p-ISSN: 2723-6609 e-ISSN: 2745-5254

Vol. 5, No. 12 Desember 2024 http://jist.publikasiindonesia.id/

Jurnal Indonesia Sosial Teknologi, Vol. 5, No. 12, Desember 2024 5947

Analysis of Supply Chain Risk Management in The Lubricant

Industry Using the House of Risk (HOR) Method

Muthia Putri Hidayati

, Iwan Vanany

Institut Teknologi Sepuluh Nopember

Email: [email protected]

*Correspondence

ABSTRACT

Keywords: Supply Chain;

Supply Chain Operation

Reference; House of Risk

PT.X is a company engaged in lubricant manufacturing.

Based on the results of field studies, several risks hinder the

company's supply chain process, and PT.X has never

conducted a risk assessment. Therefore, risk analysis and

mitigation are needed to minimize the risks that arise in the

company's supply chain. This research uses the Supply Chain

Operation Reference (SCOR) model to map the company's

supply chain activities and the House of Risk (HOR) method

to identify risks in the supply chain, including risk events, risk

agents, and their correlations. The results reveal a total of 32

risk events and 26 risk agents. Then, a Pareto diagram

calculation is conducted, identifying 3 priority risk agents

that need to be addressed: supplier inability to provide raw

materials, lack of work supervision, and inadequate

workforce competence. From these 3 priority risk agents, 8

risk mitigation measures have been determined: evaluating

supplier performance, establishing contracts with suppliers,

planning alternative supplier selection, conducting periodic

supervision, establishing company standard operating

procedures, providing skills training and work discipline,

recruiting workers more selectively and rigorously, and

placing workers according to their expertise.

Introduction

The company's ability to face competition against its competitors in the industrial

world is very important. The essence of competition between companies lies in how

companies produce products that are better in quality, cheaper in price, and always have

the availability of these goods. This can all be achieved with good supply chain

management so that the company's activities can run effectively and efficiently. A supply

chain includes all stages, directly or indirectly, of meeting customer demand. The supply

chain includes not only manufacturers and suppliers but also parties involved in

transportation, warehousing, retailers, and the customers themselves (Chopra & Meindl,

2001; Haial et al., 2020). In any organization, the supply chain includes all functions

involved in fulfilling customer demand.

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Jurnal Indonesia Sosial Teknologi, Vol. 5, No. 12, Desember 2024 5948

Supply Chain Management is a series of activities that manage the supply chain

which includes procurement, production, inventory, and delivery of products to

consumers. The main objective of managing the supply chain is to align customer needs

with the flow of materials from suppliers to provide a balance between what are often

seen as conflicting objectives of high customer service, low investment in inventory and

low unit costs. The design and operation of an effective supply chain is essential for any

company.

Good cooperation between suppliers, manufacturers and distributors can achieve

all of this. Therefore, a supply chain management system is needed to manage all these

stakeholders. In its application in the manufacturing world, SCM must be able to meet

customer satisfaction, incur low costs in inventory and product delivery, develop timely

products, and run the industry carefully and flexibly.

The benefits of supply chain management in a company are very important,

including customer satisfaction, increasing revenue, reducing costs, and making the

company stronger. Because of the various benefits of SCM, the company will progress if

it manages the supply chain well. Therefore, good supply chain management is necessary

in a company.

However, sometimes, this supply chain management does not work as expected.

Every activity carried out by the company cannot be separated from the risks that can

affect the flow of materials and components in the supply chain. Risk is a potential

adverse event caused by uncertainty over the occurrence of an event, where uncertainty

is a condition that causes the growth of risks originating from various activities (Suryatika

et al., 2021). Based on research conducted by Hendriks and Sinhal (2003) in (Gurgoglione

et al., 2023), it is found that disruption to the supply chain has a long-term negative impact

on the company and many companies are unable to recover quickly from this negative

impact. And based on data from the Center for Risk Management Studies (CRMS)

Indonesia in 2019, it states that the maturity level of risk management implementation in

Indonesia is 76%. This high figure shows that the implementation of risk management in

Indonesia is increasingly mature, but the implementation of risk management on

increasing the effectiveness and efficiency of the company's supply chain is only 33%.

This means that many companies have not paid attention to risk management in the supply

chain.

PT.X is a subsidiary established on September 23, 2013 and spun-off the

Lubricants Business Unit of PT. A on October 30, 2013. PT. X's line of business is to

produce, distribute and market lubricants, grease and specialties products. In order to

support these business activities, PT. X built four Production Units, seven Sales Regions,

and established various other supporting facilities such as Depot Supply Point (DSP),

Bulk Terminal, and Production Laboratory. The total production capacity of PT. X is

540,000 KL/year, with a total domestic production capacity of 480,000 KL/year and

overseas production capacity of 60,000 KL/year.

