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Cost and Quantity Inventory Analysis in the Garment Industry: A Case study Rorim Panday1*, Novita Wahyu S2, Dewi Sri W.P.G3, Cahyadi Husadha4, Tutiek Yoganingsih5 1,2,3,4,5 Universitas Bhayangkara Jakarta Raya 1*indripan@gmail.com ABSTRACT This study aims to evaluate how effective and efficient inventory is in the fashion industry by using the EOQ method. 

This research is a quantitative study of WKB companies. The data used in this study are data for 2017 and 2018 covering the number of purchases and use of raw materials, data on ordering costs, data on holding costs, raw material prices, and Lead time. 

The results of this study indicate that, the level of frequency of purchases made more than 100 times resulting in high ordering costs. By using the EOQ method inventory becomes more effective and efficient, with order frequency being 15 times a year and ordering costs being less. The number of efficient inventories for one order based on EOQ in 2017 is 647 kg and in 2018 is 809 kg. 

For inventory costs using the EOQ method in 2017, the cost will be IDR 594,867.69 per year and in 2018 the cost will be IDR 612,956.26 per year. Costs that can be saved after using EOQ in 2017 are IDR 10,811,247.31 or 94.78%. Costs that can be saved after using EOQ in 2018 will cost IDR 11,066,168.74 or 94.75%. Keywords: Inventory, Economic Order Quantity. 

Back Ground Every large or small production company or trading company needs inventory to minimize the risk of not being able to fulfill the customer's wishes. Material inventory (raw materials, semi-finished materials, finished products) is a major factor in the company in supporting the smooth production process and company operations (Fahmi Sulaiman, 2015) (Mukesh Bhagoria, 2010)(Yusuf, 2003), role to meet production and operating targets, has an important function for the company when there are more demand and demand is irregular/changing (Pujawan & Silver, 2008), late arrival of goods, the existence of defective goods when the goods arrive and or damage during the production process. 

Inventory control and inventory records are very necessary for every company (Gonzalez & González, 2010)(Winston, 2004) (Yousefli & Ghazanfari, 2012), whether the company has been maximized in managing inventory in achieving production targets or poor warehouse management in the procurement of goods. If this happens, then the impact will affect other areas ranging from targets that are not achieved, reduction of employee work hours due to running out of goods to be processed, until the decline in profits of companies that should get more sales ultimately not achieved. 

WKB convection company is one of the micro-business companies engaged in fashion, which is located in the city of Jakarta, established in 2013, which produces clothing and pants, which consists of various types, and various kinds of models. The production process is carried out, the production is sold directly to consumers and based on consumer orders (job order). 

This company is a micro company that is developing its markets in the islands of Java, Sumatra, and Kalimantan by collaborating with business partners. In this article, we will discuss only 30s of cotton fabric production material, as the main material of production, because the products that are ordered are shirts. All this time the goods ordered and stored are in the form of 30s of cotton cloth, then processed into t-shirts. 

Every month WKB uses raw materials for cotton fabric as much as 700-1000 kilograms, and production depends on the number of orders (job order). Ordering and shipping costs are IDR 20,000 per order. WKB orders an average of 900 kilograms in 1 month, which is transported by car for every 1-time order. The lead time for shipping raw materials to the WKB company is 1 day. WKB orders only based on the estimated remaining stock, and the target number to be produced. 

If the stock is running low or there is not enough production demand, then the order is returned to the supplier so that the order frequency becomes irregular and the order cost can be large. Inventory planning that has been done by WKB can be called using the "try and error" method, so it can be said to be less efficient. The frequency of bookings made by WKB is on average 9-12 times per month. This has resulted in a high order fee, which is IDR. 180,000-IDR.240,000 per month, and if totaled, the costs incurred in the amount of IDR. 2,160,000-IDR.2,880,000 per year for ordering 30s of cotton fabric raw materials. 

Based on the above problems, and inventory management evaluation will be carried out using the Economic Order Quantity (EOQ) method so that it can be known: Is the inventory method implemented by the company efficiently and effectively? Is using the EOQ method, inventory will be more effective in terms of implementation and efficiency in terms of cost? How much is an efficient inventory for one order based on EOQ? What is the cost of inventory if using the EOQ method? How much can save after using EOQ? II. 

Literature review Inventories are assets of a company, whether in the form of raw materials, or in the form of being processed, or in the form of finished goods. Excess or lack of inventory will adversely affect the company's financial performance, such as the circulation of money or capital that is not good, the existence of unemployed labor, the possibility of damaged products, disruption of the production process (Yopan Maulana, 2018). 

