Vannamei (Litopenaeus vannamei) Frozen Shrimp Raw Material Inventory Management With Supply Chain Management Approach
Iid Mufaidah1*, Tartila Fitri1, Sony Swasono2, Yuli Wibowo2
1Department of Agribusiness, Institute of Technology and Business Muhammadiyah Banyuwangi, Street.
Diponegoro No.60 Genteng Banyuwangi East Java, Indonesia 68465
2Faculty of Agricultural Technology, University of Jember, East Java, Indonesia Received: 26 August 2022; Revised: 31 January 2023; Accepted: 27 February 2023
ABSTRACT
Raw material inventory is one of the most expensive assets of the company, especially at national private companies in Banyuwangi is developing a frozen vannamei shrimp agro-industry with PND commercial products (Peeled and Devained). Companies often experience problems with losing sales profits if export demand tends to increase, because companies have not maximized their inventory management. So by using a three-level supply chain management approach, namely the level of finished products, the level of processing and the level of raw materials, it is important to ensure the availability of finished products at any time. Through this approach, the average amount of raw material needed for production of each PND product is PND 26/30 of 12,333.33 kg/month, 31/40 of 75,416.67 kg/month, 41/50. 28,750 kg/month, 51/60 42,250 kg/month, 61/70 21,083.33 kg/month, and 71/90 11,083.33 kg/month. so that the company's service level for PND finished products is above 100%, which is an average of 111,39%.
Keywords: inventory; raw materials; vannamei; PND; supply chain management How to cite:
Mufaidah, I., Fitri, T., Swasono, S., & Wibowo, Y. (2023). Vannamei ( Litopenaeus vannamei ) Frozen Shrimp Raw Material Inventory Management With Supply Chain Management Approach.
HABITAT, 34(1), 50–59. https://doi.org/10.21776/ub.habitat.2023.034.1.5
1. Introduction
Shrimp is one of the aquaculture commodities that is excellent in the domestic and global markets, 77% of which are produced by Asian countries, including Indonesia (Putrisila et al., 2021). It has even become an export commodity to several countries such as the United States, the European Union, Japan and several countries in the Asian region. Frozen shrimp, processed shrimp and fresh shrimp are export shrimp commodities that provide foreign exchange for the country (Remiasa et al., 2018).
There are 3 types of shrimp that have a wide market share, namely giant shrimp, tiger shrimp and vannamei shrimp. In Indonesia vannamei shrimp is the most popular shrimp among farmers, due to competitive prices, the demand for vannamei shrimp commodities in the market is relatively stable so that almost all farmers in Indonesia must cultivate vannamei
shrimp. Shrimp cultivation provides several benefits including increasing fish production to meet food and nutrition needs, meeting domestic and foreign market needs, increasing employment opportunities, and increasing income and people's welfare (Andi Tenri Lawa Putri L. Haris, 2019;
Sa'adah et al., 2019).
Vannamei shrimp (Litopenaeus vannamei) has advantages such as being able to adapt to low temperature environments, has a high survival rate and has a fairly good resistance to disease making it suitable for cultivation in ponds.
According to (Izzudin et al., 2018) vannamei shrimp can grow quickly, reach high salinity, low risk of conversion of feed and protein, and can be cultivated at high densities.
Vannamei shrimp production volume in Indonesia reached 716,430.69 tons in 2018 according to data from the Ministry of Maritime Affairs and Fisheries (Directorate General of PDSPKP, 2019). vannamei shrimp production centers in Indonesia are in the Provinces of Nusa Tenggara Barat, South Sumatra, West Java, Lampung, Southeast Sulawesi, Gorontalo and East Java East Java Province is the second
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*Correspondence author.
E-mail: [email protected] Phone: +62-81-234-668-882
Available online at HABITAT website: http://www.habitat.ub.ac.id province which has the largest volume of
vannamei shrimp production in Indonesia, namely 92,628.83 Tons in 2018 The production center districts in East Java Province are in Banyuwangi, Lamongan and Gresik. According to (Suryawati et al., 2019) shrimp exports were still dominated by frozen shrimp as much as 58.7%.
