Probabilistic Economic Order Quantity (EOQ) for the Flour Inventory Control (Case Study in Company Z)

Inventory control is one of the critical activities in the industries in order to minimize the total inventory cost while fulfilling customer demand on time. Company Z is one of the companies which produce bread in Indonesia. The main problem in the company is the shortage of material due to no systematic inventory control system. To solve this problem, probabilistic economic order quantity (EOQ) was applied as a solution to eliminating the stock shortage in the storage. The objective of this paper was to determine the optimum order quantity for each type of flour in minimizing the total inventory cost. The result showed that by using the probabilistic EOQ, the optimum order quantity, reorder point, and the safety stock varied for five types of flour. This system resulted in the reduction of the ordering cost and the stock shortage cost up to 15.62% and 99.82% respectively. This model provided the saving for the total inventory cost up to 0.14% compared to the company's inventory system.