Cite this Article As: Ariawan, Y., & Yudoko, G., (2023), Proposed Strategy of MRO Optimization in Cost- Effective Program by Using Kepner-Tregoe Analysis and Analytical Hierarchy Process (AHP), Journal of Engineering and Management in Industrial System, 11 (2), p105-120.
Paper accepted : August, 2nd 2023
Paper published : November, 24th 2023 105
PROPOSED STRATEGY OF MRO OPTIMIZATION IN COST- EFFECTIVE PROGRAM BY USING KEPNER-TREGOE ANALYSIS
AND ANALYTICAL HIERARCHY PROCESS (AHP)
Yona Ariawan1*), Gatot Yudoko1)
School of Business and Management, Institut Teknologi Bandung, Indonesia1)
Abstract ADC Company is a global company that operates since the year 2000 that has an issue with Maintenance Repair and Operations (MRO) in its system. The current performance and objectives show that they need to take a look at something that can be done possibly and take the initiative that can be improving the company’s performance, especially in this kind of situation. The current setup of Maintenance Repair and Operations or MRO of this company has shown the value that this company has 43% Non-Moving Spare Part (PNM-SP) Material value that is excessive and has turned into a particular issue for the Company, which is supposed to be their fresh money that can be operated further. This inefficient inventory due to significant Potential Non-Moving Spare Part (PNM-SP) Materials all across the years has resulted in the inefficiency of Operational Expenditures (OPEX) which costs the company unused/ never used bought materials associated with handling and maintaining costs produced by those (PNM-SP) materials. The higher the inventory value and the remaining items/materials that cannot be utilized, then the worse the inventory performance reflects. Therefore, the business problem could be identified and further transformed into a problem statement. The objectives of this research are to overcome or reduce the volume of Potential Non-Moving Spare parts (PNM-SP) Materials in our organization, and what tactics or alternative solutions exist to avoid massive Potential Non-Moving Spare parts (PNM-SP) Materials, along with the precautions that should be taken in the event happens in the future, by using Kepner Tregoe Analysis and Analytical Hierarchy Process (AHP). As the result, observed there are 2 quick win actions that can be initiated, those are “Review Item Criticality and removal follow-up” and “Review the calculation and Quantity”
consecutively, consistently selected by both Analytical Hierarchy Process (AHP) and Kepner-Tregoe Analysis that has potential effect for the company to sustain and growing up further.
Keywords: Maintenance Repair and Operations, Kepner-Tregoe, Operational Expenditure, Analytical Hierarchy Process, Multi-Criteria Decision Making.
1. Introduction
It is hard to become overly enthused about a management problem as global as MRO (Maintenance Repair and Operations) stores when we are focused on the exciting developments in maintenance management that are taking place right now, such as Total Productive Maintenance, Reliability Centre Maintenance, the technology around condition- based maintenance, and the new computerized maintenance management systems. The acronym MRO stands for maintenance, repair, and operations, and it refers to all the tasks necessary to keep a business's facilities and operational/production processes functioning as intended [13].
When the MRO supply chain is given any serious thought at all, it is typically viewed as a
problem—a pricey but necessary difficulty to guarantee the availability of components that maintain equipment reliability. Integrating end- to-end planning, boosting the availability and dependability of physical assets, managing inventories more effectively, and achieving efficient spending management are among the difficulties. MRO supply chain has shown to be potential for businesses who have overcome these obstacles to significantly cut costs while enhancing asset dependability [14].
All functions in this company have the same objective: maintaining the plant to be reliable, operating well without interruption, and running
* Corresponding author. Email : [email protected] Published online at http://Jemis.ub.ac.id
Copyright ©2023 JTI UB Publishing. All Rights Reserved
106 Covid-19 pandemic situation that harms all
sectors, then later followed by the Russia- Ukraine war that shakes most of the industries in Europe which this company is working with and put the market on. According to the challenge and problem above, there is an opportunity for the company to make more effective inventory through the inventory policy strategy and improvement. The higher the inventory value and the remaining items/materials that cannot be utilized, then the worse the inventory performance reflects.
