THE APPLICATION OF ANALYTICAL HIERARCHY PROCESS (AHP) TO DETERMINE BEST CITY FOR TEA FACTORY OPENING: A CASE STUDY OF PT. SURYA SENTOSA SEJAHTERA

• Main Author: Derrick, Neilson
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/79731
• Institution: Institut Teknologi Bandung

In the midst of Indonesia’s growing tea industry, the capability to reach consumers nationwide in a cost-effective manner has gained unprecedented significance. PT Surya Sentosa Sejahtera (PT SSS) as a prominent tea manufacturer is exteremely aware of this urgency. Due to the existing factory's location in Medan, a city in the province of North Sumatra, the current distribution channel imposes significant delivery costs on islands other than Sumatra. Logistic costs are approximately fifty percent higher than they should be, eroding the company's profit margin and making expansion difficult. In response, the company intends to construct a new facility in a more strategic location in 2025. But this initiative also presents management with a challenge, as they are still uncertain of the optimal location. With the core objective of enhancing logistic efficiency, the study centers on utilizing the Analytical Hierarchy Process (AHP) as one of the Multi-Criteria Decision Making (MCDM) method to identify the most suitable location for establishing tea plant. The AHP method is developed through a literature review and brainstorming with five key employees who are involved in the project. Based on previous studies and discussion with the experts in the company, there are (4) four important criteria in selecting the factory location, which are Financial Viability, Location, Operational Requirement, Organizational Capability that in total consist of twelve (12) sub-criteria which lead the company to have five (5) alternative locations. The AHP analysis revealed that the criterion with the highest weight is Organizational Capability, followed by Location, Operational Requirement, and Financial Viability in thar order. At the sub-criteria level, Partnership Readiness emerges as the most significant sub-criterion with respect to the objective. The Manufacturing Supervisor Availability holds the second most significant position, followed by the Prospective Area in the third rank, and the Easiness to Build Distribution Network in the fourth position. In the alternative level, Surabaya was identified as the most preferred site, with Bogor ranking second, Lampung third, Batam fourth, and Makassar in the last position.