THE APPLICATION OF ANALYTICAL HIERARCHY PROCESS (AHP) TO DETERMINE BEST CITY FOR TEA FACTORY OPENING

Neilson Derrick; Manahan Parlindungan Saragih Siallagan

doi:10.31955/mea.v7i3.3584

Neilson Derrick Institut Teknologi Bandung, Bandung
Manahan Parlindungan Saragih Siallagan Institut Teknologi Bandung, Bandung

DOI: https://doi.org/10.31955/mea.v7i3.3584

Keywords: Tea Industry, Factory Location, Logistic Efficiency, AHP, MCDM

Abstract

PT Surya Sentosa Sejahtera (PT SSS), a leading tea manufacturer in Indonesia, faces a pressing urgency to reach consumers nationwide in a cost-effective manner within the booming tea industry. The current distribution channel, originating from their facility located in Medan, North Sumatera, incurs substantial delivery costs for destinations outside Sumatra. These high logistic expenses, about fifty percent more than ideal, negatively impact the company’s profit margins and hinder expansion. In response, the company intends to construct a new facility in a more strategic location in 2025, but the optimal factory location remains uncertain. 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. Four-critical criteria are identified, consisting a total of twelve sub-criteria, leading to five alternative locations. In the criteria level, the AHP analysis indicates that Organizational Capability carries the highest weight, followed by Location, Operational Requirement and Financial Viability. At the sub-criteria level, Partnership Readiness emerges as the most significant, followed by Manufacturing Supervisor Availability, Prospective Area and Easiness to Build Distribution Network. At the alternative level, Surabaya is the most preferred site, followed by Bogor, Lampung, Batam and Makassar.

Author Biographies

Neilson Derrick, Institut Teknologi Bandung, Bandung

Neilson Derrick is a dedicated graduate student at the School of Business and Management, Institut Teknologi Bandung, currently pursuing a Master of Business Administration (MBA). He earned his Bachelor of Laws degree from Universitas Sumatera Utara in 2018, demonstrating a multifaceted educational background. With a solid foundation in law and a keen interest in business management, Neilson is poised to integrate legal and business perspectives, contributing to a well-rounded understanding of contemporary challenges.

Manahan Parlindungan Saragih Siallagan, Institut Teknologi Bandung, Bandung

Dr. Manahan Parlindungan Saragih Siallagan, an Assistant Professor at the School of Business and Management, Institut Teknologi Bandung, holds a Bachelor's degree in Mathematics from Institut Teknologi Bandung, Indonesia (1999). He further pursued and earned a Master's degree in Electrical Engineering from the same institution (2004) before venturing internationally for his Master's in Computational Intelligence and Systems Science at Tokyo Institute of Technology, Japan (2011). Dr. Siallagan's academic journey culminated in a Doctorate in Computational Intelligence and Systems Science from Tokyo Institute of Technology in 2013. His comprehensive education background, spanning mathematics, electrical engineering, and computational intelligence, forms the foundation for his research expertise in decision making, strategic negotiation, and the application of big data analytics and social simulation. As the Director of the Big Data Analysis and Social Simulation Laboratory, Dr. Siallagan continues to blend his diverse educational background to push the boundaries of knowledge in these fields.

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THE APPLICATION OF ANALYTICAL HIERARCHY PROCESS (AHP) TO DETERMINE BEST CITY FOR TEA FACTORY OPENING

A CASE STUDY OF PT. SURYA SENTOSA SEJAHTERA

Abstract

Author Biographies

References