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UNIVERSITAS INDONESIA
ANTI-MOSQUITO AIR FRESHENER
Report Assignment 4
GROUP 17
GROUP PERSONNEL
HANNA JULIA (1206202066)
JONATHAN (1206202040)
MOHAMAD AMIRUDIN (1206240650)
REXY DARMAWAN (1206202103)
USWATUN NUR KHAZANAH (1206201946)
CHEMICAL ENGINEERING DEPARTMENT
ENGINEERING FACULTY
UNIVERSITAS INDONESIA
DEPOK 2015
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EXECUTIVE SUMMARY
In this report we will explain about our product supply chain and economic
analysis. We will distribute our product in Java Island which is divided into three
regions. There are West Java and DKI Jakarta as Region I, Central Java and DI
Yogyakarta as Region II and East Java as Region III. We distribute our product by
six trucks which is transport through North and South Java Beach Line. Which is
North line end up his transportation in Surabaya, while South line end up in Jember.
The distribution of our product will occur in every week with set percentage 40%
to Region I and 30% for each Region II and Region III. The marketing integration
of our product is we distribute all of our product to wholesaler in Java and promote
our product through media, radio and our website. We have three inventories there
are raw material inventory, work in process inventory and product inventory. This
inventory is use to if there is any accident that inhibit our production.
Our capital cost is about 5.316 Billion Rupiah; our operating cost per year
is about 54.032 Billion Rupiah and our revenue is about 70 Billion Rupiah per year.
The payback period of our plan tis about 4 years with the breakeven point about87,000 packs of anti-mosquito air freshener. Our interest rate or IRR of 33%. Large
IRR is greater than a predetermined MARR which is 12%, this shows the air
freshener anti-mosquito products have a good level of economy.
The product price changing will affect IRR, NPV, and Payback Period
values significantly. For the raw material, the changes will affect less than the
product price changes. Meanwhile for operating labour, we can infer that their
changes will not significantly affect IRR, NPV, and Payback Period values.
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LIST OF CONTENTS
EXECUTIVE SUMMARY ..................................................................................... ii LIST OF CONTENTS ........................................................................................... iii LIST OF FIGURES ............................................................................................... iv LIST OF TABLES .................................................................................................. v CHAPTER 8 : SUPPLY CHAIN ............................................................................ 1 8.1. Supply Chain .................................................................................................. 1
8.1.1. Plant Location ........................................................................................... 1 8.1.2. Raw Material Distribution ........................................................................ 3 8.1.3. Product Distribution and Distributing Product Method .......................... 11 8.1.4. Inventory ................................................................................................. 19
8.2. Fluctuation in Raw Material and Products in the Distribution Center.... 21 8.3. Marketing ................................................................................................ 24
8.3.1. Target Determination .............................................................................. 24 8.3.2. Marketing Integration ............................................................................. 25 CHAPTER 9 : ECONOMIC ANALYSIS ............................................................ 27 9.1. Capital Investment (CAPEX) ................................................................. 27
9.1.1. Bare Modul Cost or Fixed Capital Cost .................................................. 28 9.1.2. Other Investment ..................................................................................... 34
9.2. Operating Cost (OPEX) .......................................................................... 38 9.2.1. Manufacturing Cost ................................................................................ 38 9.2.2. General Expenses Cost ........................................................................... 44
9.3. Economic Analysis ................................................................................. 53 9.3.1. Product Price Determination ................................................................... 53
9.3.2. Cash Flow Analysis ................................................................................ 54 9.3.3. Cost Breakdown ...................................................................................... 59
9.4. Profitability Analysis .............................................................................. 59 9.4.1. Payback Period........................................................................................ 59 9.4.2. Breakeven Point ...................................................................................... 60 9.4.3. Internal Rate of Return (IRR) ................................................................. 61 9.4.4. Net Present Value (NPV) ........................................................................ 65 9.4.5. Sensitivity Analysis ................................................................................ 66
CHAPTER 10 : CONCLUSION ........................................................................... 71 REFERENCE ........................................................................................................ 72
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LIST OF FIGURES
Figure 8.1 Plant Location ...................................................................................... 3
Figure 8.2. Packaging Our Products ...................................................................... 5
Figure 8.3 Map of Java ......................................................................................... 13
Figure 8.4 Alternatives Product Distribution ...................................................... 17
Figure 8.5 Alternatives of Route Distribution ..................................................... 18
Figure 8.6 Route Distribution ............................................................................. 18
Figure 8.7 Distribution Process by Truck ........................................................... 19
Figure 8.8 Product Inventory In Plant Graph ...................................................... 22
Figure 8.9 Product Inventory In Region I Wholesaler ........................................ 23
Figure 8.10 Product Inventory In Region II Wholeseller .................................... 23
Figure 8.11 Product Inventory In Region III Wholeseller .................................. 24
Figure 9.1 CiaoBellaTM Branding Logo .............................................................. 36
Figure 9.2 Cash Flow Graph ............................................................................... 58
Figure 9.3 Cost Breakdown Graph ...................................................................... 59
Figure 9.4 The Payback Period Graph ................................................................ 60
Figure 9.5. IRR Sensitivity Graph ....................................................................... 68Figure 9.6. NPV Sensitivity Graph ..................................................................... 69
Figure 9.7. Payback Period Sensitivity Graph .................................................... 70
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LIST OF TABLES
Table 8.1 Data and Location Supplier.................................................................. ...4
Table 8.2 Modelling and Scenarios Supplier Our Products.................................. ..6
Table 8.3 List First and Second Supplier Our Products …………………………. 7
Table 8.4 Plan Consuming and Ordering Raw Materials ………………………...9
Table 8.5 Scheduling Raw Material ……………………………………………. 10
Table 8.6 The Cities Target on Each Province …………………………………14
Table 8.7 Percentage of Distribution on Each Region …………………………. 14
Table 8.8 Total Amount Wholesaler on Each Region …………………………..15
Table 8.9 Total Amount Our Products in Each City per Week …………………16
Table 8.10 Percentage of Distribution …………………………………………..25
Table 9.1 Bare Module Factor …………………………………………………..29
Table 9.2 Main Equipment Cost ………………………………………………...30
Table 9.3 Total Bare Module Cost Calculation …………………………………31
Table 9.4 Plant Rearrangement and Modification Cost ………………………... 32
Table 9.5 Summary of Utility Installation Cost ………………………………... 32
Table 9.6 Supporting Equipment Cost …………………………………………. 33Table 9.7 Market Research Cost ……………………………………………….. 34
Table 9.8 Patent Fee Details ……………………………………………………. 35
Table 9.9 Brand Fee Details ……………………………………………………. 36
Table 9.10 Total Permanent Investment and Fixed Capital Cost ……………… 37
Table 9.11 Total Capital Investment Calculation ……………………………….38
Table 9.12 Number of Operator and Worker in Each Process …………………. 40
Table 9.13 Total Direct Labor ………………………………………………….. 40Table 9.14 Total Raw and Packaging Material Cost …………………………… 41
Table 9.15 Electricity Needs for Main Equipments ……………………………. 42
Table 9.16 Annual Insurance Cost ……………………………………………... 44
Table 9.17 Annual Indirect Labors Cost .............................................................. 45
Table 9.18 Electricity Needs for Supporting Equipments ………………………47
Table 9.19 Annual Cost of Water Consumption ……………………………….. 48
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Table 9.20 Annual Cost of Communication …………………………………….48
Table 9.21 Annual Marketing Cost …………………………………………….. 49
Table 9.22 Annual Distribution Cost ……………………………………………50
Table 9.23 BCA Loan Payment …………………………………………………51
Table 9.24 Investor Loan Payment ……………………………………………...51
Table 9.25 Total Financial Interest ……………………………………………...52
Table 9.26 Total Operating Cost (TOC) ………………………………………...52
Table 9.27 Determination of Product Price …………………………………….. 54
Table 9.28 Cash Flow for Ciao BellaTM Company …………………………….. 56
Table 9.29 Cash flow calculation ………………………………………………. 63
Table 9.30.Cash flow calculation ………………………………………………. 63
Table 9.31 .Cash flow calculation ……………………………………………… 63
Table 9.32.Cash flow calculation ......................................................................... 64
Tabel 9.33 .NPV Calculation ……………………………………………………65
Table 9.34 Calculation for sensitivity .................................................................. 66
Table 9.35 Calculation for sensitivity analysis ………………………………….67
Table 9.36 Calculation for sensitivity analysis ………………………………….67
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CHAPTER 8
SUPPLY CHAIN
8.1. Supply Chain
Supply chain management is a cross-function approach include in managing
the movement of raw materials into an organization, certain aspects of the internal
processing materials into finished products, and the movement of finished products
out of the organization and toward the consumer. As organizations strive to focus
on core competences and becoming more flexible, it reduces its ownership of raw
materials sources and distibution channels. These functions are increasingly being
outsourced to other entities that can perform the activities better or more cost
effectively. The effect is to increase the number of organizations involved in
satisfying customer demand, while reducing management control of daily logistics
operations. Less control and more supply chain partners led to the creation of supply
chain management concepts. The purpose of supply chain management is to
improve trust and collaboration among supply chain partners, thus improving
inventory visibilty and the velocity of inventory movement.This chapter become
important because by the supply chain system we have anticipated the worse case
our production, so our production will not disrupt if anything else come.The marketing of our product is relied on distribution from producers to the
consumer. We need some strategies to sell the product to get more profits. One of
the strategies is determined the distribution strategy. The marketing of our product,
we implement centralized distribution strategy. Centralized distribution is done by
delivering products directly to consumers through several wholesalers available in
spesific areas. We apply a distribution channel with a short groove. So that
manufacturers can more easily conduct surveillance. Short distribution channel weuse is a major manufacturer that sells products to wholesalers. Then, wholesaler
resell the product to the consumer or resell to the retailers.