Based on the results of field studies conducted at PT.X, several risks were

obtained that could hinder the supply chain process. One of the problems is the quality of

Analysis of Supply Chain Risk Management in The Lubricant Industry Using the House of Risk

(HOR) Method

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raw material receipt which is quite fluctuating where the expected quality of raw materials

is in the middle of the specification limit but not a few raw materials received are on the

borderline of the minimum or maximum specification limit. Although based on the

provisions of the raw material specifications can be accepted, it will cause a shift in results

during the blending process to produce products. In addition, there are also several risks

that occur along the supply chain flow, including products experiencing Off Spec which

requires a rework process, delays in shipping finished products, shortages of raw

materials and many other risks that often occur along the supply chain flow which cause

supply disruptions to end consumers to the detriment of all stakeholders in the supply

chain. If these risks occur and are not handled, it will cause losses or reduce profits for

the company. Until now, PT.X has never conducted a detailed risk assessment for

handling these obstacles.

Risk assessment is an effort to find out, analyze, and control risks in every

industrial activity with the aim of obtaining higher effectiveness and efficiency

(Darmawi, 2016). Therefore, an analysis is needed to identify, measure, and handle the

occurrence of obstacles or risks at PT.X.

In addition, based on the results of research that has been conducted on 209

companies in Asia, it explains that there are still many company owners who have not

realized the presence of a risk and still have the mindset that the risk will not happen to

them (Adeyele & Osemene, 2018; Balasubramanian, 2022). The results of the study are

relevant to what happened at PT.X considering that the company is also still not optimal

in understanding risks, as well as how to control the risks themselves even though they

understand in detail the business processes they do. This is the basis for this research so

that the company better understands the importance of managing existing risks, by

providing an explanation of the risks in the supply chain process from upstream to

downstream, identifying the risks that exist in the company and providing risk mitigation

strategies for companies based on risks that may occur now or in the future to maximize

the performance of the company so that the vulnerable points of risk occurrence can be

known and minimized (Settembre-Blundo et al., 2021).

Risks in the supply chain can be reduced when a company implements Supply

Chain Risk Management. The framework consists of several stages or phases, namely

risk identification, risk measurement, risk assessment, risk evaluation, risk mitigation &

contingency plans, and risk control & monitoring Tummala & Schoenherr, (2011) in

(Pradita et al., 2020). Risks in the supply chain can be minimized if the company applies

good supply chain rules, one of which is by applying SCOR (Supply Chain Operation

Reference) modeling. SCOR is a reference model of the supply chain that is able to map

the parts of the supply chain which aims to measure the performance of the supply chain

itself. The implementation of the SCOR model at certain limits is quite flexible and can

be adjusted to increase productivity to meet consumer needs (Darojat & Wuryaningtyas,

2017; Haial et al., 2020). The SCOR model is used to identify supply chain activities

carried out at PT.X based on five different management processes, namely plan, source,

make, deliver and return from suppliers to consumers, where the processes in the SCOR

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Jurnal Indonesia Sosial Teknologi, Vol. 5, No. 12, Desember 2024 5950

model have represented all activities in SCM from upstream to downstream in detail, so

as to explain and classify the processes that build the measurement indicators needed in

measuring SCM performance. The advantage of SCOR compared to other models is the

performance measurement that applies a balance between financial and non-financial

factors.

Then the House of Risk (HOR) method is used to identify risks along the PT.X

supply chain flow. The HOR method is divided into two phases, phase 1 begins with the

process of identifying risks based on activities that have been mapped with the SCOR

model. Furthermore, phase 2 by processing the risk agent and risk event matrix to

prioritize the source of risk that will be treated, then re-processing the risk cause matrix

with preventive action and the final result is the risk mitigation priority as the output of

HOR. The approach with the HOR method presents the final result, namely the priority

of risk mitigation actions. Broadly speaking, the priority of risk mitigation is only

determined by the correlation between preventive action and risk agent, but there are

several criteria desired by policy makers in prioritizing risk mitigation actions (Mohsin et

al., 2022; Pescaroli, 2018).

Based on the formulation of the problem that has been prepared, this research aims

to identify the risks that occur in the supply chain flow at PT. X. In addition, this study

also aims to determine an effective risk mitigation strategy to reduce the potential for

risks in supply chain activities at PT X. Therefore, it is necessary to conduct research on

the supply chain activities of PT.X, especially in the Gresik Production Unit. In

identifying risks and designing handling strategies to reduce the probability of occurrence

of risk agents by providing preventive measures to risk agents in the supply chain at PT.X

which can hinder the supply chain process, the HOR (House of Risk) method is used.

