THE STUDY INTERNAL OF INVENTORY MANAGEMENT

IN RAW MATERIAL STORE NSD (NON SOAPY DETERGENT)

FOR DECISION MAKING

PT. UNILEVER INDONESIA TBK. CIKARANG

OCTOBER TO DECEMBER 2013

SKRIPSI

BY

LUCIE PUSPAWARDANI

014201000317

Presented to

The Faculty of Business, President University

In partial fulfillment of the requirements for

Bachelor Degree in Economics, Major in Management

February 2014

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CHAPTER I

INTRODUCTION

The first chapter gives an introduction of the background of this study.

Furthermore it gives explanation of factory problems. The research questions and

purpose of this skripsi are presented. The chapter ends with the limitation of this study

and the outline of following chapters.

1.1 Research Background Inventory decision is both high risk and high impact throughout the supply

chain. Inventory committed to support future sales drives a number of anticipatory

supply chain activities without the proper inventory assortment, loss sales and

customer dissatisfaction may occur. Likewise inventory planning is critical to

manufacturing or force production schedule modification, added cost and potential

finished goods shortages. Just as shortage can disrupt marketing and manufacturing

plans, inventory overstocks also create operating problems. Overstock increase cost

and reduce profitability as a result of added warehousing, working capital, insurance

and obsolesce. Manage of inventory resources require of understanding of

functionally, principles, cost, impact and dynamics.

The research conducted in Warehouse Non Soapy Detergent Factory PT.

Unilever Indonesia Tbk. Due the researcher involve in Raw Material Store (RMS)

NSD Factory Team. RMS NSD Factory storage only for raw material and packaging

material for detergent product. Many problems occur in Warehouse NSD which must

fulfill supply to production on full time, on full quantity and quality target. Special

problem which almost happened in RMS NSD Factory are overstock material and

shortage material which will be impact in inconsistency inventory. Due this problem

will influent to stock inventory and achievement production plan.

RMS NSD Factory have been implemented Replenishment which supplier

will be delivery material based on stock position in warehouse which have minimum

and maximum stock according to material requirement from production.

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Inventory data in RMS NSD Factory from 2010 to 2013 as below graphics:

Figure 1.1 Data Utilization RMS NSD 2010 t0 2013

Source Data Dailty Stock 2010-2013

From this data above researcher know that inventory NSD current in 2010

very high almost 5000 palet place but researcher try to reduce inventory untill now to

2885 palet place, Researcher will try to minimise inventory which will be inpact to

working capital etc. The reason why this researcher choose the topic in the Skripsi due

cost will be increase if cannot manage inventory properly. As mention above that

inventory can shortage or overstock if cannot monitoring and control properly.

Nowadays inventory in RMS NSD had been reduced to minimise inventory

due any expantion production which will be use warehouse area, so we try to relayout

racking based on capacity available racking and make smooth RDS not over but

enought for requirement production.

Researcher interested to study topic because of several reasons. First it is the

importance of managment inventory in RMS NSD due Inventory management also

becomes a fundamental part of supply chain management (SCM). SCM become an

important way to enhance the company’s competitive strength and therefore an

important issue for most companies in recent years. According to Lam and Postle

(2006), a summary definition of the supply chain can be stated as :

All the activities involved in delivering a product from raw material through to

the customer including sourcing raw materials and parts, manufacturing and

assembly, warehousing and inventory tracking, order entry and order management,

distribution accross all channels, delivery to the customes and the information systems

necessarry to monitor all of these activies.

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Supply chain management coordinates and integrates all of these activities into

seemless process. During the process, inventory holding and warehousing play an

important role in modern supply chain

Second reason because inventory will be impact to days on hand material, so it

can be imagined if no monitoring and controlling inventory, some material witt high

price with high quantity will be impact to working capital.

1.2 Problem identification and Statement Researcher indentified that inventory level will be increase if we cannot

managed inventory properly. The problem for inventory level in RMS NSD Factory

had been observed by researcher, many factors which had been influence to inventory

level from plannig material and production performance. Researcher decided to

choose how to reduce inventory through efficient management and effective

control of inventories . This problem as object for invetigation due the researcher

involve in manage inventory in RMS Factory effort are made to minimize the stocks

by proper planning & scheduling why this problem had occured.

Regarding the issue that arises, there are some questions that researcher needs

to solve about :

1. What the reason behind uneffecient inventory management in RMS NSD

2. How to imporve inventory management through analysis, after examining

the relevant theories and understanding the business operational practice in

PT. Unilver Indonesia Tbk.

1.3 Research Scope and Limitation Due the limitations of time, it is impossible for the author to make a

longitudinal study, in which the implementation result of the purpose invnetory

control system can be osberved and verrified . The research has limited to the internal

inventory management in RMS NSD. Therefore it is likely that the findings will not

apply similarly to other factory.

Another limitation is that the results may not represent every factors impacting

inventory in every factory. Therefore the findings may not apply to each specific

factory and category.

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1.4 Research Objective The purpose of this project are :

1 To invetigate and indentify the reason behind uneffecient inventory management

in RMS NSD. Then author tried to purpose feasible managerial suggestions.

2 To improve inventory management through analysis, after examining the relevant

theories and understanding the business operational practice of PT. Unilever

Indonesia.

1.5 Research Benefits The research aims to contribute highly to the following institutions :

a. President University

This research about analysis impact of the factors impact inventory in RMS

NSD which the researcher chooses as skripsi topics. The research can show how to

implement the class knowledge into real research and get meaningfull outcome. It

also can provide some references to the following students from President University

and help them make better skripsi.

b. RMS NSD Factory

The research can provide a guideline and consult for RMS NSD to implement

management inventory. From the research they can evaluate the implementaion

inventory and balance the benefits and risks they have to take. Besides this research

also provides them a way to reduce inventory risk in their future operation.

This research analysis the strength and weakness of inventory in RMS NSD and

the result can provide the RMS Teams guideline how to improve management

inventory.

c. Researcher

This research can enrich the knowledege of the researcher and it will make the

researcher understand clearly and deeply about inventory, especially the situation in

warehouse factory. More important it is very usefull for the researcher’s career in the

future after graduate from President University.

The researcher conducted for several benefits, which are clasified into several

categories :

a. Academic

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This skripsi writing is for fulffilling the requirement of graduation in President

University, majoring management

b. Researcher

Writing this skripsi will improve researcher knowledge about inventory management

and understanding the business operational practice in PT. Unilever Indonesia Tbk..

c. Unilever

Understanding the strength and weakness inventory managment in Unilever will help

Unilever to improve their current inventory managememt

1.6 Research Methods In qualitative research-case study : Consultant Engagement Study- besides

literature reviw , researcher do filed research in order to get primary data. Therefor

author not only use questioanaires as the base of my research. Researcher involve to

the research object being researched and get primary data by using a types of evidence

instruments which are :

a) Inquiries of the client

In this procedure, researcher ask for written (through questionnaires) or

oral (through interviews and discussion) information from the

management/staffs of the company being researched. From this method,

researchers obtain invalidated information that need to be validated

through other procedures.

b) Analytical procedures

Analytical procedures is the procedures done in order to know whether

there is relationship or correlation between two variables or more. The

result of analytical procedure is not valid evidence therefore need to be

validated through other types of evidences such as documentation, re-

performance, confirmation, observation and physical examination.

Researchers should elaborate what data being analyzed, method of analysis

being used, and conclusion of the analysis. (Skripsi Guidelines-

Management Qualitative Research-President University 2011)

c) Observations

Observation is the process of gathering data by seeing, smelling, hearing,

tasting, and feeling to assess certain activities. Through observation,

researchers can obtain information such as process of production,

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recording process of employee attendance, warehouse condition,

application of certain procedure, and organization or working

environment.

Researchers should explain what they observe, how and when the

observation takes place. Besides, researchers should also elaborate clearly

he result of the observation process.

d) Documentations

Documentation is the process of tracking down evidences either internal or

external evidences of transactions or activities being researched.

Researchers should state evidences (documents) being researched and the

function of the documents; their format, content, function who made them,

function who authorized them, where they are distributed, and the use of

the evidences (documents). Further, researchers should also explain about

the result of their investigation (research).

In literature review researcher get references or relevant theories from text

books, internet & other scientific sources including previous researches in order to get

criteria to be used in assesing the existing condition which in the facts obtained from

field research

The result of field research assesing on literature review in order to know the

discrepancies, their causes, their effecr and the recommended solution of how to

overcome the problems

1.7 Chapter Outlines

Chapter 1 Introduction : The first chapter gives an introduction of the

background of this study, furthermore it gives an explanation of factory’s problem.

Then the research questions and purpose of this skripsi are presented. The chapter

ends with the delimination of this study and the outline of following chapters.

Chapter 2 Literture Review : This chapter will explore the different theories

and models that are related to the subject of this skripsi and can be used for the

analysis

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Chapter 3 Methode of Data Processing and Compnay’s Existing Condtion :

Examines different research methods and present what methods are applied to this

skripsi

Chapter 4 Analysis and Evaluation : Present empirical findings about business

practice of the studied factory and the major isssues that needs to be addressed in

their inventory management. And Conduct the analysis guided by theoritical

framework. The analysis part is based on empirical findings. Furthermore the author

will present his suggestion upon the probelm identified

Chapter 5 Conclusions and Recommendations : Present the conclution about the

whole skripsi and summarize the implication of the research

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CHAPTER II

LITERATURE REVIEW

The chapter will explore the different theories and models that are related to

the subject of this skripsi and can be used for the analysis.

2.1 Supply Chain Management (SCM) The term “supply chain management” has become a popular buzzword,

probalby used by consultants in the late 1980s and then analyzed by the academic

comunity in the 1990s (Burt, Dobler & Starling, 2003)

Supply Chain Management is a set of approaches utilized effectively

integrate suppliers, manufactures, logistics, and customers for improving the long

term performance of individuals companies and the supply chain as a whole (Chopra

and Meindl, 2001). Supply chain management includes the link between upstream

(such as supply and manaufacturing) and downstream ( such as logistics and

distribution) value chain entities to create cooperative environments that facilitate

information exchanges, materials and cash flosws (Kukalis, 1989)

2.2 Inventory Management Effective inventory management is essential in the operation of any business

(Basin, 1990), Hakanson and Person (2004) identifies three different trends in the

development of logistics solution within industry, one trend is concerned with the

increased integration of logistics activities beyond organization boundaries with an

aim to reduce cost items such as capital costs for inventory and handling costs of

flows.

Inventory as an asset on the balance sheet of company has taken on increased

importance because many companies are applying the strategy of reducing their

investment in fixed assets, like plants, warehouses, equipment and machinery and so

on, which even highlight the significance of reducing inventory (Coyle et al, 2003)

Changes in inventory levels affect Return on Assets (ROA), which is in

importance financial parameter for an internal & external perfective. Reducing

inventory usually improves ROA, and vice versa ( Coyle et al, 2003).