8.1.1. Plant Location
Plant location is one of the most important factors that determine the
sustainability of entire physical activity in manufacturing our product that is started
from taking raw materials, manufacture processes until the distribution of the
product until reach consumers. Selecting the plant location requires careful
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consideration because it can automatically reduce the manufacturing cost. There
are many factors can affect plant location selection. All factors that affect plant
location selection can be divided into two types are:
Primary Factors
Primary factors are factors needed by all types of industry. Primary factors
consist of closeness with raw material source location, closeness with product
market location, availability of transport facility, availability of labor, availability
of power
Secondary factors
Secondary factors are factors needed by some type of industry but not needed
by another type of industry. Examples of secondary factors are plant future plan.
Probability of plant extension, equipment service facility, land and building cost,
local regulations, environment condition, and climate.
From those considerations, we decide to choose our plant location in an
industrial area because the infrastructure available there are already settled and
close the suppliers of raw material our products so we can build our plant readily.
Location’s accessibility our plant location must not be too far from the suppliers of
raw materials and the distributor s of our product. The main target for our market
are houses and boarding houses. So our plant location must be easy to access for
distributing our products to those areas
We choose on factory production activity at one location that is close to raw
materials, markets and ease of product distribution. Indonesia has Jabodetabek area
as the best infrastructure development area to support manufacturing activity since
it has critical infrastructure as electrical, water, gas, road access, workface quality
and port availabilities. Because of shortage industrial area and increasing land prices, manufactures have to find relatively new industrial area with low land prices
and complete infrastructure. Based on list and industrial area average price we
choose Bogor region to build our plant. Specifically located in industrial area
Purbajaya, Cibinong, Bogor, West Java. Here the map of location our factory
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Figure 8.1 Plant Location (Cibinong,Bogor,West Java)
(Source: Google earth,2015)
Cibinong has several benefits like relatively near to our raw material supplier in the
West Java Island and low land price too. Cibinong also is not far from capital city
like Bandung, Jakarta, Depok, Bekasi which are one of our consumer market target.
8.1.2. Raw Material Distribution
Distribution of raw materials is one of the essential things that need to be
considered in determining the location of the plant since it affects the costs to be
incurred and also the sustainability of production. There are three parameters thatneed to be considered in determining supplier: price, distance and the availibily or
security of supply. It is important to mantain the smooth flow of raw materials and
ultimately a smooth of product to the consumer. The distribution of the raw
materials up to factory warehouse is assumed become the responsibility of supplier
and it is included at the signed contract. Before it is sent, we need to determine how
much the raw materials that should be ordered, the order time, and when will the
raw materials arrived at our factory. Besides all of that, we need to calculate storage
life of the raw materials so that ordered raw materials are not over storage capacity
or accumulated in storage room.
8.1.2.1. Raw Material Location
To make sure our supply of components which are needed in order to make
our product, we have to know where we can get its component. Those components
as a raw material should be as near as possible from our plant location because if
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we can get the component quite near from our plant, so the costs which will be paid
by us become lower than if raw material is quite far from our plant. We provide at
least two suppliers so that when there is congestion supply of the first supplier we
can direct back-up and the plant can continue to stay run
Table 8.1 Data and Location Supplier
No Raw Material Supplier 1Location
Supplier 1Supplier 2
Location
Supplier
2
1
Dried Orange
Peel (Citrus
Sinensis)
CV. M&H
Farm
Bogor, West
Java, Indonesia
CV Herbal
Export
Jakarta,
Indonesia
2
Lavender
Essential Oil(Lavandula
Agustifolia)
CV. M&HFarm
Bogor, WestJava, Indonesia
PT SaranaBela Nusa
JakartaIndonesia
3
Bourbon-
Madagascar
vanilla
PT Tripper
Nature
Jakarta,
Indonesia
PT Tripper
Nature,
Jakarta,
Indonesia
4 Ethanol 90%
PD. Cipta
Bangun
Nauli
Bogor, West
Java, Indonesia PT ICMI
Garut,
Indonesia
5 Hydrogel
(Polyacrylamide)
PT.
Nalpreme
Technochem
Jakarta,
Indonesia
PT
Flowersouv
Surabaya,East
Java,
Indonesia
6Packaging (
Acrylic Jar)
Ningbo
Somewang
Packaging
Shanghai,China
Zheijang
Blue
Dream Co.,
Ltd
Taizhou
City,
Zhejiang
Province,
China
7Aluminium Foil
Circle
PT Alsinta
Karta
Jakarta,
Indonesia
PT Indo
aluminium
Intikarsa
Industri
Cibitung,
Bekasi
(Source: Author’s Document)
The table above consist of raw materials and packaging our products, where
the numbers 1-5 is the main raw materials and the number 6-7 are packagaing on
our producs.The material used as our package is made from acrylic, in the previous
assginment we have already featured which is transparent and has holes with a
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certain diamter so that the fragrance of hydrogel will be dispersed to the external
environment through the holes while the aluminium foil used as as sealer that the
fragrance is not dispersed when distributed.
Figure 8.2. Packaging Our Products(Source: Alibaba.com)
8.1.2.2. Alternative Scenarios Modelling
In this section, we will develop model which can help us to determine the
best and effective scenario of put raw material distribution system. The model
which will be develop consist of supplier credibility, the distance needed to arrive
at our plant location, effectiveness of the pathway, the time needed to deliver to our
plant location and the minimum order from the supplier. The supplier credibility
become the most important factor because we will cooperate with these supplier for
at least 5 to 10 years, so we have to choose the supplier that have good credibility
to make sure the supply from them is always adequate. Other criteria is the distance
needed and path ways . Basically if the distance and the pathway is nearest so the
transportation cost become cheaper, and last but not least is the minimum order,
this is important because we do not always consume the minimum order that they
offer to us so we have to adjust our need and their supply in the table 8.1 to see the
modelling and the raw material distribution.