One of the national private companies in Banyuwangi, is engaged in the vannamei industry to meet export needs in frozen form. According to (Saputri, 2017) Currently, Indonesia's shrimp export destinations are still dominated by Asian, European and US countries, including Japan, Hong Kong, China, Singapore, Malaysia, Australia, the United States, Britain, the Netherlands, France, Germany, Belgium, Italy, and others. other. This market opportunity and development of agro-industry has led to greater company competition and increased consumer demand for product quality and quantity (availability) (Brown, James G, 1994; Wu et al., 2021).
There is foreign market demand for frozen vannamei shrimp, especially with the aim of increasing Japan's marketing, tends to fluctuate especially in negative events such as the spread of disease in shrimp, especially in PND (Peeled and Devained) commercial products weighing 900 grams with 6 variations in size in units (amount shrimp/Lb) 26/30; 31/40; 41/50 ; 51/60 ; 61/70; 71/90 and 91/120. This has implications for the availability of raw materials from ponds and suppliers that are ready to be processed as finished products. Market demand for frozen shrimp is relatively the same for monthly and tends to increase significantly just before holidays such as Eid, Christmas and New Year, but the amount of inventory of finished products in warehouses is inadequate (Mufaidah et al., 2017).
In production activities every month the company uses raw materials of approximately 15 tons, and even then the company still has difficulty getting raw materials because shrimp raw materials are seasonal depending on weather, disease, easily damaged due to bacterial activity and suppliers also have limited quantities in fulfilling company needs. So that companies often experience loss of sales profits and difficulty managing the availability of finished products (Al-Holy et al., 2015; Xue et al., 2014;
Zhang et al., 2015).
Because inventory of goods or products is one of the company's assets that has an important role in business operations with proactive management, this means that companies must be able to anticipate conditions and challenges that exist in inventory management to achieve the ultimate goal, namely to minimize costs incurred for supply and service quality improvement (Eriyatno, 1999; Yamit, 2002). In industrial systems, the existence of inventory is a factor that triggers increased costs. Determining the amount of inventory too much will result in a waste of storage costs, but if it is too little it will result in the loss of the company's opportunity to make a profit, if the demand for goods is greater than the amount of inventory in the warehouse.
So to overcome obstacles in meeting export needs and expedite the availability of frozen vannamei finished products at national private companies in Banyuwangi, it requires supply of raw materials with a supply chain management approach. This approach is the right approach to determine the amount of raw material inventory in agro-industry-based companies.
2. Theoretical Underpinning
In several previous studies, one of the methods used to calculate a company's inventory is to use the economic order quantity method.
This method is qualitatively effective enough to calculate the exact reorder point, efficient total cost and safety stock (Melati, 2012; AW Pratiwi et al., 2020; Randi et al., 2021).
Inventory procurement in many companies still uses adversarial logistics management practices, so it is no longer relevant because it is considered less competitive. Whereas in the modern industrial era which is closely related to market dynamics or other external environments, it becomes a trigger for companies to be able to identify the key factors for competitive success (M. Pratiwi et al., 2021; Sucahyowati, 2011).
Moreover, at this time, companies are not only facing market fluctuations and competition, but also the possibility of disturbances in the supply chain of goods caused by the external environment, such as chaos and the spread of disease outbreaks (pandemic). Companies will experience extraordinary shocks or pressure to deal with it. So that requires companies to be able to establish and develop a framework in decision making to be able to meet customer demand (Kumar et al., 2021).
The efforts made by the company in providing the best products to customers in terms of production and operations management are a combination of products and services. So the method used to manage inventory that is considered appropriate for development is to use a supply chain management approach, because in addition to optimizing the distribution of materials from suppliers, the flow of materials in the production process up to the products into the hands of consumers (Sucahyowati, 2011).
3. Research Methods
The type of research used is quantitative descriptive research. The limitations of the problem in this study are:
a. This research was conducted to determine the supply of vannamei shrimp raw materials used for the production process of frozen vannamei shrimp with the assumption that all raw materials come from suppliers, not self-cultivation.
Research is limited to the company's internal supply chain covering the reception of raw materials to the storage of finished products.
b. This research does not involve consumers.
c. The period used in this study is monthly.
d. This research is limited to the calculation of raw material inventory and does not involve cost categories.
