An improvement of supplier-manufacture inventory system integrated with stochastic periodic review modeling for SMEs in Indonesia

Economic Annals-XXI: Volume 198, Issue (7-8), Pages: 24-33

Citation information:
Dewa, P. K., Patanduk, Y., & Jumintono (2022). An improvement of supplier-manufacture inventory system integrated with stochastic periodic review modeling for SMEs in Indonesia. Economic Annals-XXI, 198(7-8), 24-33. doi:

Parama Kartika Dewa
MA (Economics),
Department of Industrial Engineering,
Atma Jaya University (Universitas Atma Jaya Yogyakarta)
Yogyakarta, 12930, Indonesia (Corresponding author)

Yuharningsih Patanduk
MA (Economics),
Department of Industrial Engineering,
Atma Jaya University (Universitas Atma Jaya Yogyakarta)
Yogyakarta, 12930, Indonesia

MA (Economics),
Faculty of Technical and Vocational Education,
University Tun Hussein Onn Malaysia
Johor, 86400, Malaysia

An improvement of supplier-manufacture inventory system integrated with stochastic periodic review modeling for SMEs in Indonesia

Abstract. SME LCR is one of the handicrafts SME in Yogyakarta, Indonesia. This SME produces several handicraft products such as storage baskets with various variants, and furniture. The process of ordering raw materials for SMEs is carried out when there is a demand for incoming products with the order quantity based on the raw material needs in meeting product demand. This study intends to provide recommendations for improving raw material governance to overcome demand fluctuations during the lead time and reduce the total cost of supply chain inventory by implementing an integrated inventory system. To meet the study aim, the EOQ Probabilistic P system (Period Review Method) is utilized. The P inventory model is distinguished into two models namely model P with backorder and model P with lost sales. Next, the Purchase Cost (Ob) and Procurement Costs are applied to the P model. The research method comprises through 3 stages: the pre-field stage, field stage, and the advanced stage (laboratory analysis, data analysis, and reporting). Given the results regarding banana and mendong raw materials supply, it can be observed that for banana raw materials, the reorder time interval that can generate the minimum total inventory cost for banana raw materials is 0.1470 years or 53 days with a total cost of IDR 263,721,081.72. Moreover, it is seen that the suggested model generates the minimum total cost of supply chain inventory compared to the SME policy and the individual model, which justifies the economic feasibility of this model.

Keywords: Inventory System; Supplier; Manufacture; Sales; Supply Chain; Craft Business; Handicraft; Banana Raw Materials; Mendong Raw Materials

JEL Classіfіcatіon: O18; O12; O14

Acknowledgements and Funding: The authors would like to thank Universitas Atma Jaya Yogyakarta and the parties involved to complete this research.

Contribution: The authors contributed equally to this work.

Data Availability Statement: All data will be available upon request.



  1. Atan, Z., Ahmadi, T., Stegehuis, C., de Kok, T., & Adan, I. (2017). Assemble-to-order systems: A review. European Journal of Operational Research, 261(3), 866-879.
  2. Barrett, J. W., & Boyaval, S. (2018). Finite element approximation of the FENE-P model. IMA Journal of Numerical Analysis, 38(4), 1599-1660.
  3. Chiu, Y. P., Chiang, K.-W., Chiu, S. W., & Song, M.-S. (2016). Simultaneous determination of production and shipment decisions for a multi-product inventory system with a rework process. Advances in Production Engineering & Management, 11(2), 141-151.
  4. Chowdhury, P., & Shumon, R. (2020). Minimizing the gap between expectation and ability: Strategies for smes to implement social sustainability practices. Sustainability, 12(16), 6408.
  5. de Sousa Jabbour, A. B. L., Ndubisi, N. O., & Seles, B. M. R. P. (2020). Sustainable development in Asian manufacturing SMEs: Progress and directions. International Journal of Production Economics, 225, 107567.
  6. Harwiki, W., & Malet, C. (2020). Quintuple helix and innovation on performance of SMEs within ability of SMEs as a mediator variable: A comparative study of creative industry in Indonesia and Spain. Management Science Letters, 10(6), 1389-1400.
  7. Juergensen, J., Guimón, J., & Narula, R. (2020). European SMEs amidst the COVID-19 crisis: assessing impact and policy responses. Journal of Industrial and Business Economics, 47, 499-510.
  8. Keerthana, M., Sivakumar, B., & Manuel, P. (2020). An inventory system with postponed and renewal demands. International Journal of Systems Science: Operations & Logistics, 9(2), 180-198.
  9. Kouki, Ch., Babai, M. Z., Jemai, Z., & Minner, S. (2016). A coordinated multi-item inventory system for perishables with random lifetime. International Journal of Production Economics, 181(A), 226-237.
  10. Li, B., Ji, Q., & Arreola-Risa, A. (2020). Optimizing a production-inventory system under a cost target. Computers & Operations Research, 123, 105015.
  11. Mittal, S., Khan, M. A., Purohit, J. K., Menon, K., Romero, D., & Wuest, T. (2020). A smart manufacturing adoption framework for SMEs. International Journal of Production Research, 58(5), 1555-1573.
  12. Mura, M., Longo, M., & Zanni, S. (2020). Circular economy in Italian SMEs: A multi-method study. Journal of Cleaner Production, 245, 118821.
  13. Pazhani, S., Ventura, J. A., & Mendoza, A. (2016). A serial inventory system with supplier selection and order quantity allocation considering transportation costs. Applied Mathematical Modelling, 40(1), 612-634.
  14. Pooya, A., & Pakdaman, M. (2018). A delayed optimal control model for multi-stage production-inventory system with production lead times. The International Journal of Advanced Manufacturing Technology, 94, 751-761.
  15. Rosasco, L., Villa, S., & Vũ, B.-C. (2014). Convergence of stochastic proximal gradient algorithm. Applied Mathematics & Optimization, 82, 891-917.
  16. Sarkar, S., Tiwari, S., Wee, H.-M., & Giri, B. C. (2020). Channel coordination with price discount mechanism under price-sensitive market demand. International Transactions in Operational Research, 27(5), 2509-2533.
  17. Shashi, Centobelli, P., Cerchione, R., & Singh, R. (2019). The impact of leanness and innovativeness on environmental and financial performance: Insights from Indian SMEs. International Journal of Production Economics, 212, 111-124.
  18. Sumadi, J., & Ardiani, F. (2020). Supply chain brown sugar agroindustry in Banyuwangi district: Analysis study with a dynamic system approach. International Journal of Supply Chain Management, 9(1), 626-632.
  19. Tsilika, Th., Kakouris, A., Apostolopoulos, N., & Dermatis, Z. (2020). Entrepreneurial bricolage in the aftermath of a shock. Insights from Greek SMEs. Journal of Small Business & Entrepreneurship, 32(6), 635-652.
  20. Xu, G., Feng, J., Chen, F., Wang, H., & Wang, Z. (2019). Simulation-based optimization of control policy on multi-echelon inventory system for fresh agricultural products. International Journal of Agricultural and Biological Engineering, 12(2), 184-194.

Received 10.04.2022
Received in revised form 14.05.2022
Accepted 26.05.2022
Available online 20.08.2022