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Table 8.2 Modelling and Scenarios Supplier Our Products
No Raw Materials
Distance, Time
Distribution,
Price, Pathway
(S1)
Minimum
Order(S1)
Distance,
Time
Distribution,
Price,
Pathway
(S2)
Minimum
Order(S2)
1
Dried Orange
Peel (Citrus
Sinensis)
10.5 km, 1
days, Rp
100,000-
200,000/kg,
Truck
100 Kg
52 km, 1
days, Rp
100,000-
200,000/kg,
Truck
150 kg
2
Lavender
Essential Oil
(Lavandula
Agustifolia)
10.5 km, Rp90,000/50
litres , 1 days,
Truck
100 L
48 km, 1
days, Rp
90,000/50 L,
Truck
200 L
3 Tahitian vanilla
58 km, 3 days,
Rp 300,000/kg
, truck50 Kg
58 km, 1
days, Rp
300,000/kg,
truck
50 kg
4 Ethanol 90%
16,5 km, 1
days, R p
13,000/litres,
truck
500 L
296 km, 3
days Rp
24,800/litres,
truck
500 L
5Hydrogel
(Polyacrylamide)
69,5 km, 1
days, Rp
600,000-
700,000/kg,
truck
25 kg
823 km, 7
days, Rp
700,000-
800,000/pcs,
truck
30 kg
6
Packaging
(Acrylic Jar)
4484 km, 4
weeks, $0,15-/pcs, shipping
5,000 pcs
4219 km, 4
weeks,
$0,25/pcs
shipping
10,000
pcs
7Aluminium Foil
Circle
55 km, 3 days,
Rp 10/pcs ,
truck
100,000
pcs
71 km, Rp
12/pcs, 1
days, truck
100,000
pcs
(Source: Author’s Document)
From the tables above, we can choose the priority of our future supplier.
Basically we do not have sufficient information to know the credibility of all the
supplier above, so we assume that all the suppliers above have good credibility.
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Then, we have to consider the distance of the supplier, we have to choose the
supplier which have the nearest path. But we already see that in each raw material,
the location of those two supplier is almost same, so we have to choose the supplier
that offer the amount of minimum order less than other. In the terms of price offered
is less than the first supplier, so the second supplier will be the second option if the
first supplier unable to suppply the needs of our factory. In the packaging (acrylic
jar) supplier is the only supplier comes from abroad so we need to transport them
through the shipping. In the packaging also, the distance farther than the second
supplier but the price is cheaper and the minium order is also much smaller in the
first supplier. Based on the those 5 parameters, we can determine the priority of our
supplier.
Table 8.3 List First and Second Supplier Our Products
No Raw Material First Priority Second Priority
1Dried Orange Peel
(Citrus Sinensis)
CV. M&H
Farm
CV Herbal
Export
2Lavender Essential Oil
(Lavandula Agustifolia)
CV. M&H
Farm
PT Sarana Bela
Nusa
3
Bourbon-Madagascar
vanilla or Tahitian
vanilla
PT Tripper
Nature
PT Tripper
Nature,
4 Ethanol 90%
PD. Cipta
Bangun
Nauli
PT ICMI
5Hydrogel
(Polyacrylamide)
PT.
Nalpreme
Technochem
PT Flowersouv
6 Packaging ( Acrylic Jar)
Ningbo
Somewang
Packaging
Zheijang Blue
Dream Co., Ltd
7 Aluminium Foil CirclePT Alsinta
Karta
PT Indo
aluminium
Intikarsa
Industri
(Source: Author’s Document)
8.1.2.3. Raw Material Supply Chain ad Scheduling
This section the discussion is directed to how we manage the supply of raw
material from supplier. The raw material that we order will be delivered from the
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supplier from domestic and abroad. For domestic supplier, all the supplier is from
Jakarta and for abroad, all the suppliers are from China. For the suppliers located in
Jakarta which have distance only 10-50 km, the raw material is quite easy to be
delivered, the delivery of the raw materials will be carried by any land
transportation, such as large box truck. And for supplier from China, the delivery
of raw materials will be transported with ships across continents to Indonesia’s port,
Tanjung Priuk port, and then will be continued with the large box truck to reach our
plant location in Marunda industrial area. The cost of delivery up to the plant
warehouse assumed to be the responsibility of the suppliers and included in the
contract that were made. For some particular cases, there will also be an agreement
for who will pay the cost of delivery.
Before the raw material is arrived from the supplier, we have know how
long the delivery takes time, so when the plan stars up, the raw material is ready to
be used. It is also important to strategize how the raw materials will be kept and for
how long, so that the raw materials did not accumulate for too long. The time
needed for the raw materials are arrived in our plant for domestic supplier is one
day by large box transportation, so we have to order the raw material maximum one
day before the production starts up. While for supplier from China, the distributiontime is 4 weeks, so we have to order at least one month before production starts.
When we are going to order some amount of raw material, we have toadjust their
minimum order value. We do not have permitted to order less then their minimum
order value. For the first order, the amount of raw materials for the first production
are ordered 10-15% more from the initial amount to anticipate the disturbance in
first production. Thus if they come trouble when production start, the manufacture
process will not stopped because of the raw material has run out.In this scheduling there are two steps, fisrt is order the materials, and second
is the time materials are received. We order raw material once a month for the
materials which are in Indonesia and once in 6 months
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Table 8.4 Plan Consuming and Ordering Raw Materials
(Source: Author’s Document)
NoRaw
Material
Plant
Daily
Consum
Plant
1
Mont
h
First
SupplierMinimu
m Order
Dist.
Time
(days)
First
Order
1
Dried
Orange Peel
(Citrus
Sinensis)
157 kg4710
kg
CV.
M&H
Farm100 Kg 1 5,000 kg
2
Lavender
Essential Oil
(Lavandula
Agustifolia)
161 kg4830
kg
CV.
M&H
Farm 100 kg1
5,000 kg
3
Bourbon-
Madagascar
vanilla or
Tahitian
vanilla
16 kg480
kg
PT
Tripper
Nature 50 Kg1 500 Kg
4 Ethanol 90%1813
kg
5439
0 kg
PD. Cipta
Bangun
Nauli500 L 1
55,000 kg
5
Hydrogel
(Polyacryla
mide)
6,5 kg195
kg
PT. Nalpreme
Technoch
em
25 kg 1250 kg
6Packaging
(Acrylic Jar)8467
pcs
254,0
10
pcs
Ningbo
Somewan
g
Packaging
5,000
pcs30
255,000
pcs
7Aluminium
Foil Circle
8467
pcs
(d=10
0 mm)
254,0
10
pcs
PT
AlsintaKarta
1,000 pcs
1 255,000 pcs
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Table 8.5 Scheduling Raw Material
*ordered in every month(Detail: Blue: Order to supplier; Green: Arrival Raw Material; Yellow: Distribution Materia; from supplier; Pink : Consumption Raw Material)(Source: Author ’s Document)
No
RawMaterial
Schedule
DESEMBER January February March April May June
III
III
IV
III
III
IV
III
III
IV
III
III
IV
III
III
IV
III
III
IV
III
III
IV
1DriedPeel
Orange
Ordering
Consuming
2Lavender
Oil
Ordering
Consuming
3TahitianVanilla
Ordering
Consuming
4Ethanol
90%
Ordering
Consuming
5 HydrogelOrdering
Consuming
6Acrylic
Jar
Ordering
Consuming
7
Aluminiu
m FoilCircle
Ordering
Consuming
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Our anti-mosquito air freshener product will be packaged by acrylic jar and
between the lid there is a circle of aluminum foil to prevent dispersion into the
environment, as in seal products we put in cardboard boxes and ready to be
distributed to wholesalers and retailers until finally arriving at the consumer. We
make a reservation in December because the plant will run from January 2015, due
to acrylic jar takes up to 4 weeks to arrive at the factory. Because we still do not
know the credibility of suppliers, we still place an order once a month during the
period of 2 years, after our factory has gained the advantage and was able to occupy
market, the scheduling of raw material is converted into once a year and also
increase the value of its products.
8.1.3. Product Distribution and Distributing Product Method
Selecting the best way in terms of distributing our product is one of the
biggest considerations that our group had to make a decision. By selecting the best
method in term of distribution method, later this decision will lead our factory to
gain more profits. Considering our products targeted to middle-income people and
easily found in supermarkets, minimarkets, up to the stalls, the distribution process
should be evenly but still considering a request from each region. Then our groupdecide to use traditional distribution model as a starting point. The conventional
distributing model has three levels, which are the produce (our factory), the
wholesaler, and the retailer. This is a time-tested with many well-established
members at all levels. The conventional distribution model, however, calls for all
parties in the channel to protect their own best interest. Thus, retailers are pitted
against wholesalers, and wholesalers try to become the best producers to
consumers.This web of conflicting interest sometimes works to the detriment of the
entire system. For instance a producer may try by pass the wholesaler and go
straight to retailers, prompting the wholesaler to retaliate by dropping the
producer’s products. One fact that surely we must accept is by bypassing the
wholesaler and go straight to retailers will lead us to gain a greater profit, and we
will fit a far greater benefits if we bypassing wholesaler and retailer at once and
decided to do a direct distribution method. By doing a direct distribution method it
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calls for us to sell and deliver our own product using our own salespeople and
warehouses. Going direct can cut significant costs from the system because we dont
have to provide a profit for intermediaries such as wholesalers and retailers, but
slicing two steps from the traditional distribution channel tends to alienate
wholesalers and retailers.
