INVENTORY COST REDUCTION OF FLAT PLASTIC GLASS LID CODE 85: A CASE STUDY OF A PLASTIC PACKAGING FACTORY

Abstract

     The purposes of the current research were to 1) forecast the product demand, 2) explore an economical order quantity and 3) reduce the inventory cost of flat plastic glass lid code 85. The researchers collected data from a factory manager, a warehouse manager, and a sales supervisor by using in-depth interview form for compiling the primary data. In addition, the secondary data was collected from the relevant organizations using the time series forecasting methods to forecast product demand. Additionally, the methods of error forecasting Mean Absolute Percentage Error (MAPE), Economic Order Quantity (EOQ) method and Reorder Point (ROP) method were used to find the economical-order quantities to control inventory costs and reduce the number of deteriorated products.
     The results shown that using Exponential Smoothing (ES) method, the forecast product demand had the lowest MAPE value of 3.69 percent. Moreover, EOQ could lead to the optimum order quantity of flat plastic glass lids, code 85, for 2,192 boxes per lot with the ROP equal to 233 boxes per lot with the order cycle of 17 days. Thus, the total cost would be 1,644 baht per year. Comparing to, the original cost of 38,790 baht per year, the forecast values could reduce the total cost by 37,146 baht per year and could reduce the cost of deteriorated products by 4,998,993 baht per year. Therefore, the inventory cost could be reduced by 5,036,139 baht per year.