Thus it is hoped that the risks faced by PT.X can be overcome properly so as to create

sustainable company development towards operation excellence.

Methods

The object of research is supply chain activities at PT X, especially the Gresik

production unit, with a focus on risk analysis to determine priorities and mitigation

required. Primary data was obtained directly from the source through interviews,

questionnaires, and brainstorming, including supply chain activity mapping, risk event

data, risk agents, and mitigation priority assessment. Secondary data, such as company

annual reports and literature, complemented the primary data and provided additional

information.

The data collection process was conducted through direct observation and

interviews with PT X workers. The research flow begins with problem identification,

followed by literature and field studies, problem formulation, goal setting, supply chain

activity mapping using the SCOR method, risk identification and assessment, risk agent

prioritization evaluation with Pareto diagrams, and risk mitigation strategy assessment.

The analysis and discussion stage compares field results with scientific theory, ending

with conclusions and suggestions. Tools such as Microsoft Visio and Excel are used to

Analysis of Supply Chain Risk Management in The Lubricant Industry Using the House of Risk

(HOR) Method

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support the research, which aims to determine the priority of risk mitigation that should

be implemented immediately.

Results and Discussion

Analysis of Risk Identification Results of PT.X

Based on the results of business process mapping with the SCOR model that has

been carried out in each PT.X supply chain process both from the supplier stage to the

customer. The supply chain process starts with the plan process which includes planning

for customer order fulfillment, raw material procurement planning, production planning,

and delivery planning. At the customer order fulfillment stage, an agreement is made

regarding the design, specifications, and price of the product desired by the customer.

Then after there is an agreement between the company and the customer, the company

will carry out the production procurement planning stage which is the stage where the

company orders the raw materials needed for the production process. This stage is carried

out after receiving an order from the customer because PT.X implements a combined

production system between Made to Stock (MTS) and Made to Order (MTO) where the

company produces products to fulfill stock and based on orders received so that it affects

the stock of raw materials owned by the company. The PT.X source process includes

receiving raw materials and storing raw materials. In the activity of receiving raw

materials, checking the quantity and quality of raw materials sent from suppliers is carried

out whether it is in accordance with orders from the Company and in quality conditions

in accordance with predetermined specifications. The make process includes the

implementation of production activities, inspection of finished products, and storage of

finished products. Inspection of finished products is very important considering that the

products produced by PT.X are lubricant products that are used both in vehicle engines,

industrial machinery and others. In the product delivery process (deliver) is carried out

by the delivery method by the TPL (Third Party Logistics) company. In the PT.X return

process includes returning finished products from & to the customer and returning raw

materials to the supplier.

In the activity of returning finished products from and the customer will be carried

out when the customer makes a claim about the defect of the product received. Then the

company will take the defective product that has been received by the customer and

immediately replace the defective product according to the agreement with the customer.

This is done in order to maintain trust and service to customers. And also if in the

receipt of raw materials there is a mismatch between the order and the raw materials that

come, the company will immediately return the raw materials to the supplier.

Based on the results of risk identification that has been carried out by interviews

and direct observation of the reality of the problems that occur in the company, 32 risk

events and 26 risk causes (risk agents) are obtained. In the House of Risk (HOR) phase

1, an assessment of the risk event is carried out based on the level of impact caused

(severity) of the risk event and an assessment of the risk agent based on the level of

probability of occurrence and the level of correlation or relationship between the risk

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Jurnal Indonesia Sosial Teknologi, Vol. 5, No. 12, Desember 2024 5952

agent and the risk event (Hamka et al., 2021). After the assessment, the ARP value is

calculated. Of the 26 risk agents that have been assessed, A3 is obtained as the risk agent

that has the highest ARP value of 4095. Then testing is done with a pareto diagram that

uses the 80/20 principle where 20% of the risk can minimize 80% of the risk occurrence.