So, before we decide to go direct, we have to make sure we dont need these
other channels of distribution later in the future, because if we decide to use them
later, they may not be available to us in the future. So by basing on the existing
theory, then our group decided to use a wholesaler and retailer roles as part of our
distribution method our products. If later on as time goes by we have found a pattern
of market demand for our products, then it will be the basis of a review of the re-
distribution method that we'll use later on the future. If we found that latter the
market demand for our product decreasing over a certain time, then we decided to
bypass one of the intermediaries whether it’s wholesaler or retailer. But if we found
that latter the market demand for our products turns out to be well accepted in the
market level, then we decided to continue the distribution method that we already
selected first.
8.1.3.1. Product Distribution Region
In distributing our sealt product, our group decided to distribute into certain
region. We choose 5 provinces are Jakarta, West Java, East Java, central Java and
Yogyakarta as our focus target region in distributing our sealt product. Of these
provinces we subdivide into cities: Jakarta, Depok, Bogor, Bekasi, Bandung,
Cirebon, Garut, Tasikmalaya, Ciamis, Cianjur, Karawang, Kuningan, Indramayu,
Majalengka, Purwakarta, Cimahi, Sukabumi. The city of Jakarta and West Java
serve as region 1 as closest to the plant, then we divide the second region into the
cities in Central Java and Yogyakarta: Semarang, Banjarnegara, Banyumas, Batang,
Blora, Boyolali, Brebes, Cilacap, Demak, Kebumen , Jepara, Klaten, Kudus,
Magelang, Pati, Pekalongan, Pemalang, Purbalingga, Purworejo, Rembang,
Sragen, Sukoharjo, Tegal, Wonogiri, Pekalongan, Salatiga, Surakarta, Sleman,
Yogyakarta and Bantul. The third region of the distribution of our products are
Banyuwangi, Surabaya, Blitar, Bojonegoro, Gresik, Jember, Jombang, Kediri,
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Lamongan, Madiun, Malang, Mojokerto, Ngawi, Pacitan, Pasuruan, Probolinggo,
Sidoarjo, Blitar, and Probolinggo. Of the cities we reduce again by big cities and
some small cities that will be the target of the distribution of our product, because
our products are still not as big as the existing air fresehener in market such as
Stella, water wick, bayfresh and Glade. After we discuss, we decided to opt for
West Java and Jakarta as region 1, Central Java and Yogayakarta as East Java region
II and III seabagi region. Here is a map of Java where our plant is located in the
western part of the island of Java, thus closest to the plant is the region I, and the
farthest is the region III.
Figure 8.3 Map of Java(Source: pixshark.com)
The first reason we choose five provinces because five of the province are
the provinces with the highest number of households and the city is a city that has
a university because our targets are also students who in boarding house also
considered, so it would be an attractive market for our products, and because our
product have anti mosquito in it is supported also by the data that the province is
the fifth highest population of patients with dengue fever, it means that the provincedoes require products which can repel and kill mosquitoes. In addition other
additional factors are the most steady economic growth and the number of middle-
income population also comes at the most on the island of Java
Moving the last reason, which is about the effectivity to deliver our products
to consumer with considering about the plant location. As we first stated above,
where our plant location likely to be established in the area of industry in Bogor.
Here the summary of each region where our sealt product is distributed
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Table 8.6 The Cities Target on Each Province
No Provinsi Kabupaten/Kota
1 DKI JakartaJakarta Selatan, Jakarta Barat, Jakarta Timur,
Jakarta Pusat, Jakarta Utara
2 West Java
Bandung, Bogor, Bekasi, Cirebon, Depok,
Garut, Tasikmalaya, Indramayu, Cianjur,
Sukabumi, Karawang
3 Central JavaSemarang, Purwokerto, Brebes, Solo, Demak,
Jepara, Kudus, Magelang, Tegal
4 D.I Yogyakarta Yogayakarta, Bantul, Sleman
5 East JavaSurabaya, Malang, Madiun, Tulungagung,
Jember
(Source: Author’s Document)
Cities in the above is the target of our distribution, on several considerations
such as the condition of the town, population and economy we decided to spread
out in the cities above as a distributor. We will cooperate with a spesific wholesaler
for each region in conducting our product distribution. Wholesaler itself means a
corporation that buys and sells a great amount of products with variative quality of products and variative form. The wholesaler that we choose to distribute our
product is a well known wholesaler and also a wholesaler with an easily accesible
location, so that the consumer can easily obtain the target of our product, our
wholesaler such as Hero, LotteMart, Giant, Hypermart, Yogya Toserba, Surya
Toserba, and Carrefour.
Table 8.7 Percentage of Distribution on Each Region
Region Percentage
I 40%
II 30%
III 30%
(Source: Author’s Document)
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Table 8.8 Total Amount Wholesaler on Each Region
No Region Wholesaler Amount
1 I
Hypermart 32
Giant 32
Lottemart 32
Carrefour 32
Toserba Yogya 42
Hero 30
2 II
Hypermart 25
Giant 25
Lottemart 25
Carrefour 25
Toserba Yogya 25
Hero 25
3 III
Hypermart 25
Giant 25
Lottemart 25
(Source: Author’s Document)
From the list above, wholesaler in each region will get a number of products
which will be adjusted for the percentage distribution of our products, because our
product still new in the market so we can not be evenly distributed in all the
distributors of the city that became the target of our products. Our group also
arranged for the distribution system above can be evenly distributed, the number of
wholesaler above also do not cover the total number of existing wholesaler, amountof wholesaler above have been decided by a variety of considerations, according to
the conditions of each region. Additionally in the table 8.7 are described the number
of our product distribution division
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Table 8.9 Total Amount Our Products in Each City per Week
No Region CitiesTotal Amount Distribution Our Product
(pcs/week)
1
I
Jakarta 20,340
Bandung 10,000
Bekasi 10,000
Bogor 10,000
Ciayumajakuning 15,207
Garut 5207
Tasikmalaya 5207
Cianjur 5207
Sukabumi 5207
Depok 10,000
Karawang 5207
2 II
Semarang 10,000
Solo 10,000
Purwokerto 5134
Brebes 5134
Demak 5134
Jepara 5134
Kudus 5134
Magelang 5134
Tegal 5134
Yogyakarta 10,000
Bantul 5134
Sleman 5134
3 III
Surabaya 22,861
Malang 22,861
Madiun 7620
Tulungagung 7620
Jember 15,240
(Source: Author’s Document)
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Can be seen in the above data that the number of the deployment of our products
will be kept evenly but due consideration of a large number of requests in the area of a
particular area so that there are some areas the number of households, the condition of
the region, as well as our consumers' income. This proves that the area in need
compared to other regions.
8.1.3.2. Product Distribution Chain
The product that had been made will be saved in storage for distribution to
consumer. We will buy a truck with a number that has been considered to facilitate
the process of transportation, other than that this truck will be an investment for our
factory. That product then will be distributed to wholesaler by using some
alternatives below:
Figure 8.4 Alternatives Product Distribution(Source: Author’s Document)
We decided to just use the truck as the truck has a large capacity, relatively
quick time to get to the distributor on time, and the distance between the plant with
distribution targets can still be reached using the strip of land, a reason not to use
the train because the train line is limited to city bypassed, and will give cost more
from the station to the location of distribution.
Product
Distribution
Plant Location Bogor
(Industrial Area)
Raw Material
Supplier
6 Supplier Local
1 Supplier
Import
Distribution
Route
Route 1 (North)
Route 2 (South)
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8.1.3.3. Distribution Route and Transportation
Below is the route to be traversed to get to the areas of distribution, there
are two routes that will be used. Both were selected based on the effectiveness of
time spent because it is in one lane. Of these cities will be distributed again to
retailers, they are who sell of these products in smaller quantities to the general
public. Afterwards, arrive to the consumer that the target market of our products are
households and students in boarding house
Figure 8.5 Alternatives of Route Distribution(Source: Author’s Document)
Figure 8.6 Route Distribution ( Green Line: Route 1; Red Line: Route 2, Blue triangle: PlantLocation, Pink Triangle: Last Distribution City )
(Source: Author’s Document)
Previously has been explained briefly why our products use the truck as
transportation to deliver our products to the distributor. By using the first truck
departs from Bogor which the location of our factory is located, and then is
distributed by truck, after reaching the destination of such products is kept by a
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wholesaler, direct sell to the consumer also depends on the decision of the
distributor, then to retailers who intend to resell it after buy from the wholesaler, so
as to reach the consumer user of our products can be directly from the distributor
or through the retailer first.