By carrying out inventory control can reduce costs and simultaneously meet customer needs. With an inventory that is too small, resulting in delays in the production process due to shortages of stock, so that the delay in meeting the demand that impacts the company does not make a profit because of lost selling opportunities (Lin & Chen, 2011) Determining the amount of inventory for merchandise to be resold or raw materials for processing is part of the company's decision (Yuliana, Topowijono, & Sudjana, 2016). 

Economic Order Quantity EOQ is one of the inventory management models, to determine the number of goods / raw materials with minimal costs, or as an optimal number of purchases (Kalaiarasi, 2011). The EOQ method strives to achieve the lowest possible inventory levels, at a low cost. (Yuliana et al., 2016) (Yopan Maulana, 2018) (Saragi & Setyorini, 2014) (Fahmi Sulaiman, 2015). 

The EOQ model as one of the tools that are easily adjusted according to company needs, as a basis for decision making. EOQ is a form of business management by the company especially the production and inventory department to always create a stable operation in various conditions (Fahmi Sulaiman, 2015). According (Heizer, J., & Render, 2014) (Hillier & Lieberman, 2010) (Blumenfeld, 2009) (Onawumi, Oluleye, 2011) (Birbil, Bulbnul, J.B.G.Frenk, n.d.) 

(Tibrewala & Kleinstein, 2000) to determine the amount of economic order, use the following formulas:
Table -1: The formula of Economic Order Quantity EOQ Formula  EOQ or Q?: Optimal order amount (in units) D: Number of demand per year (in units). S: Ordering cost. H: Holding cost per unit. N: Frequency of orders for one year  Frequency Formula    Total Holding cost  TCC: total holding cost TOC: total ordering cost Q: EOQ H: ordering cost D: demand S: holding cost  Total Ordering Cost    Total Cost  TC: Total cost ROP: Reorder point L: Lead time d: rate of need per day SS: safety stock  Reorder Point    Standard deviation  X: The number of goods needed x ¯: Average amount of goods needed n: Amount of data SD: Standard deviation Z: Safety factor  Safety Stock  or    
 In general, the use of EOQ, to reduce costs and minimize the number of orders. 

The use of the EOQ method must meet the following assumptions (Maisuriya & Bhathawala, 2013)(Heizer, J., & Render, 2014)(Hillier & Lieberman, 2010): The amount of material/goods is fixed / unchanged in one period. Material is always available and easy to obtain. Material/goods prices are fixed. Relatively fixed lead time. All orders are sent at the same time. Material items/goods are one type and do not depend on other materials/items. 

Ordering and holding costs are fixed Prior Research Research on EOQ has been carried out by (Mathew, 2013) (Rorim Panday; Hernawati, 2015) (Emmanuel Adjin Okwabi, 2014) (Al-salamah, 2011) (Ameli, Mirzazadeh, & Shirazi, 2008) (Rezaei & Salimi, 2012), which in all research when used the EOQ method in inventory management on each research object, has been proven to reduce total inventory costs and minimize reordering and optimize ordering frequency. III. 

Methodology This research is quantitative. Research data obtained from interviews and secondary data from company reports that include: Data on the number of purchases and uses of raw materials in 2017 and 2018 Ordering cost data in 2017 and 2018 Data on inventory costs in 2017 and 2018 Price of raw materials in 2007 and 2018 Lead time in 207 and 2018. 

In the study of calculations conducted using the EOQ method. The raw material used is 30s cotton fabric. From the results of calculations using EOQ, then a comparison is made between inventory costs based on EOQ and inventory costs that have been carried out for 2017 and 2018. 

Besides comparing the frequency of orders and the number of orders for a one-time order, compared between calculations using EOQ with those already carried out in 2017 and 2018. IV.Result and Analysis Calculation of ordering cost and inventory costs Ordering cost Ordering costs, in the form of transportation cost to spend from the company to the supplier, amounting to IDR. 20,000 per purchase. Inventory cost. 