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2.3 Objective of Inventory Management The primary objective of inventory management are :

a. To minimize the possibility of disruption in the porduction schedule of a firm for

want of raw material, stocks, spares

b. To keep down capital investment in inventories

Inventory Management Problem often interact with other areas operation or

supply chain management. Example include :

a. Provision of raw materials for production scheduling

b. Productions of inventoies of finished items contained by agregate output rate

detemined by medium production planning

c. Inventories needed for servise activites (Berman, et al, 1993)

d. Selection of the location and capacities of warehousess

e. The modes of transportation to be used for inbound & outbond shiping (Higgison

and Bookbinder, 1994, Henig et al, 1977)

f. The effect of pricing, promotion and other marketing decission

g. The choice of suppliers

2.4 Challenge of Inventory Management The wholesalers and retails that are major actors involved in downsteam

distribution chanels face spesial challenge in keeping inventory at reasonable levels due

difficulty of forecasting demand and expectations of customers about product avaibility

(Coyle et al., 2003). The challenge grown even bigger when we think about the

diverstity of products in terms of their color/design, package type, size and so on. To

further explain the problem, there is an accurate demand forecast, however the agregate

demands needs to be broken down by various specification of the product into subtotal

demand forecast to guide the stock keepeing units (SKUs) in the company in order to

fulfill customer’s order. But the subtotal demand forecast could be diverse, reaching

dozens, hundreds, or even thousand of categories , in this case they become trully

difficult, complex and time consumimg

The difficulty of forecasting demands accurately naturally results in two

problems, which are in opposite extreme, overstock and stock-out of inventory. As

companies strive to avoid lost sales from stock-out inventory, there is a tendency to

overstock. Nevertheles because keeping inventory is costly which definetly reduces

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the profit margins, companies try to reduce inventory level, so appear the tendency to

stock out of inventory. We can get an overview of inventory management dilemma,

where to opposing powers keep pulling the inventory towards their own direcrions. It

is hard to balance the two powers all the time and station the inventory. At the right

level constantly

2.5 Why Inventory Control?

SCORE

Counselors to America’s Small Business

Inventory Control

Control of inventory, which typically represents 45% to 90% of all expenses

for business, is needed to ensure that the business has the right goods on hand to avoid

stock-outs, to prevent shrinkage (spoilage/theft), and to provide proper accounting.

Many businesses have too much of their limited resource, capital, tied up in their

major asset, inventory. Worse, they may have their capital tied up in the wrong kind

of inventory. Inventory may be old, worn out, shopworn, obsolete, or the wrong sizes

or colors, or there may be an imbalance among different product lines that reduces the

customer appeal of the total operation.

Inventory control systems range from eyeball systems to reserve stock systems

to Perpetual computer-run systems. Valuation of inventory is normally stated at

original cost, market value, or current replacement costs, whichever is lowest. This

practice is used because it minimizes the possibility of overstating assets. Inventory

valuation and appropriate accounting practices are worth a book alone and so are not

dealt with here in depth. The ideal inventory and proper merchandise turnover will

vary from one market to another. Average industry figures serve as a guide for

comparison. Too large an inventory may not be justified because the turnover does

not warrant investment. On the other hand, because products are not available to meet

demand, too small an inventory may minimize sales and profits as customers go

somewhere else to buy what they want where it is immediately available.

Minimum inventories based on reordering time need to become important

aspects of buying activity. Carrying costs, material purchases, and storage costs are all

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expensive. However, stockouts are expensive also. All of those costs can be

minimized by efficient inventory policies.

Inventory Control

Inventory control involves the procurement, care and disposition of materials.

There are three kinds of inventory that are of concern to managers:

a) Raw materials,

b) In-process or semi-finished goods,

c) Finished goods.

If a manager effectively controls these three types of inventory, capital can be

released that may be tied up in unnecessary inventory, production control can be

improved and can protect against obsolescence, deterioration and/or theft.

The reasons for inventory control are:

a) Helps balance the stock as to value, size, color, style, and price line in

proportion to demand or sales trends.

b) Help plan the winners as well as move slow sellers

c) Helps secure the best rate of stock turnover for each item.

d) Helps reduce expenses and markdowns.

e) Helps maintain a business reputation for always having new, fresh merchandise

in wanted sizes and colors.

Three major approaches can be used for inventory control in any type and size

of operation. The actual system selected will depend upon the type of operation, the

amount of goods.

The Eyeball System

This is the standard inventory control system for the vast majority of small

retail and many small manufacturing operations and is very simple in application. The

key manager stands in the middle of the store or manufacturing area and looks around.

If he or she happens to notice that some items are out of stock, they are reordered. In

retailing, the difficulty with the eyeball system is that a particularly good item may be

out of stock for sometime before anyone notices. Throughout the time it is out of

stock, sales are being lost on it. Similarly, in a small manufacturing operation, low

stocks of some particularly critical item may not be noticed until there are none left.

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Then production suffers until the supply of that part can be replenished. Such

unsystematic but simple retailers and manufacturers to their inherent disadvantage.

Reserve Stock (or Brown Bag) System

This approach is much more systematic than the eyeball system. It involves

keeping a reserve stock of items aside, often literally in a brown bag placed at the rear

of the stock bin or storage area. When the last unit of open inventory is used, the

brown bag of reserve stock is opened and the new supplies it contains are placed in

the bin as open stock. At this time, a reorder is immediately placed. If the reserve

stock quantity has been calculated properly, the new shipment should arrive just as the

last of the reserve stock is being used. In order to calculate the proper reserve stock

quantity, it is necessary to know the rate of product usage and the order cycle delivery

time. Thus, if the rate of product units sold is 100 units per week and the order cycle

delivery time is two weeks, the appropriate reserve stock would consist of 200 units

(I00u x 2w). This is fine as long as the two-week cycle holds. If the order cycle is

extended, the reserve stock quantities must be increased. When the new order arrives,

the reserve stock amount is packaged again and placed at the rear of the storage area.

This is a very simple system to operate and one that is highly effective for virtually

any type of organization. The variations on the reserve stock system merely involve

the management of the reserve stock itself. Larger items may remain in inventory but

be cordoned off in some way to indicate that it is the reserve stock and should trigger

a reorder.

Perpetual Inventory Systems

Various types of perpetual inventory systems include manual, card-oriented,

and computer- operated systems. In computer-operated systems, a programmed

instruction referred to commonly as a trigger, automatically transmits an order to the

appropriate vendor once supplies fall below a prescribed level. The purpose of each of

the three types of perpetual inventory approaches is to tally either the unit use or the

dollar use (or both) of different items and product lines. This information will serve to

help avoid stock-outs and to maintain a constant evaluation of the sales of different

product lines to see where the emphasis should be placed for both selling and buying.

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Stock Control

A stock control system should keep you aware of the quantity of each kind of

merchandise on hand. An effective system will provide you with a guide for what,

when, and how much to buy of each style, color, size, price and brand. It will reduce

the number of lost sales resulting from being out of stock of merchandise in popular

demand. The system will also locate slow selling articles and help indicate changes in

customer preferences. The size of your establishment and the number of people

employed are determining factors in devising an effective stock control plan. Can you

keep control by observation? Should you use on-hand/on order/sold record?

Detachable ticket stub? Checklist? And/or physical inventory? If so, how often?

With the observation method (the eyeball system), unless the people using it

have an unusually sharp sense of quantity and sales patterns, it is difficult to keep a

satisfactory check on merchandise depletion. It means that you record shortages of

goods or reorders as the need for them occurs to you. Without a better checking

system, orders may only be placed at the time of the salesman's regular visit,

regardless of when they are actually needed. Although it may be the simplest system,

it also can often result in lost sales or production delays. Detachable stubs or tickets

placed on merchandise provide a good means of control. The stubs, containing

information identifying the articles, are removed at the time the items are sold. The

accumulated stubs are then posted regularly to the perpetual inventory system by hand

or through the use of an optical scanner. A checklist, often provided by wholesalers, is

another counting tool. The checklist provides space to record the items carried, the

selling price, cost price, and minimum quantities to be ordered of each. It also

contains a column in which to note whether the stock on hand is sufficient and when

to reorder. This is another very simple device that provides the level of information

required to make knowledgeable decisions about effective inventory management.

Most smaller operations today, except for the very smallest, are using some

form of a perpetual online system to record the movement of inventories into and out

of their facilities. In a retail operation, the clerk at the register merely scans the ticket

with a reader, and the system shows the current price and removes the item from the

inventory control system. A similar process occurs in a manufacturing operation,

except that the "sale" is actually a transfer of the inventory from control to production.

This is a particularly critical system in a large operation such as a grocery store where

they regularly maintain 12,000 plus items. Often a vendor will provide on-site or

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computerized assistance needed to help their smaller customers maintain a good

understanding of their own inventory levels and so keep them in balance

Inventory Control Records

Inventory control records are essential to making buy-and-sell decisions. Some

companies control their stock by taking physical inventories at regular intervals,

monthly or quarterly. Others use a dollar inventory record that gives a rough idea of

what the inventory may be from day to day in terms of dollars. If your stock is made

up of thousands of items, as it is for a convenience type store, dollar control may be

more practical than physical control. However, even with this method, an inventory

count must be taken periodically to verify the levels of inventory by item.

Perpetual inventory control records are most practical for big-ticket items.

With such items it is quite suitable to hand count the starting inventory, maintain a

card for each item or group of items, and reduce the item count each time a unit is

sold or transferred out of inventory. Periodic physical counts are taken to verify the

accuracy of the inventory card.

Out-of-stock sheets, sometimes called want sheets, notify the buyer that it is

time to reorder an item. Experience with the rate of turnover of an item will help

indicate the level of inventory at which the unit should be reordered to make sure that

the new merchandise arrives before the stock is totally exhausted.

Open-to-buy records help to prevent ordering more than is needed to meet

demand or to stay within a budget. These records adjust your order rate to the sales

rate. They provide a running account of the dollar amount that may be bought without

departing significantly from the pre- established inventory levels. An open-to-buy

record is related to the inventory budget. It is the difference between what has been

budgeted and what has been spent. Each time a sale is made, open-to-buy is increased

(inventory is reduced). Each time merchandise is purchased; open-to-buy is reduced

(inventory is increased). The net effect is to help maintain a balance among product

lies within the business, and to keep the business from getting overloaded in one

particular area.

Purchase order files keep track of what has been ordered and the status or

expected receipt date of materials. It is convenient to maintain these files by using a

copy of each purchase order that is written. Notations can be added or merchandise

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needs updated directly on the copy of the purchase order with respect to changes in

price or delivery dates.

Supplier files are valuable references on suppliers and can be very helpful in

negotiating price, delivery and terms. Extra copies of purchase orders can be used to

create these files, organized alphabetically by supplier, and can provide a fast way to

determine how much business is done with each vendor. Purchase order copies also

serve to document ordering habits and procedures and so may be used to help reveal

and/or resolve future potential problems.

Returned goods files provide a continuous record of merchandise that has

been returned to suppliers. They should indicate amounts, dates and reasons for the

returns. This information is useful in controlling debits, credits and quality Issues.

Price books, maintained in alphabetical order according to supplier, provide a

record of purchase prices, selling prices, markdowns, and markups. It is important to

keep this record completely up to date in order to be able to access the latest price and

profit information on materials purchased for resale.

Controlling Inventory

Controlling inventory does not have to be an onerous or complex proposition.

