The Calculation of Extra Carrying Cost (ECC) and Stock out Cost (SOC)

to Determine the Raw Material’s Optimal Arrival Lead Time

Haryadi Sarjono

Management Department, School of Business Management (SoBM)

Bina Nusantara University, Jl. KH. Syahdan No. 9

Kemanggisan, Jakarta Barat, Indonesia, 11480

Copyright © 2014 Haryadi Sarjono. This is an open access article distributed under the Creative Commons

Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the

original work is properly cited.

(IM01)

 

Abstract

The purpose of this research is to determine how long is the arrival time of raw material needed by the company based on Extra Carrying Cost (ECC) and Stock Out Cost (SOC) calculation.

The result of the calculation will be compared with company strategy and with theoretical calculation using Economic Order Quantity (EOQ).

The research done in Rajalu Ltd. located in Surabaya, an aluminium smelter company, which smelting the recycle from all types of aluminium scraps or trashes.

Research methodology in this research is qualitative research by observing the raw material requirements, ordering cost, holding cost, and working days within a year.

The result of this research showed that between the comparison of the calculation based on company strategy and Economic Order Quantity (EOQ), the optimal lead time calculation was based on Economic Order Quantity (EOQ), which is 7 days with the lowest total cost IDR 22,809,436,-

 

Keyword:

EOQ, inventory, lead time, order frequency, extra carrying cost, stock out cost.