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DOI: https://doi.org/10.33258/birci.v5i3.6545
Design of a Business Branch of Rawit Seeds Alon Farm in Surade District Sukabumi Regency
Muhammad Rif’at Reihan Aula Arifin1, Endang Chumaidiyah2, Maria Dellarosawati Idawicaksakti3
1,2,3Faculty of Industrial Engineering, Universitas Telkom, Indonesia
[email protected], [email protected], [email protected]
I. Introduction
Quoted from sukabumiupdate.com news, most of the residents in the area have a profession as farmers. The following is a breakdown of the livelihoods of the residents of Surade Sub-district: 60% of farmers, 20% of traders and entrepreneurs, 15% of civil servants, 5% of Indonesian workers and workers. According to the BPS, in 2019 the population in Surade District was 77,049 people. This area is also located at the tip of the island of Java which has a beach.
In relation to the people of Surade District, 60% of whom are farmers and a large population, it can be concluded that the need for cayenne pepper seeds for farmers is very high. Not only that, the central ALON Farm in this area is also unable to meet the demands of farmers who want to fill their agricultural land with cayenne pepper. Surade sub-district has a large area and most of it is agricultural land. For a map of Surade District, you can see in the following picture.
Abstract
This study discusses how to make a business feasibility study that must be carried out by every company that will invest or a new business. The discussion starts from the scope of the study of market aspects, technical/operational aspects and financial or financial aspects accompanied by case studies. ALON Farm is one of the authors' objects in this study, which is a cayenne pepper seed business located around the Surade area. Starting from a company that was overwhelmed in providing cayenne pepper seeds, ALON Farm emerged because by promising to fulfill the needs and demands of local farmers. The purpose of this research is to propose and plan the opening of a branch of the cayenne pepper seed business that is deemed necessary in connection with the need for the supply of chili seeds in the Surade area and its surroundings. With the feasibility study method through market aspect analysis from the company's past data for the past 3 years, then the data is processed by using the Linear Trend forecasting method in order to get the estimated total sales for the next 3 years. The company targets production to exceed the estimated sales value with an allowance of 0.1% from the estimated sales.
For the technical and financial aspects, secondary data obtained from various sources is used. The results of the feasibility calculation show the NPV value for the calculation period in this study, which is 1-36 months, is Rp103.294.565, the IRR value is 24,42% and the PP is 2,569 years. Because the value of NPV > 0 and IRR > MARR, the opening of the ALON Farm company can be said to be feasible
Keywords
feasibility analysis; ALON farm; NPV; IRR; PP
Budapest International Research and Critics Institute-Journal (BIRCI-Journal) Volume 5, No 3, August 2022, Page: 25013-25026 e-ISSN: 2615-3076 (Online), p-ISSN: 2615-1715 (Print)
www.bircu-journal.com/index.php/birci email: [email protected]
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Figure 1. Surade District Map (Google Maps Surade District)
Apart from the existing opportunity data, the opening of a cayenne pepper seed business branch is recommended by ALON Farm. The reason the company suggested opening a branch was due to a request that was not fulfilled by ALON Farm. The location of the central company is in the same sub-district and is not too far away. The name of the first company village is Citaritih Village. Data on demand and fulfilled by the central company can be seen from the table and figure below.
Figure 2. Requests and Fulfilled ALON Farm
Based on the things above, there is an opportunity to open a branch of cayenne pepper seed business whose company name is still the same as the central company, namely ALON Farm. ALON Farm is a cayenne pepper seed business located around the Surade sub-district, precisely in Warungtilu Village, Pasiripis Village, Surade District.
ALON Farm is specifically opening the sale of cayenne pepper seeds. The reason for
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establishing this ALON Farm branch started from the central ALON Farm, which opened a cayenne pepper seed business.
ALON Farm has an on-site sales system, namely in Warungtilu Village. So for customers who want to buy cayenne pepper seeds, they will take the seeds to the ALON Farm location. Orders can be made via whatsapp and line@to find out information on the availability of cayenne pepper seeds. Seeing the many opportunities that can be optimized by ALON Farm, therefore ALON Farm established a seed shed for the production of cayenne pepper seeds to meet consumer needs that have not been met. However, to ensure that this business is feasible to develop or not, it is necessary to design a proposal. The design of this proposal will determine whether the opening of a business branch is feasible or not by reviewing several aspects, including market aspects, technical aspects and financial aspects. The results of the proposed design are expected to provide an overview for the owner regarding future business prospects.