Based on the tests that have been carried out using pareto diagrams, the 3 largest risk

agents are obtained which are explained as follows: (Anvari et al., 2021)

1. Supplier inability to provide raw materials (A3): Supplier inability to provide raw

materials is the biggest risk at PT.X with an ARP value of 4095. This risk greatly

affects the production process and occurs quite often. The types of products produced

by PT.X have many variations, this causes the raw materials needed by the company

to also have many and varied types. The same type of product does not necessarily

have the same raw material because the specifications of each product are different

and for ATPM (Single Agent Brand Holder) customers are made based on the needs

or desires of the customer. One example of raw materials that usually experience

constraints in supply capability is the main raw material base oil because the supply

of base oil is highly dependent on the operation of the Refinery Unit, if the Refinery

Unit is experiencing a shutdown then the supply of base oil will be disrupted. This

causes a shortage of raw materials so that PT.X must find another supplier who has

the desired raw materials. Looking for other suppliers who have the raw materials the

company wants is what takes a lot of time for the production process. Often companies

get raw materials from locations that are quite far away, for example, companies get

imported base oil which causes a long delivery time for raw materials and also

requires high shipping costs which burden production costs. Therefore, the inability

of suppliers to provide raw materials is the biggest risk agent and causes the following

risk events:

Table 1. Impact of Risk agent A3

Code

Risk Event

Explanation

Increase in raw

material prices

The inability of suppliers to provide raw materials causes an

increase in raw materials, this is because suppliers who usually

provide raw materials to the company cannot meet demand so

the company must find other suppliers to meet production

needs. Often replacement suppliers sell

more expensive raw materials.

Running out of

raw materials

This problem is also caused

by the inability of suppliers to provide raw materials. If raw

materials run out, it takes longer for the company to complete

orders from customers. Production that exceeds the agreed

deadline can have an impact on customer satisfaction, thus

worsening the company's image.

Delayed arrival

of raw materials

This problem is also caused by the inability of suppliers to

provide raw materials in accordance with the wishes of the

company, especially the availability of raw materials and the

delivery time of raw materials. Usually this delay is caused by

Analysis of Supply Chain Risk Management in The Lubricant Industry Using the House of Risk

(HOR) Method

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Code

Risk Event

Explanation

suppliers who are late in sending raw materials to the company

or the company must find other suppliers who have the

required raw materials. This causes delays in the arrival of raw

materials.

E11

Raw material

quality is not up

to standard

Several times it has happened that the quality of raw materials

sent is not in accordance with company standards, for

example, base oil raw materials sent OFF SPEC so that the

company has to wait for replacement raw materials or in

urgent conditions make special treatment that makes

production time late

E12

Raw materials

that do not arrive

according to the

order

Sometimes raw materials come not in accordance with the

order given, this usually happens to the quantity of goods that

come, for example, it happens to the arrival of additive drums,

additives that come are less than the order given to the

supplier.

E16

Production stops

Raw materials are the most important thing in the production

process, if raw materials are not available, the company cannot

carry out the production process.

E18

Less raw

materials

The lack of raw materials is also caused by the inability of

suppliers to provide raw materials in accordance with the

required quantity.

E22

Delay in

production

process

Delays in the production process are caused by many things,

one of which is the inability of suppliers to provide raw

materials so that raw materials that arrive late cause delays in

the production process.

E28

Delayed delivery

process

This is the last effect caused by the supplier's inability to

provide raw materials. Raw materials that are sent late by the

company cause the production process to take longer so that

the ordered products will also experience delays in the

delivery process.

2. Lack of work supervision (A9): The lack of work supervision is the third largest risk

at PT.X which has an ARP value of 3861. The lack of work supervision causes

workers to often not do work during working hours. Often workers carry out rest

activities during working hours so that they can cause delays in the production of a

product. The absence of work supervision also causes workers to carry out activities

that they should not do while at work, besides not wearing personal protective

equipment in accordance with the SOP when doing quite dangerous work such as not

wearing safety hardness when climbing into tanks to take samples, this has the

potential to cause work accidents that can be experienced by workers. The following

is a risk event caused by the lack of work supervision:

Table 2. Impact of Risk agent A9

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Jurnal Indonesia Sosial Teknologi, Vol. 5, No. 12, Desember 2024 5954

Code

Risk Event

Explanation

E13

Raw materials

delivered are not

checked

Lack of supervision during the arrival of raw materials sometimes

makes workers not check the quality and quantity of raw materials

sent by the supplier.

E15

Work accident

occurs

Work accidents can occur due to weak supervision of workers,

causing workers to ignore the rules in doing a risky job.

E17

Raw materials

are wasted

The use of raw materials should be done efficiently so as not to

burden production costs. In its application, sometimes workers do

not use raw materials efficiently, this often happens when putting

drum additives into blending tanks, even though they have used

an automatic process, there are still additives left in the drum.

E20

Machine/equipm

ent breakdown

Damage to a machine or equipment is caused by a lack of work

supervision which makes workers use a machine or equipment

available regardless of the applicable SOP.

E21

Delay in

production

process

Worker indiscipline is also caused by the lack of work supervision

which makes workers work not according to the targets that must

be achieved at that time, causing the production process to take a

relatively long time.

