INVENTORY MANAGEMENT OF FRESH FOOD PRODUCTS AT HYPERMART BIP
FINAL PROJECT
By PUTRI KUSUMAPRATIWI 19004096
Undergraduate of Management Study Program School of Business and Management Institut Teknologi Bandung 2007
VALIDATION PAGE
INVENTORY MANAGEMENT OF FRESH FOOD PRODUCTS AT HYPERMART BIP
By PUTRI KUSUMAPRATIWI ID No: 19004096
Undergraduate of Management Study Program School of Business and Management Institut Teknologi Bandung
Validated By
(Ir. Togar M. Simatupang M.Tech., Ph.D)
INVENTORY MANAGEMENT OF FRESH FOOD PRODUCTS AT HYPERMART BIP PUTRI KUSUMAPRATIWI 19004096 Examination Date 10 August 2007 Graduation Date 27 October 2007 Undergraduate of Management Study Program Institut Teknologi Bandung, 2007 Advisor: Ir. Togar M. Simatupang M.Tech., Ph.D ABSTRACT Many food retail companies developed in Indonesia, such as Carrefour, Giant, Super Indo, and Hypermart, have their own way in managing the inventory. The way in managing perishable inventory is more difficult than other products, since the perishable have limited of age life and will be obsolete in short period of time. The retail company should be able to determine the correct quantity ordered in order to give the high sales and contribution to the company and could minimize the damage resulted from broken/rotten products. The most problem happen in managing inventory is between the inventories will be leftover or stock out. Leftover inventory means the company should give discount or waste the products, then out of stock affects the company’s sales and images. Hypermart, as one of big retailers in Indonesia also offers various perishable products, such as kinds of fruits, vegetables, bakery, meat, chicken and fish. Hypermart have to be careful in selling perishable products because it affects the company’s policy of selling price if the products have close with the age life or quality decreased. In Fresh Food division of Hypermart, there are some departments involved. From all departments in Fresh Food division, Produce Department had the highest value of products damaged. Basically, there are three primary activities of inventory management, which are planning, execution, and controlling. The activities about inventory management could be classified into those three primary activities. Planning activity is about how to estimate the quantity needed for the company’s main business process and do the order to the suppliers. Execution is for receiving, displaying, and holding activities. And discount given, return to suppliers, waste or destroy the products which is close to the expiry date are done in controlling activity. The primary activities can be shown as the business process of managing inventory. Then, the business process is also described the root cause of problem happened. There are three main problems of perishable inventory management: high damage; poor supplier’s service level; and too much order when promo time. The ideas to solve and anticipate those problems are such separating the green bin into two parts in order to display two products; using the newsvendor model to forecast the order beside the historical data and intuition; packing some products which always got the cruel customers’ act with plastic or Styrofoam packs; not having tall display and the staff should always be ready to monitor and replenish the displays from storage to display; cooperating and communicating with the suppliers by carrying out a meeting periodically. The inventory should be managed well because it is an important asset of the company and it will need more cost if it is not well managed. Keywords: Perishable Inventory, Business Process, Newsvendor Model, Retailing
INVENTORY MANAGEMENT OF FRESH FOOD PRODUCTS AT HYPERMART BIP PUTRI KUSUMAPRATIWI 19004096 Tanggal Ujian Akhir 10 Agustus 2007 Tanggal Wisuda 27 Oktober 2007 Program Studi Sarjana Management Institut Teknologi Bandung, 2007 Pembimbing: Ir. Togar M. Simatupang M.Tech., Ph.D ABSTRAK Banyak perusahaan ritel makanan berkembang di Indonesia, seperti Carrefour, Giant, Super Indo, and Hypermart, memiliki cara sendiri dalam mengelola persediaan. Pengelolaan persediaan perishable lebih sulit dibandingkan dengan persediaan lain karena persediaan ini memiliki usia yang terbatas. Perusahaan ritel harus mampu menentukan jumlah pesanan yang tepat agar dapat