Saputra 2018

MULTIPLE-CRITERIA DECISION MAKING TO SELECT THE BEST STRATEGY
FOR REDUCING RISKS AND MAINTAINING SUSTAINABILITY IN SUPPLY

CHAIN ACTIVITY BASED ON HOUSE OF RISK (HOR) FRAMEWORK:
APPLICATION IN SUGAR INDUSTRY
Undergraduate Thesis
Submitted to International Program

Industrial Engineering Department in Partial Fulfillment of
Requirements of Bachelor Degree of Industrial Engineering
Universitas Islam Indonesia
Arranged by:
Muhammad Firdaus Saputra (14522265)
Supervisor:
Dr. Drs. Imam Djati Widodo, M.Eng.Sc.
INTERNATIONAL PROGRAM
DEPARTMENT OF INDUSTRIAL ENGINEERING
FACULTY OF INDUSTRIAL TECHNOLOGY
UNIVERSITAS ISLAM INDONESIA
YOGYAKARTA
2018
i
RESEARCH CERTIFICATE
ii
AUTHENTICITY STATEMENT
iii
THESIS APPROVAL
iv
EXAMINER APPROVAL OF EXAMINATION COMMITTEE
v
DEDICATION
I am grateful for the love and encouragement from Ayah, Ibu and Obik, have always
provided during every endeavor in my life.
PTPN X Unit PG. Modjopanggoong
My Thesis Supervisor, Dr. Drs. Imam Djati Widodo, M.Eng.Sc.
International Program, Department of Industrial Engineering, Faculty of Industrial

