Reducing Pertamax Inventory Costs at a Gas Station by Eliminating Shortage Using Probabilistic Economic Order Quantity

DOI

10.2991/978-94-6463-284-2_50How to use a DOI?

Keywords

Pertamax Inventory Costs; Eliminating Shortage; Probabilistic Economic Order Quantity

Abstract

Gas Station Z is a retail entity selling various fuel products such as gasoline (pertalite, pertamax) and diesel, the demands of which were fluctuating. Such a fluctuating demand often contributed to a condition in which customers failed to get the product at the right time. In addition, the gas station was not prepared with a sufficient safety stock for the fluctuating demand, so the high risk of shortage could not be avoided. The objective of the research was focused on minimizing the costs of product inventory and to avoid the shortage risk by identifying the quantity of the optimum order and setting the right time for re-ordering the product. To achieve the objective, a control model should be utilized. A model to control the inventory, commonly referred to as the Probabilistic Economic Order Quantity was then applied to calculate the quantity of the optimal order. It is very much suitable for use in fluctuating demand conditions and it needs the safety stock calculation to prevent shortage. The data related to demands, lead time, cost of purchase, cost of making order, handling cost, and costs due to shortage were collected using related documents and interviews with the personnel of the gas station. A spreadsheet and Minitab were then utilized to process the data for forecasting the right amount of product order. The amount of products for safety reserve and the time for making a reorder were also calculated. The overall cost of inventory was calculated and compared with the gas station’s overall cost of inventory to find out if the model was successful to create the reduction in cost of inventory. The results indicated that the model made it possible for the gas station to lower the cost of inventory to 83.88%.

Copyright

© 2023 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial 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.

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TY  - CONF
AU  - Sono
AU  - Andian Ari Istiningrum
AU  - Dwi Nurma Heitasari
PY  - 2023
DA  - 2023/11/09
TI  - Reducing Pertamax Inventory Costs at a Gas Station by Eliminating Shortage Using Probabilistic Economic Order Quantity
BT  - Proceedings of the 4th Borobudur International Symposium on Science and Technology 2022 (BIS-STE 2022)
PB  - Atlantis Press
SP  - 446
EP  - 452
SN  - 2352-5401
UR  - https://doi.org/10.2991/978-94-6463-284-2_50
DO  - 10.2991/978-94-6463-284-2_50
ID  - 2023
ER  -