E25

Many defective

products

The lack of work supervision in the production line can cause

every stage of work carried out not according to procedures so

that the products produced have defects.

3. Incompetent labor (A8): Incompetent labor is the second biggest cause of risk at PT.X

which has an ARP value of 3822. Incompetent labor can hinder the ongoing

production process because workers do not have the skills and experience of what

they will do and how they use the available production tools. This is due to the absence

of skill requirements needed to apply for existing jobs in the company. For example,

a person can work for the company even if they do not have any special skills, so they

will be assigned to work stations that do not require special skills. And also, in looking

for workers, the company prioritizes partners from workers who have already worked

at PT.X and also the surrounding community who do not have jobs. The following is

a risk event caused by incompetent labor:

Table 3. Impact of Risk agent A8

Code

Risk Event

Explanation

Contracts are

not

implemented

properly

This problem can also be caused by workers who do not

understand the details of the order from the customer so that the

contract that has been agreed between the company and the

customer is not implemented properly.

E10

Raw material

quantity

miscalculation

Errors in calculating the amount of raw materials needed usually

occur because workers do not understand the details of a product

order so that there is an error in conveying information to the

owner of the company who later orders raw materials to the

supplier.

Analysis of Supply Chain Risk Management in The Lubricant Industry Using the House of Risk

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Jurnal Indonesia Sosial Teknologi, Vol. 5, No. 12, Desember 2024 5955

Code

Risk Event

Explanation

E17

Work accident

occurs

Lack of knowledge of the importance of personal protective

equipment when doing risky work or workers who do not have

experience in using certain tools and machines can cause work

accidents. An example of an incident is splashing lubricant

products during the filling process to packaging

E21

Machine/equip

ment

breakdown

This problem usually occurs due to workers' ignorance of how

to use a machine or tool that can cause damage to the machine

or tool.

E22

Delay in

production

process

Incompetent workers cause the stages of work carried out to take

a long time due to lack of work expertise, for example in the

work of cleaning tanks or pipe manifolds.

E25

Product

checking is not

thorough

This problem is also caused by the lack of worker expertise to

inspect the finished product whether it is suitable to be sent to

consumers or whether improvements are still needed on the

product.

E26

Many defective

products

Workers' lack of understanding of the steps involved in making

a product can cause the product being worked on to be defective.

E27

Product

damaged in

storage

Sometimes in storing finished products, workers are less careful,

resulting in damage to the stored products due to the absence of

protection that protects the product, such as leaks in doos caused

by forklift forks.

Risk Mitigation Strategy Analysis of PT.X

In phase 2 of the House of Risk, the design of risk mitigation strategies is

determined based on prioritized risk agents. Risk mitigation strategy planning is the

process of developing options and actions to reduce the impact of risk and reduce the rate

of occurrence of a risk. In House of Risk phase 1, the results of 3 priority risk agents with

the largest ARP value based on the 80/20 pareto diagram rule were obtained. After

determining the risks to be mitigated, the process of planning risk mitigation strategies

that can be implemented in the company is carried out. The risk mitigation strategy

planning process is based on literature review and discussions with experts in

entrepreneurship. Based on these stages, 8 risk mitigation strategies were determined

based on 3 risk agents. Meanwhile, to determine the validity of risk mitigation strategies,

discussions were held with research subjects to determine the ability to implement risk

mitigation which includes readiness in terms of costs and human resources so that after

determining the strategies, the prioritization of risk mitigation strategies was carried out.

The following are the prioritized risk mitigation strategies based on the results of the

House of Risk phase 2 and its explanation:

1. Make a plan in determining alternative suppliers (PA3): Making plans in determining

alternative suppliers is one of the ways used to overcome the inability of suppliers to

provide raw materials in terms of quality, quantity and arrival time of raw materials.

Raw materials are an important component in the production process. Making plans

in determining alternative suppliers is done by collecting data related to alternative

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suppliers that provide the required raw materials, both the price of raw materials and

shipping costs, so that when the raw materials run out the company does not waste

time surveying alternative suppliers. The reason for choosing this strategy is that often

companies only entrust their raw material needs to raw material suppliers without

thinking about existing risks such as raw material unavailability.

2. Conduct skill training and work discipline (PA6): Workers who work at PT.X usually

come from local residents and partners of workers who have worked before, therefore

not all workers have special skills. The work performed is usually very flexible and

does not have a fixed jobdesc. Then the level of worker discipline is considered to be

lacking because workers are often found not doing work during working hours and

the production floor is messy which often causes work accidents. Therefore, there is

a need for skill training and work discipline that aims to improve the quality of human

resources and the quality of business from the company.

