PROPOSED IMPROVEMENT TO INCREASE COST REDUCTION ACHIEVEMENT IN PROCUREMENT OF SERVICE (CASE STUDY AT PT. KUTAI MINING)

• Main Author: Rahman, Fuadie
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/53354
• Institution: Institut Teknologi Bandung

PT. Kutai Mining is an Indonesia open-pit coal mining company that produces thermal coal for domestic and export consumption. In recent times, the company faces two main challenges namely coal price uncertainty and coal demand drop as impacted by significant changes in global market, regulation, economic situation, and rise of renewable energy. Because of that, it requires efficiency and effectiveness in coal producer’s business process to remain survive or even continue to grow amid challenges of coal industry competition. Based on company’s records, cost reduction in procurement process still encounters a number of obstacles, especially in the procurement of services process. Therefore, this research is aimed to identify and analyze the problems, and propose solutions that can improve procurement of services process in order to meet expected cost reduction targets. The research has been developed with qualitative method, with primary data collection through interview and secondary data through company’s data & reports. By using root cause analysis, it found that root causes of failure to achieve the cost reduction in procurement of services are limited vendor available, no service mapping, no standardized negotiation plan & strategy, unclear or not detail scope of work/ term of reference, no database of rate, and negotiation skill is not adequate. Solutions and improvements that can be implemented to increase cost reduction achievement are strategic sourcing, e-procurement development, database of rate development, and staff’s skill development. Strategic sourcing includes market research, strategy development, negotiation, and vendor development, where it provides benefits such as cost efficiency through competitive vendor selection, volume spending consolidation, vendor number rationalization, and risk management. Development of e-procurement consists of integrated procurement-vendor-contract module, where it provides benefits such as simplify & shorten procurement process, enhance choices in vendor selections, lower purchasing prices and transactions costs, and establish collaboration with vendor. Development of rate database consists of manpower rate, equipment rate, material rate, and vendor, where it provides benefits such as improved quality in price review, data accuracy, data consistency, and data integrity. In other hand, for the effectiveness of procurement staff’s skills development it can be done using the 70:20:10 method namely through 70%-assignment, 20%-coaching, 10%-training as per expected competencies and skills.