Economic Order Quantity Model for Minimizing Total Inventory Cost at PT PQR in Indonesia

The purpose of this research is to see whether an Economic Order Quantity model can be used to reduce cost of inventory significantly in PT PQR, manufacturer of spring and sponge mattresses in Pekanbaru, Indonesia. The research was conducted on three main materials required in producing spring and sponge mattresses. Using Economic Order Quantity (EOQ) model to analyze historical demand on main materials, it is proven that with EOQ model the company can save by more than 45% from procuring and inventory costs of those materials. The research continues to forecast the sales demand to get the annual requirement of materials needed in 2014 and calculate the EOQ model again. The results show that, comparing with traditional practice done by company, EOQ model can reduce costs up to 118 million rupiah per year.