A Study of Total Inventory Cost Reduction through Economic Order Quantity (EOQ) Calculation A Case Study of Ban Sa Si Liam Community Store, Chaiyaphum Province
Keywords:
Economic Order Quantity, EOQ, ABC Analysis, Total Inventory CostAbstract
This research aimed to: 1) classify and prioritize inventory items of Ban Sa Si Liam Community Store, Chaiyaphum Province, using ABC Analysis; 2) analyze the optimal order quantity calculation to reduce total inventory costs; and 3) reduce the annual total inventory cost by comparing the total inventory costs before and after the analysis with the existing ordering method. This study used purchasing data from the case study store collected between January and December 2023, covering a 12-month period. The research procedures consisted of collecting product item data, classifying and prioritizing inventory items using ABC Analysis, selecting Group A items to calculate the optimal order quantity using the Economic Order Quantity (EOQ) method, and comparing total inventory costs before and after the analysis.
The results revealed that ABC Analysis classified 137 items as Group A products, which were considered important for inventory control and purchasing planning. When Group A items were analyzed using the EOQ method, the total optimal order quantity was 21,891 units, whereas the order quantity before the analysis was 2,724 units. This resulted in an increase of 19,167 units in the optimal order quantity. In addition, the case study store had sufficient storage space; therefore, the adjusted order quantity did not create storage limitations.
The comparison of total inventory costs showed that, before the analysis, the annual total inventory cost of the case study store was 3,060,102 baht. After applying the EOQ method, the annual total inventory cost decreased to 791,881 baht. As a result, the total inventory cost was reduced by 2,268,221 baht per year, equivalent to a 74.12% reduction compared with the total inventory cost before the analysis. The findings indicate that applying ABC Analysis together with EOQ can help determine more appropriate order quantities, reduce total inventory costs, and improve inventory management efficiency for community stores.
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