Figure 8.7 Distribution Process by Truck(Source: Author’s Document)
Light blue above illustrates that consumers to get the our products either
through a retailer or directly from the wholesaler. Trucks that we use is a medium-
sized truck with a capacity of 8,000 kilograms, if a box of our products contains 12
pieces weighing 2280 grams, so that the amount of load that can be carried by a
truck is 3508 pcs.
8.1.4. Inventory
8.1.4.1. Raw Material Inventory
The raw materials used in the production of Anti-Mosquito Air Fresheners
are mostly chemical compounds. Chemical compounds used in the production of a
diverse nature compounds derived from nature, characteristics and so compounds.
Given this diversity, it takes a special storage space for storing raw materials
production.
1.
Buffer Inventory
Inventory is sometimes used to protect against the uncertainties of supply and
demand, as well as unpredictable events such as poor delivery reliability or poor
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quality of a supplier's products. Inventory is used to prevent any out of stock. So,
we can use raw materials that can replace the role of raw material stocks are
depleted.
2.
Anticipation Inventory
Anticipation inventory is used to prevent delaying on production as a result of
delays in the distribution of raw materials. Therefore, when the raw material is
delayed, it can be anticipated with the raw materials that are still present in the
storage room. In addition, anticipation inventory is also done in order to cope with
increasing demand. So that production can be enhanced Anti-Mosquito Air
Fresheners with stock material available backup in the storage room.
8.1.4.2. Work In Process Inventory
The uses of tool during the process also require an inventory. This is
because there is a certain period in an experienced maintenance tool that causes the
device to be replaced with another tool. In addition, the uses of tool during the
process cant separated from the time of usage. Therefore, when the uses of
production tools which has used intemperate use, it is possible that the device will
be damaged. This tool inventory can be called with Decoupling Inventory.
8.1.4.3. Product Inventory
Inventory the Anti-Mosquito Air Freshener products can be done by storing
the products in the storage room. We must keep this room dry and humidity.
Because the moisture will be maintained to minimize the possibility of experiencing
the process of hygroscopic tablets. The presence of the hygroscopic effect on the
structure of the tablet. The change will affect the structure of the tablet hardness of
tablets. Storage effervescent tablets must be in a condition that can be protected
from water and outside air.
Storage room should in a large area to keep the product for at least one
month. Storage is used to anticipate when there is an increasing of demand for raw
materials or shipping inhibited to make Anti-Mosquito Air Freshener products.
There are 2 types of inventory that can be done on Anti-Mosquito Air Freshener
products.
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1. Cycle Inventory
Cycle inventory is inventory that is carried out in order to comply with the
request in accordance with the product order. Inventory capacity of the inventory
cycle has a value which is equal to the production capacity of a Plant where
production capacity is equal to xxx packages per month.
2. Safety Inventory
Safety inventory is used to anticipate the uncertainty of demand or delay on the
distribution of raw materials required for the production process. Anticipation of
demand uncertainty is because if the number of requests increases, we still find that
the stock has to fulfill the request. Inhibition of the distribution of raw materials can
have an impact on the production process is not running as much as possible so that
the resulting production decrease.
Anti-Mosquito Air Freshener product is produced from the plant does not have
a dependency on a specific time. This is because Anti-Mosquito Air Freshener
products are not seasonal. Anti-Mosquito Air Freshener products is a necessity of
everyday household, so the demand for Anti-Mosquito Air Freshener products tend
to be more stable than the products that use fruit as raw material production
8.2. Fluctuation in Raw Material and Products in the Distribution Center
Fluctuation of raw material and product in the plant can be estimated as
important for us to the ability of producers to meet the market demand at an time
given. In this section, fluctuation in raw material will not to be discussed because
our raw material of our products can be obtained at any time as long as we ordered
it with interval variation. Raw material is divided into 4 kinds there are dried orange peel, vanilla and lavender essential oil and ethanol. Each of them is ordered with
interval variation, like 7 days for dried orange peel and every month for the essential
oils and ethanol. The fluctuation is already explain in the inventory section.
Basically, we use inventory because of the safety reason, we just prevent that our
raw material have broken when we shall use it, so in every order we buy more than
our need, to be save as our inventory.
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This section will be focused to explain the fluctuation of our product in the
distribution center in each regions. This fluctuation projection is done with this
assumption below:
1.
Production is done with capacity 100%
2. Product transportation to distribution is done in every 5 days
3.
Market can receive the entire projection set in the initial for each distribution
center region
4. There is shipping in the first week to stock product
Here are the graphs showing fluctuations in the plant inventory and any existing
distribution center for each region.
Figure 8.8 Product Inventory In Plant GraphSource : Authors Document
0
10000
20000
30000
40000
50000
60000
70000
80000
0 5 10 15 20 25 30 35
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Figure 8.9 Product Inventory In Region I WholesalerSource : Authors Document
Figure 8.10 Product Inventory In Region II WholesellerSource : Authors Document
0
5000
10000
15000
20000
25000
30000
0 10 20 30 40 50 60 70
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
0 10 20 30 40 50 60 70
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Figure 8.11 Product Inventory In Region III WholesellerSource : Authors Document
We can see that our plat distributing the product every 7 days or every wee.
There was a shipping since the first week because we have produced our product
in a week approximately 60000 packs.
8.3. Marketing
Marketing is defined as an activity that makes the availability of the product
and can satisfy consumers, and also provide benefits to companies that sells the
product. It is a science of choosing target market through market analysis and
market segmentation on the previous assignment before. Based on them, our
product marketing goal is to promote the product and purpose them to use anti-
mosquito air freshener to freshen their room and make mosquito-free room. Beside
that
8.3.1. Target Determination
For planning and developing our marketing strategy, to determinate our
product’s target is a must in order to be more focused in the market in accordance
to our products specialty. Our marketing target is a student and household that are
in the upper-middle and lower middle society in Java Island. The reason why we
choose them as our main target is because our product is one of consumer goods in
daily life. So almost every day the consumers buy the new one of air freshener
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
0 10 20 30 40 50 60 70
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product. The second reason why we choose just Java Island as our main market
because Java Island has a high population in Indonesia, beside that five region that
we choose has a high percentage of dengue patients. This reason is fit to our product
function that is to repel mosquito.
As we discuss above, we have set five region as our main market. There are
DKI Jakarta and West Java as Region I, Central Java and DI Yogyakarta as Region
II, and East Java as Region III. The target that will be set must be fulfill the
segmentation which is consist of geography, demography, psychographic and
behavior. The criteria that must be fulfill for each segmentation are possible to
measure, must be large enough to earn profit and must stable.
We set target for DKI Jakarta and West Java is 40% because it is near to our
plant location to distribute our product. Beside there is a lot of student life in West
Java and Jakarta, especially in Depok and Bandung. This region also has the highest
population in Java. Target for Region II or Central Java and DI Yogyakarta is 30%
because in this region have a second highest population and in this region there life
a lot of students since DI Yogyakarta has a nickname “Kota Pelajar”. For East Java,
we set 30% because although this province has a large area in Java Island, the
population of house hold and student in boarding house is not as high as in Jakarta,West Java and Yogyakarta. Besides, to distribute and promote our product to this
region relative more difficult than in Jakarta, West Java, Central Java and
Yogyakarta.
Table 8.10 Percentage of Distribution
Province / Region Target of Sales of Our Product
Jakarta and West Java/ Region I 40%
Central Java and DI Yogyakarta / Region II 30%
East Java / Region III 30%
(Source : Author’s document)
8.3.2. Marketing Integration
The purpose of marketing integration is to create the good packaging
market, get the success vision mission fabric, and to give satisfied the consumers.
