ANALYSIS OF OPTIMAL RAW MATERIAL INVENTORY ORDER QUANTITY: A CASE STUDY OF A WATCH MANUFACTURING

Abstract

This research aims to select an appropriate forecasting technique for customer order demand and to analyze the optimal raw material ordering quantity for a watch manufacturing factory. Three forecasting methods were applied: 1) Moving Average Method (2-6 months), 2) Exponential Smoothing, and 3) Winters’ Multiplicative Method. The forecasted demand was used to determine the raw material ordering quantity that aligns with customer requirements. Results indicate that the 5-period Moving Average Method is the most suitable technique, producing the lowest forecasting error. Products were selected using ABC Analysis, and the product with the highest demand, item F01, was chosen. Its main raw material, RM01, which has the highest consumption and longest lead time, was analyzed using the Fixed Order Period (FOP) system. The analysis revealed a Target Stock Level of 7,406.55 kg and a Safety Stock of 411.87 kg. Comparing the total inventory management cost between the current and proposed methods, the new approach can reduce costs by 77,859.93 Baht per year, equivalent to a 12.08% reduction.