Therefore, the business problem could be identified and further transformed into a problem statement as " Significant Potential
down to 2022 which costs 41,566 million USD money that it is kept in their warehouse without any withdrawal, and at the end the materials will be expired, obsolete, and can’t be used. This concern has not been raised by the company to identify and focus to be resolved by the actions and get the improvement result afterward.
The objective of the research is to find the applicable solutions to resolve this issue by utilizing the Analytical Hierarchy Process (AHP) and Kepner-Tregoe Analysis, as part of Multi Criteria Decision Making which will be used by the researcher, and plan to be implemented later afterward to get the improvement result as required as above mentioned.
Fig. 1 The Material Inventory Value (ADC Company) Inventory Value (in
MUSD) 2017 2018 2019 2020 2021 2022
Fast Moving (F) 26,985 31,633 33,603 32,912 32,960 90,342 Medium Moving (M) 93,693 93,736 94,428 94,354 94,495 106,986 Potential Non-Moving
Spare Part (PNM-SP) Materials
43,868 45,037 43,490 45,436 41,334 41,566
Slow Moving (S) 14,935 15,021 14,964 15,054 14,959 14,963 Grand Total 179,482 185,427 186,485 187,757 183,748 253,858
0 50,000 100,000 150,000 200,000 250,000 300,000
2017 2018 2019 2020 2021 2022
179,482 185,427 186,485 187,757 183,748
253,858
INVENTORY VALUE (IN MUSD)
Grand Total
107 The structure of this research will be defined to
allow the researcher to point to the right idea with the proper approach, as follow;
1. Introduction 2. Literature Review 3. Research Methodology 4. Result and Discussion
5. Conclusion and Recommendation All functions in this company have the same objective that maintains the plant to be reliable, operated well without interruption, and running with 100% plant availability. In order to achieve those objectives, a warehouse shall be able to supply Maintenance Repair and Operations materials at any time the plant needs, particularly if there is a breakdown in the equipment and need a spare part to repair it as soon as possible. Hence it is very important to sustain the cash flow of the company, and the researcher has the idea to have the approach with all relevant people to save that money from the MRO field, in the Inventory Management System.
2. Literature Review
A theoretical foundation is a formal, peer- reviewed theoretical model (or models) that may be utilized to describe the problem motivating our study. Frequently, we begin our investigation with a persistent query or the realization that something has been neglected [19]. The literature review demonstrates master's-level students' mastery of the underlying sciences pertinent to the studied concerns. Hence, the literature review is NOT a description of commonly used procedures and/or fundamental theoretical concepts. The literature review needs to be organized in accordance with the progression of knowledge.
The literature review also includes evaluations of the sources and explains why and how the topic of inquiry was selected. The citation system would be utilizing Mendeley, as reference management.
2.1 MRO Inventory System
Typically, commercial organizations maintain inventories to track the movement of their items into and out of the firm. The management of inventories relies on whether or not the things being sold have a sluggish or rapid turnover rate.
The management of stocks for slow-moving products, however, can be quite difficult. Spare
components for slow-moving stocks are neither intermediate nor final items that customers may immediately purchase. In addition, the regulations regulating these types of inventories differ from those controlling work-in-progress (WIP) inventories and other inventories. The management of an inventory is crucial to the expansion of a firm. Indicators of MRO inventory levels include the needed service level and the cost of buying and storing the inventory in storage [4].
MRO inventory management's primary objective is to specify what spare parts should be ordered when they should be purchased, and how many spare parts should be ordered.
To develop an efficient MRO inventory system, there are seven MRO Inventory 7 key point driving factors [5] as follows:
• Lead Time: Time is taken from when an item is ordered before it may be used. The lead time must account for the entire process, from placing the order to the final delivery.
• Reorder point: When the number of an item on hand falls to this level, it gets reordered.
Reorder Point (ROP) or Reorder Level denotes the point ‘when to order’ the balance quantity on stock, when the replenishment process shall be initiated.