3. Placement of workers in accordance with expertise (PA8): Placement of workers

according to their expertise is considered quite important so that workers can

maximize their expertise in order to minimize the risks that might occur. This strategy

was chosen because in its implementation there is no clear job description for each

worker, so the company must be sensitive enough to the expertise or competence of

each worker.

4. Making contracts with suppliers (PA2): The cooperation between suppliers and PT.X

is bound by a short contract that must be renewed every certain period, so it is often

late to order raw materials because the contract has not been extended. Problems that

often occur are delays in the delivery of raw materials, errors in the type of raw

materials sent, and stock vacancies of raw materials on the supplier's side. Therefore,

a long-term contract is needed that binds cooperation between the company and the

supplier to avoid this from happening.

5. Conduct regular supervision (PA4): At PT.X, sometimes workers do not follow the

applicable rules. During working hours, workers sometimes do not do work but rest.

In addition, many workers do not wear personal protective equipment when working

and the production floor is messy, so work accidents often occur due to worker

indiscipline. Therefore, regular supervision needs to be implemented so that it is

expected to minimize the risks that can occur. Periodic supervision was chosen

because it can also be a benchmark for assessing each worker in doing their job so

that the company can find out which workers deserve appreciation and workers who

must receive a warning.

6. Conducting more selective and strict recruitment of workers (PA7): More selective

and rigorous recruitment of workers was chosen because previously the company

mostly accepted workers from partners and local residents without considering their

skills. This meant that new workers could not immediately carry out activities with

specific skills. Therefore, more selective recruitment of workers is needed so that new

workers can immediately work professionally and can minimize existing risks.

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7. Establishment of standard operating procedures for the Company (PA5): Considering

the unclear job descriptions that must be carried out and the lack of discipline of

workers, it is important to develop standard operating procedures. Currently, there is

a standard operating procedure for each activity, but to improve workers'

understanding, a pictorial standard operating procedure will be created. This strategy

serves as a work guideline so that worker performance is more directed so that

workers will know what to do and what not to do when working. And also the creation

of pictorial company operational standards also functions as a work discipline

controller with consequences in the form of sanctions, automatically making workers

more disciplined in doing their work.

8. Evaluate supplier performance (PA1): Suppliers are an important component in the

smooth running of the company's supply chain because they are one of the

stakeholders in the supply chain. Supplier performance in providing raw materials is

an important assessment in supplier selection, so an evaluation is needed to assess

how well each supplier is performing. Supplier performance assessment can be based

on the level of quality, quantity, and availability of raw materials.

Cost Benefit Analysis

Table 4. Cost Benefit Analysis

Mitigation

Strategy

Mitigation plan

Cost

Positive Impact

Benefit

Make a plan

determining

alternative

suppliers

1. Conduct a

dual supplier

procurement

system for raw

materials used in

large quantities

2. Increase the

resilience of raw

material stocks

3. Raw material

contracts are

made with price

adjustment

formula clauses

4. Strategic

partnership plan

within a certain

period

Plan Cost:

$20,000.

1. Reduce risks associated

with dependence on a

single supplier including

the risk of supplier

bankruptcy, drastic price

changes, and supply chain

disruptions

Alternative suppliers may

have different

technologies or

production methods that

can be utilized for

product innovation and

production process

improvements

Relationships with

multiple suppliers can

create a stronger and

more stable support

network for the company

in the long term.

● Procurement Cost

Reduction: 10%.

● Annual

Expenditure on

Procurement:

$200,000.

● Savings: $200,000

* 0.10 = $20,000

per year.

● Total Profit in 5

Years: $20,000 *

5 = $100,000.

● ROI (Return on

Investment):

($100,000 -

$20,000) /

$20,000 = 400%.

Conduct skill

training and

work

discipline

1. Make a

routine training

schedule both

external and

internal

● Training

1. Skills training and

work discipline help

employees work more

efficiently and

effectively, which in turn

● Productivity

Improvement:

10%.

● Annual Income:

$120,000,000.

Muthia Putri Hidayati, Iwan Vanany

Jurnal Indonesia Sosial Teknologi, Vol. 5, No. 12, Desember 2024 5958

Mitigation

Strategy

Mitigation plan

Cost

Positive Impact

Benefit

Apple/Briefing

before starting

work

3. Digitization of

inter-shift

changeover form

Costs:

$30,000 per

employee.

● Number of

Employees:

600.

● Total

Training

Cost:

$30,000 *

600 =

$18,000,00

increases the overall

productivity of the

company

Employees who feel

valued and have the

opportunity to grow tend

to be more loyal to the

company, reducing

turnover rates and

recruitment costs

Employees trained in new

skills can bring fresh

ideas and innovative

solutions, which promote

company development

and growth

● Profit from

Productivity

Improvement:

$120,000,000 *

0.10 =

$12,000,000 per

year.

