PROPOSED SOLUTIONS TO OPTIMIZE PRODUCTION COST IN FULFILLING THE COAL DOMESTIC MARKET OBLIGATIONS (STUDY CASE: PT XYZ)

• Main Author: Hawari, Regita
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/67414
• Institution: Institut Teknologi Bandung

A coal-mining and trading company in Indonesia, PT XYZ, annually fulfils the demand for Domestic Market Obligations for the public interest power generation industry. Policy issued by the Ministry of Energy and Mineral Resources for coal entrepreneurs in Indonesia mandates that 25 percent of the annual production plan be met by Indonesian coal producers. This policy has set the selling price of coal for the power generation industry for public use at $70 per metric ton with a calorific specification of 6,322 kcal/kg GAR, 8% total moisture, and 15% ash. Indonesian coal business owners must follow this policy if they don't want to be fined or punished by being banned from exporting. Due to higher production costs than the set selling price, this policy is hazardous to the company's bottom line. Losses in the company can be reduced through actions taken by the company. The root cause of the problem that could be solved by the company, namely the planning of the coal blending process, was found to be ineffective, according to a root cause analysis using the Current Reality Tree method. This is due to the fact that the user still plans the coal blending process using intuition and the user's limited knowledge of methods that can optimize these activities. As a result, companies can reduce production costs by optimizing these plans. The linear programming method is used to solve this problem because it can reach the goal of minimizing production costs by allocating the amount of coal mixed from the 9 types of coal that are available at PT XYZ and taking into account the buyer's quality requirements. After the implementation of the linear programming method in the process of allocating coal to be mixed, the total production cost is low and meets all product specifications required by the buyer, while the current method also has a low total production cost but does not meet the quality specifications desired by the buyer. It can be concluded if the company violates the contract agreement with the buyer and reduces the company's service level to the buyer if using the current method.