1 CHAPTER I INTRODUCTION 1.1 Background Inventory management is a key issue faced by every retail business. The inventory turnover defines the company’s revenue and shareholder’s earnings (Dharmaraj, 2014). The failure of managing inventory results in high cost of operations. Inventory management is of critical strategic importance in two key areas, customer service and cash flow (Augustine, Huff, Lockman, & MacLean, 2004). Inaccuracies in an inventory creates a range of problems, including loss of productivity, the manufacturing of unwanted items, a reduction in the levels of customer commitment, the accumulation of costly physical inventories and frustration (Meyer, 1991). Indonesia is a country that has a population of more than 250 million people and still growing, thus the rate of its people’s consumption of daily goods will be very high. Furthermore, people tend to buy goods from fast and high mobility places. This phenomenon is an opportunity for entrepreneurs to start a retail business of non-food mini-market. Non-food minimarket or convenience store is a new retail store concept which offers many everyday products but none are food or consumables. Minimarket is a trend now-a-days because of the high quantity of retail stores, convenience and low prices, we could see stores like Alfamart and Indomaret are very successful. In cities like Bintara, Tanjung Priok, and Bekasi this type of business is blooming large at a fast rate. This concept transcends to a non-food minimarket because demand for daily office tools, blank textbooks and even toys will exist. The demands for these types of goods are seasonal but also stagnant, for example toys which always change with new designs and technologies. The best approach to address this problem is by formulating a forecast method for each month of the year, so that to know how to order specific items at specific times, so ordering regularly for the stagnant demand items and order adaptively on seasonal demand items, thus keeping inventory as low as possible while maintaining product availability. The non-food minimarket that the author analyzed is PT Idola Cahaya Semesta. PT Idola Cahaya Semesta is a growing non-food convenience store, established in 2007 by the name 2 of Toysmart, where they originally only sell toys. Its humble beginnings originated in Taman Galaxy, Bekasi. As they expand they started to sell text books, office supplies, and other general goods, transforming into a non-food convenience store in 2010. This expansion gives the company the revenue growth, as the number of stores grows however, more problems occur for the company, one of the problems is overstocking and under- stocking inventory levels, this research analyzes the inventory management of the company, and gives a suggestion of a better inventory management policy. Every period, whether it’s monthly, weekly or daily, the manager must make forecast of demand for every product to sell.