It is known as 4Ps, that are product, price, place and promotion strategy. A formal
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approach to this consumer-focused marketing is known as SIVA (Solution,
Information, Value, and Access).
a)
Product
This product name is Ciao Bella. The advantage of this product is can make the
consumer beautiful inside and outside through the function of this product. This
product is can freshen and relaxing the consumer through the fragrant its
contain. The relaxing agent will release anti-stress, anti-anxiety and anti-
depressant and will make the consumer beauty inside. Beside that, this air
freshener has a function as mosquito repellant. This function will make the
consumer beauty outside without mosquito bites on their body
b)
Price
The price of Ciao Bella Anti-Mosquito Air Freshener is IDR 25.000,00. We
estimate that this price is affordable to compete with other air freshener product
and for our consumer to buy.
c)
Place
Our product will be distribute through indirect route. We will work with a
variety of retail business and many mini markets and super markets such as
Giant, Alfamart, Indomaret, Carrefour, ACE Hardware and other small shop asmarketing media.
d) Promotion
The need of promotion of Ciao Bella Anti-Mosquito Air Freshener use to spread
information to general public about new air freshener. The promotion will be
done through thse deployment of advertises in television, radio and any other
media, product website, and grand launching.
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CHAPTER 9
PRODUTION COST
Our product, CiaoBellaTM, is manufactured in Purbajaya Industrial Estate,
Cibinong, Bogor, West Java. With total area of 600 m 2, the plant is intended to
produce about 8,467 CiaoBellaTM per day. To achieve this production target, our
plant operates 24 hours/day from Monday to Sunday (7 working days) with 3 shifts
working time.
A product needs to be good not only in technical aspect but in economical
aspect as well. Because the motivation behind starting a business or establish a plant
is of course to gain profit. Therefore, an accurate economic analysis needs to be
done before build a plant and manufacture a product to see whether it is
economically feasible or not. In the economic analysis, all costs which may affect
the selling price of a product should be taken into consideration. The selling price
of the product includes desired profit and taxes are determined as well. Component
costs are the factors which influence the price of the product the most. There are
two types of costs contained in component costs, fixed costs and operating costs.
Fixed costs are costs that are not influenced by the amount of production and tendto be the same each year, such as marketing expenses (advertising and promotion),
administrative costs, indirect employee salaries (indirect labor), as well as other
costs that affect the price of the product (insurance, taxes, depreciation). While
operating costs are costs that will change depending on the amount of production
or needs, such as purchase of materials or cost of raw materials and employee
salaries (direct labor).
9.1. Capital Investment (CAPEX)
Total Capital Investment (TCI) or invested capital is all costs that are needed
to design, to build and to start the production. In another words, TCI represents the
total amount of cash needed to begin a product manufacture. TCI consists of fixed
capital cost and working capital cost. The source of fund for TCI can be obtained
from the investor, bank’s loan or self -raised. TCI itself can be calculated by several
methods. The method that we use to calculate TCI here is Guthrie method. Some
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data and assumptions below are used in the upcoming section and subchapter to
help us analyze the economical aspect.
1 US$ = Rp 12,876.00 (www.bi.go.id , accessed on April 24th, 2015).
Some equipments have salvage value.
CiaoBellaTM plant will operate 24 hours each day, through 335 days of work
in one year.
Our plant rearrangement and equipment installation process will be finished in
3 months (October until December 2015). So our production process can be
started in the beginning of 2016.
The service life of PT CiaoBella Cantika Nusantara (n) is 10 years.
Depreciation will be conducted using declining balance method.
The Guthrie method to calculate Total Capital Investment (TCI) is shown in
Equation (9.1) below.
TCI Fixed Capital FC Working Capital WC (9.1)Where,
Fixed Capital 1.18 × C (9.2)C CM C+bu Cff f Ch (9.3)
Therefore, we need to calculate fixed capital and working capital cost first in
order to get the TCI’s value.
9.1.1. Bare Modul Cost or Fixed Capital Cost
Fixed capital cost in our company, PT CiaoBella Cantika Nusantara, is
consist of main equipment cost, plant rearrangement and modification cost, offsite
facilities cost, market research cost, and other costs such for patent & branding. All
will be described more detailed below one by one. Fixed capital then can becalculated by using Equation (9.2) and Equation (9.3), explained earlier.
9.1.1.1. Main Equipment Cost
All the costs that are used to buy main equipments required in the production
process of PT CiaoBella Cantika Nusantara will be discussed in this section. The
cost of an equipment is depend on the type, characteristic, capacity, size or
dimesion, as well as brand/country of origin. Equipments from China are much
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cheaper compared to Japan’s, Europe’s or America’s. So equipments that are made
in China, are more preferable for a starter like us.
Because we hire the plant location, not buy a land and then build it, plus if
everything goes smoothly, we have a plan to buy the equipments in the end of this
year. Hence, because the year in the website where the equipments are sold and the
year when we will purchase them is same, we do need Marshall and Swift Factor
or others similar factor to extrapolate our equipments price in the future.
Then, the result of total main equipment calculation can be seen in Table
9.2. But in Guthrie method, TCI calculation is conducted by adding some cost
calculated based as “Bare Module Cost”. The bare module factors included FOB
(Free on Board) purchase, equipment instruments and installations (piping,
concrete, steel, controllers, electrical, insulation, and paint), direct labor for
installation (material erection and equipment setting), and also indirect module
expenses (freight, insurance, taxes, construction overhead, and contractor
engineering expenses). TBM cost calculation of each module is multiplied by factor
that obtained from the literature (Table 9.1). For some tools that are not found in
the literature, we use the average of the bare module of all the tools to
marginalization because the tool is a batch chemical industrial, and is not listed inthe general list of existing modules bare. The result of TBM cost calculation of our
equipments can be seen in Table 9.3. We also add delivery cost calculation from
the port to our plant location because it is not included in the bare module factors.
Table 9.1 Bare Module Factor
(Source: Seider W. D., J. D. Seader, and D. R. Lewin. 2004. Product and Process Design Principles:Synthesis, Analysis, and Evaluation, Second Edition. USA: Wiley. )
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Table 9.2 Main Equipment Cost
Equip. Cap. Qty Supplier
Price
per
Piece
(US$)
Price per
Piece (Rp)
Total Price
(Rp)
Grinder 150 kg/h 1
Jinan Tery
Machine
Co., Ltd.
750 9,657,000 9,657,000
Extractor
400 L
(solvent)
150 kg
(feed)
2
Shanghai
Better
Industry
Co., Ltd.
1,50019,314,00
038,628,000
Mixing
Tank1500 L 1
Wenzhou
FlowtamLight
Industry
Co., Ltd.
1,83823,666,08
823,666,088
Absorptio
n Tank1500 L 2
Staes.com,
Belgium2,171
27,953,79
655,907,592
StorageTank
50 L 1
Staes.com,Belgium
590 7,596,840 7,596,840
100 L 1 1,17915,180,80
4
15,180,804
200 L 1 1,25516,159,38
016,159,380
2500 L 2 2,52432,499,02
464,998,048
Sealing
Machine
180
pcs/min1
Guangzho
u Shifeng
Electric
Appliance
Co., Ltd.
1,32016,996,32
016,996,320
Total Main Equipment Cost248,790,07
2
(Source: Author’s personal data, gathered from many source)
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Table 9.3 Total Bare Module Cost Calculation
Equip. QtyPrice per
Piece (Rp)
Total Price
(Rp)
Model
Equip.