It is a process and thoughtful inventory management. There are no hard and fast rules

to abide by, but some extremely useful guidelines to help your thinking about the

subject. A five step process has been designed that will help any business bring this

potential problem under control to think systematically through the process and allow

the business to make the most efficient use possible of the resources represented. The

final decisions, of course, must be the result of good judgment, and not the product of

a mechanical set of formulas.

STEP 1: Inventory Planning

Inventory control requires inventory planning. Inventory refers to more than

the goods on hand in the retail operation, service business, or manufacturing facility.

It also represents goods that must be in transit for arrival after the goods in the store or

plant are sold or used. An ideal inventory control system would arrange for the arrival

of new goods at the same moment the last item has been sold or used. The economic

order quantity, or base orders, depends upon the amount of cash (or credit) available

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to invest in inventories, the number of units that qualify for a quantity discount from

the manufacturer, and the amount of time goods spend in shipment.

STEP 2: Establish order cycles

If demand can be predicted for the product or if demand can be measured on a

regular basis, regular ordering quantities can be setup that take into consideration the

most economic relationships among the costs of preparing an order, the aggregate

shipping costs, and the economic order cost. When demand is regular, it is possible to

program regular ordering levels so that stock-outs will be avoided and costs will be

minimized. If it is known that every so many weeks or months a certain quantity of

goods will be sold at a steady pace, then replacements should be scheduled to arrive

with equal regularity. Time should be spent developing a system tailored to the needs

of each business. It is useful to focus on items whose costs justify such control,

recognizing that in some cases control efforts may cost more the items worth. At the

same time, it is also necessary to include low return items that are critical to the

overall sales effort. If the business experiences seasonal cycles, it is important to

recognize the demands that will be placed on suppliers as well as other sellers. A

given firm must recognize that if it begins to run out of product in the middle of a

busy season, other sellers are also beginning to run out and are looking for more

goods. The problem is compounded in that the producer may have already switched

over to next season’s production and so is not interested in (or probably even capable

of) filling any further orders for the current selling season. Production resources are

likely to already be allocated to filling orders for the next selling season. Changes in

this momentum would be extremely costly for both the supplier and the customer. On

the other hand, because suppliers have problems with inventory control, just as sellers

do, they may be interested in making deals to induce customers to purchase

inventories off season, usually at substantial savings. They want to shift the carrying

costs of purchase and storage from the seller to the buyer. Thus, there are seasonal

implications to inventory control as well, both positive and negative. The point is that

these seasonable implications must be built into the planning process in order to

support an effective inventory management system.

STEP 3: Balance Inventory Levels

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Efficient or inefficient management of merchandise inventory by a firm is a

major factor between healthy profits and operating at a loss. There are both market-

related and budget-related issues that must be dealt with in terms of coming up with

an ideal inventory balance :

a) Is the inventory correct for the market being served?

b) Does the inventory have the proper turnover?

c) What is the ideal inventory for a typical retailer or wholesaler in this business?

To answer the last question first, the ideal inventory is the inventory that does

not lose profitable sales and can still justify the investment in each part of its whole.

An inventory that is not compatible with the firm’s market will lose profitable sales.

Customers who cannot find the items they desire in one store or from one supplier are

forced to go to a competitor. Customer will be especially irritated if the item out of

stock is one they would normally expect to find from such a supplier. Repeated

experiences of this type will motivate customers to become regular customers of

competitors.

STEP 4: Review Stocks

Items sitting on the shelf as obsolete inventory are simply dead capital.

Keeping inventory up to date and devoid of obsolete merchandise is another critical

aspect of good inventory control. This is particularly important with style

merchandise, but it is important with any merchandise that is turning at a lower rate

than the average stock turns for that particular business. One of the important

principles newer sellers frequently find difficult is the need to mark down

merchandise that is not moving well.

Markups are usually highest when a new style first comes out. As the style

fades, efficient sellers gradually begin to mark it down to avoid being stuck with large

inventories, thus keeping inventory capital working. They will begin to mark down

their inventory, take less gross margin, and return the funds to working capital rather

than have their investment stand on the shelves as obsolete merchandise. Markdowns

are an important part of the working capital cycle. Even though the margins on

markdown sales are lower, turning these items into cash allows you to purchase other,

more current goods, where you can make the margin you desire.

Keeping an inventory fresh and up to date requires constant attention by any

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organization, large or small. Style merchandise should be disposed of before the style

fades. Fad merchandise must have its inventory levels kept in line with the passing

fancy. Obsolete merchandise usually must be sold at less than normal markup or even

as loss leaders where it is priced more competitively. Loss leader pricing strategies

can also serve to attract more' consumer traffic for the business thus creating

opportunities to sell other merchandise as well as well as the obsolete items.

Technologically obsolete merchandise should normally be removed from inventory at

any cost.

Stock turnover is really the way businesses make money. It is not so much the

profit per unit of sale that makes money for the business, but sales on a regular basis

over time that eventually results in profitability. The stock turnover rate is the rate at

which the average inventory is replaced or turned over, throughout a pre-defined

standard operating period, typically one year. It is generally seen as the multiple that

sales represent of the average inventory for a given period of time.

Turnover averages are available for virtually any industry or business

maintaining inventories and having sales. These figures act as an efficient and

effective benchmark with which to compare the business in question, in order to

determine its effectiveness relative to its capital investment. Too frequent inventory

turns can be as great a potential problem as too few. Too frequent inventory turns may

indicate the business is trying to overwork a limited capital base, and may carry with

it the attendant costs of stock-outs and unhappy and lost customers. Stock turns or

turnover, is the number of times the "average" inventory of a given product is sold

annually. It is an important concept because it helps to determine what the inventory

level should be to achieve or support the sales levels predicted or desired. Inventory

turnover is computed by dividing the volume of goods sold by the average inventory.

Stock turns or inventory turnover can be calculated by the following equations:

Stock Turn = Cost of Goods Sold

Average Inventory at Cost

Stock Turn = Sales

Average Inventory at Sales Value

If the inventory is recorded at cost, stock turn equals cost of goods sold

divided by the aswverage inventory. If the inventory is recorded at sales value, stock

turn is equal to sales divided by average inventory. Stock turns four times a year on

the average for many businesses. Jewelry stores are slow, with two turns a year, and

19

grocery stores may go up to 45 turns a year. If the dollar value of a particular

inventory compares favorably with the industry average, but the turnover of the

inventory is less than the industry average, a further analysis of that inventory is

needed. Is it too heavy in some areas? Are there reasons that suggest more inventories

are needed in certain categories? Are there [conditions peculiar to that particular firm?

The point is that all markets are not uniform and circumstances may be found that will

justify a variation from average figures.

In the accumulation of comparative data for any particular type of firm, a wide

variation will be found for most significant statistical comparisons. Averages are just

that, and often most firms in the group are somewhat different from that result.

Nevertheless, they serve as very useful guides for the adequacy of industry turnover,

and for other ratios as well. The important thing for each firm is to know how the firm

compares with the averages and to deter- mine whether deviations from the averages

are to its benefit or disadvantage .

STEP 5: Follow-up and Control

Periodic reviews of the inventory to detect slow-moving or obsolete stock and

to identify fast sellers are essential for proper inventory management. Taking regular

and periodic inventories must be more than just totaling the costs. Any clerk can do

the work of recording an inventory. However, it is the responsibility of key

management to study the figures and review the items themselves in order to make

correct decisions about the disposal, replacement, or discontinuance of different

segments of the inventory base.

Just as an airline cannot make money with its airplanes on the ground, a firm

cannot earn a profit in the absence of sales of goods. Keeping the inventory attractive

to customers is a prime prerequisite for healthy sales. Again, the seller's inventory is

usually his largest investment. It will earn profits in direct proportion to the effort and

skill applied in its management.

Inventory quantities must be organized and measured carefully. Minimum

stocks must be assured to prevent stock-outs or the lack of product. At the same time,

they must be balanced against excessive inventory because of carrying costs. In larger

retail organizations and in many manufacturing operations, purchasing has evolved as

20

a distinct new and separate phase of management to achieve the dual objective of

higher turnover and lower investment. If this type of strategy is to be utilized,

however, extremely careful attention and constant review must be built into the

management system in order to avoid getting caught short by unexpected changes in

the larger business environment.

Caution and periodic review of reorder points and quantities are a must.

Individual market size of some products can change suddenly and corrections should

be made.

Source: U.S. Small Business Administration

Edited by SCORE 471

21

CHAPTER III

METHOD OF DATA PROCESSING

AND COMPANY’S EXISTING CONDITION

Basically this chapter consists of the explanation about how researcher collects

and processes the data

Saunders, Lewis and thornhill (2003) define business and management

research as undertaking systematic research to find out things about business and

management. Business and management research not only should provide findings

that advance knowledge and understanding, it also should address business issues and

practical managerial problems (Saunders et all, 2003)

The research process usually includes formulating and clarifying a topic,

reviewing the literature, choosing a strategy, collecting data, anlyzing data and writing

up (Saunders at al, 2003). The research process not strictly sequential in reality, the

researcher often needs to revisit each stage many times in order to refine the ideas.

3.1 Data Collecting & Processing 3.1.1 Primary Data

The author collected primary data mainly through in depth-interview with the

management of the company and through non participant observations in the

fieldwork, such as looking into the information system, visiting the warehouses and

observing the operational process of warehouse activities. Emails were used to send

out questions and get responses and other data from some interviewees. The author

prepared the interview questions in advance and also raised unprepared questions of

relevance when interacting with the interviewees during the conversations. The author

used semi-structured and unstructured interviews approach to all the interviews that

were conducted. Using unstructured interview approach gave the authors greatest

flexibility in picking up as many clues as she would to draw a clear picture of the

facts. While semi-strcutured interview approach was applied to the later stage of data

collection action, which assisted the author in keeping focus on identified questions

and digging deeper into the questions, however, concurrently allowed a certain degree

of flexibility during the interview.

22

a) Participant of Interview

The participant of interview are someone who involve in all activities in suply

chain : supply planner, material, progressor, storekeeper, substorekeeper, assistant

manager process, assistant manager packing.

In qualitative approach, the research method that is very optimal for obtaining

data would be the interview process . Interview process that the researcher would like

to conduct later will be done with the help from Raw Material Store Department,

Supply Planning Department, Supply Management Department and Packing & Proses

Department as user. The researcher will ask some questions related to the problem

that we concern in this research.. When conducting the interview, the researcher

choose some respondents who involve in Supply Chain Non Soapy Detergent

Factory. Below are the respondent profiles..

a) Respondents Profiles

1. Supply Planning Assistant Manager

Supply Planning Assistant Manager is Pak Fata Firmansyah. He is charge for

planning activity related to capacity, material, production planning &

inventory control

2. Assistant Manager Production - Packing Line NSD Factory

Assistant Manager Packing Line is Pak Prince Tambunan. He is charge in

production activity specially for managing labour, production performance,

waste in Packing Line Department.

3. Assistant Manager Powder Making Plant –Processing NSD Factory

Asisstant Manager Powder Making Plant is Pak Oktanu Riyanto. He is charge

in production activity specially for process powder & finish goods making.