Figure 1. Research Stages Inventory of raw materials.
3.1. Research Stages are as follows:
A. finished product level is the determination of the average number of product requests for monthly (Heizer, J. and Render, 2006).
a) Determination of on order with the on order model formulation is:
OGt= QG (t-1) (1) Information :
OGt = on orderfrozen vannamei shrimp (MC)
QG(t-1) = frozen vannamei shrimp order quantity (MC)
b) Determination of Inventory at the beginning of the period is the inventory of frozen vannamei shrimp at the beginning of the period which was at the finished product storage level at the time the research was conducted. Period t inventory model formulation:
IGt = IG(t-1)–D (t-1) + OG (t-1) (2) Information :
IGt= inventory at the beginning of the period (MC)
IG(t-1) = inventory in the previous period (MC) D(t-1) = demand in the previous period (MC) OG(t-1) = on order in the previous period (MC) c) Determination of Order Up To Target (R)
Order up to target is the number of frozen vannamei shrimp orders targeted to the processing level. The order up to target model approach used is:
RGt = Dt(t+1) + SSG (3) Information :
RGt = order up to targetfrozen shrimp at finished product level (MC)
t = lead time (months)
SSG= safety stock at finished product storage level (MC)
d) Determination of Order Quantity (Q).
Order quantity. The formulation of the order quantity model is:
QGt = RGt–IGt–OGt Information :
QGt= order quantity frozen vannamei shrimp (MC)
RGt = order up to targetat the finished product storage (MC) level
IGt= inventory at the beginning of the period (MC)
OGt = on order frozen vannamei shrimp (MC)
Finished Frozen product demand
forecast
Determination of inventory plan:
1. Levelsfinished product 2. LevelsProcessing 3. Levelsraw material Safety stock,
Lead time
Raw material requirements Start
Available online at HABITAT website: http://www.habitat.ub.ac.id B. Processing level is the determination of the
average amount of inventory in process (Heizer, J. and Render, 2006).
a) Determination of capacity at each level b) The amount of shrimp needed for the
processing of frozen vannamei shrimp. 1 MC frozen shrimp = 900 gram shrimp x 6 x 2 = 10.8 kg
Xt = Qtx10.8x 60%
Information :
Xt= demand for frozen vannamei shrimp to processing level in period t (kg)
c) Determination of yield y= 62%
d) The need for vannamei shrimp for the processing of frozen vannamei shrimp (dt)
=
C. Raw material level is the calculation of the average amount of raw material inventory for monthly (Heizer, J. and Render, 2006) a) Determination of lead time between the
level of raw materials and processing. The lead time in this study was determined by measuring the average time from ordering vannamei shrimp to the raw material level until the goods enter the processing process.
b) Determination of inventory at the beginning of the period (I). Inventory at the beginning of the period is vannamei shrimp inventory at the beginning of a certain period at the raw material level with the formulation:
IF(t) = IF(t–1) Information :
IF(t)= supply of vannamei shrimp at the beginning of the period in raw material levels (kg)
IF(t – 1)= supply of vannamei shrimp in the previous period (kg)
c) Supply of vannamei shrimp for the next period with the formulation
IFt = IF (t–1)–d(t–1) + OF(t–1) Information :
d(t– 1) = demand for vannamei shrimp in the previous period (kg)
OF(t–1) = on order at the raw material level d) Determination of Order Up To Target (R)
Order up to target is the number of vannamei shrimp that must be ordered to the cultivator according to the target set by the processing department. Formulation in order up to target:
RFt = dt (t + 1)
Information :
RFt= order up to target vannamei shrimp at raw material level (kg)
etc= demand for vannamei shrimp at the raw material level (kg)
t= lead time (months)
e) Determination of Order Quantity (Q) Order quantity is the number of vannamei shrimp ordered in a certain period by the level of raw materials to farmers.Order quantityis the number of vannamei shrimp ordered in a certain period by the level of raw material to the cultivator. Determination of the order quantity is influenced by the lot size by the cultivator of 1000 kg or around 1 ton.
f) The current On Order (O) calculation comes from the previous order quantity.