II. Review of Literature
2.1 Definition of Feasibility Study
A feasibility study is a study of a business plan that not only makes a business feasible or not, but also when it is operated continuously in order to achieve maximum profit with a predetermined time (Umar, 2015).
2.2 Aspects of the Feasibility Study a. Market Aspect
The market aspect is an analysis to examine the size of the market to be entered, how big the ability of a business actor to dominate the market and how the strategy will be carried out. Market aspect assessment is important because no business project can be successful without a demand generated by the project (Raharja, 2018). Marketing is a process of planning and execution, starting from the conception stage, pricing, promotion, to the distribution of goods, ideas and services, to make exchanges that satisfy the individual and his institutions (Dianto in Asmuni et al, 2020). According to Tjiptono in Marlizar (2020) marketing performance is a function that has the greatest contact with the external environment, even though the company only has limited control over the company's environment. In the world of marketing, consumers are assets that must be maintained and maintained their existence in order to remain consistent with the products we produce (Romdonny and Rosmadi, 2019).
b. Technical Aspect
Technical aspects are aspects related to the project development process from the technical side and its operations after the project is completed. This analysis can also result in an initial assessment of the investment cost plan (Bustami, 2010).
c. Financial Aspect
The financial or financial aspect is an aspect that is used to assess the company's overall finances (Kasmir, 2017). Things that are assessed on financial aspects such as sources of funds, investment cost needs, estimated income or income, balance sheets and income statements. Here are the types of working capital.
25016 1. Net Present Value (NPV)
Net Present Value (NPV) is the value of a project in question which is obtained from the difference between the cash flow (PV of net cash) generated and the investment (PV of investment) issued (Kasmir, 2017). The formula for the Net Present Value is:
NPV = PV Benefit PV Cost
The calculation result criteria for decision making based on an investment from the NPV is if the NPV value > 0, then the investment is accepted.
2. Payback Period (PBP)
Payback Period (PBP) is a technique of assessing the return on investment of a business.
Where payback period is the ratio between initial cost investment and cash inflow.
Calculation of payback period can use the following formula:
If componentcash flow benefits andcostcharacterannual, then the formula becomes:
3. Internal Rate of Return (IRR)
Internal rate of return (IRR) is a discount rate that has the same current value (present value) derived from cash inflows and investments of a business. If the cost of business capital is greater than the IRR, then the NPV value becomes negative and causes the business to be unacceptable.
2.3 Design
There are four stages in problem solving, namely having to understand the problem that occurs, then planning in an effort to solve the problem, then implementing the plan and finally re-examining the problem that has been resolved according to (Polya, 1973:5).
The following is the flow of problem solving carried out by researchers.
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Figure 3. Design Systematics III. Result and Discussion
3.1 Market Aspect Design
Before designing market data using forecasting methods to get an estimate of demand at ALON Farm branch companies, a comparison of 3 forecasting methods was carried out. Has the goal of obtaining the smallest error value (MSE). The methods to be compared are Trend Linear, Single Moving Average, Weight Moving Average, Double Moving Average and Single Exponential Smoothing. The error values of the three methods are as below.
Table 1. Error Value Forecasting Methods
No Method MSE
1 Linear Trend 27494305.86
2 Moving Average 34121212,12
3 Single Exponential Smoothing 28410980.65
Seen in the tables above, we can conclude that the method chosen is the Linear Trend method because it has the smallest MSE error value, namely, =27494305.86. Then do the design of market data with the selected method. The details of the market data design using the Linear Trend method are as follows.
