DETERMINING THE OPTIMAL WORKING CAPITAL MANAGEMENT FOR BUSINESS OPERATION (CASE STUDY : PT. MTM)

• Main Author: Helmi Faisal, Muhammad
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/35545
• Institution: Institut Teknologi Bandung

PT. Multi Teknik Mandiri (PT. MTM) is one of the heavy equipment spare parts manufacturing companies located in Bekasi, West Java. The company has 2 plants in Bekasi, namely Makrik plant and Pengasinan plant with a production capacity of 1440 tons/year. The business issue in this research is working capital management in PT. MTM that is not optimal between the competitors. Working capital management is very necessary for the company's business continuity. One tool to measure good working capital management is the cash conversion cycle (CCC). CCC is one of the working capital management instruments to consider the key aspects of current asset management. CCC of PT. MTM is always higher each year compared to industry averages where the cash conversion cycle of PT. MTM is 13 days while the industry average is 9 days The research framework of this research is to optimize cash conversion cycle of PT. MTM in order to shorter than average industry. This research framework has many steps. First, in the external analysis the author uses PEST Analysis to study about the market and second use porter’s five forces analysis to explore about industry and competition. Third step, in internal analysis, the author use working capital assessment such as calculate the cash conversion cycle and working capital policy to find the best solution. Fourth step, the author finds the root cause using five why analysis. Fifth step, the author proposed several methods to solve the problem. There are three types of methods used in solving this research problem, namely using early payment discounts, factoring, and modifying cash conversion cycle. Scenario calculations using these three methods have been carried out and look for cost and benefit analysis of three methods. In determining the best method, the author uses Analytical Hierarchy Process where there are four criteria, namely calculation of cash conversion cycle, implementation, profitability, and impact to customer. In last step, explain about implication and implementation plan. The results in this study indicate that the modifying cash conversion cycle method has the highest value based on the analysis of the Analytical Hierarchy Process with a value of 0.518 while in the second position is the factoring with a value of 0.347. This is because even though the cash conversion cycle calculation using factoring method has a good value which can reduce the value of the cash conversion cycle up to -3 days while using modifying cash conversion cycle method is 4 days (9-day industry average) but in terms of implementation, factoring is more difficult because PT. MTM still small company so it will difficult to access to bank or factoring companies. Therefore, the author recommends PT. MTM to use modifying cash conversion cycle method in running its business in order to create good working capital management so that it can affect to optimal performance. Because the application of 20% advanced payment is too difficult for PT. MTM, the authors carry out simulations to apply advanced payments of 5% and 10%. From the calculation, it can fix the CCC to 11 days and 8 days. The management agree to apply a 10% advanced payment and would further consider the results of this study.