Inventory management by minimizing bullwhip effect using vendor managed inventory method

Abstract

Inventory management is an important aspect in a business. Well managed inventory system will reduce the inventory cost. One factor that influence the decrease of inventory system performance is bullwhip effect. Bullwhip effect is a distortion of information and poor coordination at every level in the supply chain network. This study aims to reduce inventory cost by minimizing bullwhip effect using Vendor Managed Inventory Method. Inventory policy and inventory cost are calculated using Economic Order Quantity Method. Case study has been done at PT. Inti Vulkatama, a tire retreading manufacturing company located in Padang City, West Sumatra, Indonesia. In the tire retreading process, the main raw materials are in the form of camel back tread rubber (hot process) and precured tread rubber (cold process). The existing supply chain network at PT Inti Vulkatama includes supplier - manufacturer - retailer - user. There are eight retailers who become consumers in this company. The problem that is often faced by this company is the inventory management of raw tread rubber (precured tread rubber) in the cold process, namely the supply of raw material for tire treads in the cold process is not available (out of stock). It indicates that the Bullwhip Effect happens in the supply chain network. Using data in the period January 2021 - August 2021, the results of the research show the more accurate demand information and inventory policies that minimize inventory costs at PT. Inti Vulkatama.