APPLICATION OF ABC ANALYSIS AND ECONOMICAL ORDER QUANTITY FOR INVENTORY MANAGEMENT OF CONSTRUCTION MATERIALS AND EQUIPMENT SUPPLIER: A CASE STUDY SOMNUEK INTERTRADE CO., LTD.

Abstract

This research aimed to analyze the ABC of inventory and the economic order quantity (EOQ), and to compare inventory management costs between the current model and the EOQ model of construction materials and equipment supplier: a case study of Somnuek Intertrade Co., Ltd. The analysis of inventory data for the past 1 year (May 2021-May 2022) using ABC analysis to group the inventory of 250 items showed three different groups. In inventory Group A, there were 14 items with a value of 11,043,728 baht or 70.02%. In Group B, there were 83 items, valued at 3,940,501 baht or 24.98%. In Group C, there were 153 items with a value of 788,593 baht or 5.00 percent. Group A inventory had a variability coefficient (VC) of less than 0.25, in which all items were suitable for an EOQ model. It was found that the number of economical orders for Group A inventory ranged from 5-11 times a year, and there was a reorder point (ROP) when the inventory was reduced to 3-18 units in the warehouse. A comparison of the current model with the EOQ model showed that the EOQ model could reduce the cost of ordering by 197,386 baht or 58.03 percent, and the cost of storage by 5,213 baht or 3.39 percent. In total, the cost of inventory was reduced by 202,581 baht or 41.02 percent per year.