4. Material Progressor

Material Progressor is Pak Affandi. He is charge in planning activity who plan

RDS (Rolling Delivery Schedule) & monitoring delivery material

5. Storekeepeer Packaging Material (PM)

Storekeeper PM is Pak Ratmono. He is charge in RMS activtiy as storekeeper

who monitoring avaibility packaging material who responsilbe for Project

Replenishment in Packaging Material.

6. Storekeeper Raw Material

Storekeeper Raw Material are Bu Tina Oktiana. She is charge in RMS

Department activity as storekeeper who responsible for managing the flow of

23

inventory if there’s any incoming materials from receiving or any requirement

from other departments, report the inventory level, and maintain the

availibility material..

7. Substorekeeper

Substorekeeper is Pak Udin Safrudin. He is charge in Substore Department as

Substorekeepr who responsible for preparation material direct to production

(proses & packing line) based on weekly production plan and he also

resposbile for loss & gain material compare to receipe in systems.

Those people are selected to be respondent of the interview because they are

who directly involve to the activity in RMS Department within NSD Factory. Since

the main focus of this skripsi will be so much related to the Planning Department,

therefore acquiring information from the people which their daily activities is related

with supply planning activity will be needed

3.1.1.2 Periods of Interview

The interview conducted in October to December 2013. Due the limitation

time for conducting interview, the interview done by email & quetionaire.

3.1.1.3 Object of Interview

As it is stated before, in qualitative apporach, the research method that is very

obtaining data would be the interview process. The researcher has designed several

questions that would be needed in order to answer the problems that we talk about in

this skripsi. Below are some Question (Q) and Answer (A) that are provided by the

researcher during the interview process with the staffs at PT. Unilever Indonesia Tbk.

Those area several questions an the response from the employees at PT.

Unilever Indonesia NSD Factory during the interview session with the researcher.

3.1.1.4 Place of Interview

Since it is a research that is conducted only on particular object of study, the

process of collecting the data and all of necessary documents will be done in PT.

Unilever Indonesia Tbk.

24

3.1.1.5 How

Conduct interview to get analysis of the situation/problem need information and

purpose study (specification of study task) specified objectives (choose of

approach methods & technic plan of invetigation Basic database result

conclution recomendation

Figure 3.1: Routine of a typical project

Souce 13 Lekvall & Wahlbin. 2001. Information för marknadsföringsbeslut, pp. 183-191

Quetions (Q) & Answer (A) :

Q1 : Kindly explain what factors which influence shortage material?

A1 : “Factors which influence in shortage material usually over lead time material

due when planning arrange delivery schedule to supplier, the barriers are they

must preparation raw material for their production whcih need time for

preparation matetial and supplier production

Quality Issue can make cause shortage material due incoming material must

qualtiy check first to prevent if any defect or substandard material based on

specification which have been agreed by vendor and development. If any

material defect will be reduced quantity material which ready stock.

Force majeur like strike, flood, supplier force shutdown and breakdown in

supplier will be impact to leadtime and will be delay incoming material to the

factory.

25

Over sales/high possitive demand bias will be impact to uneffecient inventory

due production will be increase not based on weekly prodcution plan whivh

has been committed in meeting procuction planning.”

(By Mr. Fata Supply Planning Assistant Manager and By Mr. Oktanu Riyanto

Assistant Manager Powder Making Plant Processing)

Q2 : Kindly give alternatives solution to preventive shortage material

A1 : Mr. Fata said : “Alternatives solution to preventive shortage material find

explore alternative supplier as back up if any problem with main supplier,

reduce leadtime delivery material and calculate safety stock and find explore

alternative material or subtitute material”

A2 : Mr. Oktanu said : “ To prevent shortage material for qualtiy issue, need more

engagement and commitment from supllier side, have alternatives supplier as

back up if main suppliers faces problems, increase tolerance of safety stock for

sisky material (specially for imported material) and for single supplier snf

routine and dicipline in recording material consumptiomn from production to

know loss & gain material”.

Q3 : Kindly explain what factors which influence overstock material

A1 : Mr. Fata answer : “Factors which influence overstock material longlead time

material (long frozen lead time), in flexible supplier for delivery, strategic

investment buying when low price in certian period and seasonal material and

any negative demand bias”

A2 : Mr. Oktanu said : “ Many factors which influence overstock material due the

low demand/sales drop while materials are still ordering, under dose/under

consumption of materials in production and miss coordination from planning

and procurement team and suppliers keep delivering materials”.

Q4 : Kindly give alternatives solution to prevent overstock material

A1 : Mr. Fata said : “Alternatives solution to prevent overstock material are reduce

lead time material delivery (e.g. localized), increase felxibility of supplier,

managing Raw Material & Packaing Material by consignment, VMI,

Replenishment, JIT”.

26

A2 : Mr Oktanu said : “ To prevent overstock materialare to close coordination with

MSO and demand planning for order and sales forecast in the upcoming

weeks, routine record of what materials that under consumption of materials

in Production, close coordination with procurement team on opening PO for

supplier vs demand”.

Those are several quest;ons and the response from the employee of PT.

Unilever Indonesia during the interview session with the researcher

3.1.2 Secondary Data As for the secondary data the researcher managed to obtain several data.

Because the example of problem that we talk about in this case is reducing inventory

to prevent overstock & shortage materials

3.1.2.1 Documents

Collecting the related documents is also will be helpful for conducting this

research. The document itself can be act the physical evidence of whats actual

business process in Planning & RMS Department as below :

SNP

PPDS

Deployment

Planned Order

STR

Key Process in SNP

Forecast at LocationInput Input :

• Forecast

Output :• Planned Order • STR

Output

Output

MRP

Forecast at National

Figure 3.2 Key Process in SNP

Source : Business Process in Planning.ppt

27

Depot

Key Diagrammatic Process in DP – SNP / Location Based Planning

Forecast at Location

Forecast at National

Depot Depot DepotDepot

CDC JktCDC Sby

Manufacturing

BaselineMI

Proportional Factor

Safety Stock10

Distribution Demand = 30

Stock=10

Fc=100

Fc=20 Fc=20 Fc=20 Fc=20 Fc=20

Stock = 0

Distribution Demand(20)+(10-0)=30

Stock=10Distribution Demand = 20+20=40

SS=10 SS=10SS=10SS=10

Stock=10 Stock=20Distribution Demand =

20+(10-10)+20+(10-20)

= 30

Distribution Demand = 40

Total Demand = 100

Production Plan = 100 – 0= 100

Safety Stock=20 Safety Stock=40Stock = 20 Stock = 40

Lot sizeStock = 0

Figure 3.3 Key Dragmatic Process in DP-SNP Source : Business Process in Planning.ppt

Demand – Supply Flow

o The following is an illustration of SNP and Deployment process

Supply

at source loc

Demand

at destination locStep 1 – Request for

Replenishment

(constrained in optimizer)

SNP

Step 2 -Confirm the replenishmentDeployment

Planning hor = 104 w

Planning horizon = 7 d

BOF CDC

CDC

Depot

Depot

Figure 3.4 Key Demand Supply Flow Source : Business Process in Planning.ppt

28

A day without improvement is a day lost..

PLANNING PROCESS

• Optimizing the usage of SAP APO, SAP ECC & SAP BW to support Planning Process

SNP

PPDS

MRP

CLEAN Transaction DATA

APO ECC

SAP BW

FINISH GOOD PLANNING

MATERIAL PLANNING

Planned Order

Planned OrderProcess Order

Process Order

Customer OrderDistribution Demand

Planned OrderPurchase Req.Purchase OrderStock Transfer

Forecast

Figure 3.5 Planning Proses Source : Business Process in Planning.ppt

6

SNP Master Data and Transaction Data

6

•Plant•Material•Contract/ Info Record•Work Center•Routing & BOM (Prod. Version)

APOECC

•Location•Product•Transportation Lane •Resource•Production Data Structure

ECC Master Data

APO Master Data

PeriodicCIF

Integration model

•Storage Location Stocks/Intransit Stocks•Sales Order•Process Order•Purchase Requisitions•Purchase Orders•Planned Orders

APOECCECC Transaction Data

APO Transaction Data

Real-TimeCIF

Integration model

•Storage Location Stocks/Intransit Stocks•Sales Order•Process Order•Purchase Requisitions•Purchase Orders•Planned Orders

Master Data: Periodic (Daily Background Job)

Transaction Data: Real-Time

Figure 3.6 SNP Master Data and Transaction Data

Source : Business Process in Planning.pp

29

The researcher also collected data list packaging & raw material data with the

total 58 items packaging materials and 56 items raw materials. Beside that for support

the analysis researched make summary raw & packaging material which ever shortage

(means no material or zero material in Raw Material Store storage location) from

October to December 2013.

3.1.2.2 Prosedure

Prosedure for all activity in PT. Unilever Indonesia based on Quality

Prosedure which has been implemented in all areas. Any review prosedure conductly

yearly to maintain the prosedure comply to actual activity.

There are several procedure for planning, buying & warehouse as below :

i. QC 46.0.01.00.00 Perencanaan Produksi

The objective for Production Planning is to ensure production plannng finish

goods in accordance with demand from the customer based on sales forecast

from Sales Department

Procedure

Procedure ISO for production planning shown in QC Procedure No.

46.0.01.00.00 Perencanaan Produksi :

Please see appendix QSHE Procedure HC 46.0.01.00.00 Rev Date 18 January

2011

ii. QC 46.0.02.00.00 Perencanaan Material

The objective or Matterial Planning is to ensure avaibility of raw & packaging

material to fullfill requirement production

Procedure

Procedure ISO for material planning shown in QC Procedure No.

46.0.02.00.00 Perencanaan material as below :

Please see appendicx QSHE Procedure HC 46.0.02.00.00 Rev Date 25 January

2013

iii. QC 46.0,21.00.00 Pembelian Material

The objective to manage raw & packaging material which need in production

process with quantity, quality & price which company curiosity, please see

Please see appendicx QSHE Procedure HC 46.0.21.00.00

iv. QC 46.1.60.00.00 Penerimaaan, Penyimpanan Raw & Packaging

Material

30

The obejctive to control receiving prosess, storage, delivery of raw &

packaging material in Raw Material NSD. Safety aspect, health & enviroment

aspect in this activity as part of process control which have been done by

consumer safety (HACCP)

Please see appendicx QSHE Procedure HC 46.1.60.00.00

3.1.2.3 Email

Email is a tools to get prirmary data to the interviewees.The author also

gathered List of daily stock material in RMS NSD Factory as the secondary data for

the skripsi project. that are most frequently used in the company’s business activity,

since the author considered these documents as small pieces of a research and they

were too many too collect and from the whole picture for outside researchers. Instead

the author acquired the relevant information from the manager through in dept-

interviews.

Purposive sampling is very usefull for researchers. The authors collected

national Stock Cover from wk 41 ot wk 46 report for 183 top sku which were selected

through purposive sampling. The sales report also is the secondary data and was

retrieved from the factory’s information system. The author set criteria for sampling

listed : they should be “alive” which mean they are ordered frequently, and they

should have different unit price-low, medium and high.

All the primary and secondary data collection in the factory was under the

permission of Suply Planning Assistant Manager and without any offence in ethical

rules during the whole research process.

