the impact of lean organization to employee cost

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By

Warno Santoso 21952032

MASTER’S DEGREE in

MECHANICAL ENGINEERING – ENGINEERING MANAGEMENT FACULTY OF ENGINEERING AND INFORMATION TECHNOLOGY

SWISS GERMAN UNIVERSITY The Prominence Tower

Jalan Jalur Sutera Barat No. 15, Alam Sutera Tangerang, Banten 15143 - Indonesia

February 2021

Revision After Thesis Defence on February 2^nd, 2021

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WARNO SANTOSO

STATEMENT BY THE AUTHOR

I hereby declare that this submission is my own work and to the best of my knowledge, it contains no material previously published or written by another person, nor material which to a substantial extent has been accepted for the award of any other degree or diploma at any educational institution, except where due acknowledgement is made in the thesis.

Warno Santoso

___________________________________________

Student Date

Approved by:

Dr. Gembong Baskoro, M.Sc

___________________________________________

Thesis Advisor Date

Edi Sofyan, B.Eng., M.Eng., Ph.D

___________________________________________

Thesis Co-Advisor Date

Dr. Maulahikmah Galinium, S.Kom., M.Sc

___________________________________________

Dean Date

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WARNO SANTOSO

THE IMPACT OF LEAN ORGANIZATION TO EMPLOYEE COST IN INDONESIA LARGEST HEAVY EQUIPMENT DISTRIBUTOR COMPANY

By

Warno Santoso

Dr. Gembong Baskoro, M.Sc, Advisor Edi Sofyan, B.Eng., M.Eng., Ph.D, Co-Advisor

SWISS GERMAN UNIVERSITY

Lean organization is an initiative to increase productivity in challenging business condition by evaluating ineffective processes and strengthening internal collaboration to increase value and impact, which able to reduce organizational costs. This research is assessing Lean Organization by analyzing the data using fuzzy logic. While, the correlation between lean organization with employee cost was assessed through internal company data analysis, FGD and Root Cause Analysis (RCA) in order to obtain pareto causes in Employee costs. It’s result that current level is Very Lean and the company's productivity is also increased. However, internal company data analysis also found that the causes of employee costs tend to increase due to Internal variable cost factors (linear with increasing company business performance) and fixed costs based on changes in the employee composition.

This study provides recommendation for an organization to measure lean level of a company in order to identify room for improvement, that has meaningful benefits in controlling employee cost, increase value creation and gaining productivity, as a key to the competitiveness and profitability in a long term.

Keywords: company productivity, employee cost, fuzzy logic, lean organization, root cause analysis

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WARNO SANTOSO

DEDICATION

This thesis is dedicated to my beloved family, especially my wife Riza Kusumawati Machda, my sons (Hilmy and Nazmi), parents, colleagues (HC

division especially CHCOPCC Team), All MME UT students and Management of PT United Tractors, Tbk

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WARNO SANTOSO

ACKNOWLEDGEMENTS

I Would like to thank to Mr. Dr. Gembong Baskoro, M.Sc, Mr. Edi Sofyan, B.Eng, M.Eng, Ph.D and Mr. Dena Hendriana B.Sc, S.M., Sc.D and all Lecturers who have guided me while studying in Swiss German University.

And also to Management of PT United Tractors, Tbk (especially Mr. Edhie Sarwono and Mrs. Endang Tri Handajani) and who gave me the opportunity to take a master's degree.