ROP = Minimum stock + Safety Stock (1)
• Safety stock: Inventory stored in excess of anticipated consumption owing to variable usage rate and/or lead time. Safety Stock, also known as Emergency or Buffer Stock, is used to cater for uncertainties (breakdowns), and to prevent material shortfalls during the stocking-up period, which may occur if consumption is unexpectedly high, or if delivery dates are not met.
Safety Stock levels are based on the Risk Index, Criticality, and Service Level [4], and will be as follow;
𝑆𝑆 = 𝐾 √𝐿𝑒𝑎𝑑 𝑇𝑖𝑚𝑒 𝐶𝑜𝑛𝑠𝑢𝑚𝑝𝑡𝑖𝑜𝑛 (2) Where K = Safety Factor as below:
Table 1 Material Criticality and Service Level Matrix Criticality %
Service Level
K
(Statistical Normal Distribution)
Vital 99 % 2.32
Essential 95 % 1.64
Desirable 90 % 1.20
108
Fig. 2 The MRO Inventory process cycle [13]
• Service Level: the probability that an order can be met on demand. The service level is the probability that all orders will be fulfilled from stock within one order cycle's replenishment lead time. This service level is the inverse of the proportion of stock-outs. In other words, the service level is 95% if the stock out rate is 5%. This indicates that there is a 95% chance that a spare component will be accessible during an ordering cycle.
• Economic Order Quantity (EOQ)
In an effort to balance all of these expenses, the economic order quantity (EOQ) for spare components has been developed. Using the economic order quantity model requires a number of fundamental assumptions [3]. They include:
a. Only one spare part at a time is considered.
b. A historical yearly demand average is known.
c. Utilization is constant throughout the year.
Formula to calculate Economic Order Quantity (EOQ) is:
𝐸𝑂𝑄 = √2∗𝐷∗𝑂𝐶𝑃𝑟∗𝐼 (3) Where:
D = Demand (per year) OC = Ordering Cost Pr = Unit Price of Item
I = Inventory Holding Cost (25% of material cost) Total Cost = Annual Carrying Cost + Annual
Ordering Cost 𝑇𝐶 = 𝑄
2𝐻 + 𝐷
𝑄𝑆 (4)
TC = Total Cost
Q = Order Size – In units
H = The cost of holding one unit per year D = The annual demand – in units
S = The cost of setting up an individual order
• Holding (carrying) costs: the cost to carry an item in inventory for a period of time, often one year
• Ordering costs: the expenses of ordering and receiving goods.
Fig. 3 MRO management process [15]
109 2.2 Kepner-Tregoe Approach
Kepner-Tregoe, or rational management, is comprised of four patterns of thought for resolving problems by assessing and clarifying the issue, relating cause to effect, making a decision, and anticipating the future [2]. Kepner and Tregoe identified four rational processes in which four fundamental questions are reflected:
• Situation analysis
This clarifies the problem situation (what happened). A situation appraisal aims to inform the individual in charge of where to begin, recognize the situation, separate overlapping issues, and assign each concern a priority.
• Problem analysis
Here the actual cause of the problem and the relationship between cause and result are searched for (why did it happen). Problem analysis will explain the circumstance and source of difficulties that caused a management's performance to deviate from its goal.
• Decision analysis
Based on the decision-making criteria, choices are made to arrive at potential problem resolutions (how should we act). the decision analysis process will determine what needs to be done, define the particular criteria for its
completion, evaluate the various options in relation to the criteria, and identify the associated risk [6].
• Potential Problem analysis
Here potential future problems are anticipated and preventative actions are developed (what will the result be). Potential problem analysis focuses more on procedures and actions that may be required for future management improvement and change.
2.3 Ishikawa Diagram (Root Cause Analysis Framework)
The fishbone diagram, commonly referred to as a cause-and-effect diagram, is a causal graphical representation of potential causes of a specific problem or flaw [11]. The instrument is also known as the Ishikawa diagram after its inventor, Kaoru Ishikawa. Diagrams are utilized to identify causative elements as variation sources. By grouping these components, Ishikawa diagrams enable the classification of many sources of variation into categories and aid in identifying the root cause of a problem. Widespread use of the approach to prevent quality flaws. The deficiency is symbolized by the fish's head, while the bones reflect the most significant recognized root causes. Sub-causes are shown as fish ribs.