Emails which researcher used to support analysis data as below :

1. Email related Preparation Closing Stock

Email issued by Supply Planing Assistant Manager on 27 December 2013

To : All planning & production

Re : Closing December 2013 update 26 Dec 2013

He said : “Reminder for preparation closing stock, Therefore please support,

evenhought production must maksimal, please do cycle count speciall for

material which high value different in physic & system”

31

Figure 3.7 DOH RM PM Plant 900

Source : researcher email

Figure 3.8 DOH WIP Plant 9000 Source researcher email

He said : “DOH PM over target 34 Bill vs.19 Bill.”

Othetr email from Supply Planning Manager to all production and planning,

on 27th December 2013 for preparation closing stock , he said : “We must

focus to PM & WIP stock, please validate quantity stock & do cycle count

specially for key material, and validate all transaction to consumpt

WIP/liquids stock.”

Figure 3.9 Email preparation closing stock to anticipate higher DOH Source : Researcher Own Data

Emails related to reduce Day on Hand Material (DOH) ussually issued by

Supply Planinig Manager, this concerned to to reminder closed monitoring before

closing to minimize value of stock on hand material to minimize DOH.

2. Email related slow moving & expired materal :

Email from Supply Plannig Manager on 22 November 2013 RE : SLOB &

Expire Material

He said : “Please verrification data for hard closing”

Figure 3.10 Email SLOB (slow moving) & expired material Source : Researcher Own Data

3. Email related to shortage material

Shortage Parfume “A” from Manufacturig Manager :

32

Email from Manufacturing Manager NSD Factory to All Supply Planning &

Production on Wednesday, 2nd October 2013 Regarding Plant Stop Spray Parfume

“A” Shortage he said :

“Please help to solve & eliminate shortage problem to stabilize output production

after transition time, I hope no issue again after this.”

Figure 3.11 Email shortage Parfume “A” Source : Researcher Own Data

Email from Material Progressor to production team, she said “that she got

confirmation from supplier if supplier lack transportation, so no transportation to

delivery this perfume to the factory” and she prosposed to RMS to implemantaion for

thes new perfume.”

Figure 3.12 Email preventive action to shortage Parfume “A” Source : Researcher Own Data

Another email from Assistant Suply Planning Manager regarding Shortage Perfume

“A” to Buying & Production Team on 10 January 2014, he said : “Please be informed

that produstion stop due material perfume which will be arrived last night untill this

morning not arrived yet. And supplier not informed yet the progress”

Figure 3.13 Email 2nd Shortage Parfume “A” Source : Researcher Own Data

4. Email Shortage “SAL”

Email Supply Material Head Office to supplier “I”

“We are deeply disappointed of the Service Level from “I” supplier that cause us to Stop Production (due to SAL Shortage) as we speak. This should have been communicated better than this, as this leaves us no option but to Stop our production in Factory. And until now we receive no feedback from “I”.The situation is clearly explained in below email from Planning, We require an urgent feedback by today. Lets improve the ways of working to avoid such case happen again in the future. Let us have your very best support on this.”

Email shortage SAL from Ass Supply Planning to supplier “I” on Wednesday, 11 Sepetember 2013, Subject Critical Soda Ash Ligh, he said :

“ Please confirmation, if any barriers with supplying SAL, which caused to our production caused shortge SAL eventhough we have reminder replenishment SALt which in minimum stock for two days”

33

Figure 3.14 Email Shortage “SAL” Source : Researcher Own Data

5. Emails regarding overstock material as below:

Email from Supply Panning Manager HPC Factory to All Supply Planning Team &

Production Team on Wedensday, 2nd October 2013 Regarding overstock Packaging

Material OPP Tape (please see figure 3.14 Overstokc OPP Tape):

From primary data he statement : “ Stock OPP Tape will be continue increase to Rp.

2.36 Bill (12% value contribution to total packaging) and any change to decreased to

value stock Rp. 1.2 Bill = decreased Rp.1.1 Bill (6% to total packaging value).

Below tabel Total RM/PM in plant 9000 and 9014

Finding found:

1. BOM is not installed so it does not auto backflush since January 2013.

a. HHC Develompment

b. Fab Clean Liq Development

c. Fab Con ok, thanks dev, just need to recheck again alone.

d. Fab Clean Powder ok, thanks Dev just need anymore validation only.

2. Stock Accuracy:

a. Ask RMS do a stock take, especially for very high numbers

3. Ordering

a. Progressor please do not order in advance if there is no BOM, and his

contact with the Assistant Manager for clarification with the relevant sections of what

material they will be really really needed or not!!!”

34

Some action needs to be done from the following teams as below :

Figure 3.15 Email Overstock OPP Tape

Source : Researcher Own Data

3.2 Company Profile & History

a. Deed of establishment

PT Unilever Indonesia Tbk (the company) was established on 5 December

1933 as Lever’s Zeepfabrieken N.V. by deed No. 23 of Mr. A.H. van Ophuijsen,

notary in Batavia. This deed was approved by the Gouverneur Generaal van

Nederlandsch-Indie under No. 14 on 16 December 1933, registered at the Raad van

Justitie in Batavia under No. 302 on 22 December 1933 and published in Supplement

No. 3 to the Javasche Courant on 9 January 1934.

b. PT Unilever Indonesia Tbk

By deed No. 171 of notary public Mrs. Kartini Muljadi SH dated 22 July 1980

the company’s name was changed to PT Unilever Indonesia. By deed No. 92 of

notary public Mr. Mudofir Hadi SH dated 30 June 1997 the company’s name was

changed to PT Unilever Indonesia Tbk. This deed was approved by the Minister of

Justice under No.C2-1.049HT.01.04 TH.98 dated 23 February 1998 and published in

Supplement No. 39 to State Gazette No. 2620 of 15 May 1998.

35

c. Go public

The company listed 15% of its shares on the Jakarta Stock Exchange and

Surabaya Stock Exchange following approval from the Chairman of Badan Pelaksana

Pasar Modal (Bapepam) No.SI-009/PM/E/ 1981 on 16 November 1981.

d. Line of business

The company is engaged in manufacturing soaps, detergents, margarine,

edible oil and dairy based foods, ice cream, snacks, tea based beverages and cosmetic

products.

As approved at the company’s Annual General Meeting on 13 June 2000,

which was notarized by deed No. 82 of notary public Singgih Susilo SH dated 14 June

2000 the company also acts as a main distributor and provides marketing research

services. This deed was approved by the Minister of Law and Legislation (formerly

Minister of Justice) of the Republic of Indonesia under decree No. C-18482

HT.01.04-TH.2000.

e. Commercial production

The company commenced commercial operations in 1933.

f. Locations & factories

The company’s head office is located in Jakarta and its factories are located in

Cikarang and Surabaya.

g. Timeline

1920 -30 Import by van den Bergh, Jurgen and Brothers

1933 Soap Factory - Lever’s Zeepfabrieken NV – Angke, Jakarta

1936 Margarine and oil production van den Bergh’s Fabrieken NV -

Angke, Jakarta

1941 Cosmetics factory - Colibri NV, Surabaya

1942 -46 Unilever control discontinued (World War II)

1965 -66 Under government control

1967 Control of business back to Unilever under foreign investment law

1981 Go public and listed in Jakarta Stock Exchange

1982 Construction of Elida Gibbs Factory in Rungkut, Surabaya

1988 Transfer of the Toilet Soap Factory from Colibri to Rungkut

Factory, Surabaya

Enter into the tea business

1992 Opening of ice cream factory

36

1995 Construction of detergents and foods factory in Cikarang, Bekasi

1996 -98 Consolidation of manufacturing facilities – Cikarang, Rungkut

1999 NSD Liquid Detergents – Cikarang

2000 Enter into soya sauce business

2001 Opening of tea factory – Cikarang

2002 Opening of central distribution centre Jakarta

2003 Enter into mosquito coil business

2004 Enter into snack business

2005 Opening of liquid / shampoo factory Cikarang

2008 Enter into fruit-based Vitality drinks business

3.3 Organizational Structure

Figure 4.2 : PT. Unilever Indonesia Tbk. Organizational Structure

Figure 3.16 Organization Structure of PT. Unilever Indonesia Tbk.

Source Unilever’s Annual Report 2007

The Red Circle indicates the department where the researcher takes research. Actually

the researcher has assigned as supervisor for Raw Material Store Department in NSD

Facory which is including for category HPC.

a. Board of Directors

President Director : Maurits Daniel Rudolf Lalisang.

Vp Supply Chain Director : Biswaranjan Sen

Finance Director : Franklin Chan Gomez

Personal Care : Debora Herawati Sadrach

Customer Development Director : Hadrianus Setiawan

Ice Cream & Mktg Serv.Director : Ira Noviarti

Human Resource Director : Enni Sampurno

37

3.4 Company Vision & Mission

a. Unilever Indonesia Vision

“Unilever’s vision is to add vitality to life. We meet everyday needs for nutrition,

hygiene, and personal care with brands that help people fee; good, look good and get

more out of life.”

b. Unilever Indonesia Mission

a. Be the first and best in class in meeting the needs and aspirations of

consumers

b. Be the most preferred partner to our customers, consumers and

community

c. Remove non-value added activities from all processes

d. Employer of choice for high performance people

e. Aim for stretching targets for profitable growth and secure above

average rewards for employees and shareholders

f. Earn respect for integrity, care for community and environment.

4.4 HPC Powder Factory (NSD Factory)

HPC Powder Factory structure organization as below :

38

Organization Chart OfProduction Department

PT Unilever Indonesia Tbk.HPC FactoryCikarang - Bekasi

Doc. No : HC.41.0.02.00.01Page : 1/1

Revision No. : 7Date : 3-Jan-11

Copy No. :

BIGBAG DISCHARGE

(3 ORG)

SLURRY MAKING (3 ORG)

OPR. POST DOSING (6

ORG)

Prepared by : Approved by : Maulana Wahyu Jumantara

PRODUCTION MANAGER HPC

POWDER (Suwandi Yulia Putra)

BIN FILLING (3 ORG)

SULPHONATION LESDER (4 org)

LEADER RMS(1 Org)

LEADER PACKING 18

ORG)

PROCESS CONT. ANALYST (1 ORG)

Upstream Operator/Ass

Operator (4 0rg)

SUBSTOREKEEPER(1 Org)

RM/PM STOREKEEPER (3 Org)

Trouble Sooting (9

org)

Trouble Sooting (6

org)

WEIGHER OPERATOR

(2 org)

CHARGEHAND RM/PM

(5 Org)

FORKLIFT DRIVER(2 Org)OPERATOROPERATOR

LEADER PROCESS

(6 ORG)

ASST. Man. Mgr. NSD For Packing

(Immanuel Manurung)

ASST. Man. Mgr NSD for Sulph, & RMS (Agung R)

Asst.. Man. Mgr. NSD for

Processing

ASST. Man. Mgr. NSD For Packing (Rhandyka Jili

Prasanto

GMM HPC(Maulana Wahyu Jumantara)

ENGINEERING MANAGER HPC

(Cipto Utomo)

OPR. TOWER (6 ORG)

FORKLIFT (3 ORG)

Downstream Operator/Proc

ess Control Analyst (3 org)

Sulphur/Acid Mist Operator

(4 org)

Loading/unloading

Operator(3Org)

Speckle Operator(2 Org)

Figure 3.17 Organization Chart of Production Department

Source ISO Document HPC Factory

4.5 Raw Material Store Department (the red box) Raw Material Store Department are under Manufacturing Manager. That

department are Small Business Unit (SBU) which lead by Small Business Units

Leader.The SBU Leader must responsible for daily operation of RMS.

