Report Chem 17 Assignment 4

8/17/2019 Report Chem 17 Assignment 4

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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


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


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


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


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%



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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


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



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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 )


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

http://www.bi.go.id/http://www.bi.go.id/http://www.bi.go.id/http://www.bi.go.id/


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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


2.18 121,878,551

Storage

Tank

1 7,596,840 7,596,840


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


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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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


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



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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

Report Chem 17 Assignment 4

Documents

Transcript of Report Chem 17 Assignment 4