OFt = QF(t–1) Information :
OFt= on order at raw material level (kg).
QF(t–1) = order quantity of vannamei shrimp in the previous period (kg)
D. Determination of service level Service level) Company, Service level is a level of service that ensures that finished product orders by consumers can be fulfilled from the company's inventory (Heizer, J. and Render, 2006; Heizer, 2015)
Percent service level =∑
∑ x100%
=∑
∑ x100%
4. Results And Discussion
Inventory Management is one of the company's steps in improving the quality of the company's service to customers. Supply chain management as the main idea to implement an integrated system approach for companies to manage information on raw materials, services from raw material suppliers through factories and warehouses to end customers. This service trend, which is turning companies to look for flexible ways that can be used to meet customer demands.
The focus of the objective of raw material inventory management using a supply chain management approach is optimizing the main activities within the company to maximize the speed of response to changes in customer expectations (Jacobs, FR, & Richard, 2015).
Today's business also requires knowledge readiness in introducing logistics or supply chain systems and their innovations. This is used by the
company in an effort to prevent, detect or respond to unexpected events or events that cause disruptions in the company's service process to customers. Supply chain resilience in a company is the configuration of its resources or infrastructure. This supply chain management approach is used to maintain the resilience of the company's supply chain so that everything runs smoothly (Ambulkar et al., 2015; Orlando et al., 2022).
Calculations with a supply chain approach, first knowing the number of customer requests for products in each type of product. Future customer demand is obtained from the company's customer demand data which has been projected into customer forecast data. The following is Figure 1 the number of requests for PND products monthly.
Figure 2. Number of requests for monthly PND products.
The picture above shows that the highest demand each month is for PND 31/40 products while the lowest product demand monthly is PND 71/90 which is a small frozen shrimp product. The average number of requests for PND finished products is 2,609 MC (Master carton). From the demand for these products, the company will be able to calculate the amount of raw materials that will be provided for smooth production and sales. Based on calculations using the internal supply chain management approach, the amount of raw material inventory in the raw material storage warehouse. This can be planned by the production planning and inventory control department to improve the company's performance in achieving the best service for customers through three stages.
4.1. Finished Product Level Inventory Inventory at the finished product level shows that the number of frozen vannamei shrimp in the form of finished products in master cartons (MC) which must be stored in cold storage can be shown in Table 1. The addition of the number of orders is made when the existing inventory has reached a certain point or level where inventory cannot meet consumer demand (Heizer, J. and Render, 2006). This will automatically add to the costs incurred by the company. So that with this finished product level approach, you can plan the amount of initial inventory in the warehouse and the number of orders for each type of product, so you can meet customer demand at any time. The following Table 1 calculates the supply chain management for each PND product at the finished product level.
Table 1. Inventory Levels of PND Frozen Shrimp Finished Products in Master Carton (MC) Types of
products
Starting Inventory (Igt)
Order Quantity (Qgt)
On Order (Oct)
Demands (D)
PND 26/30 4,831.18 1065.67 1048,17 843,26
PND 31/40 3,849.61 6391.75 5892.42 5923.81
PND 41/50 1906.79 2,654.17 2,745.83 2598.25
PND 51/60 2,476.83 3,890.58 3,875.58 3,606.33
PND 61/70 1321.42 1903.42 1839.25 1828.25
PND 71/90 1585.92 1024.42 1051.92 854,17
Average 2,661.96 2,821.67 2,742.2 2609.01
Available online at HABITAT website: http://www.habitat.ub.ac.id Table 1. shows that to meet customer
demand with an average number of PND finished products of 2,609 MC, companies planning their finished products in cold storage must provide initial inventory (Igt) with an average number of 2,662 MC, the number of orders at the finished product level (Qgt) is 2,822 MC and the average on order (Ogt) is 2,742 MC. So that availability at the level of finished products to improve the quality of customer service can be fulfilled properly by the company.
The increasing consumer demand will automatically reduce the amount of frozen shrimp supply in the next period so that more and more frozen shrimp must be ordered. However, because the company has to anticipate fluctuating demand, when market demand increases, the number of orders in the processing section increases so that the goods stored in the finished product storage section also increase. This also causes the number of products stored in the finished product storage section to be greater than the number of orders targeted at the processing section.