Technology, Universitas Islam Indonesia
vi
MOTTO
‫خير الناس أنفعهم للناس‬

“The best of people are those that bring most benefit to the rest of mankind.”
(HR. Ahmad, Thabrani, Daruqutni. Disahihkan Al Albani dalam As-Silsilah AsShahihah)
For indeed, with hardship [will be] ease, Indeed, with hardship [will be] ease
(Q.S. Al-Insyirah: 5-6)
O you who have believed, persevere and endure and remain stationed and fear Allah that you
may be successful.
(QS. Ali ’Imran: 200)
vii
PREFACE
Assalamu’alaikum Warahmatullahi Wabarakatuh
Praise be to Allah SWT. Almighty who has bestowed His mercy and grace, shalawat and
greetings always poured to the Great Prophet Muhammad SAW and the all his companions
who always istiqomah to practice their religion. Thanks to the help and mercy of Allah SWT
so that the author be able to complete the Thesis entitled “Multiple-Criteria Decision Making
to Select the Best Risk Mitigation Strategy for Reducing Risks and Maintain Sustainability in
Supply Chain Activity Based on House of Risk Framework: Application in Sugar Industry”.
During the process of compilation of this report the author have received assistance and
guidance and direction from various parties. Therefore, the author would like to say thank you
to:
1. Allah SWT. for His grace and mercy and His last Messenger, Prophet Muhammad SAW.
2. PTPN X Unit PG. Modjopanggoong especially Mr. Abdul Fatah as Manajer Tanaman
who allowed the Author to collect required data.
3. Dr. Drs. Imam Djati Widodo, M.Eng.Sc. as the Thesis Supervisor who always directs
and gives suggestions and solutions in the completion of this Thesis.
4. Ayah, Ibu and Obik who always support me in any kind of aspects. May Allah gives His
mercy to them.
5. Mr. Deddy and any staffs in PTPN X Unit PG. Modjopanggoong who cannot be
mentioned one by one by Author for the assistance in completing this Undergraduate
Thesis.
6. My friends of International Program Industrial Engineering batch 2014, Mba Devy, Mrs.
Diana, my senior, my junior who always motivate each other to be better person.
7. All the residents of Asrama The Cave who always support me to finish my Thesis.
8. All parties who may not be mentioned one by one.
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Author realizes that this thesis is still not perfect and still have some weaknesses so
that author really expects any criticism and suggestions from readers for the perfection of
this report. Hopefully this report and information included will be useful for author and give
benefit to other parties who read this.
Wassalamualaikum Wr. Wb.
Yogyakarta, November 2018
Muhammad Firdaus Saputra
ix
ABSTRACT
As the main commodity in the plantation sub-sector, sugarcane plays an important role in
national food seft-sufficiency. PTPN X Unit PG. Modjopanggoong is one of agro-industry unit
under BUMN Ministry that produce sugarcane based white crystal sugar. In the company's
supply chain, upstream department which is Bagian Tanaman plays a crucial role in the
procurement activity of raw material sugarcane. Based on RKAP data of the last three milling
seasons, Bagian Tanaman was unable fulfill amount of sugarcane supplied with RKAP target.
Uncertainty in the supply chain that has the potential to cause disruption to achieve company
goals is called risk. Therefore, supply chain risk management is needed which not only
reducing risks but also maintaining the sustainability of the company. This study aims (1) To
find out the risk agents that highly contribute disrupting raw materials procurement
sustainability in PTPN X Unit PG. Modjopanggoong supply chain based on HOR, (2) to find
out the best mitigation strategies to reduce risk and maintain sustainability in raw material
sugarcane procurement activities. The HOR method is used to identify risks, determine risk
priorities and design risk mitigation. The ANP method is used to determine the best risk
mitigation strategies to reduce risk based on sugar industry sustainability criteria. Based on the
results of risk identification found 14 risk events and 20 risk agents. The HOR1 result shows
that there are 10 risk agents highly contribute disrupting procurement activity; namely,
sugarcane cultivation margins are less competitive than other commodities, the price of sugar
is very volatile, registered sugarcane which has been harvested are delivered to competitors
(Brown Sugar & Sugarcane Shelter), narrow cultivation area, the number of indigenous
sugarcane areas are limited; farmers lack financing and other production facilities (seeds,
fertilizer, medicines, etc.), several farmers are reluctant to register their sugarcane with PG.
(contract bound), the amount of sugarcane has not been achieved according to RKAP, credit
agreements among PG, Bank and People's Sugarcane Farmers Cooperative (KPTR) are not
timely, many of planting data of sugarcane variety is less accurate. Based on prioritized risks,
4 alternatives of risk mitigation strategies were composed to treat them and pairwise compared
based on sustainability dimensions (economic, social, environment) as criteria. ANP method
employed to select the best risk mitigation strategy. As result, Expanding the company unit
sugarcane area (TS) and managed directly by PG. Modjopanggoong gradually (PA1) has the
highest priority weight to be selected as the best strategy. By implementing this mitigation
strategy, all activities under the Bagian Tanaman are more controlable, so that the risks are able
to be reduced and sustainability maintained.
Keyword: Sugarcane, Procurement, The Best Strategy, Supply Chain Risk Management,
Sustainable Supply Chain Management, Risk Mitigation Strategies, HOR, ANP
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TABLE OF CONTENTS
COVER PAGE……………………………………………………………………………….. i
RESEARCH CERTIFICATE.................................................................................................ii
AUTHENTICITY STATEMENT ........................................................................................ iii
THESIS APPROVAL ............................................................................................................. iv
EXAMINER APPROVAL OF EXAMINATION COMMITTEE ...................................... v
DEDICATION………………………………………………………………………………. vi
MOTTO…………………………………………………………………………………….. vii
PREFACE…………………………………………………………………………………..viii
ABSTRACT………………………………………………………………………………….. x
TABLE OF CONTENTS ....................................................................................................... xi
LIST OF TABLES ................................................................................................................ xiv
LIST OF FIGURES ............................................................................................................... xv
CHAPTER I INTRODUCTION .......................................................................................... 1
1.1 Background .................................................................................................................... 1
1.2 Problem Formulation ..................................................................................................... 5
1.3 Reseach Objectives ........................................................................................................ 5
1.4 Scope of Problem ........................................................................................................... 5
1.5 Benefits of Research ...................................................................................................... 6
1.6 Systematical Writing ...................................................................................................... 6
CHAPTER II LITERATURE REVIEW ............................................................................. 8
2.1 Inductive Study .............................................................................................................. 8
2.2 Deductive Study ........................................................................................................... 13
2.2.1 Supply Chain Management ................................................................................ 13
2.2.2 Procurement ........................................................................................................ 14
2.2.3 Risk……………………………………………………………………………. 14
2.2.4 Risk Management ............................................................................................... 15
2.2.5 Supply Chain Risk Management ........................................................................ 16
2.2.6 Sustainable Supply Chain Management (SSCM) in Sugar Enterprises ............. 17
2.2.7 House of Risk (HOR) ......................................................................................... 18
2.2.8 Analytic Network Process (ANP)....................................................................... 20
CHAPTER III RESEARCH METHODOLOGY ............................................................. 24
3.1 Research Object and Location ..................................................................................... 24
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3.2 Problem Identification .................................................................................................. 24
3.3 Problem Formulation ................................................................................................... 24
3.4 Data Collection............................................................................................................. 25
3.5 Data Collection Method ............................................................................................... 25
3.6 Data Processing ............................................................................................................ 26
3.6.1 House of Risk ..................................................................................................... 27
3.6.2 Analytic Network Process .................................................................................. 29
CHAPTER IV DATA COLLECTION AND PROCESSING ......................................... 33
4.1 Risks Identification ...................................................................................................... 33
4.1.1 Brief history of Company ................................................................................... 33
4.1.2 Organizational Structure in Unit PG. Modjopanggoong .................................... 34
4.1.3 Supply Chain mapping in PG. Modjopanggoong ............................................... 36
4.1.4 Mapping Business Process of Procurement Activity ......................................... 37
4.1.5 Risk Identification .............................................................................................. 38
4.2 Data Processing using House of Risk .......................................................................... 41
4.2.1 Data Processing using HOR1 .............................................................................. 41
4.2.2 Pareto Chart ........................................................................................................ 44
4.2.3 HOR2 Composing Risk Mitigation Strategy ...................................................... 46
4.3 The Best Strategy Selection using ANP ...................................................................... 46
4.3.1 Build the ANP model ......................................................................................... 46
4.3.2 Pairwise comparison and Consistency Test ........................................................ 48
4.3.3 Create Supermatrix ............................................................................................. 53
4.3.4 Synthesize ........................................................................................................... 54
CHAPTER V ANALYSIS AND DISCUSSION ................................................................ 58
5.1 Identified Risks in Procurement Activity..................................................................... 58
5.2 Risk Prioritization using HOR ..................................................................................... 59
5.3 Analysis of The Best Strategy Selection using ANP ................................................... 65
5.3.1 Analysis of Main Criteria ................................................................................... 66
5.3.2 Analysis of Economic Sustainability Cluster ..................................................... 67
5.3.3 Analysis of Environmental Sustainability Cluster .............................................. 68
5.3.4 Analysis of Social Sustainability Cluster ........................................................... 68
5.3.5 Analysis of Sub-Criteria w.r.t. Alternatives ....................................................... 69
5.3.6 Analysis of Supermatrix ..................................................................................... 70
5.3.7 Analysis of Synthesized Supermatrix ................................................................. 71
5.4 Limitation and Future Research ................................................................................... 71
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CHAPTER VI CONCLUSION AND RECOMMENDATION ...................................... 72
6.1 Conclusion ................................................................................................................... 72
6.2 Recommendation.......................................................................................................... 73
REFERENCES……………………………………………………………………………... 74
APPENDICES……………………………………………………………………………… 78
Appendix A: Pairwise Comparison of nodes in Economic Sustainability Cluster ............. 78
Appendix B: Pairwise Comparison of nodes in Environment Sustainability Cluster ......... 79
Appendix C: Pairwise Comparison of nodes in Social Sustainability Cluster .................... 80
Appendix D: Pairwise Comparison of Alternatives ............................................................ 81
Appendix E: Pairwise Comparison of Sub-Criteria w.r.t. Alternatives .............................. 84
xiii
LIST OF TABLES
Table 1.1 Comparison data of RKAP and Realization period 2014/2015 - 2016/2017 ............ 3
Table 2.1 Research Position ..................................................................................................... 12
Table 3.1 Risk Agent’s Occurrence Level ............................................................................... 27
Table 3.2 Risk Event’s Severity Level .................................................................................... 27
Table 3.3 Relationship Scale between Risk Events and Risk Agents...................................... 28
Table 3.4 HOR 1 Model........................................................................................................... 28
Table 3.5 The Fundamental Scale of Making Judgement........................................................ 29
Table 4.1 Procurment activity in unit PG. Modjopanggoong based on SCOR ....................... 37
Table 4.2 Identify Risk Events in procurement acitivity ......................................................... 39
Table 4.3 Risk Assesment on Risk Events............................................................................... 40
Table 4.4 Risk Agents .............................................................................................................. 40
Table 4.5 House of Risk Phase 1 ............................................................................................. 43
Table 4.6 Result of HOR1 sorted from highest ARP .............................................................. 44
Table 4.7 Preventive Action for Risk Response ...................................................................... 46
Table 4.8 Economic Sustainability Sub-Criteria ..................................................................... 47
Table 4.9 Environmental Sustainability Criteria ..................................................................... 48
Table 4.10 Social Sustainability Criteria ................................................................................. 48
Table 4.11 Pairwise Comparison of the three main criteria w.r.t. Goal .................................. 49
Table 4.12 Pairwise Comparison of Sub-Criteria within Economic Sustainability................. 49
Table 4.13 Result of Pairwise Comparison within Economic Sustainability Cluster.............. 50
Table 4.14 Pairwise Comparison for sub-criteria within Environmental Sustainability ......... 50
Table 4.15 Result of of Pairwise Comparison within Environmental Sustainability .............. 51
Table 4.16 Pairwise Comparison for sub-criteria within Social .............................................. 51
Table 4.17 Result of Pairwise Comparison within Social Sustainability Cluster .................... 52
Table 4.18 Pairwise Comparison Alternatives w.r.t Sub-Criteria ........................................... 52
Table 4.19 Pairiwise Comparison Criteria w.r.t. Alternatives ................................................. 53
Table 4.20 Unweighted Super Matrix of Risk Mitigation Strategies ...................................... 55
Table 4.21 Weighted Super Matrix of Risk Mitigation Strategies .......................................... 56
Table 4.22 Limit Matrix of Risk Mitigation Strategies ........................................................... 57
Table 5.1 Category of Risk Events based on Level of Severity .............................................. 59
Table 5.2 Category of Risk Agents based on Level of Occurrence ......................................... 59
Table 5.3 Rank of Prioritized Risk based on ARP value ......................................................... 60
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LIST OF FIGURES
Figure 2.1 Supply chain ........................................................................................................... 13