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Table 2. Linear Trend Method 1
Period Request (Yt) Available for Sale X X^2 XYt
1 52000 10000 -35 1225 -1820000
2 40000 11000 -33 1089 -1320000
3 47000 11000 -31 961 -1457000
4 53000 11500 -29 841 -1537000
5 54000 12000 -27 729 -1458000
6 47000 12000 -25 625 -1175000
7 42000 12000 -23 529 -966000
8 47000 13000 -21 441 -987000
9 52000 13000 -19 361 -988000
10 53000 13500 -17 289 -901000
11 54000 13500 -15 225 -810000
12 58000 14000 -13 169 -754000
13 53000 15000 -11 121 -583000
14 47000 16000 -9 81 -423000
15 55000 16000 -7 49 -385000
16 57000 16000 -5 25 -285000
17 48000 16000 -3 9 -144000
18 46000 16500 -1 1 -46000
19 50000 17000 1 1 50000
20 54000 17500 3 9 162000
21 57000 17500 5 25 285000
22 57000 17500 7 49 399000
23 60000 17500 9 81 540000
24 51000 18500 11 121 561000
25 48000 18500 13 169 624000
26 50000 19000 15 225 750000
27 61000 19000 17 289 1037000
28 59000 20000 19 361 1121000
29 60000 20000 21 441 1260000
30 60000 20000 23 529 1380000
31 53000 20000 25 625 1325000
32 49000 20000 27 729 1323000
33 54000 20000 29 841 1566000
34 51000 20000 31 961 1581000
35 52000 20000 33 1089 1716000
36 62000 20000 35 1225 2170000
Total 1893000 584000 0 15540 1811000
a b
52583,33333 116.5379665
25019 Formula:
a = b =
In Table IV.4 above is the historical data on the overall sales of ALON Farm in the last 3 years that have been processed. After that, the estimated demand for the next period can be calculated using the formula Yx = a + bx. The period to be sought is the next 3 years. The following is an estimate of future demand.
Table 3. Estimated Demand for ALON Farm's Rawit Chili Seeds in the future
Year Period a b x Yx Total per Year
2023
37 52583,33333 116.5379665 37 56895,2381 698125,8687 38 52583,33333 116.5379665 39 57128,31403
39 52583,33333 116.5379665 41 57361,38996 40 52583,33333 116.5379665 43 57594,46589 41 52583,33333 116.5379665 45 57827.54183 42 52583,33333 116.5379665 47 58060,61776 43 52583,33333 116.5379665 49 58293,69369 44 52583,33333 116.5379665 51 58526,76963 45 52583,33333 116.5379665 53 58759,84556 46 52583,33333 116.5379665 55 58992,92149 47 52583,33333 116.5379665 57 59225,99743 48 52583,33333 116.5379665 59 59459,07336
2024
49 52583,33333 116.5379665 61 59692,14929 731688,8031 50 52583,33333 116.5379665 63 59925,22523
51 52583,33333 116.5379665 65 60158,30116 52 52583,33333 116.5379665 67 60391,37709 53 52583,33333 116.5379665 69 60624.45302 54 52583,33333 116.5379665 71 60857.52896 55 52583,33333 116.5379665 73 61090,60489 56 52583,33333 116.5379665 75 61323,68082 57 52583,33333 116.5379665 77 61556,75676 58 52583,33333 116.5379665 79 61789,83269 59 52583,33333 116.5379665 81 62022,90862 60 52583,33333 116.5379665 83 62255,98456
2025
61 52583,33333 116.5379665 85 62489,06049 765251.7375 62 52583,33333 116.5379665 87 62722,13642
63 52583,33333 116.5379665 89 62955,21236 64 52583,33333 116.5379665 91 63188,28829 65 52583,33333 116.5379665 93 63421,36422 66 52583,33333 116.5379665 95 63654,44015 67 52583,33333 116.5379665 97 63887.51609 68 52583,33333 116.5379665 99 64120,59202 69 52583,33333 116.5379665 101 64353.66795 70 52583,33333 116.5379665 103 64586,74389 71 52583,33333 116.5379665 105 64819,81982 72 52583,33333 116.5379665 107 65052.89575
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To find future estimates, it is carried out as in the table above. It can be seen in table IV.2. The period required for this final project is 3 years ahead.
From the data above, it can be concluded that there will be an increase in sales from ALON Farm in the coming period. So, based on the market aspect assessed from the sales forecasting method using the linear trend method, the data values obtained are positive forecast results, where sales in each future period continue to increase. So it can be said that the opening of a branch of the ALON Farm company is feasible because it can provide benefits to the company in the future.
3.2 Technical Aspect Design
Determination of the location of the opening of ALON Farm has been determined by the central owner, which is in Kp. Warungtilu Ds. Pasiripis Kec. Surade Kab. Sukabumi, West Java Province with a building area of 132 m2 (12x11 m2). The amount of production volume carried out is based on the calculation of historical data forecasting and is added with a 1% allowance with the aim of avoiding defective products. The production volume is also used to determine the need for labor, then the calculation of investment needs is carried out. The total amount of investment costs that must be issued by the owner is IDR 250,761,221.
