to divide the product into classes and create theoretical and optimized model. The theoretical model allows the number of order to follow the least inventory turnover in each class while optimized model is built by determining optimum number of order in a year based on holding cost and ordering cost data. The number of demand in a year is based on the best forecast result for each SKU. The three model was compared which are current model, FSN model and optimized FSN model. The result shows that by using optimized FSN model reduces the total cost incurred by Rp. 43,004,821.3 or 13.36% in percentage.