Figure 2.2 Risk Management Process ISO 31000 by ISO 31000:2009 standard .................... 15
Figure 2.3 Dimensions of Sustainability in Sugar Production ................................................. 17
Figure 4.1 PG. Modjopanggoong Production System ............................................................. 34
Figure 4.2 Organizational Management in PG. Modjopanggong ............................................ 35
Figure 4.3 Supply Chain activity in PG. Mojopanggong until marketed by Office Center .... 37
Figure 4.4 Pareto Chart of ARP ............................................................................................... 45
Figure 4.5 Network Model of Best Risk Mitigation Strategy Selection .................................. 47
xv
CHAPTER I
INTRODUCTION
1.1 Background
As an agricultural country, Indonesia is blessed with abundant natural wealth. There are
many types of plants can live and grow because of Indonesia's geographical location
which is located in tropical regions with high rainfall. As the backbone of national
development, the agricultural sector is the leading sector in national economic growth.
Therefore, the needs development of agriculture and agro-industries has a critical role in
the process of sustainable and comprehensive economic growth, Giving Incentives to
Local Community and reduction of poverty and hunger (un.org, 2018).
Agroindustry is an industry that processes materials of plant or animal origin

involving transformation and preservation through physical or chemical alteration,
storage, packaging and distribution (Austin, 1992). One of the most well known
agroindustry in Indonesia is sugarcane based sugar industry. Sugarcane based sugar is
generally grouped into two; namely, sugar for household consumption known as white
crystal sugar or Gula Kristal Putih (GKP) and sugar for industry known as refined sugar
or Gula Kristal Rafinasi (GKR). As one of main commodities in plantation sub-sector,
sugarcane has important role in national food self-sufficiency. Thus, Kementerian
Pertanian Indonesia assigned sugarcane-based sugar as strategic commodity for national
Giving Incentives to Local Community enhancement as it stated in (Indonesia/Jakarta
No. 19/Permentan/HK.140/4/2015, 2015).
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2
In order to contribute to the development of national economy in general and state

revenue in particular, BUMN was established by Indonesian government as stated in
(Indonesia/Jakarta No. UU RI No. 19/2003 Tentang Badan Usaha Milik Negara, 2003).
One of BUMN that engaged in agroindustry sector is PTPN X. PTPN X has several
business units, one of which is a sugarcane-based sugar business unit. There are 9 sugar
business units scattered in East Java producing GKP. One of them is located in
Tulungagung named Unit PG. Modjopanggoong.
In carrying out its business, business entities cannot be separated from supply chain.
Therefore, management the of supply chain in business entities is necessary. In term of
managing a supply chain, it covers several activities such as material sourcing, production
scheduling, and the physical distribution system as well as supported by the necessary
information flows (Felea & Albeastroiu, 2013). Material sourcing or procurement
function is a crucial activity in any organization and must be conducted efficiently and
effectively (Musau, 2015). Hence, procurement activity must be concerned in supply
chain in order to accomplish company’s goal. Besides, procurement play a big role in the
sustainability of company to fulfill the demand with high quality raw materials.
In agricultural supply chain management has special characteristics; for instance,

perishable, the cultivation process depends on climate and season, yields have varied
shapes and sizes and also tends to be bulk density making it difficult to handle (Marimin
& Slamet, 2010). Thus, these characteristics are uncertain factors may occur and affect
the performance of the company's supply chain such as the condition in Unit PG.
Modjopanggoong. Uncertainty has close relationship with risk as ISO 3100 defines risk
as the effect of uncertainty on an organization’s objectives (ISO Guide 73:2009, 2009).
Since the research object was Unit PG. Modjopanggoong, according to interview
with the vice general manager, the main problem of the supply chain in this unit is the
activity of sugarcane raw materials procurement. The amount supply of raw materials
sugarcane could not fulfill minimum milling cane capacity. Therefore, the amount of
sugar that produced could not achieved the target. According to the data of the last three
milling seasons, activity plan and company budget (RKAP) cannot be realized. The
comparative data between RKAP and realization is on the Table 1.1 below.
3
Table 1.1 Comparison data of RKAP and Realization period 2014/2015 - 2016/2017
Tebu (Ton) Bagi Hasil
Periode
Luas Rend Hablur Gula SHS
Musim Kategori Per
(Ha) Jumlah (%) Bagian Bagian
Giling Ha
PG PG
RKAP 5,810.200 87.4 510,218.4 8.58 14,445.340 14,474.220
2014/2015
Realisasi 4,855.851 75.7 369,808.5 8.58 10,270.023 9,901.798
RKAP 5,443.560 76.7 419,873.4 6.58 9,336.320 8,648.860
2015/2016
Realisasi 3,630.469 81.1 296,139.5 6.07 3,637.424 3,308.664
RKAP 4,254.500 77.2 330,095.6 8.23 8,868.670 8,886.415
2016/2017
Realisasi 3,473.341 78.4 273,743.6 8.52 7,534.485 6,824.953
Source: PG. Modjopanggoong
Regarding to information above, it indicates the condition in Unit PG.
Modjopanggoong has problem with uncertainty factors or risks that dirupt in procurement
activity to achieve RKAP. The risks that occurs on the upstream supply chain potentially
have a systemic impact on the company's performance. Consequently, increase higher
risks in terms of supply interruptions, productions delays etc. which ultimately result in
loss of reputation, lost sales and poor financial performance (Sreedevi & Saranga, 2017).
So that, the uncertainty factors affecting pontential losses and bankcruptcy in company
unit categorized as the supply chain risk. So far, risks that disturb procurement activity in
Unit PG. Modjopanggoong have not been identified yet. Hence, application of supply
chain risk management is necessary in order to reduce risks in procurement activities by
identifying the risks and respond the risks with suitable risk mitigation strategies.
Supply chain risk management (SCRM) is the management of supply chain risks
by coordinating and collaborating among the supply chain echelons so as to ensure
profitability and continuity (Christopher & Lee 2004; Rokou & Kirytopoulos 2014).
Reseach was conducted by Giannakis & Papadopoulos (2016) stated SCRM is not
perceived merely as cost saving, but rather a value creation activity to lead more
sustainable supply chains. However, implementation of supply chain risk management is
not just to handle the risks in company supply chain, but also to maintain the company
sustainability.
Various studies about supply chain risk management have been carried out
previously. House Of Risk (HOR), which is combination of House Of Quality (HOQ) of
Quality Function Deployment and Failure Mode and Effect Analysis (FMEA) by
4
selecting a set of risks agents to be treated and prioritize proactive actions in order to
reduce aggregate impact of risk events caused by risk agents (Pujawan & Geraldin, 2009).
Research about supply chain risk management also has been conducted by Utari &
Baihaqi (2015) to devise risk mitigation strategy in PT. Atlas Copco Nusantara supply
chain. The use of the HOR method proved to be the right solution to arrange mitigation
strategies toward the causes of risks (Utari & Baihaqi, 2015). Another method that used
for supply chain risk management is Analytic Network Process (ANP). ANP is one of
multi-criteria decision making method for judgement found by Thomas Saaty. ANP is the
extends the AHP to cases of dependence feedback and generalizes on the supermatix
approach, it also enables interactions and feedback within clusters (inner dependence)
and between clusters (outerdependence) for decision making (Adams & Saaty, 2016).
Research about decision making in supply chain environment has been conducted by
several researchers. Muchfirodin, et al. (2015) composed strategy by using ANP to
mitigate risk on tobacco commodity supply chain in Temanggung. Poh & Liang (2017)
also conducted research using ANP to select the best strategy for sustainable supply chain
because ANP is suitable and represents all the interrelationships and interdependency
among the elements in the problem. ANP analysis is suitable to deal with complex
decision-making problems (Molinos-Senante et al., 2015) as well as raw materials procurement
activity in supply chain.
Based on the background description above, the application of risk management is

very important to be applied in the procurement activity in Unit PG. Modjopanggoong.
The aims of this study are to identify risk events and the risk agents and provide an
appropriate risk mitigation strategy based on sustainability dimensions to reduce risk
agents so that the sustainability of the company can be maintained. For the methods
employed in implementation of risk management is the HOR framework and ANP. This
research object is Bagian Tanaman who has responsibility in raw materials sugarcane
procurement, and the research was conducted based on HOR framework by combining
HOR1 model for risk assessment and ANP model for the best risk mitigation strategy
selection. The first phase of the HOR is used to identify risk events and source of risk
events or risk agents; then the risk agents that contribute greatly in disrupting raw material
procurement activities are prioritized to be responded to with appropriate risk mitigation
strategies. The second phase of HOR is to compose suitable risk mitigation strategies;
5
then using ANP for decision making on which risk mitigation strategy is selected as the
best strategy tha lead to sustainability of the company's supply chain.
1.2 Problem Formulation
Based on the background of the research, the problems that come up in the research would
be formulated and they generated research questions as follows:
1. What are the risk agents that highly contribute disrupting raw materials
procurement sustainability in PTPN X Unit PG. Modjopanggoong supply chain
based on HOR?
2. What is the best strategy for reducing risks and maintaining sustainability in raw
material sugarcane procurement activity in PTPN X Unit PG. Modjopanggoong
supply chain based on proposed ANP method?
1.3 Reseach Objectives
The objective of this research is to fulfill several objectives as mentioned as below:

1. To find out the risk agents that highly contribute disrupting raw materials
procurement sustainability in PTPN X Unit PG. Modjopanggoong supply chain
based on HOR.
2. To find out the best strategy for reducing risks and maintaining sustainability in
raw material sugarcane procurement activity in PTPN X Unit PG.
Modjopanggoong supply chain based on proposed ANP method.
1.4 Scope of Problem
In order to facilitate problem solving and to focus on research objective, this research
limited the problem as follows:
1. This research focuses on implementation of supply chain risk management using
House of Risk (HOR) method combined with sustainable supply chain
management in raw material sugarcane procurement activity using ANP.
2. This research was only conducted in raw material sugarcane procurement
activity in Bagian Tanaman in PTPN X Unit PG. Modjopanggoong.
6
1.5 Benefits of Research
There are several benefits of this research as below:

1. Researcher can find out the risks event and sources of risk that potentially dirupt
procurement activity in PTPN X Unit PG. Modjopangooong.
2. Researcher can gain deep understanding regarding to relationship between
SCRM and SSCM in sugar industry.
3. The proposed method of this research can be used to identify risks in Bagian
Tanaman and also facilitate manager’s decision making to select proper risk
mitigations strategy for reducing risks and maintain company’s supply chain
sustainability.
4. To be contributor in the research development supply chain risk management in
the scope of sugar industry.
1.6 Systematical Writing
In order to get a well-structured research report, this research writing will be based on
rules of scientific writing in accordance with the systematics as follows:
CHAPTER I INTRODUCTION
This chapter contains an introductory description of research process, the background of
research, problem formulation, research objectives, and the benefits of research and
systematic writing.
CHAPTER II LITERATURE REVIEW

In this chapter, there will be elaboration on the theories of reference such as journals,
proceeding, books, websites as well as the results of previous researches regarding to the
research problem which is used as a reference for problem solving with appropriate
methods.
CHAPTER III RESEARCH METHODOLOGY

This chapter consists of the description of the framework or concept, research object and
methods that used in this study with systematic way on conducting the research.
7
CHAPTER IV DATA COLLECTION AND DATA PROCESSING

This chapter contains data collection of research during the research and how to analyse
the data. Data processing result that displayed in the form of tables and graphs. Analysis
of the processed data to gain the result. In this section is a reference to the discussion of
the result to be written in Chapter V.
CHAPTER V DISCUSSION
Contains discussion of the results of data processing that has been done in research.
Compatibility research objectives to give recommendations.
CHAPTER VI CONCLUSION AND RECOMMENDATION