Assumpt
ion
BM
Factors
Bare
Module
Cost (Rp)
Grinder 1 9,657,000 9,657,000 Crushers 1.39 13,423,230
Extractor 2 19,314,000 38,628,000AverageModuleFactors
2.18 84,209,040
Mixing
Tank1 23,666,088 23,666,088
AverageModuleFactors
2.18 51,592,072
Absorptio
n Tank2 27,953,796 55,907,592
AverageModuleFactors
2.18 121,878,551
Storage
Tank
1 7,596,840 7,596,840
AverageModuleFactors
2.18
16,561,111
1 15,180,804 15,180,804 33,094,153
1 16,159,380 16,159,380 35,227,448
2 32,499,024 64,998,048 141,695,745
Sealing
Machine1 16,996,320 16,996,320
AverageModuleFactors
2.18 37,051,978
Total Bare Modul Cost 534,733,327
Delivery Cost 26,736,666
Total Main Equipment Cost 561,469,993
(Source: Author’s personal data, gathered from many sources)
9.1.1.2. Plant Rearrangement and Modification Cost
We say plant rearrangement and modification cost because the location that
we chose is not an empty land, there is already a plant building standing over in a
total area of 600 m2 at Purbajaya Industrial Estate. So we don’t have to build from
zero, just need to do little arrangement and modification at some points, make it
looks like our plant’s layout. To achieve this, we will just hire a few workers (±20)
and an architect. And because we have just started, it is better for us to hire the
location first rather than buying it too. Hiring cost per year then will be categorized
as operating cost. By doing these (hiring an already-built plant), it will save time
(our plant can operate soon) and reduce our fixed capital cost. Thus, reduce amount
of money we need to loan from the bank. But of course, we don’t intend to hire it
forever, we have a plan to buy it someday in the future when our financial state
already strong and stable.
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(Source: Author’s personal data, gathered from many sources)
As for the price estimation, we allocate Rp 500,000,000 for plant
rearrangement and modification. We assume the process only takes 1.5 month with
cost of worker per day is Rp 150,000 for each person (we hire 20) and the architect’s
salary is Rp 35,000,000. The summary list of price is shown in Table 9.4.
Table 9.4 Plant Rearrangement and Modification Cost
Cost Breakdown Cost Total Cost
Material and Others Rp 500,000,000 Rp 500,000,000
Architect Rp 35,000,000 Rp 35,000,000
Workers (20), for 45
days
Rp 150,000
(per person per day)Rp 135,000,000
Hiring Cost (3 Months) Rp 100,000,000
Total Plant Rearrangement Cost Rp 770,000,000
(Source: Author’s personal data, gathered f rom many sources)
9.1.1.3. Offsite Facilities Cost
Offsite facilities cost is the cost of support facilities installation at the plant
(such as the installation of water, electrical, etc) and cost of supporting equipments
that needed to accelerate production process that determined from the number of
employees and also their needs. Here is another advantage of choosing location in
an industrial estate area: we don’t need to worry about the installation of electricity,
water, telecommunication, and waste treatment unit. All of them are already
provided by the developer as the infrastructure and facilities of the industrial estate.
So convenient and practical, right? The roads there are also wide and smooth, very
good for transportation.
Then, because our lovely company, PT CiaoBella Cantika Nusantara, is also
not too big, just 600 m2, so the supporting equipments needed are not plenty. The
detailed price and needs for offsite facilities is shown in Table 9.5 and Table 9.6.
Table 9.5 Summary of Utility Installation Cost
No Component Price (Rp) Note
1 Electrical Installation - provided by theinfrastructure and
facilities of theindustrial estate
2 Water Installation -
3 Telecommunication Installation -
4 Making Road -
5 Internet Network Installation 5,000,000
Total Utility Installation Cost 5,000,000
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Table 9.6 Supporting Equipment Cost
No Supporting Equipment QtyCost per
Piece (Rp)
Total Cost
(Rp)
1 Computer (ASUS) 15 5,000,000 75,000,000
2 Faximile Machine 1 2,100,000 2,100,000
3 Fotocopy Machine (Canon IR 6070) 2 19,000,000 38,000,000
4 Receptionist Desk 1 1,500,000 1,500,000
5 Printer 2 1,200,000 2,400,000
6 Office Stationary 1 2,000,000 2,000,000
7 Clock 5 50,000 250,000
8 Office Table Desk 15 650,000 9,750,000
9 Office Chair Desk 15 300,000 4,500,000
10 Cabinet 5 998,000 4,990,00011 Sofa 3 1,700,000 5,100,000
12 CCTV 10 1,500,000 15,000,000
13 Canteen Table + Chair Set 15 600,000 9,000,000
14 Meeting Desk + Chair Set 1 5,000,000 5,000,000
15 Meeting Instruments 1 4,000,000 4,000,000
16 Pantry Utensils Set 1 2,500,000 2,500,000
17 Dispenser 3 500,000 1,500,000
18 Toilet Set 10 5,500,000 55,000,000
19 Neon Lamp 40 25,000 1,000,000
21 Generator Set 1 150,000,000 150,000,000
22Office Car (Avanza All New 1.5 G
M/T)2 186,100,000 372,200,000
23 Recycle Bin 18 35,000 630,000
24 Air Conditioner 1 PK 7 2,400,000 16,800,000
25 Telephone 4 450,000 1,800,000
26 Television 4 1,120,000 4,480,000
Total Supporting Equipment Cost 784,500,000(Source: Author’s personal data, gathered from many sources)
9.1.1.4. Market Research Cost
One of the responsibilities of the marketers is to analyze the motivation and
behavior of today's consumers and potential consumers. Here are some basic
questions that must be answered by marketers in order to successfully market their
product:
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What are their needs and desires?
How are the needs impact on the benefits of the product they are looking for
and what criteria that consumers use to choose products and brands?
What are the chances they react to certain price, promotion and service policy?
To answer these questions, marketers should have an idea of how
consumers making the decision to buy the product and how psychological factors
and social factors influence the decision. Market research is a systematic method of
gathering information about customers and markets that will be used by the
company in designing marketing strategies. It is important to know what consumers
or potential consumers need. Thus, market research is an important input in
designing marketing strategies. To perform this market research, it takes time but
not much cost. The total cost of market research for CiaoBella TM is Rp 30,000,000.
Table 9.7 below shows the detailed cost of market research.
Table 9.7 Market Research Cost
No Activity Cost (Rp)
1 Survey 5,000,000
2Online questionnaire
(own web development) -
3 Consultant service 25,000,000
Total Market Research Cost 30,000,000
(Source: Author’s personal data, gathered from many sources)
9.1.2. Other Investment
Besides the costs that have already explained above, there are some
investment costs that support the plant development, such as patent, licensing and brand registration cost.
9.1.2.1. Patent Cost
Patent is a set of exclusive rights granted by a sovereign state to an inventor
or their assignee for a limited period of time, in exchange for the public disclosure
of the invention. Patent that will be registered by PT CiaoBella Cantika Nusantara
is the overall composition of CiaoBellaTM. Based on Direktorat Jenderal Hak atas
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Kekayaan Intelektual , Ministry of Law and Human Rights, Republic of Indonesia,
the costs that charged for CiaoBellaTM patent are shown in Table 9.8.
Table 9.8 Patent Fee Details
No Item Unit Cost (Rp) Total (Rp)
Registration Fee
1 Patent request Per request 575,000 575,000
2Additional cost per
claimPer request 40,000 40,000
3
Announcement
acceleration that held
as soon as 6 months
Per request 200,000 200,000
4Substantive
inspectionPer request 2,000,000 2,000,000
Certification Fee
5Request for letter of
priority right evidencePer request 250,000 250,000
6Cost for publishing
certificatesPer certificate 250,000 250,000
7 Cost for patent search that has been announced
a) Domestic Per subject 250,000 250,000
b) Overseas Per subject 1,287,600 1,287,600
License Fee
8License agreement
registration feePer request 1,000,000 1,000,000
9
Request for
compulsory
licensing
Per request 3,000,000 3,000,000
10
Request for general
list excerpts of
patents
Per request 100,000 100,000
Total Cost for Patent 8,952,600
(Source: http://www.dgip.go.id/hak-cipta/tarif-biaya-hak-cipta, accessed on April 24th 2015)
Next is brand. Brand is a name, term, sign, symbol or design, or a
combination of them intended to identify the goods and services of one seller or
http://www.dgip.go.id/hak-cipta/tarif-biaya-hak-ciptahttp://www.dgip.go.id/hak-cipta/tarif-biaya-hak-ciptahttp://www.dgip.go.id/hak-cipta/tarif-biaya-hak-cipta
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group of sellers and to differentiate them from those of other sellers. Therefore it
makes sense to understand that branding is not about getting your target market to
choose you over the competition, but it is about getting your prospects to see you
as the only one that provides a solution to their problem. PT CiaoBella Cantika
Nusantara will register CiaoBellaTM as an anti-mosquito air freshener product with
the following logo shown in Figure 9.1.
Figure 9.1 CiaoBellaTM Branding Logo
Table 9.9 below is describing about the detail of brand cost for CiaoBellaTM based
on law that applicable in Indonesia.