● Total Profit in 5

Years:

$15,000,000 * 5 =

$60,000,000.

● ROI (Return on

Investment):

($60,000,000 -

$18,000,000) /

$18,000,000 =

233%.

Placement of

workers

according to

expertise

Refreshment of

worker

competencies

according to the

competency

matrix

● Placement

Fee:

$10,000 per

position.

● Number of

Positions:

20.

● Total

Placement

Cost:

$10,000 *

20 =

$200,000.

1. When workers perform

work they are good at, the

quality of work tends to be

better, reducing errors and

resulting in increased

customer satisfaction

2. Workers who are

experts in their field are

faster and more effective

in identifying and

resolving problems,

reducing downtime and

increasing operational

efficiency.

● Turnover

Reduction: 15%.

● Replacement Cost

per Employee:

$15,000.

● Number of

Employees

Replaced Each

Year: 10.

● Savings from

Turnover

Reduction:

$15,000 * 10 *

15% = $22,500

per year

● Profit from

Turnover

Reduction in 5

Years: $22,500 *

5 = $112,500.

Establishing

long-term

contracts

with

suppliers

1. Make a

partnership

contract with a

longer period

2. Conduct a

mandatory audit

of the items that

have been

determined by

PT.X before the

long-term

partnership

● Contract

partnership

fee:

$100,000.

1. Long-term contracts

ensure a consistent supply

of goods or raw materials,

reducing the risk of

supply shortages that

could disrupt business

operations

2. Long-term contracts

allow companies to better

plan for growth and

expansion, as they can

rely on consistent support

from suppliers.

● Cost Savings: 5%

of $1,000,000 =

$50,000 per year.

● Profit from

Savings in 5

Years: $50,000 *

5 = $250,000.

● ROI (Return on

Investment):

($250,000 -

$100,000) /

$100,000 = 150%

Analysis of Supply Chain Risk Management in The Lubricant Industry Using the House of Risk

(HOR) Method

Jurnal Indonesia Sosial Teknologi, Vol. 5, No. 12, Desember 2024 5959

Mitigation

Strategy

Mitigation plan

Cost

Positive Impact

Benefit

contract process

3. Suppliers often offer

discounts or incentives to

customers willing to sign

long-term contracts,

which can reduce overall

purchasing costs

Conduct

regular

supervision

1. Real-time

digitization of

every quality

check point

2. Digitalization

of shift change

form

3. Anti-

counterfeit fight

against the

circulation of

counterfeit

products 4.

● Supervision

Fee:

$3,000,000

per year.

1. By conducting regular

surveillance, problems or

errors can be detected

early before they become

larger and more difficult

to resolve, thereby

reducing repair costs and

operational disruptions

2. Regular surveillance

ensures that company

assets, such as equipment

and machinery, are used

and maintained properly,

which extends the life of

the assets and reduces

maintenance costs 2.

● Cost Savings: 5%

● Annual operating

costs =

$30,000,000.

● Penghematan=1,5

00,000

● Profit from

Savings in 5

Years: $1,500,000

* 5 = $7,500,000.

● ROI (Return on

Investment):

($7,500,000 -

$3,000,000) /

$3,000,000 =

150%

Conduct

selective and

rigorous

recruitment

of workers

1. Recruitment

of workers

through

subsidiaries

whose fields are

related to human

resources

2. Recruitment

of workers is

prioritized who

have experience

in the

appropriate field

or have

certification in

the appropriate

field

● Recruitmen

t Fee:

$15,000 per

position.

1. Rigorous selection

helps ensure that the

company gets employees

with skills, experience

and personalities that

match the company's

needs and culture

Employees who have the

right skills and experience

will adapt more quickly

to new roles and

responsibilities.

● Turnover

Reduction: 10%.

● Replacement Cost

per Employee:

$10,000.

● Number of

Employees

Replaced Each

Year: 20.

● Savings from

Turnover

Reduction:

$10,000 * 20 *

10% = $20,000

per year.

● Profit from

Turnover

Reduction in 5

Years: $20,000 *

5 = $100,000.

● ROI (Return on

Investment):

($100,000 -

$15,000) /

$15,000 = 567%

Establishmen

t of standard

1. Pictorial SOPs

that are easily

accessible and

SOP Creation

1. Consistency and

Quality Standards

2. Well-documented

● Cost Savings:

● Annual operating

Muthia Putri Hidayati, Iwan Vanany

Jurnal Indonesia Sosial Teknologi, Vol. 5, No. 12, Desember 2024 5960

Mitigation

Strategy

Mitigation plan

Cost

Positive Impact

Benefit

operating

procedures

understood by

workers,

especially

operators

Review/Creation

of checklists

related to work

activities

3. Digitalization

of the SOP

review process

in the Company

make

it easier if there

is an update.