Contains the conclusion of the analysis and any recommendations or suggestions on the
results attained in the problems identified during research, so it needs to be done on
assessed in future research.
REFERENCES
APPENDICES
CHAPTER II
LITERATURE REVIEW
2.1 Inductive Study
Inductive study known as inductive reasoning is a literature study using previous research
that has been documented into journals, books and or proceedias. Literature review is
very helpful for researcher to get appropriate theory and methods as guidance to conduct
research. The previous research explained as follows:
Astutik, et al. (2015) conducted research about risk management in the supply chain
of organic fertilizer manufacturer. The research employed two methods; namely, House
of Risk (HOR) and Fuzzy Analytical Hierarchy Process (FAHP). The aim of their
research was to create robust supply chain flow against various risks that causes
faulureness to achieve company’s target. HOR employed to mitigate the risks occurrence
in the supply chain flow by identify the risks, priotize the risk agents and construct the
strategy to respond the risks. In order to construct risk rensponse strategy, FAHP was
employed to prioritize and rank risk response strategies based on the weight.
Nugraheni et al. (2017) also conducted research using House of Risk (HOR)
method. The objectives of their research is to analyze the risks on supply chain flow of
Ready To Drink (RTD) Product in PT SGB. The research that they used is HOR that
consist of two phases. The first phase is knowing the risk priority that should be mitigated
and the second phase is generating some preventive strategies to mitigate the choosen
priority risks. There were 63 identified risk events based on SCOR elements, 43 identified
risk agents, and 15 recommended preventive strategies according to the most effective
sequence of strategies that applied in the company.
8
9
Wahyudin & Santoso (2016) also conducted research about modelling of risk
management for product development using HOR method. The research object is a yogurt
product that produced by a dairy based product company. The aim of their research is to
identify the potential appeared risks, to arrange the priority order of risk agents and to
conceptualize the risk mitigation to be applied. The first phase of HOR results 20 risks
with 27 identified risk agents. Those risks were lack of information regarding the
competitors, Error cost analysis management, and Error of production division in yogurt
drink production. There are 11 mitigation strategies were obtained to be applied in
product development of yogurt drink in company among others is supervise all production
activity. Based on the result, it confirmed that HOR method is quite effective to analyse
risks and to formulate the mitigation strategies for any identified risks in each stage of the
product development.
Anggrahini et al. (2015) also conducted research about quality risk management in
a frozen shrimp supply chain using HOR framework. Their research analyse the quality
problems of frozen shrimp product including supply chain activity and the Company X’s
stakeholders. In HOR phase 1 all supply chain activity mapped by using Supply Chain
Operations Reference (SCOR) model. There were 41 risks occurance and 52 risk agents
were identified. Regarding to risk analysis based on highest Aggregate Risk Potential
(ARP), it results 11 most critical risk agents. According to the selection analysis, 12
mitigation actions are proposed to be implemented in Company X.
A research about supply chain risk management was conducted by Ramadhani &
Baihaqi (2018) entitled Designing Supply Chain Risk Mitigation Strategy in The Cable
Support System Industry of PT. X. Their research is conducted in plate manufacturer
which has currently experienced with supply chain disruptions. The disruptions in
company’s supply chain has resulted delay of goods delivery ot customers. Thus, they
combined two methods, namely Analytic Network Process (ANP) and House of Risk
(HOR) to analyze the relationship between risks and relationship between causes of risks.
The final result of both methods found that there were 30 source of risk and 13 critical
risk that had 28 risks management strategies with 15 priority strategies can be carried out
by company. The research concluded the method of using ANP (Analytical Network
10
Process) and HOR (House of Risk) is proved to be the right solution to identify and
influence strategy (Ramadhani & Baihaqi, 2018).
Hosseini, et al. (2013) used ANP to select the best strategy for reducing risks in a
supply chain. In their research they considered four criteria that consists supply risk,
process risk, demand risk, and disruption risk. In supply risk there are three sub-criteria
namely supply quality, supply cost risk, supply commitment; in process risk there are
three sub criteria namely, time risk, quality risk, and capacity risk; in demand risk there
is demand uncertainty; and in disruption risk there are two sub-criteira namely natural
disaster and technological disaster dis five alternatives namely, total quality management
(TQM), leanness, alignment, adaptability, and agility.
Poh & Liang, (2017) conducted research about sustainable supply chain. The
research was conducted in fashion industry. The research presented decision support
approach based on multiple-criteria-decision-making (MCDM) methodologies with
purpose to help companies develop effective models for timely decision-making
involving sustainable supply chain management strategies. The aim of their research was
to evaluate and select the best sustainable supply chain management strategy by compared
AHP and developed AHP structure into ANP. The proposed model using Analytic
Network Process (ANP) that suitable and expose all the interrelationships and
interdependency among the elements in the problem. There are three dimension of
sustainability that considered; namely, economic, social, and environmental. According
to their result, the ANP model is the more suitable and realistic than AHP by selecting
socially leagile supply chain as the best strategy.
Muchfirodin, et al. (2015) conducted research about supply chain risk management
on tobacco commodity in Temanggu, Central Java. The aim of their research is to identify
and mitigate risks in tobacco supply chain in Temanggung Regency based on risk
management principle in ISO 31000: 2009. The methods that employed in their research
is Analytical Network Process (ANP) combined with Decision Making Trial and
Laboratory (DAMATEL) to push more comprehensive plan in mitigating risks
occurrence according to criteria. The research resulted that ANP method can minimize
the risk of tobacco yielding and marketing (Muchfirodin, Guritno, & Yuliando, 2015).
11
Giannakis & Papadopoulos, (2016) also conducted research entitled Supply Chain
Sustainability: A Risk Management Approach. Their research discussed about the
relationship between sustainable supply chain and risk management. Their research try to
develop of operational perspective of supply chain sustainability, by considering risk
management process. They adopted mixed method approach to collect and analyze the
data. First, they identified 30 risks across three main pillars of sustainability; namely,
economic, social and environmental. In their research, they utilized Failure Mode and
Effect Analysis (FMEA) technique for risk assessment to identify potential causes and
effects between the identified risks in two textile manufacturing companies. Based on the
findings, show that endogeneous environmental risks are perceived to be the most
important across different industries and the interconnectedness between several
sustainability-related risks is very high. The research concluded the need for integrated
sustainability risk management approaches to facilitate the development of effective
sustainable strategies.
Based on the previous research above, there is a relationship between supply chain
risk management and sustainable supply chain management. Since the decisions taken in
present have an impact in the future, it is necessary to have an appropriate strategy to
reduce risks that disrupt the supply chain and maintain the sustainability of the company
by considering economic, social and environmental aspects. Therefore, this research uses
risk management combines with sustainable supply chain management approaches in
order to reduce the risks that highly contributes dirupting procurement sustainability. The
proposed methods are HOR for the risk asssessment combined with ANP to facilitate
Manajer Tanaman’s decision making to select the best risk mitigations strategy. HOR
framework is employed because it’s capability to identify the risks events and the risks
agents; then the risk assessment is conducted by following FMEA method then combined
with HOQ method to calculate ARP to find out the risk priority based on the rank of
contribution of the risk disruption. After HOR stage 1 has been finished, the prioritized
risk responded by composing suitable risk mitigation strategies for risk treatment. Since
ANP represents interdependencies more realistically, it is employed to give pairwise
comparison the composed risk mitigations strategies as alternatives by considering sub-
criteria within sustainability dimensions (economic, social, environment) as criteria. The
research positions is on the Table 2.1 below:
Table 2.1 Research Position
No Researcher(s) Title Method(s) Approach
Risk Management Strategy in the Supply Chain of Organic Fertilizer by Using Fuzzy
1 Astutik, et al. (2015) HOR, Fuzzy AHP Risk Management
Analytical Hierarchy Process (FAHP) (Case Study in PT Tiara Kurnia, Malang)
The analysis of Supply Chain Risk on Ready to Drink (RTD) Product using House of
2 Nugraheni et al. (2017) HOR Risk Management
Risk Method
Wahyudin & Santoso Modelling of Risk Management for Product Development of Yogurt Drink Using
3 HOR Risk Management
(2016) House of Risk (HOR) Method
4 Anggrahini et al. (2015) Managing quality risk in a frozen shrimp supply chain: a case study HOR Risk Management
Ramadhani & Baihaqi Designing Supply Chain Risk Mitigation Strategy in the Cable Support System
5 ANP, HOR Risk Management
(2018) Industry of PT. X
Using the Analytical Network Process to Select the Best Strategy for Reducing Risks
6 Hosseini, et al. (2013) ANP Risk Management
in a Supply Chain
Multiple-Criteria Decision Support for a Sustainable Supply Chain: Applications to Sustainable Supply
7 Poh & Liang, (2017) AHP, ANP
the Fashion Industry Chain Management
Supply Chain Risk Management on Tobacco Commodity in Temanggung, Central
8 Muchfirodin, et al. (2015) ANP, DAMATEL Risk Management
Java (Case study at Farmers and Middlemen Level)
FMEA, Causal Risk Management,

Giannakis &
9 Supply Chain Sustainability: A Risk Management Approach Model, Correlation Sustainable Supply
Papadopoulos (2016)
analyses Chain Management
Multiple-Criteria Decision Making to Select the Best Strategy for Reducing the Risks Risk Management,
* Saputra (2018) and Maintaining Sustainability in Supply Chain Activity Based on House of Risk HOR, ANP Sustainable Supply
Framework: Application in Sugar Industry Chain Management
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2.2 Deductive Study
Deductive study or deductive reasoning is testing the existing theory to develop

hypothesis in this research. The basis theory of House of Risk and ANP as follows:
2.2.1 Supply Chain Management
Stock & Boyer (2009) defined supply chain as the management of a network of
relationships within a firm and between interdependent organizations and business units
consisting of material suppliers, purchasing, production facilities, logistics, marketing,
and related systems that facilitate the forward and reverse flow of materials, services,
finances and information from the original producer to final customer with the benefits
of adding value, maximizing profitability through efficiencies, and achieving customer
satisfaction. Mentzer, et al. (2001) also defined supply chain management as a set of many
entities that directly involved in the upstream and downstream flows of products, services,
finances, and/or information from a source to a customer. So that, supply chain
management is managing the chain of materials flow, information flow and finances flow
from upstream to downstream in order to create valuable product for the customers.
Figure 2.1 Supply chain
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2.2.2 Procurement
Dobler & Burt (1996) defined procurement as the acquisition of goods and/or services at
the best possible total cost of ownership, in the right quality and quantity, at the right
time, in the right place and from the right source for the direct benefit or use of
corporations, individuals, or even government. Procurement is the process of getting the
goods and/or services your company needs to fulfill its business model and also include
developing standards of quality, financing purchases, creating purchase orders,
negotiating price, buying goods, inventory control, inventory management, and disposal
of waste products like the packaging (Kolenko, 2018). According to information above,
procurement can be defined as the activity of acquiring goods or services to fulfill
company business requirements in order to produce valuable product based on customers’
desire that involves quality and cost of materials, and right time materials.
2.2.3 Risk
In ISO 31000, risk is defined as effect of uncertainty on objectives (ISO Guide 73:2009,
2009). Šotić & Rajić (2015) stated risk in engineering practices is generally expressed as
the product of the probability of the occurrence of an opposing event and the weight of
the consequences of such an event. Other definitions of risk also has been modified. Aven
(2016) stated several qualitative definitions of risk as:
1. The possibility of an unfortunate occurrence,
2. The potential for realization of unwanted, negative consequences of an event,
3. Exposure to a proposition (e.g. the occurrence of a loss) of which one is uncertain,
4. The consequences of the activity and associated uncertainties,
5. Uncertainty about and severity of the consequences of an activity with respect to
something that humans’ value,
6. The occurrence of some specified consequences of the activity and associated
uncertainties,
7. The deviation from a reference value and associated uncertainties
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2.2.4 Risk Management
Risk Management is risk related action that includes planning for the risk, identifiying
risks, analyzing risks, developing risk response strategies, and monitoring and controlling
risks to resolve how they have reduced. According to ISO 31000: 2009 risk management
defined as a coordinated activity to direct and control an organization with regard to risk
(ISO Guide 73:2009). Risk management process is summarized by ISO 31000 into seven
steps as depicted in Figure 2.1 and discussed as follows: (ISO 31000, 2009ab ; Oliveira,
et al. 2017).
Figure 2.2 Risk Management Process ISO 31000 by ISO 31000:2009 standard
1. The process of communication and consultation covers the existence of plans for
communication among the parties responsible for implementing the risk
management process and the interested parties.
2. The step of establishing the context involves whether the firm articulates its
objectives, defines the external and internal parameters that will be considered in
managing risks and establishes the scope and risk criteria for the rest of the process.
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3. Risk identification aims to generate a comprehensive list of risks from different