Fig. 4 K-T Approach Template [7]
110
Fig. 5 Ishikawa Fishbone Diagram sample [12]
Fig. 6 Conceptual Framework The quality control tool is great for graphically
representing the results of brainstorming sessions in which analytical teams identify root problems.
All underlying causes and their causal components are represented clearly and are readily accessible.
Fishbone diagrams are simple to create and can be adopted by a variety of teams and industries to assist in the identification of the causes and effects of errors [8]. The components of the 6Ms manufacturing framework are mentioned below.
• Man/People: Refers to the physical or mental/knowledge job performed by personnel.
• Method: refers to the manufacturing procedure.
• Machine: refers to all the machinery, tools, and facilities utilized in the production process.
• Material: refers to the raw materials employed in the manufacture of a final product.
• Medium (Environment): Refers to the impact of uncontrollable environmental conditions including weather, floods, and humidity.
• Measurement: refers to inspections and physical measures such as volume, temperature, etc.
2.4 Conceptual Framework
A conceptual framework is a visual representation in research that helps to illustrate the expected relationship between cause and effect [10]. The goal of ADC company is to maximize advantages for stakeholders by extracting additional value from its resources.
From the above conceptual framework, the researcher’s main objective is to evaluate the availability of non-moving materials which leads to dead stock material without any uses. The
111 improvement in the inventory system and
purchased materials as reinforced feedback to reduce or minimize the amount of slow-moving material or mitigate these slow materials becomes non-moving material or dead stock in the warehouse stock.
3. Research Methodology
This final project utilizes both primary data and secondary data. Primary data taken from ADC company was found and extracted without any changes. Secondary data would be sourced from books, journals, articles, and websites. Primary and secondary data would consist of mixed-up quantitative and qualitative information. In this final project, the author applied the Ishikawa Cause and Effect Diagram for Root Cause Analysis along with Kepner-Tregoe Approach for business analysis and solutions decision-
making. The author uses a variety of methods to identify difficulties from a problem’s issue, including quantitative analysis, combined analysis, observational secondary data analysis, and literature review.
3.1. Multi Criteria Decision Making by Analytic Hierarchy Process (AHP)
In addition of multi criteria decision making approach as above-mentioned using decision making tool with Kepner-Tregoe Analysis, the researcher also wants to utilize the other decision- making tool that is Analytic Hierarchy Process (AHP). The aim is to compare and validate the decision taken already fulfilling the relevant aspects and really feasible to be implemented.
The Analytical Hierarchy Process is a one of Thomas L. Saaty's multiple-criteria decision- making methods.
Fig. 7 Research Methodology
112
Fig. 8 AHP Hierarchy Model [1]
With AHP, the level of importance of each criterion will be compared and weighted, and then the decision alternatives will be ranked, with the highest-ranking alternatives being selected. AHP is designed to solve complex, multi-criteria decision-making problems based on the inherent human capacity to make sound judgments. It facilitates decision-making by organizing perceptions, emotions, judgments, and experiences into a framework that illustrates the forces which affect a decision [1]
In AHP, the decision-maker is required to execute a pairwise comparison in order to establish preferences between decision alternatives for various criteria. This pairwise comparison will be converted into a numerical value (preference scale) and the resulting numbers will be arranged in comparison matrices. With mathematical computation, Eigenvalue and eigenvector, these comparative matrices will be converted into weights of preference, and the decision maker will use these weights to choose the best alternative.
The Analytical Hierarchy Process procedure consists of four steps [9] as follows;
First Phase
In the initial phase of the analytical hierarchy process approach, identifying and selecting the appropriate criteria and/or sub-criteria and establishing the decision hierarchy is the first step [18]. The objective of the decision-making process is at the top of the hierarchy, followed by the criteria and, if necessary, sub-criteria, and finally, the alternatives are at the bottom. Sub- criteria are not required for every criterion in the hierarchy model; sub-criteria are only required when the description of the criterion is comprehensive [16]. The hierarchical
model was developed to restrict the pairwise comparison. Several levels of hierarchical organization may be utilized to reduce discrepancies during pairwise comparisons.