Table 9.9 Brand Fee Details
No Item Unit Cost (Rp) Total (Rp)
1 Request for trademarkregistration
Per request 600,000 600,000
2 Additional cost per claim Per request 50,000 50,000
3Brand license
maintenance feePer certificate 2,000,000 2,000,000
4Brand license publishing
costsPer certificate 100,000 100,000
5License agreement
registrationPer request 500,000 500,000
6Cost for proof of
prioritytrademark
application copy
Per request 250,000 250,000
Total Cost for Brand 3,500,000
(Source: http://www.dgip.go.id/hak-cipta/tarif-biaya-hak-cipta, accessed on April 24th 2015)
9.1.2.2. Distribution Facility Cost
From supply chain analysis section, we decide to distribute our product
through the three region with 2 routes by trucks because it is cheaper and trucks are
http://www.dgip.go.id/hak-cipta/tarif-biaya-hak-ciptahttp://www.dgip.go.id/hak-cipta/tarif-biaya-hak-ciptahttp://www.dgip.go.id/hak-cipta/tarif-biaya-hak-cipta
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flexible, they can reach wider area than plane, ship or train. So we will buy and
invest 6 trucks in order to reduce our distribution cost and make the distribution
easier. The truck that we will buy is HINO Dutro with capacity/load until 8 ton. The
price per unit is Rp 261,300,000. Then the total cost of buying 6 trucks are Rp
1,567,800,000.
9.1.2.3. Contingency
Contingencies are unanticipated costs incurred during construction of plant.
To account for the cost of contingencies, it is common to set aside 15% of the direct
permanent investment. And we use this assumption to determine cost for
contingencies because it is being an useful estimation when our team is unable to
make a better estimate. With that common rule, we get cost of contingency as much
as Rp 559,683,389.
Therefore, from all of the cost calculations that have been conducted, we
can finally calculate the Total Permanent Investment (TPI) and Fixed Capital Cost
by using Equation (9.2) and Equation (9.3). The result is shown in Table 9.10.
Table 9.10 Total Permanent Investment and Fixed Capital Cost
Cost Component Total Cost (Rp)Main Equipment 561,469,993
Plant Rearrangement and Modification 770,000,000
Utility Installation 5,000,000
Supporting Equipment 784,500,000
Distribution Facility 1,567,800,000
Market Research 30,000,000
Others (Patent + Branding) 12,452,600
Contingency 559,683,389
Total Permanent Invesment (TPI) 4,290,905,982
Fixed Capital Cost 5,063,269,059
(Source: Author’s personal data)
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(Source: Author’s personal data)
9.1.3. Working Capital
Working capital is the fee paid in the first months of the production process.
These are costs that are paid by the company before the company earns
revenue/income from product sales. Components of working capital is the cost
required for monthly operating expenses such as employee salaries and operating
costs to be paid during production. Cost of working capital (WC) can be estimated
by the formulas in Equation (9.4).
. (9.4)Where,
WC = Working Capital
k = 0.05 (for single product)
FC = Fixed Capital
Therefore,
. , , , , , After that, we can calculate the value of Total Capital Investment (TCI), using
Equation (9.1). The result is shown in Table 9.11.
Table 9.11 Total Capital Investment Calculation
Then, our company, PT CiaoBella Cantika Nusantara will have TCI value as big asRp 5,316,432,512.
9.2. Operating Cost (OPEX)
9.2.1. Manufacturing Cost
Manufacturing cost is one of the basic costs which must be taken into
account in economical aspect analysis of a product manufacture. Manufacturing
cost is one of the biggest key factors in determining the selling price of CiaoBellaTM.
Manufacturing cost itself consists of direct production cost, fixed cost, and plant
overhead cost. We can obtain the manufacturing cost by calculating those three
Cost Component Total Cost
Total Permanent Investment (TPI) Rp 4,290,905,982
Fixed Capital Cost Rp 5,063,269,059
WC Rp 253,163,453
TCI Rp 5,316,432,512
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costs mention before, starting from direct production cost, fixed cost, and the last is
plant overhead cost.
9.2.1.1. Direct Production Cost
Direct production cost is an element of manufacturing cost, which is the
major contri butor of factory’s annual operating cost, that is directly related to the
costs that are changeable or unsteady for the next 10 years operations. To make it
simple, this kind of cost will be affected easily with the change of operating years.
In doing economical analysis, we use four elements of direct product costs as a
consideration, which are annual raw & packaging material costs, annual
direct/operating labour costs, annual utility costs, and annual maintenance costs. In
operation of the factory to produces 8467 packs of anti-mosquito air freshener per
day, a direct production cost must be calculated.
a) Raw and Packaging Material Cost
Raw material cost is calculated based on the supply chain analysis and the
mass balances. The total units of raw materials are calculated based on the needs of
each material for the annual production. Four main factors that affect the price of
our raw material cost are their availability in Indonesia, distance from the supplierto producer, cost to produce that raw material and the raw material quality. Because
raw material cost gives big contribution to manufacturing cost thus operating cost
of a plant per year, factors that affecting it must be maintained carefully.
Total annual raw material costs of our plant can be seen in Table 9.13. We
put packaging material also in the list because we do not produce the packaging by
ourselves but buying it from another company. As can be seen, most of our main
supplier location is near our plant location (Bogor and Jakarta) thus it will reduceeven eliminate the delivery cost because we buy in high amounts, the distance is
near and we tend to cooperate with them in long term. As for the plastic jar for
packaging, because we import it from China, we put the delivery cost into
consideration.
b) Direct Labor Cost
Direct labors or operating labors are type of labors who get involved directly
in the production processes. Direct labors are needed to maintain and make sure the
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continuity of the production process. There are operator, worker, shift coordinator,
warehouseman, and process controller.
Operator is the person with the duty to watch and keep an eye to the raw
material supply and process in the process equipments. Worker is the one who do
the filling, labeling, sealing and storing process. Process controller will stay in the
control room and keep eyes on the overall process, and make sure everything is
going alright. Shift coordinator is the one who coordinates the rotation of each shift.
Meanwhile warehouseman is the person who secures and keeps eyes on the raw
material and final product storage in the plant.
In Table 9.12 and Table 9.13, we can see the list, the number of operator
and worker in each process as well their salary per month. We use Upah Minimum
Kabupaten Bogor as a reference there. As we can see there is also a variable cost
contained in the table, the variable cost taken is 20% of the amount of total costs. It
is needed for the extra costs for the bonuses such as Tunjangan Hari Raya,
Overnight Bonus, Yearly Bonuses, etc.
Table 9.12 Number of Operator and Worker in Each Process
Production
No Process Total Operator
1 Grinding + Extraction 4
2 Mixing + Absorption 4
3 Filling + Packaging 25
4 Sealing + Packing 2
5 Storing 2
Total Operator + Worker 37(Source: Author’s personal data, gathered from many sources)
Table 9.13 Total Direct Labor Cost
No Position Salary/Month/PersonAmount
(Person) Total Salary
1 Operator + Worker Rp 2,590,000 37 Rp 95,830,000
2 Process Controller Rp 2,590,000 2 Rp 5,180,000
3 Shift Coordinator Rp 2,590,000 2 Rp 5,180,000
4 Warehouseman Rp 2,590,000 2 Rp 5,180,000
Total Labour Cost Rp 111,370,000
Variabel Cost Rp 22,274,000
Total Labour Cost per Month Rp 133,644,000
Total Labour Cost per Year Rp 1,603,728,000
(Source: Author’s personal data, gathered from many sources)
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Table 9.14 Total Raw and Packaging Material Cost
Raw Material
No Material Supplier LocationNeeds
per Day
Order
per YearPrice (Rp) Order Cost per Year (Rp)
1 Lavender Essential OilCV M & H
FarmBogor
128.06
kg42902 kg 650,000/kg 27,885,894,192
2 Dried Citrus PeelCV M & H
Farm
Bogor155.92
kg
52234 kg 15,500/kg 809,624,176
3 VanillinPT Tripper
NatureJakarta 16.01 kg 5363 kg 60,000/kg 321,760,318
4 EthanolPD Cipta
Bangun NauliBogor
2329.00
L780215 L 13,000/L 10,142,795,000
5 Hydro GelPT Nalpreme
TechnochemJakarta