Predict Inventory of Raw Material at ABC (Pvt) Ltd

Abstract

ABC (Pvt) Ltd is one of the largest entity in Sri Lanka which exports tires, tracks and wheels. It is popular among its customers as a company delivering high quality products at competitive prices. To achieve the production targets, the raw materials should be available on time. The procurement department order raw materials from foreign and local suppliers and store them according to the forecast done by using the System Applications Products (SAP) system which is one of the largest enterprise resource planning softwares. The accuracy of the forecast done by this method is 66 percent which leads to a high excess in the raw materials. In order to reduce this excess, it is required to identify a forecasting method which gives high accuracy. The Box-Jenkins and the Holt-Winters methodologies were suggested to find an accurate forecasting method. The main raw material used for tire production is Carbon Black 2375. The monthly data was collected from January ( 2012) to March (2019). The ARIMA (0, 1, 1) model is found as the best model in Box-Jenkins methodology and it is compared with the existing forecast and the Holt -Winters model and it shows the lowest mean percentage error. Therefore, ARIMA (0, 1, 1) was identified as the best model with 79% of accuracy to forecast the inventory of Carbon Black 2375.