sources, the events, their causes and potential consequences, and the areas affected.
4. Risk analysis aims to provide an understanding of risk to serve as the basis for
making decisions on the best strategies and methods to deal with them, it involves
consideration of the causes and sources of risks, their negative consequences and
the probability these consequences will occur.
5. Risk evaluation has purpose to provide more support for making decisions, based
on the results of the risk analysis, by evaluating what risks need treatment and the
priority of implementing that treatment.
6. Risk Risk treatment entails the selection of one or more options to modify the risks
and the implementation of these options, through a cyclical process that analyzes
the treatments previously applied, residual risk levels, implementation of a new
treatment for intolerable residual risks and evaluation of the efficacy of the
treatment proposed.
7. Monitoring and critical review should be planned as part of the risk management
process, to clearly define responsibilities among those involved, covering all
aspects of the risk management process.
2.2.5 Supply Chain Risk Management
Heckmann et al. (2015) defined supply chain risk is the potential loss for a supply chain
in terms of its target values of efficiency and effectiveness affected by uncertain
developments of supply chain characteristics were caused by the occurrence of triggering-
events. Supply Chain Risk Management (SCRM) has been defined in several ways.
Supply Chain Risk Management (SCRM) is the implementation of strategies to manage
both everyday and exceptional risks along the supply chain based on continuous risk
assessment with the objective of reducing vulnerability and ensuring continuity (Wieland
& Wallenburg, 2012). Most companies recognize the importance of risk assessment
programs and use different methods, ranging from formal quantitative models to informal
17
qualitative plans, to assess SC risks (Kirilmaz & Erol, 2016). In addition, Supply Chain
Risk Management is implementation of risk management that consists of risk
identification, risk analysis, risk response, monitoring and control across supply chain
activities.
2.2.6 Sustainable Supply Chain Management (SSCM) in Sugar Enterprises
Sustainable supply chain management (SSCM) comprises the “management of material,

information and capital flows as well as cooperation among corporations along the supply
chain while achieving goals of all three dimensions of sustainable development, i.e.
economic, environmental and social, into account which are derived from customer and
stakeholder requirements” (Seuring & Muller, 2008; Grimm et al., 2014). According to
Fish (2016) sustainable supply chain management (SSCM) can be defined as “the
strategic, transparent integration and achievement of an organisation’s social,
environmental and economic goals in the systemic coordination of key inter-
organisational business processes for improving the long term economic performance of
the individual company and its supply chains”. Thus, the sustainable supply chain
management is the management the chain of supply that involve informations, materials
and funds flows integrates with economic, environmental and social aspects to achive
company’s competitive advantage.
Sugar sector enterprises currently have incentives and disincentives to play their
roles. Sugarcane sustainability dimensions summarized in Figure 2.3
Figure 2.3 Dimensions of Sustainability in Sugar Production

Source of Picture: (FAO, 2014; Jenkins et al., 2015)
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2.2.7 House of Risk (HOR)
House of Risk (HOR) is a framework that developed by Pujawan & Geraldin (2009)
which combines two basic ideas of two well-known tools: the house of quality of quality
function deployement (QFD) and the failure mode and effect analysis (FMEA). The aims
of HOR are to identify risk agents and respond prioritezed risks with proactive actions
based on SCOR model.
In the well-known FMEA, risk assessment is done through calculation of an RPN

as a product of three factors, i.e. probability of occurrence, severity of impacts, and
detection. Unlike in the FMEA model where both the probability of occurrence and the
degree of severity are associated with the risk events, here we assign the probability to
the risk agent and the severity to the risk event. Since one risk agent could induce a
number of risk events, it is necessary to quantity the aggregate risk potential of a risk. In
order to perform proactive supply chain risk management this model consist of two
phases; namely:
1. HOR1 is used to determined which risk agents are to be given priority for
preventive actions.
2. HOR2 is to give priority to those actions considered effective but with
reasonable money and resource commitments.
A. HOR Phase 1
HOR1 is a severity assessment of the risk event, risk agent occurrence assessment, and
correlation between the risk event and the risk agent (Pujawan & Geraldin, 2009). Risk
assessment will be conducted by spreading questionnaire to the expert respondents or risk
takers. The risk variables that be assessed consist of risk occurrence and risk event
severity. The results of questionnaire will be used as Aggregate Risk Potential (ARP)
value, which additional be used to determine the priority of risk agents as basis for risk
mitigation (Wahyudin & Santoso, 2016). The prioritized risk agents are the result from
Pareto 80:20 principle. Aggregate Risk Potential (ARP) can be calculated using equation
2.1:
19
… (2.1)
Description:
ARPj: Aggregate Risk Potential on risk agent ‘j’
Oj: Probability of Risk Occurance ‘j’
Si: Severity or Impact of Risk Event ‘i’
Rij: Correlation between risk agent ‘i’ and risk event ‘j’
B. HOR Phase 2
HOR2 is conducted to conceptualise the mitigation strategy to overcome the appeared
risks. The Total Effectiveness (TEk) of each strategy is calculated using Equation (2.2),
aimed to explain the effectiveness level of mitigation strategy in terms of handling the
risk agents.
… (2.2)
Description:
TEk: Total Effectiveness
ARPj: Aggregate Risk Potential on risk agent ‘j’
Ejk: Correlation level between risk agent ‘j’ and mitigation strategy ‘k’
Then give assessment to Degree of Difficulty (Dk) using likert scale with 3-5-point scale.
The last step is to calculate the ration of Effectiveness to Difficulty (ETD) to determine
the rank of risk mitigation priority. The ETD is calculated based on formula using
equation 2.3
… (2.3)
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2.2.8 Analytic Network Process (ANP)
The Analytic Network Process (ANP) is a generalization of the Analytic Hierarchy

Process (AHP), by considering the dependence between the elements of the hierarchy
(Saaty, 2008). Saaty (2004) defined Analytic Network Process (ANP) is a multicriteria
theory of measurement used to derive relative priority scales of absolute numbers form
individual judgements (or from actual measurements normalized to relative form) that
also belong to a fundamental scale of absolute numbers. This method is useful to
overcome complex problem that cannot be solved using AHP and it allows to give
feedback amongs the inner and outer dependence elements of network. Lin, et al. (2018)
explained the ANP method consists of four steps: (1) building a hierarchical structure; (2)
generating a pairwise matrix and calculating the eigenvectors; (3) creating supermatrices
and calculating the weights; and (4) select the best alternatives solution (Meade & Sarkis,
1999; Cheng & Li , 2005; Lin, et al., 2018): The steps as follows:
Step 1: Build a hierarchical structure

