Advances in Management and Applied Economics

Inventory Replenishment and Logistics Cost Efficiency in Agro-Industrial Company: A Comparative Analysis of POQ and Silver-Meal Algorithm

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• Abstract

   

  Herbicides and pesticides are routine, semi-perishable inputs in oil palm plantations, so purchasing policy affects storage cost, working capital, and expiry risk. This study evaluates inventory replenishment and logistics costs at PT XYZ, an Indonesian oil palm company, comparing existing policy with the Periodic Order Quantity (POQ) and Silver-Meal Algorithm (SMA) under time-varying demand. ABC classification identified four category A items, Marshall, Glyphosate 480, Paraquat Primax 280 SL, and Racumin, accounting for 79% of purchase value. Ordering costs (telecommunication, transportation, handling) and holding costs (energy, labor, maintenance, by slot) were estimated from company records; each policy was evaluated on realized 2025 monthly demand. Relative to existing policy, POQ cut total cost 27-56% per item (45,6% overall), SMA 45-64% (57,9%). SMA raised ordering cost 60,4% through more frequent orders but cut holding cost 93,4%; POQ left ordering cost nearly unchanged, cutting holding cost 58,8%. SMA's advantage over POQ ranged 4,8 to 20 percentage points, disappearing for Paraquat Primax 280 SL if cost per order is 35% higher than estimated. Because the evaluation assumes perfect demand knowledge and excludes capital and expiry costs, savings are an upper bound. SMA is recommended, with POQ as a simpler alternative when order frequency is constrained.

   

  JEL classification numbers: M11, D24, Q12, C61.

  Keywords: Ordering cost, Holding cost, Time-varying demand, Periodic Order Quantity (POQ), Silver-Meal Algorithm (SMA), Herbicides, Pesticides.