Optimization of Trade Product Inventory Using Activity Based Costing Analysis

Merchandise inventory is one of the assets that requires significant capital investment. If inventory is not managed properly, it can result in high storage costs, the risk of inventory shortages, or even expired products. Therefore, it is important to have the right strategy in managing inventory. This study aims to classify inventory items owned by UD. XYZ in order to minimize inventory costs by focusing inventory procurement on high-value priority items. The method used in this study is Activity Based Costing analysis (ABC). The results of this study are based on the ABC classification there are 7 types of goods that fall into category A or priority are Aoka, Roma sandwich, My jelly, Slai olai, Trick, Choco pie, and Chiki balls. Where these 7 types of goods need special attention in terms of inventory management because they absorb the most investment funds from the total goods owned. By knowing these items, companies can focus on more precise inventory management, including in terms of procurement, storage, and inventory control. This can help UD. XYZ reduces unnecessary storage costs and ensures optimal availability of goods. The results of this study can contribute to the understanding of the application of the ABC method in the context of merchandise inventory management.


Introduction
The importance of good inventory management for a company so that inventory investment remains balanced and service to consumer satisfaction is maintained [1] [2].Poorly managed merchandise inventory can cause financial losses for the company.If too much merchandise is stored, the company will face high storage costs.On the other hand, if inventory is too low, companies can experience stock shortages that can affect the ability to meet customer demand [3]- [8].
UD. XYZ is a trading business engaged in the sale of various snacks and other snacks located in the city of Nganjuk, East Java.This company was founded in 2016, which started as a small-scale snack shop with only a few types of snacks.Nganjuk City is an industrial area with the largest producer of shallots in East Java [9].This is in line with the rapid mobility of the population which greatly affects business development, especially the business of trading various snacks and snacks in the Nganjuk city area.The positive impact with the development of industry in Nganjuk city was also felt by the owner of this snack shop, which later changed its form into XYZ trading business.This company now sells a variety of snacks and snacks of various brands wholesale.Even recorded until now, this business has become the only official distributor agent of Aoka brand toast and became one of the largest snack suppliers in the city of Nganjuk.
This trading business has a fairly large turnover, which ranges from Rp. 200,000,000 to Rp. 400,000,000 per month.However, according to information from business owners, the expenses borne for inventory costs are also quite large if accumulated to reach 15-20% of the total monthly revenue turnover.This happens because this business has a fluctuating number of orders with inconsistent order frequencies and tends to increase before holidays.This trading business faces difficulties in understanding the value and priorities of each trade item owned.Without a clear understanding of the value and sales volume of each merchandise, inventory management becomes difficult to do effectively [7], [8], [10]- [12].Companies need to prioritize products that have high sales value and a high level of damage risk.The activity aims to focus inventory control on high-value types of inventory rather than low-value ones [13]- [15], [15]- [19].No research or action has been taken by business owners or other parties to solve this problem.
Some previous studies have proven that to classify merchandise inventory, you can use the Activity Based Costing method (ABC) [20] [21].The ABC method can optimize inventory costs by improving inventory management, identifying items that have the most impact on costs, and finding improvement opportunities that can reduce storage costs and increase overall profits [22] [23].From these findings, the purpose of this study is to classify inventory items owned by UD.XYZ in order to minimize inventory costs by focusing inventory procurement on high-value priority items.The results of this study are expected to help UD.XYZ can optimize inventory management, allocate resources more effectively, make better decisions, and identify improvement and cost savings opportunities.All this will help the company achieve higher efficiency, increase profits and strengthen its competitive position in the market.

Research Design
This research is a quantitative descriptive research using activity-based costing analysis methods.The object of this study is UD.XYZ is engaged in buying and selling snacks and snacks in Nganjuk, East Java.This study uses secondary data containing data on the type of goods, data on buying and selling goods in January-December 2022.The data collection technique in this study used interview techniques on UD owners.XYZ, and the observations made went directly to the UD location.XYZ.

Stages of Data Analysis
The stages in sorting groups of goods using ABC analysis can be arranged based on the cumulative presentation of fund absorption and the presentation of the types of items of goods managed.The steps are as follows: Calculation of fund absorption Mi = Di x pi Classification into A, B, C respectively amounting to approximately 80%, 15% and 5% from above which can be drawn in the form of a pareto curve.
Possible policies based on ABC analysis include the following: -The purchase of resources spent on supplier development should be much higher for item A than for item C.
-Item A, unlike items B and C, needs to have stricter physical inventory controls.Perhaps they can be placed in a safer place, and perhaps the accuracy of inventory records for item A should be more verified.-The prediction of goods A needs to be more guaranteed of validity than the prediction of goods B and C.