Inventory can be defined as the materials or supplies that a business carries to

sell or to provide inputs to the production process. On the balance sheet, inventory is

one of the largest investments made by a manufacturing company and represents

20–60 percent of total assets.

39

The main reason to carry inventory is to satisfy the needs of your customer.

The overall goal is to be able to hold the minimum amount of inventory necessary and

still be able to provide the desired level of customer service.

This research introduces you to the fundamentals of inventory and will

present topics such as the classifications of inventory and a method for determining

the level of control that is necessary for inventory items.

Also, we will explain processes for:

a. Locating and organizing storage areas

b. Reporting and recording the movement of material

c. Ordering

d. Determining different costs associated with inventory

e. Verifying the accuracy of inventory records

Cycle Supply in RMS NSD

Purchase Request PR by Supply

Planning

Purchase Order by Supply Materrial

(SM)

Rolling Delivery Schedule by

Planning

Delivery Material by vendor

Receiving Material by RMS

Create Reservation by Substore

TranseferingMaterial to Packing & Proses by RMS

Consumpt Matarial by Paccking &

Proses

Figure 3.18 Cycle Supply in RMS NSD

Source own data researcher

40

CHAPTER IV

ANALYSIS & EVALUATION

In this chapter the author will present his empirical findings about the business

practice of the studied factory and major issue that needs to be addressed in their

inventory management.

Analysis Qualitative research adopts the inductive approach . Such research is

conducted because of a lack of theory or existing theories are unable to explain

phenomena non convincingly. Because of this no hypotheses are put forward to guide

research. The qualitative researcher begins by observing phenomena and continues of

find patterns in the form of themes, categories, concepts and typologies that emerge.

Tentative hypothesis are introduced and additional information are collected to

explain the phenomenon.

Back to the purpose research of this project are :

1 To invetigate and indentify the reason behind uneffecient inventory management

in RMS NSD. Then author tried to purpose feasible managerial suggestions.

2 To improve inventory management through analysis, after examining the relevant

theories and understanding the business operational practice of PT. Unilever

Indonesia Tbk.

4.1 Identify the reason behind uneffecient inventory management

RMS NSD Uneffecient inventory can be identify if any material overstock or shortage

material.

Many factors which influence overstock material as below :

a. Missed Planing Schedulling

Missed Planning Schedulling can caused overstock or shortage material due

quantity stock will be increased/decreased every day if not proper in delivery

schedulling. If Planner Run MRP, create Planned Order, create Purchase Order, plan

Rolling Delivery Scheduled without consider phyisical stock position, and delivery

will be increase or decreased the stock position, if increased delivery can not

unloading due the limitation space in RMS NSD. If decreased stock will be shortage

41

material so the production will be stop which have ever stopped due the shortage

material.

b. Under and Over Consump Production

Under and over consumption in production will be impact to overstock

material due the planner will arrange delivery material based on calculation from Bill

Off Material (BOM).

If production consumpt material under BOM so the remain stock material will

be cumulative and will be overstock material and will be effect in MRP, Planned

Order, Purchase Request and Purchase Order so will be missed planning schedulling.

If production consumpt material over than BOM, stock material will be loss

and quantity stock will be decrease and for long time will be shortage due actual

physic less than quantity in SAP system. If no adjustment trough SAP by Physical

Inventory Document (PID), the material will be shortaged

c. Failure Delivery Supplier

Many factors which made failure delivery in supplier such as transportation,

no buffer stock in supplier, any breakdown production in supplier, strikes, flood, miss

communication etc. Sometimes quantity delivery supplier more than maksimum

replenishment or less than minimum quantity and more than quantity in RDS due

supplier wants to be maksimum to capacity trucking.

To avoid this case must improve communication with supplier about barries if

they send material more than maksimum quantity replenishment or RDS. Planner

must got confirmation from supllier after issueing RDS for preparation production

running in next week.

d. Breakdown Production

Running production sometimes not smooths running, sometimes any

breakdown in process and machine in packing line which not predictable.

If breakdown happen in proses production or machine in packing line, it will

be impact to stock material, due material which have delivered will be not consumed

so will become overstock material.

Action to be taken if the breakdown happend planner must reschedule RDS as

soon as posible to avoid overtstock material and to avoid material which have been

delivered can not unload.

42

f. Output production less than target Weekly Production Plan

Achievement output production sometimes not achieved as plan in weekly

production plan, sometimes more or sometimes less than target. If achievement

production less than target will be impact to stock material in RMS which not absorb

by production and become overstock material due any material which delivery based

on weekly Rolling Delivery Schedule .

g. Manuver Production

Sometimes any manuver in production due any changes demand or fluctuative

demand in midle week so material will be not absorbed and will be impact to

overstock material due material not need in production will keep.

h. Change Demand

As mentioned before change demand will be impact to plan production and

will be impact to stock and will be caused overstock material or shortage material.

“Face spesial challenge in keeping inventory at reasonable levels due

difficulty of forecasting demand and expectations of customers about product

avaibility” (Coyle et al., 2003)

“The challenge grown even bigger when we think about the diverstity of

products in terms of their color/design, package type, size and so on. To further explain

the problem, there is an accurate demand forecast, however the agregate demands

needs to be broken down by various specification of the product into subtotal demand

forecast to guide the stock keepeing units (SKUs) in the company in order to fulfill

customer’s order. But the subtotal demand forecast could be diverse, reaching dozens,

hundreds, or even thousand of categories , in this case they become trully difficult,

complex and time consumimg

The difficulty of forecasting demands accurately naturally results in two

problems, which are in opposite extreme, overstock and stock-out of inventory. As

companies strive to avoid lost sales from stock-out inventory, there is a tendency to

overstock. Nevertheles because keeping inventory is costly which definetly reduces the

profit margins, companies try to reduce inventory level, so appear the tendency to

stock out of inventory. We can get an overview of inventory management dilemma,

where to opposing powers keep pulling the inventory towards their own direcrions. It

is hard to balance the two powers all the time and station the inventory. At the right

level constantly “ (Inventory Control 0602 by SCORE Counselor’s to America Small

Business)

43

Based on the above reason & interview to all staff in NSD Factory average

factors which influencing shortage and over stock inventory are :

a. Planning Scheduling

b. Over and Under Consumpt Production

c. Supplier Failure Delivery

d. Output Production

e. Plant Breakdown

f. Manuver Production

g. Change Demand or Forecast

To analysis the data researcher will focus for one items packaging material, so

the researcher list down the packaging material which ever shortage as below :

From the above data’s Reel RAN 50 TPLX (Rinso Anti Noda 50 gr Triplex)

which several shortage almost shortage 52% happen in packaging material. So

44

researcher decided to analysis the root cause of shortage material For Reel RAN 50

TPLX .

From the interview with Storekeeper Packaging Material, researcher got the

reason why Reel RAN 50 TPLX shortage several times in October 2013?

4.2 How to improve inventory management.

Through analysis, after examining the relevant theories and understanding the

business operational practice of PT. Unilever Indonesia Tbsk and based on researcher

do observation, interview and documentation process have been conducted then we

already got the information and data that is needed regarding the problem that we

talked about in this research then the next step that we should do is analyzing those

data and information that. Due the scope & limitation this research, so reseracher

decided will be focused to the first root cause is Planning Schedulling as below :

Planning Scheduling

Procedure

Procedure ISO for material planning shown in QC Procedure No. 46.0.02.00.00

Material Planning (Perencanaan material) as below :

“Activities include routine material planning and launch / re -launch. For the next

routine activity following the procedure section 6.1 , whereas for the launch activity /

re -launch following the procedure section 6.2 .

6.1 . Routine Activities :

Routine activities include all activities performed to ensure the availability of

materials to meet production needs . The next activity performed each week by

Assistant Supply Planning Manager include :

45

6.1.1 . Material requirements calculated by the MRP in SAP automatically every day .

6.1.2 . The SAP system will provide information if there is a material that has entered

the lead time and need to be ordered in a specified time horizon in the form of "

Planned Order " . Material Planner further review and validation in SAP by changing

their status to " requisition " ( PR ) . Furthermore , Material Planner will turn into a

Purchase Order " ( PO ) .

6.1.3 . The availability of materials is monitored by using Material Stock Projection

Report ( HC.46.0.02.00.05 ) are downloaded from SAP and reviewed whether or not

material enough for the needs of production . If the stock of the material is too low or

too high of a target stock of material which has been determined , immediate

rescheduling of material delivery and immediately informed to suppliers via email or

fax .

6.1.5 . Progressor reviewing material and preparing the availability of materials for

the production of next week and inform the Assistant / Supply Planning Manager .

6.1.6 . Materials progressor check whether the delivery schedule in the weeks running

has been sent or not . If not immediately contact the supplier.”

Figure 4.1 QSHE Procedure HC 46.0.02.00.00 Rev date 25 January 2013 Source from ISO Procedure HPC Factory HC 46.0.02.00.00 January 2013

Observation Current Actiivty

Actual activity from the reseacher observation assistant supply planning have done

this rountine activity based on procedure as below :

All activity done to ensure avaibilty material to fullfill production requirement, this

step usually do :

1. Calculation requirement material done throungh MRP from SAP automaticly

every day

2. SAP system will give information if any material begin leadtime periods and

need to order in horizon time which has been planned in “Planned Order”.

After that material planner will review and validate in SAP and change the

status to be “Purchase Requisition” (PR). And continue change PR to be

“Purchase Order” (PO)

3. Monitoring avaibility material using Material Stock Projection Report (HC

46.0.02.00.00) which download by SAP and review whether this material

adequate or not for requirement production, if quantiity stock too low or too

46

high than stock material target which has been planned immediately

reschedule material delivery and as soon as informed supplier via email

4. If any material which storage by overflow warehouse, requirement material

will be direct calculate from the system

5. Material progressor review and prepare availabilty material for next week

prduction and informed to Assistant Supply Planning Manager

6. Material Progressor check whether delivery schedule in current week has

been delivery or not. If not delivery yet immediately call supplier

Based on Primary data, below the cases regarding uneffecient management

inventory. Researcher t ry to analysis case by case whih ever happen in NSD Factory

to get conclution how to improve in the future and to prevent this case will not

happened again

Emails regarding overstock material as below:

Email from Supply Panning Manager HPC Factory to All Supply Planning

Department & Production Department on Wedensday, 2nd October 2013 Regarding

overstock Packaging Material OPP Tape (please see figure 3.14 Overstokc OPP

Tape):

From primary he statement : “ Stock OPP Tape will be continue increase to

Rp. 2.36 Bill (12% value contribution to total packaging) and any change to

decreased to value stock Rp. 1.2 Bill = decreased Rp.1.1 Bill (6% to total packaging

value).