This research set goals according to the characteristic of the problem, defines the
criteria and sub-criteria and determines mutual influences among the criteria. If the
criteria are influenced by each other, there is an outer dependence among them. If the
sub-criteria are influenced by each other, there is an interdependence among them. The
differences of AHP and ANP architecture is in on the figure 2.1
Figure 2.2 Differences the architecture of Analytic Hierarchy Process (AHP) and
Analytic Network Process (ANP); (a) AHP (b) ANP (Saaty, 1996)
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Step 2: Create a pairwise matrix and calculate the eigenvectors

For ANP the comparative pairwise is conducted same as AHP, following the 1-9
scale method (Saaty, 1980). For instance, the 1/9 scale indicates that the vertical criteria
are much more important than horizontal criteria. The eigenvector is calculated according
to each matrix comparison and used as the value of the supermatrices to indicate
interdependence and relative importance.
The computational ANP involves three matrices, including the unweighted,
weighted and limit supermatrices. The formula as follows:
… (2.3)
Where A indicates an n x n pairwise comparison matrix, w is the eigenvector and λmax is

the maximum eigenvalue of Matrix A. A consistency test is then conducted according to
the maximum eigenvalue; in other words, it calculates the CI and CR to judge the
decision-makers’ consistency (as expressed in Equation 2.4 and 2.5)
… (2.4)
… (2.5)
If 0 ≤ CR ≤ 0.1, the judgement of experts is consistent (Saaty, 1996)
Step 3: Form the supermatrices

A supermatrix is conceivable, the eigenvector calculated by pairwise comparison
is used as the weight value of each submatrix and value indicates the relationship between
two nodes (such as criteria or groups) in decision-making system (Meade & Sarkis, 1999;
Cheng & Li , 2005; Lin, et al., 2018). It is assumed that decision-making system Ci
comprises (i = 1, 2, …, n) criteria and each criterion Ci comprises ni sub-criteria. This
study uses Equation (2.6) to calculate the eigenvector of each submatrix to be used as its
weight value and then transforms the submatrix into a supermatrix in the permutation
mode detailed by Equation (2.7) (Saaty, 1996). If matrix elements are dependent on each
other, a fixed intersection extremum will be obtained after the matrix is subjected to
reiterate multiplication.
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… (2.6)
The computational ANP contains three matrices. Specifically, the weight of the
unweighted supermatrix is the weight calculated through the original pairwise
comparison, the weight of the weighted supermatrix is that of the same criterion in the
unweighted supermatrix multiplied by the related group weight and the limit supermatrix
squares the weighted supermatrix several times until the numbers in all columns are equal.
Saaty (1996) argues that, if supermatrix W is irreducible, all column vectors in the
supermatrix share the save values; in other words, the convergence effect is attained.
Equation (2.7) is a supermatrix with a three-layer hierarchy, as indicated by Wh
… (2.7)
where W21 is the eigenvector of a criterion under the decision-making goals, W32 is the
pairwise comparison matrix of the alternative solution under each criterion, I is the unit
matrix and 0 is the independence of the same criterion or between sub-criteria. The
primary function of this matrix is to evaluate outer and inner dependence. If there is
dependence between criteria, a network structure needs to be used instead of the
hierarchical structure. Then, W22 indicates the dependence between these criteria and the
supermatrix can be expressed by Saaty (1996) Equation (2.8)
… (2.8)
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Any “0” in supermatrix Wn can be replaced with a matrix based on the dependence
relationship between criteria or groups. There is naturally a dependence relationship
between groups in a network structure; therefore, the supermatrix usually contains the
weights of multiple interdependent columns. Such a supermatrix is then referred to as an
unweighted supermatrix; in other words, the weights are obtained by combining and
permutating the eigenvectors of the original pairwise comparison matrix. To meet the
mathematical reasoning logic, the supermatrix must first be normalized so that the sum
of the weight values of each column is equal to 1. Such a supermatrix is then referred to
as a weighted supermatrix. If the sum of the weight values in each column of an
unweighted supermatrix is equal to 1, it becomes a weighted supermatrix. This study uses
the ANP method to calculate the weight of main and sub-criteria. Therefore, the
unweighted supermatrix Wn needs to be modified into a weighted supermatrix W’n as
expressed by Saaty (1996) Equation (2.8)
… (2.8)
Where W22 and W33 indicate the weight of dependence between criteria and sub-criteria,
respectively. To attain convergence, the weighted supermatrix Wn is multiplied to the
power of 2k + 1 (k⟶ ∞), as expressed in Equation (2.8). Finally, this study obtains a
new limit supermatrix WANP (Saaty, 1996).
… (2.8)
Step 4: Select the best alternatives solution

The weights of the limit supermatrix WANP obtained in Step 3 can be used as the basis for
ranking the alternative solutions.
CHAPTER III
RESEARCH METHODOLOGY
3.1 Research Object and Location
This research was conducted in PTPN X, Sugar Industry Unit PG. Modjopanggoong under
BUMN ownership located in Tulungagung, East Java. The company focuses on producing
white crystal sugar (GKP) as the main product, and molases as the by-product.
3.2 Problem Identification
Problem identification is the initial step of this research. Problem identification was obtained
from the observation, interview with the Assistant Manajer & Manajer Tanaman in the PTPN
X Unit PG. Modjopanggoong and comparative data of RKAP and realization from period
2014/2015 - 2016/2017 that represent the conditions of the company.
3.3 Problem Formulation
Problem formulation is being used to construct solution of the problem and as the basis to make
conclusion and recommendation. Focus of this research is the implementation of risk
management in supply chain of GKP using HOR in the activity of sugarcane raw material
procurement in Bagian Tanaman; then using ANP to facilitate manager to make decision by
considering sustainability dimensions to select the best strategy for reducing risks and maintain
company sustainability. The method that adopted in this research are HOR as the risk
assessment to find out the risks priority and also to compose risk mitigation strategy; then use
ANP to select the best risk mitigations strategy by considering the sustainability dimension.
24
25
3.4 Data Collection
This research uses two types of data; namely:
1. Primary Data
Primary data is the data that directly obtained from the sources. Primary data of this
research was obtained from the Manajer Tanaman as the expert in the procurement
activity in PTPN X Unit PG. Modjopanggoong. The data that used in is from the
questionnaire about the risk events, risk agents, HOR1 and pairwise comparison of the
alternatives and criteria to select the best risk mitigations strategy.
2. Secondary Data
Secondary data is the data obtained from appropriate literature review, such as journals,
proceedings, books. In this research, the secondary data were used to support research
hypothesis and statement in this research. This research performed both deductive and
inductive study as literature review. Deductive study was carried out to gain relevant
basis theory and to test theory whether suitable or not. Then it followed by conducting
inductive study to gain related information in previous research in order to positioning
this research to show the uniqueness of this research.
3.5 Data Collection Method
The method of data collection in this research are observation, interview and questionnaire.
Thus, the data collection in this research categorize both qualitative and quantitative approach.
Qualitative indicated by carried out interview and observation that concern with the quality of
information gathered; while quantitative concern on the numerical analysis by giving
questionnaire to the expert as respondent to fulfill required data in HOR and ANP. Data
collection method was conducted in order to identify the risks that potentially disrupt the
procurement activity both risk events and risk agents for risk assessment; risk analysis and
evaluation; and pairwise comparison of the composed risk mitigation strategies to select the
most suitable for the conditions by considering the sustainable dimensions. The methods as
follows:
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1. Observation and Interview
Observation is used to observe the business process in PTPN X Unit PG.