4.2. Inventory Processing level
Inventories at the processing level are components or raw materials that have gone through several process changes, but are not yet finished. There is work in process because it takes cycle time to make a product. Reducing cycle time means reducing in-process inventory.
Based on the inventory calculation at the finished product level, the number of finished product orders addressed to the processing level becomes a reference used to be able to calculate the amount of inventory at the processing level.
Processing level inventory is the number of shrimp in units (kg) needed in the processing process, so that the capacity at each level is the maximum capacity of each level to meet the needs of the previous level.
This capacity measures the ability of each level, namely storage of finished products based on market demand, storage of raw materials and the ability of suppliers to send shrimp to the company. It is known that each level is able to meet the needs of the previous level, which is indicated by the large capacity at the next level.
This can prevent bottle necks from occurring.
According to (Kusuma, 2002) states that a bottle neck is a blockage of the flow of material flow on the production line that occurs because the output in the previous section is greater than the following section. By knowing that the production process at national private companies in Banyuwangi does not have a bottle neck, so the flow of information on the number of shrimp ordered by the raw material storage level can be used as a conversion result.
The need for shrimp in the frozen shrimp processing process is the large demand for shrimp in the raw material storage section to produce frozen shrimp products which is influenced by the yield of the product. As for the yield of frozen shrimp products is 62%. The fluctuating demand for finished products to the processing department will affect the need for shrimp to the level of raw material storage. The following table shows the amount of shrimp needed for processing to the raw material storage section.
Table 2. Processing Level of PND Shrimp Needs for monthly (kg)
Types of products Qt (MC) xt(kg) dt(kg)
PND 26/30 1065.67 6905.52 11137.94
PND 31/40 6391.75 41,418.54 66804.10
PND 41/50 2,654.17 17,199.00 27,740.32
PND 51/60 3,890.58 25,210.98 40,662.87
PND 61/70 1903.42 12..334,14 19,893.77
PND 71/90 1024.42 6638,22 10706.81
Average 2,821.67 18,284.40 29,490.97
In Table 2. It can be explained that to produce a PND finished product with an average number of 2,822 MC, 18,284.40 kg of shrimp are needed in a process that has been multiplied by the yield of frozen shrimp. So the need for raw materials at the processing level (dt) averages
29,490.97 kg. The biggest demand for raw materials is for PND 31/40 products, namely 66,804.10 kg. According to (Pujawan, 2005), a supply chain is governed by the power of consumers, the need for shrimp to the level of storage of raw materials originating from market
demand information to the level of storage of finished products affects the level of storage of raw materials to place orders with suppliers.
4.3. Raw material level inventory
The calculation of supply chain management at the raw material storage level is influenced by information from the processing section to the raw material storage section and the lead time, namely the time required for the processing section to store raw materials, which
is 2 days (0.067 months). Shrimp supplies at this level are not added to safety stock because the addition of safety stock has been done at the beginning, namely the finished product storage level, this is intended to prevent changes in shrimp orders that are too large for pond farmers and suppliers. The following is a table of raw material requirements that must be ordered to pond farmers or suppliers for each PND product of various sizes.
Table 3. Monthly Need for PND Shrimp Raw Material level (kg)
Types of products Starting Inventory (Ift) Order Quantity (Qft) On Order (Of) Demands (d)
PND 26/30 11,827.89 12,333.33 12,666.67 11137.94
PND 31/40 47,323.32 75,416.67 71,250.00 66804.10
PND 41/50 20503.14 28,750.00 30166,67 27,740.32
PND 51/60 15,485.44 42,250.00 42,416.67 40,662.87
PND 61/70 13,082.00 21083.33 20,416.67 19,893.77
PND 71/90 12070.84 11083.33 12,750.00 10706.81
Average 20048.77 31,819.44 31611.11 29,490.96
Table 3. shows that the average initial inventory in the raw material warehouse that must be provided by private companies in Banyuwangi (Ift) is 20,048.77 kg, the average raw material inventory contained in the storage warehouse (d) is 29,490.98 kg, on order (Oft) is 31,611.11 kg and the average order quantity to suppliers ( Qft) is 31,819.44 kg.