To define the production process from start to finish, OPC (Operational Process Chart) is used so that the material, process, and time required to carry out production can be defined easily. The following is the OPC of cayenne pepper seed products.
Figure 4. OPC of Cayenne Pepper Seeds
With the production process time the company can make products. After the product is made, the next process is the process of watering or caring for the seeds of cayenne pepper which can be seen on the OPC Watering until the product can be sold, namely the height of the seeds reaches 10-15 cm and is healthy.
ALON Farm, which previously did not have a manager and admin, to open a branch company the owner wants to add a manager who works as well as an admin who is used as direct labor who works according to working days and has a salary above the minimum
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wage. For other workers, they are included in indirect labor because they work not full working hours, working days, and of course their salaries do not reach the minimum wage.
Details of manpower requirements are as follows.
Table 4. Manpower Needs
Division 2022/2023 2023/2024 2024/2025 Direct Labor
Manager 1 1 1
Indirect labor Production
Workers 2 2 2
Maintenance
Workers 1 1 1
Total 4 4 4
Production workers are only needed 4 days in a month. According to the owner of ALON Farm, 2 production workers alone is enough to run the production process with a predetermined number of targets, 2 production workers within 450 minutes of processing can complete a product of 9000 cayenne pepper seeds, with an estimated processing time of 0.05 minutes/product . Then the author proves by a calculation, the calculation is as follows.
Table 5. Calculation of Proof of the Number of Workers Required
Product Time (minutes)
The highest number of products in 3
years of production
Processing Time per
Year (minutes)
Processing Time per
month (Hours)
Estimated Number of
Days required per
Month (Days) Cayenne
Pepper Seeds
0.05 32852 1642.59 27.38 3.65
4
From the table above, it can be concluded that it is proven that 2 production workers are enough to carry out the production process for the next 3 years.
The layout of the building was made based on the layout of the first company and was improved on the advice of the owner of ALON Farm which has been analyzed to be the most efficient layout during the production period every year, provided that the building is built using bamboo, nets and roofs using plastic. The layout and flow of the production process at the ALON Farm branch of the company which has a building with an area of 132 m2 (12x11 m2) is shown in the image below.
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Figure 5. Layout Design A detailed explanation of the signs in the image above can be seen in the table below.
Table 6. Explanation of Marks in the Design Layout
Sign Information
1 Digging site
2 A place for making polybags, filtering soil and making cayenne pepper seeds 3 Warehouse of tools and materials 4 Organic Place
5 Place for chili seeds 6 Plant vitamin storage 7 Parking lot
Squat chair Soil filter Manager's chair Manager desk
The arrival of the materials to room number 3
Land transfer to room number 2 Transfer of husk and EM4 material to room number 2
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Moving the cayenne pepper seed container to place number 5 Door
The size of the building in the layout is in accordance with the owner's orders and the calculation is based on the number of sales targets, namely the number of 60 seed containers containing the product with the highest number of product targets in one sale for the next 3 years as many as 32852 products (with 1% allowance) . The layout image above has a scale of 1:100. The area of the table number 5 or the place for cayenne pepper seeds is 400x100 cm2, totaling 6 tables in one table filled with 10 containers, then the area of the container is 40x100 cm2 which can be filled by products with an area of 36x96 cm2, and the product area is 2.5x2.5 cm2. By knowing these areas, it can be calculated how many products can be produced at ALON Farm, the calculation is that in the width of the seedling container it can be filled with 14.4 products and then in the length of the seed container it can be filled with 38.4 products, when multiplied it is 14.4 x 38. , 4 = 552.96.
Then to get the total number of products multiplied by 60 containers, then 553 x 60 = 33177.6 or rounded down to 33177 products. The estimated number of production is 32852 products in a container that can accommodate 33177 products.
3.3 Financial Data Design
ALON Farm's income is obtained from the sale of chili aunt products. Sales revenue is calculated by multiplying the selling price by the production volume minus the 1%
production volume allowance. Details of sales for 2023-2025 are shown in the image below.
Figure 6. Sales Revenue for the Year 2023-2025
The calculation of the feasibility analysis is carried out so that the feasibility of running a business can be estimated measurably. Proof of the feasibility of building a new branch of ALON Farm, Surade District, Sukabumi Regency is measured using the NPV, IRR, and PBP methods. Internal Rate of Return is one of the investment analysis methods that is carried out. The calculation of the feasibility analysis is shown in the following table.
