DETERMINING THE OPTIMAL WORKING CAPITAL MANAGEMENT (CASE STUDY: PT ULTRAJAYA MILK INDUSTRY & TRADING COMPANY TBK)

• Main Author: Alya Shofa Irawan, Mutiara
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/52972
• Institution: Institut Teknologi Bandung

PT Ultrajaya Milk Industry & Trading Company Tbk (ULTJ) is one of the leading producers of food and beverage products in Indonesia. The Company introduced the technology of Ultra High Temperature (UHT) processing combined with aseptic packaging in carton packs. The business issue in this research is working capital management in ULTJ is not optimal. A powerful tool for accessing how well a company manages its working capital is the Cash Conversion Cycle (CCC). ULTJ has the problem that their CCC is getting longer from year after year. This situation makes the company needs to manage their working capital. For that reason, the company needs to manage its cash conversion cycle. The research framework of this research is to optimize CCC of ULTJ. This research framework has many steps. The first step is identifying business issues that occur in the company. The second step is exploring the problems by reviewing from related news and journals. After conducting literature review, the next step is collecting secondary data from annual report of ULTJ. Not only ULTJ but also author collects data from another company in same sector. The data collected from 2015-2019. The analysis starts by identifying the external condition of ULTJ using PEST analysis and Porter’s Five Forces analysis. Next Step is doing internal analysis using SWOT analysis and financial ratio analysis. Fifth step, the author finds the root cause using five ways analysis. After that, the author proposed solutions to solve the problem using the sensitivity analysis and make scenario from sensitive variable. The last step, the author will choose and explain about conclusion and suggestion for the problem. The results in this study from sensitivity analysis show that inventory is the most sensitive variable compared to account receivable and account payable. The analysis shows that the company must find the best solution to manage the inventory to get an optimum CCC. The author provides business solutions by optimizing the company's inventory by determining the minimum requirement of inventory turnover to decrease the Average Age of Inventory (AAI) and Cash Conversion Cycle. From the calculation, the optimal inventory affects the AAI. The AAI is smaller than the current AAI value in the company. The analysis results also show that the decrease in the AAI causes the reduction of CCC value. Therefore, based on the analysis the author recommends ULTJ should consider to modifying inventory management in running its business in order to create good working capital management. Because this business solution offered generates a CCC value of 64 days. In other words, the CCC of this solution is better than the CCC in the previous year. With these circumstances, the profitability of the company can also increase.