Inventory cost consist of two kinds: Salary of employees and warehouse employees is only one person because the warehouse is small with few items, where the salary of the warehouse employee who works as a stock check and records is IDR. 8,400,000 / year. Warehouse electricity costs Electricity cost = number of lamps x the amount of wattage used (in kwh) x lights on per day x electricity rates For 2017 Electricity cost /day = 6x25 (0,025kw) x 10 hour x IDR1034= IDR.1.551/day Electricity cost /year =IDR.1.551 x 365 = IDR.566.115/year For 2018 Electricity cost /day = 6x25 (0,025 kw) x 10 hours x IDR.1352 = IDR.2.025 Electricity cost / year = IDR.2.025 x 365 = IDR.739.125/year so it can be calculated for holding costs, as follows: 2017:=IDR. 8.400.000 +IDR. 566.115=IDR.8.966.115 2018:= IDR. 8.400.000 +IDR.739.125 =IDR.9.139.125 Calculation of raw material usage In every shirt sale, counts are used per ball, per ball containing 25 kg of clothing. 1 kg of material is equal to 3.5 

meters, and 3.5 meters is the same as 3 shirts. Thus 1 ball for 75 shirts. WKB convection on average consumes 30 kg of cotton fabric per day. The number of t-shirts is : 2017, 30 kg = 105 meter= 90 shirts /day 2018, 40 kg = 140 meter= 120 shirts /day Purchase and Demand data for cotton fabrics 30 s Below is a table of purchases recorded with monthly data as follows: 

Table 2 Purchases data in 2017 Month Amount of Purchasing Amount of Transaction Ordering cost Amount of Demand   (Kg) (Frequency) (IDR) (Kg)  JANUARY 720 9 180,000 810  FEBRUARY 720 9 180,000 720  MARCH 720 9 180,000 810  APRIL 800 10 200,000 810  MAY 880 11 220,000 810  JUNE 960 12 240,000 810  JULY 720 9 180,000 810  AUGUST 720 9 180,000 810  SEPTEMBER 880 11 220,000 810  OCTOBER 720 9 180,000 810  NOVEMBER 960 12 240,000 810  DECEMBER 960 12 240,000 810  TOTAL 9,760 122 2,440,000 9,630   
Based on the table above, the total purchases in 2017 amounted to 9,760kg, while the total demand was 9,630kg 
Table 3 Purchasing Data in 2018 Month Amount of Purchasing Amount of Transaction Ordering cost Amount of demand   (Kg) (Frequency) (IDR) (Kg)  JANUARY  950 10  200,000 1,040  FEBRUARY 855 9 180,000 960  MARCH 950 10 200,000 1,040  APRIL 855 9 180,000 1,040  MAY 1,045 11 220,000 1,040  JUNE 1,235 13 260,000 1,040  JULY 1,140 12 240,000 1,040  AUGUST 855 9 180,000 1,040  SEPTEMBER 1,045 11 220,000 1,040  OCTOBER 855 9 180,000 1,040  NOVEMBER 1,140 12 240,000 1,040  DECEMBER 1,140 12 240,000 1,040  TOTAL 12,065 127 2,540,000 12,400  

Based on the table above, total purchases in 2018 amounted to 12,065kg, while total demand was 12,400kg Actual inventory cost The actual inventory costs incurred by the company in 2017 and 2018 can be seen in detail at the table below. 

 Table 4 Total inventory costs for 2017 and 2018 2017 2018  Ordering Cost (IDR) 2,440,000 2,540,000  Holding Cost (IDR) 8,966,115 9,139,125  Total Inventory cost (IDR) 11,406,115 11,679,125   
Total inventory costs in 2017 amounted to IDR.11,406,115. Total inventory costs in 2018 amounted to IDR.11,679,125. 
 The following are the results of the EOQ calculations for 2017 and 2018. Table. 

5 Calculation of EOQ in 2017 and 2018 The raw material for 30s cotton fabric 2017 2018  Demand (kg) 9.630 12400  Ordering cost (IDR) 20.000 20000  Holding cost (IDR) 918.66 737.03  EOQ(kg) 647.54 809.19  Frequency 14.87~ 15 15.32~15  Ordering cost (TOC)/ per-year (IDR) 297,433.85 306,478.13  Holding cost (TCC) /Year (IDR) 297,433.85 306,478.13  Total inventory cost (TC) (IDR) 594,867.69 612,956.26  Standard deviation 216 279  Service level (95%) 1.644 1.644  Safety stock (Kg) 357 460  Lead time (day) 1 1  Demand average EOQ /month (kg) 54 67,43  Re-order time (kg) 411 528   
The holding costs for 2017 IDR 918.66 are obtained from electricity costs for 2017 amounting to IDR. 566,115 plus employee salary costs during 2017 IDR.8,400,000 then divided by 9,760 kg warehouse capacity. Holding costs in 2018 IDR.737.03 obtained from electricity costs during 2018 of IDR. 