Below tabel Total RM/PM in plant 9000 and 9014

Finding found:

1. BOM is not installed so it does not auto backflush since January 2013.

47

a. HHC Dev.

b. Fab Clean Liq Dev.

c. Fab Con ok, thanks Devla just need to recheck again alone.

d. Fab Clean Powder ok, thanks Dev.just need anymore validation only.

2. Stock Accuracy:

a. Ask RMS do a stock take, especially for

very high numbers

3. Ordering

a. Progressor please do not order in advance if there is no BOM, and his

contact with the Assistant Manager for clarification with the relevant sections of what

material they will be really really needed or not!!!”

Some action needs to be done from the following teams as below :

From the above case regarding preventive action to eliminate overstock

material have been done by Supply Planning Manager. He & his team have finding

the rootcause which make increase the stock value :

1. Quantity in BOM not balcflush as material consumpt in SAP system due

the BOM not installed yet in SAP

48

2. Accuracy stock due any difference in stock & SAP system

3. Ordering material must be monitoring where any material will no longger

use

The above email mentioned how to eliminate overstock, shortage material &

action2 needs to be done by supply planning department as below :

1. Mapping material usage and material stock trend PIC Planner

2. Master Data Hygiene : BOM by Development, Safety Stock, min lot size,

roumding size, Plant & storage location by Planner

3. Transaction Data Hygiene : Past Due PO – List Down Past Due PO and

Past Due PO Cleaning by Planner

4. Stock Accuracy : Stock take by RMS & SS, stock adjuestment by SS & Sc

Finance

The investment in inventories should be just sufficient in the optimum level.

The major dangers of excessive inventories are:

(i) the unnecessary tie up of the firm’s funds and loss of profit.

(ii) excessive carrying cost, and

(iii) the risk of liquidity.

The excessive level of inventories consumes the funds of business, which

cannot be used for any other purpose and thus involves an opportunity cost. The

carrying cost, such as the cost of shortage, handling insurance, recording and

inspection, are also increased in proportion to the volume of inventories. This cost

will impair the concern profitability further.

On the other hand, a low level of inventories may result in frequent

interruptions in the production schedule resulting in under-utilization of capacity and

lower sales. The aim of inventory management thus should be to avoid excessive

inventory and inadequate inventory and to maintain adequate inventory for smooth

running of the business operations. Efforts should be made to place orders at the right

time with the right source to purchase the right quantity at the right price and quality.

The effective inventory management should

(i) maintain sufficient stock of raw material in the period of short supply and

anticipate price changes.

(ii) ensure a continuous supply of material to production department facilitating

uninterrupted production.

(iii) minimize the carrying cost and time.

49

(iv) maintain sufficient stock of finished goods for smooth sales operations.

(v) ensure that materials are available for use in production and production

services as and when required.

(vi) ensure that finished goods are available for delivery to customers to fulfil

orders, smooth sales operation and efficient customer service.

(vii) minimize investment in inventories and minimize the carrying cost and

time.

(viii) protect the inventory against deterioration, obsolescence and unauthorized use.

(ix) maintain sufficient stock of raw material in period of short supply and anticipate price changes.

(x) control investment in inventories and keep it at an optimum level.

(Journal 12 Chapter 6-Inventory Management and Control 191-192)

Emails regarding Shortage Material

Email from Manufacturing Manager NSD Factory to All Supply Planning &

Production on Wedensday, 2nd October 2013 Regarding Plant Stop Spray Parfume

“A” Shortage (please see figure 3.10 1st shortage Parfume Aragon):

From primary data he said :

“Please help to solve & eliminate shortage problem to stabilize output production

after transition time, I hope no issue again after this.”

Based on the above case shortage material Parfume “A” in Ocrober 2013 due

any barrier from the supplier which can not delivery on time due lack of

transportation to delivery to the factory and they got the trhasportaion at 18.30 and

arrival in the fatory at 22.00 so the security can not receiving this delivery due RMS

has been closed at 22.00 pm.

Other reason again perfume “A”n is new material and the shortage happen

when transition so material progressor not yet anticipation & know running rate

production.

Improvement for this case we must now running rate consumption an from the

runnnig rate consumption material so planning propose for the replanishment material

with minimum & maximum parfume must be keep in RMS as emial from Ita (RM

Material Progressor) who proposed replenishment with minimum & maximum stock

which will be implentation by RMS Team.

50

Email from Assistant Supply Planning Manager HPC Powder Factory to Panji

Assistant Manager Supply Material on Friday, 10 January 2014 regarding Plant Stop

Spray Parfume “A” Shortage (please see figure 3.12 2nd shortage Parfume “A”): He

said “ RAN Production stod due Parfume “A” which will be arrived not came and

supplier not update the progress. “

Based on the above email Parfume “A” shortage again eventhough

replenishment have been implemented but any missed with the suplier in preparing

this material due the material also imported, the supplier missed calculated in

preparing this material when the perfume arrival from overseas when factory only

buffer stock maksimum in 2 days running rate.

Eventhough the supplier effort for delivery direct to the factory but the

parfume has been shortage so the palnt stop spray in the night shift to delay

transportation from the port to the factory.

How to improve for this case, eventhough this material have been

implemented for 3 months and execute by Storekeeper but planning must always

monitoring avaibility material in supplier. Stock position supplier must monitoring

regularly for continuiting delivery replenishment and to prevent any buffer stock in

supplier

Shortage SAL

Email Supply Management Assistant Manager to supllier SAL

“We are deeply disappointed of the Service Level from xxx (supplier SAL) that cause

us to Stop Production (due to SAL Shortage) as we speak. This should have been

communicated better than this, as this leaves us no option but to Stop our production

in Factory. And until now we receive no feedback from xxx.

The situation is clearly explained in below email from Pak Fata, We require an urgent

feedback by today.

Lets improve the ways of working to avoid such case happen again in the future. Let

us have your very best support on this.”

Email : Assistant Supply Planning on September 11,2013 to supplier “I”

Subject: URGENT! Critical Stock SAL

51

“ Please confirmation what the problem in supplying SAL which have been impact to

our production eventhough replenishment stock in low stock & have veen highlight

issue for 2 days, please your support”

From the above email shortage SAL due the supplier not transparant regarding

their stock position and their barriers to delivery material eventhough RMS Team

always reminder stock replenishment everyday, the supllier not communicate before

the shortage happen and they not fullfill requirement from the factory

Gap between procedure & actual activy :

1. Some times if calculation only done through MRP from SAP system without

verification from actual stock in field so calculation will be missed due

quantitiy stock in SAP system sometimes not actually accurate due

consumption material in plant always fluctuative sometimes loss & gain, if

consumpt material under bom so quantitiy in actual physic will be more than

SAP, if material calculation & plan delivery only based on system material

will be overstock and quanttity will be higher than inventory target, and will

be effect to working capital.

2. Review & validate lead time for Purchase Request (PR) into Purchase Order

without consider actual loss & gain material will be impact to quantity

inventory in system and will be impact to planning schedulling

3. Monitoring avaibility material using Material Stock Projection Report (HC

46.0.02.00.00) which download by SAP and review whether this material

adequate or not for requirement production, if quantiity stock too low or too

high than stock material target which has been planned immediately

reschedule material delivery and as soon as informed supplier via email. In

actual observation monitoring avaibility material will be missed if material

progressor not consider actual stock physic in the field or no verrification with

any different stock in system and physic

4. For material storage in overflow warehouse will be missed if calculate only

for the system due sometimes warehouse admin in overflow not yet

transaction for receiving or not yet transfer posting due any cases when will

do Goods receipt & trasfer psoting to the factory, so the quantity stock in SAP

not accurately

52

5. Material progressor review and prepare availabilty material for next week

prduction and informed to Assistant Supply Planning Manager. Preparation &

review for preparation next weekly perduction sometimes missed missed in

no consider progress delivery in this week & remain actual stock quantitiy.

6. Material Progressor check whether delivery schedule in current week has

been delivery or not. If not delivery yet immediately call supplier. Monitoring

progress delivery must do by material progressor, sometimes material

progressor only made delivery schedule but not consistenly monitoring the

progress of delivery schedule

“Too large an inventory may not be justified because the turnover does not warrant investment. On the other hand, because products are not available to meet demand, too small an inventory may minimize sales and profits as customers go somewhere else to buy what they want where it is immediately available. Minimum inventories based on reordering time need to become important aspects of buying activity. Carrying costs, material purchases, and storage costs are all expensive. However, stockouts are expensive also. All of those costs can be minimized by efficient inventory policies.” (Inventory Control 0602 by SCORE Counselor’s to America Small Business)

B. Over and Under Consumption Production

1. Procedure

Based on confirmation from the planner & Assistant Process Production Mr.

Octanu consumpt material must refer to Biil Off Material (BOM) which has been

submitted by Product Developmetn and implemented to SAP system.

1. Observation Current Activity

Based on researcher observation, it is difficult to consumpt material same as

BOM (Bill of Material, in actual consumption material can be more or less due some

of material can be subtitute, can be as adjuster, can be fullfillment,

Email regarding more & less consumption material in production as below :

From Substorekeeper on 21 December 2013 regarding different actial consumption

vs. BOM. He said :”Based on pysical stock on 20 December morning any different for

material “C” in tanki 51.970 kg but any gain 52.259. kg, please see below data”

53

Email : Ass Supply Planning, regarding different Physic & actual on 20 December

2013. To RMS, Substore Team & Process Team, he said “ Please clarification

regarding different BOM & Physic for material “C”

“Please see below datas:

1. Stock in SAP per 20 Dec 1,059 KG; please see below screen shot

But, actual in storagee tank is 51 Ton GAIN 50 Ton.

2. Running rate BOM is ~20 TON . please see below screen shot. .

Actual consumpt for current 2 weeksttotal is 20 ton , or 10 ton perweek

where only 50% BOM

3. If overstock in NSD whcih caused demurrage for this import material due

system will suggest plan order.

Please do adjusment stock form now, & please confirmataio actual

consumpt per week in procentag BOM. “

Stock SAP Copolymer CP 5 :

Running Rate BOM ~20 ton per week

54

Actual consumpt for current 2 weeks :

Figure 4.2 Email Under Consumpt material Source Reseracher own data

55

Gap between procedure & current activity

Consumption material can not exactly same with the BOM (Bill Off Material).

Any material as adjuster, any material as subtitute other material and this case will be

impact to inventory and material requirement planning.

The step must be taken to improve this gap between procedure and actual

activity are :

1. In usage material team process must dicipline & consistent referrence to the

BOM (Bill Of Material)

2. Substore Team which responsible to stock position in system and physic

must always do cycle counting and monitoring stock in sytem and physic to

prevent if any loss and gain material which will be impact to MRP

(Material Requirement Planning)

3. Team Planning must do verrifcation stock if any difference between SAP

system and physical material which will be impact also to Material

Schedulling in RDS (Rolling Delivery Schedule) to prevent overstock &

shortage material.

4. Team Develolpmet must review BOM (Bill of Material) if any loss & gain

material which consumpt by production, usually any barriers which face

byTeam proses so they adjust the recipe in process.

C. Supplier Failure Delivery

Procedure

Planning informed RDS (Rolling Delivery Schedule) to supllier for next 3

weeks and also informed forecast for next 6 months forsupplier preparation they

raw material to they plan their production to support delivery based on forecast

from planning.