Table 2 Nine Scale Scoring of AHP [1]
Intensity of
Importance Definition Explanation
1 Equal
Importance
Two activities contribute equally to the objective
3 Moderate
Importance
Experience and judgment slightly favor one activity over another
5 Strong
Importance
Experience and judgment strongly favor one activity over another
7 Very Strong
Importance
An activity is favoured very strongly over another; its dominance
demonstrated in practice
9 Extreme
Importance
The evidence favoring one activity over another is of the highest possible order of affirmation
2,4,6,8
For a
compromise between the above values
Sometimes one needs to interpolate a compromise judgment
numerically because there IS no good word to describe it
Second Phase
Perform a pairwise comparison of criteria, including sub-criteria and alternate options.
Pairwise comparisons are used to figure out the
113 relative importance of criteria and to compare the
performance of criteria and alternatives on various features.
At each level of the hierarchy, the pairwise comparison is going to be conducted. In the method of pairwise comparison, a scale will be used to indicate the degree to which one option is superior to another.
Third Phase
Change the comparison matrices to weights and examine the result's consistency. During this phase, Microsoft Excel is used to calculate the weight in the AHP model.
Fourth Phase
Scoring the options and selecting the finest alternative. During this phase, the computations for each alternative are carried out as well using Microsoft Excel. In spite of the AHP's intricate and precise mathematical underpinnings, the method still meets the criterion of being user- friendly, in that it can be applied without a fundamental comprehension of development theory [17]. There are several reasons why AHP approach is feasible for all:
• It incorporates the decision maker's emotions, experiences, and beliefs into mental analysis.
• There are numerous user-friendly AHP mathematical computation programs, such as Microsoft Excel.
• It creates scale through reciprocal comparison as opposed to assigning numbers from the mind.
• It incorporates quantitative and qualitative judging
AHP is a single of the extensively used methods for making decisions based on multiple criteria [20]. The evaluation of the criteria/attribute is one of the advantages of AHP over other multi- attribute tools such as in SMART (Simple Multi- Attribute Rating Technique) and Kepner-Tregoe (K-T) Analysis. SMART or K-T Analysis, the decision-maker is required to designate a value to each attribute or criterion in order to evaluate the performance of the attributes' alternatives. If the attributes being evaluated have quantitative value, it may be easier for the decision maker to assign a
value to the attribute. However, if the attribute only has qualitative value, the decision maker must understand the detail and inherent of that particular attribute/criterion in order to assign appropriate values to the alternative attributes.
For AHP, the decision-makers are not required to understand the specifics and inherent nature of each criterion [7]. The decision maker is required to make pairwise comparisons of criteria on a scale of importance; these comparisons can be founded on the decision maker's intuitive understanding. This comparison yields comparison matrices that will be utilized to compute the value of weighting of the criteria and solutions. The AHP weight computation is one of the essential steps in the AHP method and can be summarized as follows,
• Step 1 - PCM (Pairwise Comparison Matrix);
Develops the comparison matrix based on the pairwise comparison. This is a square matrix, where the dimension corresponds to the number of criteria to be compared as well as the diagonal value is one (1), as it represents the comparison of the same criteria. The lower half of the matrix is the reciprocated value of the upper half.
• Step 2 - PCM-Normalization and Averaging;
Calculates both the Eigenvector as well as Eigen value from the matrix. The normalized Eigenvector will yield the priority vector, with each component representing the weight of a criterion.
• Step 3; Calculates the Consistency Index (CI) using the formula below:
𝐶𝐼 =𝜆 max − 𝑛𝑛−1 , where λmax is the maximum eigenvalue while n is the matrix's dimension.
• Step 4; Calculates the Consistency Ratio (CR), 𝐶𝑅 =𝐶𝐼
𝑅𝐼 is the Random Consistency Index.
Following is the random consistency table determined by Saaty for 500 sample matrices.
• Step 5: According to Saaty, inconsistency can be accepted when the consistency ratio has less than or equal to 0.1 (10%); otherwise, the subjective judgment must be revised.