memberikan angka penjualan yang tinggi serta mampu meminimalisasi produk yang busuk. Masalah yang biasa terjadi dalam mengelola persediaan ialah kekurangan/kelebihan persediaan. Kelebihan persediaan berarti perusahaan harus memberikan diskon atau membuang produk yang rusak, sedangkan kekurangan persediaan mempengaruhi penjualan dan nama baik perusahaan. Hypermart, sebagai salah satu perusahaan ritel besar di Indonesia, menawarkan aneka jenis produk perishable, seperti buah, sayur, roti, daging, serta ikan. Hypermart harus berhati-hati dalam menjual perishable produk karena hal ini berpengaruh terhadap kebijakan perusahaan dalam menentukan harga jual. Dalam divisi Fresh Food di Hypermart, ada beberapa departemen yang tergabung didalamnya. Dari semua departemen tersebut. Departemen Produce merupakan departemen memiliki nilai kerusakan produk tertinggi. Pada dasarnya, ada tiga kegiatan utama pengelolaan persediaan, yaitu perencanaan, eksekusi, dan pengawasan. Perencanaan mengenai memperkirakan jumlah kuantitas yang dibutuhkan untuk menjalankan proses bisnis utamanya dan melakukan pemesanan. Eksekusi mengenai penerimaan, penempatan dan penyimpanan. Pemberian diskon, dan pembuangan/penghancuran produk rusak merupakan kegiatan pengawasan. Kegiatan utama pengelolaan persediaan ditunjukkan pada gambar bisnis proses, dimana gambar tersebut mengambarkan akar masalah yang terjadi. Tiga masalah utama pengelolaan persediaan perishable, diantaranya ketidaksesuaian kebijakan pendisplayan produk; rendahnya supplier’s service level; dan banyaknya jumlah order pada masa promo. Ide untuk menyelesaikan dan mengantisipasi masalah diatas adalah memisahkan green bin menjadi dua bagian agar dapat menempatkan dua produk; menggunakan newsvendor model untuk memperkirakan pesanan disamping menggunakan historical data dan intuisi; mengemas beberapa produk yang sering terkena ulah jahil pelanggan dengan menggunakan plastik atau stereofoam; tidak menempatkan display yang tinggi; meningkatkan kerjasama dan komunikasi dengan supplier dengan mengadakan pertemuan secara periodik. Persediaan harus dikelola dengan baik karena persediaan merupakan asset perusahaan dan bila tidak dikelola dengan baik maka akan dibutuhkan biaya yang lebih banyak. Kata Kunci: Perishable Inventory, Business Process, Newsvendor Model. Retailing
PREFACE Thanks to Allah SWT for your blessing and permission that this final project could come to the end. Even this research only took place in short time, but the process of doing this project gave many meant lessons to the author. As a human being, the author realized that this project is still far away from the perfect ness. The limitation of author’s capability makes this final project need more revisions and suggestions from the readers. The succeeded completion of this final project does not escape of the helps from all people. I would like to give my gratitude to: 1. Ir. Togar M. Simatupang M.Tech., Ph.D, thanks for the counseling, support and advices to the author thus, the final project could finish on time. 2. Pak Dili as Fresh Food Division Manager in Hypermart, for letting the author to have research in Hypermart and helping in data gathering. 3. Ibu Tina as Produce Department Manager, thank you very much for being a great informer. 4. All unmentioned staffs of Hypermart BIP, who have already helped the author along the research. 5. My parents, Bapak Prayitno dan Ibu Murdiyati. Your praying, supports, and loves can not be replaced by anything. Brothers, Alief Anggaprasetya, Oties Suryaprakasa, Krisna Adipranata; and little sister, Arum Rachmapramita. 6. Kanayakan Baru team, Kak Sondang, Om Beryl, Kak Dian, Kak Ira, Kak Mpur, Kak Mela, Kak Ocha, Andin, Zaza, Maia, Icha, Anien, Gagay. Wish you our friendship will not last forever. 7. Counseling friends, Awing, Sekar, Gading, Ario, Joni. Thanks for help and support each other. 8. Ayu, Bagol, Kriska, Chika, Nunu, Tito, Andini, Ryan, Wisnu, Andre, Kadek, Mardi, Tri, Dendang. I am very thankful having such great friends likes you guys. 9. Aries, thanks for the connection to Hypermart and the thesis.
10. All SBM 2007, as the first batch of SBM, let us prove that we could get success in the future. Hope that this final project can be useful for Hypermart and also for everybody that would make this project as references. Thank you.