Raw materials in the agro-industrial system are important factors for the sustainability of the production process, especially production processes that require large quantities of raw materials. So quantity, quality, and continuity are important factors to pay attention to so that the supply chain runs smoothly and the company's level of service to customers is also high (Brown, James G., 1994).
4.4. Level of Service
Inventory as done by the company has differences with inventory after using SCM (Supply Chain Management), one of which is in terms of the level of fulfillment (service level).
Inventory planning and control that has been carried out so far has not been able to provide a solution in overcoming a shortage of inventory if there is a sudden increase in demand. Based on the three-level inventory calculation, the service level in the finished product storage section shows a very high ability to respond to market demand. With the service level value shown in the following table:
Table 4. Service level of finished products
Types of products Average Supply (Qgt) Average Demand (D) % Service Level
PND 26/30 1065,67 843,26 126,37
PND 31/40 6391.75 5923,81 107,90
PND 41/50 2654,17 2598,25 102.15
PND 51/60 3890.58 3606,33 107,88
PND 61/70 1903,42 1828,25 104,11
PND 71/90 1024,42 854,17 119.93
Average 2 2821.67 2609.01 111.39
Based on Table 4, achieving a service level of 100% is not easy, the service level tends to be below or above 100%. What needs to be considered for the company in order to achieve a
100% service level is to pay attention to finished product inventory and also safety stock (Indrajit, 2002). From this service level, there are implications for the national private companies in
Available online at HABITAT website: http://www.habitat.ub.ac.id Banyuwangi, that the company can meet product
demand well, considering that frozen Vannamei is a product with a cold supply chain system that requires proper monitoring and control management during storage and distribution so that it can achieve better supply chain performance. good quality products and remain in the hands of consumers (Awad et al., 2020).
Vannamei shrimp product is also a product that is easily degraded in quality with cold chain storage at 0-800C for 96 hours (Ahmad, I, Chawalit, J, &
Somrote, 2013; Nugroho et al., 2022).
Based on this study, the supply chain management approach resulted in national private companies Banyuwangi service level of 111.39%, so the company was declared to have excess product in the inventory section.
According to (Seebacher, 2013), environmental changes can affect the need for supply chain flexibility to a certain degree, but the flexibility needed mainly depends on whether the supply chain is affected by the make to stock, make to order, or engineer to order environment.
Meanwhile, because of this flexibility, it encourages changes in production volume.
Supply chain flexibility is certainly needed to respond to changes in demand and the latest global market conditions. Considering that almost all companies in the world are experiencing shocks due to the pandemic. So that the role of operational leniency and supply redundancy is used in reducing the effect on supply chain shocks and company performance (Azadegan et al., 2021). Moreover, considering the current economic situation, choosing a method for a profitable business is quite complicated, a supply chain model with service level and demand constraints is considered to be able to improve product quality and reduce costs (Bhuniya et al., 2021).
According to (Sinthukhammoon, 2021;
Syahputra et al., 2018). The performance of the vannamei shrimp supply chain cannot be separated from the company's experience and efforts in strengthening cooperative relationships between each member of the chain in order to unite all members of the supply chain so that products are produced and distributed at the right time and in the right quantity. Companies that are committed to a good level of service can guarantee customer satisfaction. In addition, it can reduce losses due to high demand volatility and increase company profits (Chen et al., 2020).
5. Conclusions
Raw material inventory planning with a three-level supply chain management approach, namely the finished product level, processing level and raw material level should be implemented by national private companies in Banyuwangi. This is because this supply chain approach is more detailed and comprehensive in planning needs so that companies will be better prepared to serve customer demands and face changing market conditions with a service level for finished products above 100%, which is an average of 111.39%.
6. Acknowledgments
Thanks are addressed to the Institute of Technology and Business Muhammadiyah Banyuwangi for providing their support. National private companies in Banyuwangi who has provided information on both primary and secondary data and the Chairman of the Banyuwangi Shrimp Club Association who has provided detailed directions and descriptions of the vannamei shrimp agro-industry supply chain.
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