Table 3 Random probability of sample size
n 1 2 3 4 5 6 7 8 9 10
RI 0 0 0.6 0.9 1.12 1.24 1.32 1.41 1.45 1.49
114 pairwise comparison in order to establish
preferences between decision alternatives for various criteria. This pairwise comparison will be converted into a numerical value (preference scale) and the resulting numbers will be arranged in comparison matrices.
Business Situation Analysis
As defined earlier, the business problem that will be analyzed from this company is inefficient inventory due to large Potential Non-Moving Spare Part (PNM-SP) Materials over the years in ADC company. The researcher observes that the big amount of large Potential Non-Moving Spare parts (PNM-SP) Materials, as depicted in the above graph, causes the warehouse's high cost and low performance. The purpose of this research/project is to analyze the causes of the inefficient inventory due to large Potential Non- Moving Spare Part (PNM-SP) Materials and
Conclusion of the Business Analysis
Based on the inventory material's aforementioned composition, the 54% Non-Moving Spare Part (PNM-SP) Material item and 43% Non-Moving Spare Part (PNM-SP) Material value are excessive and have turned into a particular issue for ADC Company, considering 41.57 million USD belong to this type of spare part. Therefore, steps must be taken to address the issue and lower the inventory value in the future. Since reliability, production, and safety are the company's top concerns before considering efficiency, the issue has existed from the outset. To prevent catastrophic events and production interruptions while keeping the machine operating 24 hours a day with high reliability, those three criteria necessitate constant spare component availability. As a result, the spare part is provided at the warehouse as completely as feasible.
Fig. 9 Fishbone Diagram
115 Root Cause Analysis
The Cause-and-Effect Analysis is performed to identify and compile a list of the potential contributing reasons to the inventory issue. A long story short, it consists of the following items (figure-9) that are summarized from contribution factors and root causes. Each of the elements listed in the fishbone is considered as the root cause of the business problem itself. Professor Kaoru Ishikawa, a forerunner in quality management, defined cause and effect analysis in the 1960s. In 1990, he presented the method in his book "Introduction to Quality Control." (2016) The Mind Tools Content Team Ishikawa Diagrams or Fishbone Diagrams are the diagrams produced using this method (because a completed diagram can look like the skeleton of a fish). The Root Cause Analysis by Ishikawa Fishbone Diagram will be as follow;
Business Solution
Spare part inventory existing in the firm for decreasing the chance of machine outage time.
An excellent supply of spare parts will facilitate the repair and maintenance procedure.
Notwithstanding its benefits, keeping spare parts inventories is a difficult task. Spare part inventory has the aim to conform spare parts for maintenance (a process that is already scheduled) and repair (considered as corrective action which is unplanned maintenance). If, for instance, no repair exists, it indicates that certain spare part stocks were not utilized. This circumstance will lead certain spare parts to become obsolete.
Deadstock inventory is adverse for the firm since it will bind the capital to handle the inventory.
Deadstock has a big influence on the expenses of the inventory. It’s significant for a corporation to always manage its stock from dead stocks.
Typically, dead stock relates to an outmoded product or raw material. In the context of product inventory, the dead stock was antecedent to the life cycle of the product. Goods with shorter life cycles will have a larger risk to contain dead stock in their inventory. Nevertheless, in spare component inventories this will not always be the case, Dead stock in spare parts occurs for a variety of reasons, including fast changes in technology, structural changes, order processes that exceed real demands, mistakes in order and inventory, and technical and structural variances.
With a multitude of causes existing in spare component inventory, dead stock in the spare part context will become more complex than in the product context.
Typically, a company disposes of surplus inventory while dealing with obsolete product inventories. The company's disposal procedures include selling it at a discount, modifying it or taking its pieces, and donating it as a final alternative. Either way, all the activity performed will affect the decreased cost of holding the deceased stock. In contrast, it is difficult to dispose of spare part inventory. Spare component inventory that is characterized by precise specifications will make it difficult for the organization to locate a customer for the spare part. This challenge would be increased when the firm can’t take dispose of extra goods because of legal difficulties.