739,125 plus employee salary costs during 2018 IDR.8,400,000 then divided by 12400kg warehouse capacity. The total inventory cost for 2017, for one order, using the EOQ formula is IDR.594,867 obtained from the sum of the order costs IDR.297.433 and holding costs IDR.297.433. 2017 reorder point (ROP) is 411kg. 

The total inventory cost of 2018, for one order, using the EOQ formula, the cost to IDR 612,956 is obtained from the sum of the ordering costs of IDR. 306,478.13 and a holding fee of IDR 306,478.13. The reorder point (ROP) of 2018, obtained 528kg. 

Table 6 Difference in costs before and after the calculation of EOQ in 2017 TC actual TC EOQ TC difference Percentage  11,406,115 594,867.69 10,811,247.31 94.78%   
The total cost before the EOQ calculation is IDR 11,406,115 and after the calculation using the EOQ, the fee will be IDR. 594,867.69, so that by using the EOQ method the company can save costs by IDR. 10,811,247.31 with a percentage reduction in costs of 94.78%. 

 Table 7 Difference in costs before and after the 2018 EOQ calculation TC actual TC EOQ TC difference Percentage  11,679,125 612,956.26 11,066,168.74 94.75%   
The total cost before the EOQ calculation is IDR 11,679,125 and after the calculation using the EOQ, the cost will be IDR. 612,956.26, so that by using the EOQ method the company can save costs by IDR. 11,066,168.74 with a percentage reduction in costs of 94.75%. 

With the results of the analysis above, the EOQ method can be proposed for use in other raw materials and can also be used in other similar garment businesses, both large and small. V. Conclusions Based on the results of research that has been conducted on the raw material inventory of WKB convection companies, and focusing on ordering 30 s cotton fabrics, the following conclusions can be obtained: Orders made by the company are inefficient and ineffective because the purchase frequency is more than 100 times which results in large ordering costs. 

By using the EOQ method inventory can be said to be more efficient and effective, with ordering frequency being 15 times a year automatically ordering costs being less. The amount of efficient inventories for one order based on EOQ in 2017 is 647 kg and in 2018 is 809 kg. The cost of inventory using the EOQ Method in 2017 is IDR.594,867 per year and in 2018 is IDR612,956 per year. 

Costs that can be saved if using EOQ in 2017 is IDR 10,811,247 or as much as 94.78%. Costs that can be saved if using EOQ in 2018 is IDR 11,066,169 or 94.75%. VI. Recommendation Because it has been proven that using the EOQ method can increase the effectiveness and efficiency in the procurement of goods, it is better for the WKB convection to use the EOQ method for the following year. References Al-salamah, M. (2011). 

Economic order quantity with imperfect quality, destructive testing acceptance sampling , and inspection errors. Advances in Management & Applied Economics, 1(2), 59–75. Ameli, M., Mirzazadeh, A., & Shirazi, M. A. (2008). Entropic Economic Order Quantity Model for Items with Imperfect Quality Considering Constant Rate of Deterioration under Fuzzy Inflationary Conditions. 

Birbil, Bulbnul, J.B.G.Frenk, M. (n.d.). On The Economic Order Quantity Model With Transportation Costs. Blumenfeld, D. E. (2009). Operations Research Calculations Handbook (Second Edi). New York: Boca Raton London New York CRC Press. Emmanuel Adjin Okwabi. (2014). Application of Economic Order Quantity With Quantity Discount Model. A Case Studyof West African Examination Council. 

College of Science / Institute of Distance Learning. Fahmi Sulaiman, N. (2015). Pengendalian Persediaan Bahan Baku Dengan Menggunakan Metode EOQ Pada UD. Adi Mabel. Jurnal Teknovasi, 02(1), 1–11. Gonzalez, J. L., & González, D. (2010). Analysis of an Economic Order Quantity and Reorder Point Inventory Control Model for Company XYZ. California Polytechnic State University San Luis Obispo Graded. 

Heizer, J., & Render, B. (2014). Operations Management (7th editio). New Jersey: Pearson Education. Hillier, F. S., & Lieberman, G. J. (2010). Introduction to Operation Research (Ninth Edit). New York: McGraw-Hill. Kalaiarasi, R. (2011). Optimization of Economic Order Quantity Model on the Boundaries of the Fill Rate, 6(63), 3101–3110. Lin, T., & Chen, M. (2011). 

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