Results and Discussion
For data on the types of goods taken are all types of goods sold by UD.Anugerah Snack has 60 types of goods.The qualification data taken is the name of the item, sales volume, and selling price.So that it will get a total of sales for 1 year.To calculate the absorption of funds by multiplying the sales volume (Di) and the price per unit (Pi).For the formula is as follows.
Mi = Di x pi (4) An example for the calculation can be done to calculate the absorption value of funds of the type of Aoka goods as a follow-up.The value of Aoka's fund absorption = 25700 x Rp. 105.000 = Rp.2.698.500.000For detailed calculations of all types of goods can be seen in the following table.

𝑥 100%
= 63,04 % It was found that the type of Aoka goods had a percentage of absorption of funds from the total funds of 63.04%.Data that has been calculated the percentage of absorption must first be sorted from largest to smallest.After the data is sorted, a cumulative percentage of fund absorption is calculated to find out which order of goods has the most to the least absorption of funds.After the cumulative percentage value is also known, it is possible to classify goods with ABC provisions.Based on pareto law, ABC analysis is classified into 3 categories, namely, class A goods are goods that provide high value [24].Although group A is only represented by about 20% of the total inventory, the value given is 80% of the total absorption of funds.Class B goods are items that provide moderate value.This class B inventory group is represented by 30% of the total inventory and the resulting value is 15% of the total absorption of funds.Class C goods are items that provide low value.Class C inventory group is represented by 50% of the total existing inventory and the resulting value is 5% of the total absorption of funds [25] [26].
In doing this classification, the value used as a benchmark is the cumulative percentage value.If the cumulative percentage value is 0% -80%, then the goods fall into the category of class A. If the percentage of value is between 81% -95%, it can be categorized as class B. And if the percentage of value ranges from 96% -100%, then the goods fall into category C. From these provisions, the results of the ABC classification of inventory goods at UD. XYZ can be seen in the following table.The types of goods included in class A consist of 7 types of goods, namely Aoka, Roma sandwich, My jelly, Slai olai, Trick, Choco pie, and Chiki balls.Where these 7 types of goods need special attention in terms of inventory management because they absorb the most investment funds from the total goods owned.The results of this ABC classification analysis can be important information for UD owners.Anugerah Snack to give priority to inventory management for products in class A category.This aims not to cause large cost burdens and result in large idle funds and increase storage costs in category A.
To represent the results of ABC analysis on inventory of goods, a pareto curve can be formed containing 3 groups of goods based on the volume of annual fund absorption.For more details can be seen in the following picture.From the picture of the pareto curve above, it can be clearly seen the division of classes.That the types of goods included in category A must be reviewed more strictly than goods included in categories B and C to improve program efficiency or reduce inventory costs.In addition, priority in procurement activities is focused on highvalue goods and high-quantity consumption use, which refers to class A goods.

Conclusion
By using UD's ABC (Activity Based Costing) method.XYZ can give a higher focus to 7 types of goods namely Aoka, Roma sandwich, My jelly, Slai olai, Trick, Choco pie, and Chiki balls.Where these 7 types of goods need special attention in terms of inventory management because they absorb the most investment funds from the total goods owned.The results of this ABC classification analysis can be important information for UD owners.Anugerah Snack to give priority to inventory management for products in class A category.This aims not to cause large cost burdens and result in large idle funds and increase storage costs in category A. By applying the ABC method can improve operational efficiency, reduce storage costs, improve responsiveness to customer requests, and optimize profits of UD.XYZ.
fund absorption ∑Mi = Total absorption value of funds Order inventory items by annual volume of rupiah from largest in value to smallest.Determine the cumulative percentage Volume tahuana dalam nilai uang per unit ∑ Volume tahuana dalam nilai uang per unit x 100%

Table 1 .
Results of Annual Fund Absorption Calculation After obtaining the results of the absorption of funds for each type of goods and their annual total value, the next step is to calculate the percentage of annual fund absorption.Calculating the percentage of absorption of funds can use the following formula.

Table 2 .
ABC Analysis Results on all inventory itemsFrom the table above, it can be seen that of the total 60 types of goods classified, only 7 goods are included in the class A category, where category A is the type of goods that absorb the most investment funds, which is 78.78%.If the total amount of funds absorption in class A is Rp.3,372,461,500.For more details, the classification and total distribution of funds can be seen in the following table.