The Application of Safety Stock in Controlling Packing Entry (PE) Inventory

Abstract

Inventory management of Packing Entry (PE) at PT Gemah Ripah Lohjinawi Industri is challenged by demand variability and uncertainty in procurement lead time, which may result in stockouts that disrupt production activities or overstock conditions that increase inventory holding costs. Therefore, an effective and systematic inventory control approach is required to mitigate these risks. This study aims to determine the optimal level of safety stock and the appropriate reorder point (ROP) by employing a simulation-based approach using historical data. A quantitative method with a probabilistic model is applied, incorporating a 95% service level (Z = 1.645) to account for demand and lead time variability. The empirical data indicate an average daily demand of 75 units with a standard deviation of 21.79 units, and an average lead time of 3.67 days with a standard deviation of 0.75 days. The findings reveal that the optimal safety stock level is 115 units, while the reorder point is established at 390 units. These results demonstrate that the implementation of a probabilistic inventory control model enables a transition from a reactive to a proactive decision-making approach, thereby enhancing operational reliability and systematically reducing the likelihood of stockouts and overstock conditions.