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Table 7. Calculation of Feasibility Analysis
Year 2022 2023 2024 2025
Period 0 1 2 3
Initial Cash Flow (Cash
Out) Rp250,761,221
Salvage Value Rp22,161,563
Working
Capital Rp45,252,921
Land Rp162,000,000
EAT +
Depreciation Rp60,832.198 Rp67.892.234 Rp74,921,401 Operational
Cash Flow
(Cash In) Rp60,832.198 Rp67.892.234 Rp304,335,885
Net Cash
-
Rp250,761,221 Rp60,832.198 Rp67.892.234 Rp304,335,885 p/f
Factor 8.25% 1 0.923787529 0.853383398 0.788344941 NPV
-
Rp250,761,221 Rp56,196,026 Rp.57.938.105 Rp.239.921.655 Cumulative
NPV
-
Rp250,761,221 -
Rp194.565.196 -
Rp136,627,090 Rp103,294,565 Interest Rate 8.25%
NPV Rp103,294,565
Payback
Period 2,569465438
Table 8. Determination of IRR . Percentage
Year 2022 2023 2024 2025
Net Cash -
Rp250,761,221 Rp60,832.198 Rp67.892.234 Rp304,335,885 p/f
Factor 24% 1 0.806451613 0.650364204 0.524487261 NPV
-
Rp250,761,221 Rp49,058,224 Rp44,154,679 Rp159,620,295 Cumulative
NPV
-
Rp250,761,221 -
Rp201.702.997 -
Rp157,548,319 Rp2,071,976 Net Cash
-
Rp250,761,221 Rp60,832.198 Rp67.892.234 Rp304,335,885 p/f
Factor 25% 1 0.8 0.64 0.512
NPV
-
Rp250,761,221 Rp48,665,758 Rp43.451.030 Rp155.819.973 Cumulative
NPV
-
Rp250,761,221 -
Rp202,095,463 -
Rp158,644,433 -Rp2,824,460
IRR 24.42%
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From the tables above, the required feasibility analysis values are obtained, namely the NPV of Rp.103,294,565, the IRR value of 24.42%, and the Payback Period value of 2,569 years. It can be concluded that opening a branch of the ALON Farm company is feasible because it has an IRR > MARR value, which is 24.42% > 8.25%. That means that it will be most profitable to put money in the business instead of saving it in the bank.
IV. Conclusion
After planning the opening of the ALON Farm branch, conclusions are obtained. The conclusions obtained are as follows.
1. Big market
The market size in the future is calculated using a linear trend forecasting method that processes historical market demand data for ALON Farm. The market demand for the next three years is as follows: In 2023 it is 698126, in 2024 it is 731689, and in 2025 it is 765252.
2. Design of technical and operational aspects
It can be concluded that the results of the design of the market and operational aspects of the ALON Farm business branch are as follows.
a. There is a production volume calculation that is given an allowance of 1% by the owner.
b. The investment costs incurred by the owner are for land and buildings, facilities and equipment, and spray machines. The cost to be paid by the owner is IDR 250,761,221.
c. The location of the company's branch is in Kp. Warungtilu Ds. Pasiripis Kec. Surade Kab. Sukabumi, West Java Province.
d. The building that was built has an area of 132 m2 (12x11 m2), a complete layout has been made with the production flow and an explanation of the signs on the layout at the wish of the ALON Farm owner.
e. The production design used is the same as the existing production design at the ALON Farm company.
f. The time needed by the company for the production process is 450 minutes for one day's production which produces a large number of products. The production time of one cayenne pepper is 0.05 minutes. Before the product can be sold, it is necessary to carry out maintenance so that the seedlings are healthy and reach the terms of sale, the time required for treatment is 2 weeks.
g. The workforce needed is 4 people, of which 1 person is a manager, 2 is a production worker, and 1 person is a maintenance worker.
h. To give salaries to workers are divided into several categories. The first is the manager who is given a monthly salary above the minimum wage. Both production workers are given a salary per day in 4 working days. Then lastly, maintenance workers are given a small salary per day because they only need a short working time in one day.
3. Financial Eligibility
The required feasibility analysis values are obtained, namely the NPV of Rp.103,294,565, the IRR value of 24.42%, and the Payback Period value of 2,569 years.
It can be concluded that opening a branch of the ALON Farm company is feasible because it has an IRR > MARR value, which is 24.42 % > 8.25%. That means that it will be most profitable to put money in the business instead of saving it in the bank.
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