Business Solution Alternatives
In this chapter, we implement a number of possible solutions for each contributing factors that has been identified earlier as the problem's root causes. These solutions are displayed in the table 4.
Table 4 Summarized actions as best alternative Business Solution
Sr. Summarized Proposed Actions
1 Review Item Criticality and removal follow-up 2 Review the calculation and Quantity.
3 Applying different approaches for non-routine consumable material 4 To review the option of having a Consignment Contract
5 Re-evaluate the material cost, Share the inventory materials, and perform an auction.
6 Considered as redundant materials and proposed to write-off 7 Regular stock opname check and close follow up
8 To set up the proper system and rely on it, not on the people.
9 Task Force team with clear KPI target and Reward Offer
10 To provide transactions or applications for easier monitoring of dead stock performance.
11 Regular Maintenance by considering MTTR (Mean Time to Repair) and MTBF (Mean Time Between Failure) strategy.
116
Table 5 Proposed Alternative Solutions’ Score On the basis of previously done KT Situation
Analysis and Problem Analysis with Cause-and- Effect Diagram analyses of business difficulties, Kepner-Tregoe Decision Analysis is used to determine the optimum option. Following the step-by-step approach of Kepner-Tregoe decision-making enables the use of critical thinking skills in evaluating a large number of potential factors that may be crucial to the decision. This approach is the most suitable for the working practice of decision-making in the trading business, which requires swift but calculated action.
The further step after evaluating all the potential alternatives then we need to put score of each proposed alternative solutions above comprised of the objectives defined earlier. However, the clearly defined remarks of each rating have to be decided at the beginning. Based on discussion and survey done about the rating figures which are set from 9 to 5 by the researcher to have it standardized and further rated by stakeholders involved in the discussion, and those values defined from criteria set in the table 5.
From the above graphic, observed there are 3 proposed alternative solutions leading the assessment result and having a significant score which leaves the rest solutions behind. The 3 highest ranking based on total score resulted as follow;
1. Review Item Criticality (480)
2. Review Calculation & Quantity (471) 3. MTTR & MTBF Maintenance Strategy
(447)
Based on the above result, the researcher decides to select the 3 highest scores of proposed alternative solutions to be chosen as the top priority to be implemented at the soonest time,
while the rest are considered as the second priority to be implemented later on. Further to this selection, it needs to analyze the potential problems that could be occurred in the future which could distract those selected solutions during implementation. Countermeasure actions have to be prepared to mitigate those solutions become failed and later end up with unexpected results. Similarly, Kepner-Tregoe Potential Problem Analysis would be used to assess those potential stopper or blockers.
Potential Problem Analysis
Potential Problem Analysis is a technique that allows us to look into the future, determine what it may contain, and then return to the present to take action immediately when it can do the best.
Potential Problem Analysis represents a mode of thought that allows us to alter and enhance the future. It is a safeguarding process that ensures the future will be as excellent as we are able to make it, as opposed to letting it arrive on its own terms.
In case the preventive action as the first barrier is not sufficient or adequate to mitigate the possible cause hence it will activate the contingency plan to come into the picture. The contingency plan has a potential impact to change the score of the selected solution which needs to be assessed again, whether this solution is still valid and gives benefits or not to proceed with implementation.
From the above result found that when the potential stopper or blocker occurs observed that the result is still considered as high compared with the other non-selected alternative solution.
But it has been observed also the blue scores are also close to other non-selected alternative solutions even lower than Before and After that.
That is the limitation that could be happened to decision-making with Kepner-Tregoe Analysis, it
117 may not be clear how much better a score “10” is
than a score “8”. At the end the total alternative score ratings may close one to each other, making a clear decision is difficult to take. Then from this point we observed the need to be having another decision-making analysis.
Selecting the best alternative(s) using Analytical Hierarchy Process (AHP)
To challenge our decision-making with Kepner- Tregoe as above resulted, that is with Analytical Hierarchy Process. We need to identify one by one as again to have correct and meeting with the point that we have expected. The Analytical Hierarchy Process (AHP) has been observed good for both decision-making Quantitative and Qualitative. In addition of this it puts them in the decision context by relying on relative comparison instead of attempting to define absolutes. As we can observe as well, the system has systematic use of the geometric mean to define functional utilities based on simple comparison and to provide consistent and meaningful result. AHP size is more flexible than
Kepner-Tregoe or SMART, especially when newly discovered alternatives or criteria new to be considered. Based on good finding done from above graphics, here below the result is shown by AHP Decision-Making, as follow on Fig 10.