Cost: $20,000.

procedures help reduce

operational errors and

risks as employees follow

established steps

costs =

$30,000,000.

● Savings=600,000

● Profit from

Savings in 5

Years: $600,000

* 5 =

$1,200,000.

● ROI (Return on

Investment):

($1,2000,000 -

$20,000) /

$20,000 =

5900%

Evaluate

supplier

performance

1. Conduct

performance

assessment to

suppliers based

on 5 criteria

2. Annual

supplier audits

3. Providing

rewards and

punishments to

suppliers based

on performance

assessments 3.

Supplier

Performance

Evaluation

Cost:

$100,000 per

year.

1. Supplier performance

evaluation helps ensure

that the products received

meet the desired quality

standards

By ensuring consistent

and reliable supply

quality, companies can

better meet customer

expectations, increasing

customer satisfaction and

loyalty

Data and information

from supplier

performance evaluation

provide a solid basis for

better decision-making

regarding supply chain

management and supplier

selection

● Supply Risk

Reduction: 20%.

● Cost of Loss due

to Supply Risk:

$200,000.

● Savings from

Performance

Evaluation in 5

Years: $200,000 *

20% = $40,000

per year.

● Profit from

Savings in 5

Years: $40,000 *

5 = $200,000.

● ROI (Return on

Investment):

($200,000 -

$100,000) /

$100,000 = 100%

The following is a comparison of the benefits and costs of the mitigation strategies

carried out,

Mitigation Strategy

Cost

Profit

% (profit/cost)

Profit

Ranking

Make a plan in determining

alternative suppliers

20,000

100,000

400%

Conduct skill training and work

discipline

18,000,000

60,000,000

233%

Placement of workers according

to expertise

200,000

112,500

-44%

Analysis of Supply Chain Risk Management in The Lubricant Industry Using the House of Risk

(HOR) Method

Jurnal Indonesia Sosial Teknologi, Vol. 5, No. 12, Desember 2024 5961

Establishing long-term

contracts with suppliers

100,000

250,000

150%

Conduct regular supervision

3,000,000

7,500,000

150%

Conduct more selective and

rigorous recruitment of workers

15,000

100,000

567%

Establishment of standard

operating procedures

20,000

1,200,000

5900%

Evaluate supplier performance

100,000

200,000

100%

From the CBA study, 3 mitigation strategies were obtained that have the potential

to generate large profits with small costs, namely making the Company's standard

operating procedures, recruiting more selective and strict workers and making plans in

determining alternative suppliers. By carrying out 3 mitigations in the process, it is hoped

that it can represent the completion of risk events as a whole.

Conclusion

Based on the results of research that has been conducted at PT.X, it can be

concluded as follows: From the results of mapping business process activities based on

the SCOR model at PT.X, the plan process includes planning for customer order

fulfillment, raw material procurement planning, production planning and delivery

planning. The source process includes receiving raw materials and storing raw materials.

The make process includes the implementation of production activities, inspection of

finished products and storage of finished products. The deliver process includes

shipments made by the company and shipments made by logistics providers. The return

process includes the return of finished products from and to the customer and the return

of raw materials to the supplier. Based on the results of risk identification at PT.X, 32 risk

events and 26 risk agents were obtained. Then processed with a pareto diagram through

the 80/20 principle which means dealing with 20% of the causes of risk can minimize

80% of the risks that occur at PT.X, based on the 3 largest ARP values, 3 priority risk

agents have been determined, namely the inability of suppliers to provide raw materials,

lack of work supervision and workforce competence.

Based on the results of the House of Risk, 8 risk mitigation strategies were obtained

which were then ranked from the highest to the lowest effectiveness to difficulty value,

namely making plans in determining alternative suppliers (PA3), conducting skill training

and work discipline (PA6), placing workers according to their expertise (PA8), making

contracts with suppliers (PA2), conducting regular supervision (PA4), recruiting more

selective and strict workers (PA7) and making standard operating company procedures

(PA5). By taking into account the Cost Benefit Analysis (CBA), 3 mitigation strategies

were obtained that have the potential to generate large profits at a small cost, namely

making the Company's standard operating procedures, recruiting more selective and strict

workers and making plans in determining alternative suppliers.

Muthia Putri Hidayati, Iwan Vanany

Jurnal Indonesia Sosial Teknologi, Vol. 5, No. 12, Desember 2024 5962

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