Perpustakaan Digital ITB

In the last quarter of 2008, the world faced global economic slowdown, copper tumbled below US$2 a pound for the first time since December 2005 on speculation that the world economy is headed for a recession that will reduce demand for metals. Major mining companies are reacting to the reduced demand and some are curtailing their production. Some are even being forced to temporarily shut down, including Freeport-McMoRan Copper & Gold Inc. The situation forced Freeport to do some efforts to reduce production cost, in October 2008, President Directors of PT Freeport Indonesia announced his statement on company’s cost reduction. One of the points is a tighter control in materials usage. Supply Chain Management responded to this situation with making some strategies, with the focus are to reduce inventory and maximize purchasing process effectiveness and expediting to support this goal. Analysis for improvement in supplier lead time is an interesting study to reduce cost, in this case, inventory value as the tangible cost, with a number of demands of materials, lead time will impact the order frequency and inventory level. The faster the lead time, the lesser inventory level and value needed to cover the requirement. In the opposite, the longer and more uncertain the lead time, the more inventory and safety stock needed to ensure that required service level will be achieved. The identified issues in this problem is average supplier lead time from all purchasing locations which more than standard of 21 days in year 2006- 2008. Further analysis were performed to get an appropriate number and type of stock to be analyzed, and purchasing process for fast moving item stock class N and level A&B is selected as the best object of study in order to see the impact and correlation of improvement to inventory value. To narrow the analysis, Papua location is selected as having the latest lead time compare to another locations. Six sigma framework (Define, Measure, Analyze, Improve, Control) is used to improve the existing business process. Major problems identified for the cases are unavailability of stock in supplier, additional (revision) order process, and late order information to supplier. After identify some root causes, the solutions for the problems were involving four aspects: Business process, Communication, Technology and Human Resources. The conclusion and action plan for the solutions is a need for agreement between Supply Chain Management and supplier on their performance regarding quality, cost, delivery, safety and environment, improve process control, improve communication, optimize the use of technology, and improve the skill of purchasing team. The estimated cost reduction on inventory cost through improvement in supplier lead time is US$ 54,955 for fast moving materials stock class N, level A&B sourced from local supplier, with increasing 10% in inventory turnover, and the improvement opportunity is open to another purchasing location in Freeport. However, integrated action of the implementation plan from the four aspects and support from management must be in place to ensure that the solutions will solve the problem in the long term.