Current Activity

Planning have been done procedure in material scheduling. Ideally no failure

supplier delivery but many factors which influencing supplier delivery as below :

a. Transportation

b. No buffer stock in supplier

c. Delay importing material

d. Missed communication between planning and supplier

56

Gap between procedure & current activity

Regarding the above reason many failure delivery supplier in NSD Factory

which influencing performance production. may take place-causing disruption in the

production schedule of the company. The stock, which takes care to the fluctuation in

demand, varies in lead-time and consumption rate is known as safety stock. Safety

stock may be defined as the minimum additional inventory, which serves as a safety

margin or buffer or cushion to meet an unanticipated increase in usage resulting from

an unusually high demand and or an uncontrollable late receipt of incoming inventory.

It can be determined on the basis of the consumption rate, plus other relevant factor

such as transport bottleneck, strikes or shutdowns.

In the case of uncertainly, the probabilistic approach may be applied to

determine the safety margin. To avoid stock out arising out of such eventualities,

companies always carry some minimum level of inventories including safety stock.

Safety stock may not be static for all the times. A change in the circumstances and in

the nature of industry demand, necessitates are adjusted in its level. In this study an

effort has been made to examine how the current companies determine their minimum

level for re-order inventories, safety stock, whether a level of study is maintained

throughout the year or not.

For each type of inventory a maximum level is set that demand presumably will

not exceed as well as a minimum level representative a margin of safety required to

prevent out of stock condition. The minimum level also governs the ordering point.

An order to sufficient size is placed to bring

57

CHAPTER V

CONCLUSION AND RECOMMENDATION

5.1 Conclusions Basically in this sub-chapter, researcher would explain clearly but concisely,

the main conclusion being discussed in chapter III and IV. However, the important

points that need to be presented are the problems found and discussed in chapter IV.

Therefore, they can depict clearly about the Management activities, system and

practices done by the company and its problems. Mostly, the company’s problems

that are presented are the effect and the causes.

Finally the researcher would like to take conclusion based on the research

conducted in PT. Unilever Inodonesia Tbk. regarding the problem of inventory

mangaement in warehouse RMS NSD Factory.

There will be conclusion which will answer the statement of the problem of

this research, as it is stated in chapter 1.

Statement of the problem :

1. “What’s the reason behind inefficient inventory management in RMS NSD?”

Based on analysis in chapter 4 and support data in chapter 3, several factors

which will effect to uneffecient inventory management in RMS NSD .

Reseracher identify the reason behind uneffecient inventory management in

RMS NSD. Uneffecient inventory can be identify if any material overstock or

shortage material. Factor-factor which influence overstock material as below :

a. Missed Planing Schedulling

Missed Planning Schedulling can caused overstock or shortage material due

quantity stock will be increased/decreased every day if not proper in delivery

schedulling. If Planner Run MRP, create Planned Order, create Purchase Order, plan

Delivery Scheduled without consider phyisical stock position, and delivery will be

increase or decreased the stock position, if increased delivery can not unloading due

the limitation space in RMS NSD. If decreased stock will be shortage material so the

production will be stop which have ever stopped due the shortage material.

58

b. Under and Over Consump Production

Under and over consumption in production will be impact to overstock

material due the planner will arrange delivery material based on calculation from Bill

Off Material (BOM) raw and packaging material.

If production consumpt material under BOM so the remain stock material will

be cumulative and will be overstock material and will be effect in MRP, Planned

Order, Purchase Request and Purchase Order so will be missed planning schedulling.

If production consumpt material over than BOM, stock material will be loss

and quantity stock will be decrease and for long time will be shortage due actual

physic less than quantity in SAP system. If no adjustment trough SAP by Physical

Inventory Document (PID), the material will be shortaged

c. Failure Delivery Supplier

Many factors which made failure delivery in supplier such as transportation,

no buffer stock in supplier, any breakdown production in supplier, strikes, flood, miss

communication etc. Sometimes quantity delivery packaging material supplier more

than maksimum replenishment or less than minimum quantity and more than quantity

in RDS due supplier wants to be maksimum to capacity trucking.

To avoid this case must improve communication with supplier about barries if

they send material more than maksimum quantity replenishment or RDS. Planner

must got confirmation from supplier after issueing RDS for preparation production

running in next week.

d. Breakdown Production

Running production sometimes not smooths running, sometimes any

breakdown in process and machine in packing line which not predictable.

If breakdown happen in proses production or machine in packing line, it will

be impact to stock material, due material which have delivered will be not consumed

so will become overstock material.

Action to be taken if the breakdown happend planner must reschedule RDS as

soon as posible to avoid overtstock material and to avoid material which have been

delivered can not unload.

i. Output production less than Target Weekly Production Plan

Achievement output production sometimes not achieved as plan in weekly

production plan, sometimes more or sometimes less than target. If achievement

production less than target will be impact to stock material in RMS which not absorb

59

by production and become overstock material due any material which delivery based

on weekly Rolling Delivery Schedule .

j. Manuver Production

Sometimes any manuver in production due any changes demand or fluctuative

demand in midle week so material will be not absorbed and will be impact to

overstock material due material not need in production will keep.

k. Change Demand

As mentioned before change demand will be impact to plan production and

will be impact to stock and will be caused overstock material or shortage material

5.2. How to improve & recommendations Recommendations are corrective actions needed to overcome the problems

found have been discussed in chapter IV and concluded in chapter V

How to imporve inventory management thorugh analysis, after examining the

relevant theories and understanding the business operational practice in PT. Unilver

Indonesia Tbk.. Researcher would like to recomend some points to be improved for

PT. Unilever Indonesia NSD Factory as below :

a. It would be better in improve in planning scheduling as below :

Closed communication beetween planning & RMS Team for tight monitoring

Rolling Delivery Scheduled to avoid missed in actual delivery

Action taken by Planning & RMSTeam

Closed communication between planning to all supllier to get feedback if any

barrier in suplier delivery

Action taken by Planning & Supplier

Cek & recheck confirmation RDS from supplier to know whether they can do

delivery or not for next week based on RDS which have been panned to

anticipate shortage material

Action taken by planning

Cek performance production whether any breakdown in plant production to

reschedule delivery to avoid overstock material in RMS NSD

Action taken by planning

60

b. Diciplin consumption material based on Bill Off Material (BOM).Do

montoring for material usage whether any overdoos material to avoid

shoratage material

Action taken by process

Informed planning if any material usage under or over bom to reveiw calculate

MRP & RDS

Action taken by process , planning and development team

Inform if any different material usage than BOM to Development

Action taken by Process & Powderr Making Team & Development Team

c. It would be better in diciplin running production based on weekly planning

production.

Run productin based on weekly production planning which has been agreed in

planning production meeting to avoid any shortage or overstock material due

planing has ceated RDS based on weekly production planning

Action baken by Paking Line & Process Team

d. It would be better in improve accuracy stock in system and physic

Do cycle count regularly minimum per week to avoid if any big diffenrent

between SAP & physic

Do verification stock between system & physic to avoid any mistake when do

transaction.

Action taken by Subatore & RMS NSD Team

Due a low level of inventories may result in frequent interruptions in the

production schedule resulting in under-utilization of capacity and lower sales. The

aim of inventory management thus should be to avoid excessive inventory and

inadequate inventory and to maintain adequate inventory for smooth running of the

business operations. Efforts should be made to place orders at the right time with the

right source to purchase the right quantity at the right price and quality. The effective

inventory management should

i. maintain sufficient stock of raw material in the period of short supply and

anticipate price changes.

ii. ensure a continuous supply of material to production department facilitating

uninterrupted production.

iii. minimize the carrying cost and time.

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iv. maintain sufficient stock of finished goods for smooth sales operations.

v. ensure that materials are available for use in production and production

services as and when required.

vi. ensure that finished goods are available for delivery to customers to fulfil

orders, smooth sales operation and efficient customer service.

vii. minimize investment in inventories and minimize the carrying cost and time.

viii. protect the inventory against deterioration, obsolescence and unauthorized use.

ix. maintain sufficient stock of raw material in period of short supply and

anticipate price changes.

x. control investment in inventories and keep it at an optimum level.

From the researcher point of view, this research not only beneficial for PT.

Unilever Indonesia Tbk. but also for next researcher.However this research brough

up the inventory issue and the conditions of supply and demand in RMS NSD Factory

that haven’t had explained and being study. Even though this skripsi is still lacking in

many sides, the researcher think it’ll worth to become the references for next future.

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REFERENCES Books :

Burt David N., Donald W. Dobler, adn Stephen L, Starling(2003) World Class Supply

Management : The Key to Supply Chain Management. 7th Boston : Mc. Graw –

Hill/Irin

Firdawati Sunarto (2013) Case Study Research : Analysis of the Inventory

Management in A Five Star Hotel in Jakarta,Cikarang, President University

Jonathan Sarwono (2012), Metode Riset Skripsi Pendekatan Kuantitatif Menggunakan

Prosedur SPSS, Jakarta (2nd edition) Jakarta,PT.Elex Media Komputindo

Lua Jian Long (2008) Case Study Research Improving Inventory Management,

Cikarang, President University

Sekaran, U (2003). Research Methods for Business : A Skill Building Approach (4th

ed). New York : John Wiley & Sons, Inc

Journals :

Cees De Snoo, Woot Van Wezel, Rene J Jorna (2010) An Emprirical Invetigation of

Schedulling Performance Criteria,Faculty of Economic & Business, University

of Groningen, The Nerdelands Journal of Operation Management 29- 2011

hhtp;//www.elsevier.com

Cuney Eroglu, Christian Hofer (2010) Lean, Leaner, too lean? The inventory-

performance link revisited, Journal of Operation Management 29 (2011)

hhtp;//www.eselvier.com

David J. Close, Bilbert N. Nyaga, M. Douglass Voss (2009) The differential impact of

product complexity, inventory level, and configuration capacity on unit and

order fill rate performance, Department of Syupply Chain Management,

Michigan State University, United States, Journal of Operation Management28

(2010)

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hhtp;//www.eselvier.com

Elliot Rabinovich, Rajiv Sinha, Timothy Laseter (2010), Unlimited shelf space in

Internet Supply Chains : Treasure trove or wsteland, Journal of Operation

Management 29 (2011)

hhtp;//www.eselvier.com

R. Anthony Inman, R. Samuel Sale, Kenneth W. Green Jr.Dwayne Whitten (2010)

Agile Manufacturing : Relation to JIT, Operational Performance and Firm

Performance, College of Business, Lousiana Tech University, United State,

Journal of Operation Management 29 (2011)

hhtp;//www.eselvier.com

Yo Soom Kim, Thomas Y. Choi, Tinting Yan, Kevin Dooley (2010) Structural

Investigation of supply Networks : A social network analysis approach .

Department of Supply Chain Management W.P. Carey School of Business

Arizona State University, United State, Juranl of Operation Management

29(2011)

hhtp;//www.eselvier.com

Websites :

Inventory Control. Retrieved September13th, 2013 from

http://www.ct-clic.com/newsletters/.../inventory0602.pd...

Definition of Supply Chain Management, URL :

http://en.wikipedia.org/wiki/Supply_Chain_Management