Based on graphic above depicted, it can be taken for Criteria and Sub-Criteria taken from above graphic as follow;
Table 7 Criteria and Sub-Criteria Decision-Making SUB-CRITERIA
Reasonable Safety Stock
Inventory stock Reduce Inventory
Reduce Non-Moving Material
Moderate Expenditure Implementation cost impact Infrastructure System
Uniform
Time &
standardization Time Frame
Accomplishment
Table 6 Summarized Propose Action
Sr. Summarized Proposed Actions Code Total Score
BEFORE
Total Score AFTER 1 Review Item Criticality and removal
follow-up Review Item Criticality 480 465
2 Review the calculation and Quantity. Review Calculation &
Quantity 471 444
3 Applying different approaches for non-
routine consumable material Different Approach 416
4 To review the option of having a
Consignment Contract Consignment Contract 395
5
Re-evaluate the material cost, Share the inventory materials, and perform an auction.
Share Inventory & Auction NO GO 6 Considered as redundant materials and
proposed to write-off Redundant Materials to WO 363
7 Regular stock opname check and close
follow up Stock Opname Check 406
8 To set up the proper system and rely on
it, not on the people. Set Proper System Up 337
9 Task Force team with clear KPI target
and Reward Offer KPI & Reward Offer 336
10
To provide transactions or applications for easier monitoring of dead stock performance.
Transaction Applications 364
11
Regular Maintenance by considering MTTR (Mean Time to Repair) and MTBF (Mean Time Between Failure) strategy.
MTTR & MTBF Maintenance
Strategy 447 429
118
Fig. 10 AHP Decision-Making
Fig. 11 Final Result taken for AHP From this point, we can take it further into the
detailed finding for each alternative that above has been provided. By calculating the values, we
can get the lambda max, CR, and CI, and based on the Random probability of sample size for 500 matrices then we can get. Those figures and all of
119 this process then end up with one final tab, which
is as follows on fig. 11.
5. Conclusion and Recommendations
From above findings data found that results are same for option no-1 and option no-2, those are for “Review Item Criticality and removal follow-up” and for “Review the calculation and Quantity” consecutively. For the 3rd selection it shows “Applying different approaches for non- routine consumable material” that totally different from Kepner-Tregoe Analysis finding that selected option no-10 that is “Regular Maintenance by considering MTTR (Mean Time to Repair) and MTBF (Mean Time Between Failure) strategy”. From those both approaches, found that option no-1 and no-2 is consistently selected by AHP and Kepner-Tregoe Analysis, and moreover with Analytical Hierarchy Process (AHP) emphasizes more in a counting number of which was done from Kepner-Tregoe Analysis but now more detailed data was done with Analytical Hierarchy Process (AHP). Hence, the author decided to go ahead with these 2 options, which those are “Review Item Criticality and removal follow-up” and for “Review the calculation and Quantity”. From this point, it is clear that above actions will be solving the business issue that declared in the beginning of this paper, to solve the dead stock material to sustain company’s growth and minimizing the chance of the similar case happens in the future.
5.1 Implementation Plan and Justification From the above explanation, several elements of a conclusion can then be drawn after re- evaluating the process and performing the evaluation and contrast of options we have performed in the previous chapter. Both options above is possible to do for implementation and it makes sense to be performed accurately to save our dead stock performance and to reach 5%
target of each action as above described, with proper actions and right team to be configured, and at the end to achieve the target that we define at the beginning.
These both actions will be believed can help the ADC Company to sustain the company by getting his own cash by 5% of each year to resolve the total 43% Non-Moving Spare Part (PNM-SP) Material value for expected the next 5 years, and to maintain the inventory control and strategy to avoid similar case happens again in the future by
maintaining the proposed actions as discussed above.
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