Bandung, 10 August 2007
Putri Kusumapratiwi
LIST OF CONTENTS VALIDATION PAGE.......................................................................... ABSTRACT ......................................................................................... ABSTRAK ........................................................................................... PREFACE ............................................................................................ LIST OF CONTENTS ......................................................................... LIST OF FIGURES.............................................................................. LIST OF TABLES ............................................................................... LIST OF APPENDICES ......................................................................
ii iii iv v vii ix x xi
CHAPTER I INTRODUCTION .......................................................... 1.1 Problem Background................................................. 1.2 Main Problem............................................................ 1.3 Research Objectives .................................................. 1.4 Problem Boundaries .................................................. 1.5 Report Outline ...........................................................
1 1 3 4 4 5
CHAPTER II THEORETICAL FOUNDATION ................................ 2.1 Inventory ................................................................... 2.2 Inventory Management ............................................. 2.3 Newsvendor Model ................................................... 2.4 Retailer ...................................................................... 2.5 Business Process .......................................................
7 7 8 9 11 13
CHAPTER III METHODOLOGY....................................................... 3.1 Foreword Research.................................................... 3.2 Problem Identification............................................... 3.3 Theoretical Foundation ............................................. 3.4 Research .................................................................... 3.5 Data Collecting.......................................................... 3.6 Processing and Data Analysis ................................... 3.7 Conclusion and Recommendation.............................
15 16 16 16 16 17 17 17
CHAPTER IV DATA COLLECTION AND ANALYSIS .................. 4.1 Data Collection.......................................................... 4.1.1 Company’s History .......................................... 4.1.2 Company’s Vision and Mission ....................... 4.1.2.1 Vision of Hypermart............................. 4.1.2.2 Mission of Hypermart .......................... 4.1.3 Strategy of Hypermart...................................... 4.1.4 Products Offered .............................................. 4.1.5 Organization Structure ..................................... 4.1.6 Resources ......................................................... 4.1.6.1 Human Resources................................. 4.1.6.2 Technology Resources ......................... 4.1.7 Company’s Policy ............................................ 4.1.8 Fresh Food Division ......................................... 4.1.8.1 Produce Department............................. 4.2 Business Process ....................................................... 4.3 Data Analysis ............................................................
19 19 19 20 20 20 20 21 21 21 21 23 24 24 25 26 30
4.3.1 Forecasting and Ordering ................................. 4.3.2 Receiving.......................................................... 4.3.3 Holding and Shelfing ....................................... 4.3.4 Controlling ....................................................... 4.4 Root Cause Analysis ................................................. 4.5 Solution .......................................................................... 4.3.4 Newsvendor Model ................................................
30 31 34 35 36 40 44
CHAPTER V CONCLUSION AND RECOMMENDATION............ 5.1 Conclusion....................................................................... 5.2 Recommendation............................................................. 5.2.1 Implementation Plan .............................................. 5.2.2 Key Performance Indicator ....................................
49 49 50 51 53
REFERENCES..................................................................................... 55 APPENDICES...................................................................................... 57
LIST OF FIGURES 2.1
The relationships between initial output parameters and performance measure .................................................................. 11
3.1
Research Methodology Process .................................................. 15
4.1
Organizational Structure ............................................................. 21
4.2 Education levels composition in Hypermart BIP........................ 22 4.3
Company’s Business Process ...................................................... 26
4.4
Business Process Model .............................................................. 27
4.5
Hypermart’s Business Process .................................................... 29
4.6
Inventory Model.......................................................................... 30
4.7
Ordering System Flow ................................................................ 33
4.8
Root Cause .................................................................................. 36
LIST OF TABLES 2.1
Types of Food Retailers .............................................................. 12
4.1
Education Level of Hypermart BIP’s workers............................ 22
4.2 LPB Hypermart’s Fresh Food division in April 2007................. 34 4.3
PH 0 of Fresh Food Division....................................................... 36
4.4
Damage value data per total sales ............................................... 37
4.5
Supplier service level of 3 fast moving products ........................ 38
4.6
Solution ....................................................................................... 40
4.7
Comparison of current and proposed condition .......................... 44
4.8
Actual daily sales of Apple Fuji RRC on February 2007 ........... 44
5.1
Implementation plan.................................................................... 51
LIST OF APPENDICES APPENDIX 1 ....................................................................................... 57 APPENDIX 1 ....................................................................................... 78 APPENDIX 3 ....................................................................................... 84