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TABLE OF CONTENTS

Page

STATEMENT BY THE AUTHOR ... 2

ABSTRACT ... 3

DEDICATION ... 5

CHAPTER 1 - INTRODUCTION ... 11

1.1 Background ... 11

1.2 Research Problems ... 17

1.3 Research Objectives ... 17

1.4 Significance of Study ... 18

1.5 Research Questions ... 18

1.6 Hypothesis ... 18

CHAPTER 2 - LITERATURE REVIEW ... 19

2.1 Theoretical Perspectives ... 19

2.2 Previous Study ... 29

CHAPTER 3 – RESEARCH METHOD ... 36

3.1 Scope of Study ... 36

3.2 Timeframe of Study ... 36

3.3 Research Framework ... 37

3.4 Data Collection ... 39

3.5 Sampling Method ... 39

3.6 Data Sources and Collection ... 43

3.7 Method of Analysis ... 44

CHAPTER 4 – RESULTS AND DISCUSSIONS ... 51

4.1 Respondents Data ... 51

4.2 Lean Level Organization Research Result ... 52

4.3 Employee Cost ... 62

4.4 Actions to Decrease Employee Cost with Lean Organization ... 67

4.5 Correlation Analysis of Lean Organization and Employee Cost ... 70

4.6 Discussion ... 72

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5.1 Conclusion ... 75

5.2 Recommendation ... 77

REFERENCE ... 78

CURRICULUM VITAE ... 83

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Figures Page

Figure 1. PT ABC Profile Summary ... 11

Figure 2. KOM Unit Sales 2011-2019 (in Qty) ... 12

Figure 3. Revenue 2011-2019 (In IDR Bio) ... 12

Figure 4. Financial Highlight 2011-2019 ... 13

Figure 5. Productivity Trend of PT ABC 2014 – 2016 ... 14

Figure 6. Number of Manpower 2015-2019 ... 15

Figure 7. Position Quantity 2015-2019 ... 15

Figure 8. Productivity Trend PT ABC 2016-2019 ... 16

Figure 9. Basic Principles of Lean Organization ... 19

Figure 10. Seven steps process of RCA ... 25

Figure 11. Fish Bone Diagram ... 26

Figure 12. Types of Data Based on Valid And Reliable Criteria ... 27

Figure 13. Fuzzy Membership Area for Linguistic variable ... 33

Figure 14. Research Framework ... 37

Figure 15. Membership Function of Input Fuzzy Logic Organization Aspect . 47 Figure 16. Membership Function of Input Fuzzy Logic People Aspect ... 47

Figure 17. Membership Function of Output Fuzzy Logic ... 48

Figure 18. Input and output Fuzzy Logic ... 52

Figure 19. Fuzzy Logic rules ... 52

Figure 20. Lean Organization Level on Graphic ... 53

Figure 21. Lean Organization Level Result on metlab ... 53

Figure 22. Organization and People Aspect Result ... 54

Figure 23. Root Cause Analysis Results ... 63

Figure 24. Number of Manpower and position to Employee cost ... 71

Figure 25. Manpower Composition (grade) to Employee cost ... 71

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LIST OF TABLES

Table Page

Table 1. Characteristic Organization (Lean and Not Lean) ... 21

Table 2. Distinction between Direct and Indirect Employee Cost ... 25

Table 3. Lean Organization Assessment Variables Literature Review ... 30

Table 4. Linguistic Variable Fuzzy Logic... 33

Table 5. Timeline of Study ... 37

Table 6. Employee composition ... 40

Table 7. Number of populations by position ... 41

Table 8. Employee sampling size group 1 ... 41

Table 9. Employee sampling size group 2 ... 42

Table 10. Number of Minimum Sampling... 42

Table 11. The Resume of Validity Testing ... 45

Table 12. The Resume of Reliability Testing ... 45

Table 13. Membership Function of Input Fuzzy Logic ... 46

Table 14. Membership Function of Output Fuzzy Logic ... 47

Table 15. Structure of Employee cost map (based on ECOLATOR) ... 49

Table 16. Research Respondents (actual) ... 51

Table 17. Vision and Leadership result ... 54

Table 18. Value and Process Management result ... 55

Table 19. Business Process and Standardized Work result ... 56

Table 20. Organization Structure result ... 56

Table 21. Continuous Improvement result ... 57

Table 22. Employee Involvement result ... 58

Table 23. Expansion of Autonomy result ... 59

Table 24. Adaptation to Change result ... 60

Table 25. Cross Function Experience result ... 61

Table 26. Training and Development result ... 61

Table 27. Company Performance and Employee cost Comparison ... 63