Modjopanggoong. In particular, the observation focuses in the procurement activity.
Observation was carried out for mapping the activity of procurement based on the
SCOR model.
Interview was carried out in order to identify and make sure whether the risks
potentially disrupt the procurement activity and also to compose the risk mitigations
strategy by considering the sustainability criteria.
2. Questionnaire
To fulfill the risk assessment calculation input, researcher needs to collect the data
regarding to the risk events’ severity level and also risk agents’ occurrence level based
on FMEA method. Then the next questionnaire is to give assessment the relationship
between the risk events and risk agents based on HOQ model. These assessments were
used as the input of HOR phase 1 to find out the ARP value to prioritize the risks which
has big contribution in disrupting the procurement activity. Furthermore, the prioritized
risk responded with risk mitigations strategies; then data collection using questionnaire
also carried out in ANP phase for pairwise comparison, both criteria and alternatives.
3.6 Data Processing
In this research, there were two data processing that performed to get the result in supply chain
risk management process; namely, HOR phase 1 as the risk assessment stage by combining
FMEA and HOQ to get the rank of risk agents which contribute greatly based on ARP value.
Moreover, composed risk mitigation strategies to respond the ranked risks. In order to maintain
company sustainability, the ANP were adopted to perform pairwise comparison both criteria
and risk mitigations strategy as the alternatives by considering environment, economic, and
social.
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3.6.1 House of Risk
A. HOR1
Based on the method that mentioned in chapter 2, data collection was processed in the chapter
4 using HOR phase 1. HOR phase 1 focus on processing data of risk events and causes of risk
or risk agents to gain the risks priority based on the weight of ARP. The scale that used for risk
assessment is adopted from FMEA using scale 1-5 as in the Table 3.1 and Table 3.2.
Furthermore, the result risk events’ severity and risk agents’ occurrence inputted in HOR1
model in Table 3.4 to be evaluated whether there are correlations between the risk agents and
the risk events as the procedure mentioned in the chapter 2 using correlations scale as in Table
3.3. To calculate the ANP value, the formula is mentioned in chapter 2 in Equation 2.1.
Table 3.1 Risk Agent’s occurrence level

Rank Level of Occurrence Criteria of Occurrence
Likelihood of Occurrence is 0-25%
1 Very Low (The Risk Almost is Never Occurs)
2 Low (The Risk is Rarely Occurs)
3 Moderate (The Risk is Likely Occurs)
4 High (The Risk is Often Occurs)
5 Very High (The Risk is Very Often Occurs)
Table 3.2 Risk Event’s severity level

Rank Level of Severity Criteria of Severity
The Risk has no impact on the activity
1 No Effect of sugarcane procurement
The Risk has small impact on the
2 Minor Disruption activity of sugarcane procurement
The Risk has moderate impact on the
3 Moderate Disruption activity of sugarcane procurement
The Risk has serious impact on the
4 Major Disruption activity of sugarcane procurement
The Risk has extreme impact on the
5 Catastrophic activity of sugarcane procurement
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Table 3.3 Correlations scale between risk events and risk agents
Relationship scale between the risk events and risk agents
Scale Description
There is no relationship between the risk events and risk
0 agents (no correlation)
There is relationship between the risk events and risk agents
1 is low (low correlation)
3 is moderate (low correlation)
9 is high (high correlation)
Table 3.4 HOR1 model

Severity of
Risk Risk Agents (Aj) Risk event i
Business Process Event (Si)
(Ei) A1 A2 A3 A4 A5 A6 A7
Plan E1 R11 R12 S1
E2 R21 R22 S2
Source E3 R31 S3
E4 R41 S4
Make E5 S5
E6 S6
Deliver E7 S7
E8 S8
Return E9 S9
Occurrence of agent j O1 O2 O3 O4 O5 O6 Oi
Aggregate risk ARP1 ARP2 ARP3 ARP4 ARP5 ARP6 ARPj
potential j
Priority rank of agent j
B. HOR2
In this research, HOR2 were just performed to compose risk mitigation strategies based on the
result of HOR1 to find out risks priority that has highest ARP. Risk mitigation strategies
composed by discussing with the Manajer Tanaman to respond and treat the prioritized risk
agents. The composed risk mitigations strategy will become the alternatives in for multicriteria
decision making using ANP that can lead company sustainability by considering sustainability
dimensions as criteria.
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3.6.2 Analytic Network Process
Analytic Network Process is adopted to select the best risk mitigation strategy for reducing
risks and to maintain company supply chain sustainability. The composed risk mitigations
strategy gathered from the brainstorming with the Assistant Manajer and Manajer Tanaman
were used as the alternatives in ANP model and the sustainable dimensions; namely economic,
environement, and social aspects were used as the criteria. The steps of creating ANP in this
research as follows:
1. Building a linkage model as hierarchical structure

In this stage the researcher determines the objectives to be achieved, which is determine
the best risk mitigation strategy to reduce risk and maintain sustainability; then determine
the relevant criteria based on sustainability dimensions (economic, environment, social);
and determine the alternatives based on risk mitigations stragies that have been approved
by expert.
2. Generating pairwise comparison questionnaire and calculate the eigenvectors

In this stage, the researcher give questionnaire to the Manajer Tanaman as the expert or
decision maker and the policy maker to fulfill the questionnaire based on the importance
level of the nodes in each cluster and the alternatives. The scale that used in pairwise
comparison is 1-9 same as AHP, the defition of scale is as shown in Table 3.5. The weight
of the priority vector calculated using equation 2.3 in chapter 2.
Table 3.5 The Fundamental Scale of Making Judgement

Priority Scale Definition
1 Equal
2 Between Equal and Moderate
3 Moderate
4 Between Moderate and Strong
5 Strong
6 Between Strong and Very Strong
7 Very Strong
8 Between Very Strong and Extreme
9 Extreme
Source: adopted from (Adams & Saaty, 2016)
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3. Check the consistency ratio is less than 0.1

If the result is more than 0.1, it means the data is not consistent and need to repeat the
data collection process in choosing the best mitigations strategy selection. The equation
to check the consistency is mentioned in equation 2.4 and 2.5 in chapter 2.
4. Create supermatrix
In this step the weights of each node in cluster synthesize into supermatrix that consist
of unweighted supermatrix; weighted supermatrix; limit supermatrix to find out the
weight of the alternatives.
5. Select the best alternative solution with the highest weight

The highest weight of the alternative is the best solution to overcome the risk problem
and to maintain the sustainability company.
3.6.3 Tools
In this researcher need tools to help researcher processing data by using Microsoft Excel 2016
to process the data that required in HOR phase, and using Superdecisions v2.8 to help
researcher build ANP model and process the data; create supermatrix; up to synthesized to gain
the best alternative solution. The sequence of stages of research systematically starting from
problem identification to conclusion and recommendations can be seen on the Flow Chart
shows in Figure 3.1.
31
3.7 Research Flowchart
Start
Problem
Identification
Problem
Formulation
Research
Methodology
Data Collection
Literature Interview and

Questionnaire
Review Observation
Data Processing
Mapping Supply Chain activity of

sugarcane become white crystal sugar
based on SCOR
Identify risk occurrence and risk

HOR Phase 1
events in supply chain activity
Perform HOR Phase 1
Identify risk mitigation

HOR Phase 2
strategies
Select the best risk mitigation strategy ANP
Discussion
Conclusion and Recommendation
Finish
Figure 3.1 Research flowchart

32
3.8 Discussion
After data processing finished, the next step is analysis and discussion from the result of the
calculation that performed using HOR and ANP. In this section explain in detail how the the
result of the theory that applied in the selected object. Besides, this section is the basis
suggestion in the conclusion and recommendation section.
3.9 Conclusion and Recommendation
This section would provide the answers of all the problem formulations that have been
formulated in the beginning of the research, Moreover, there are several suggestions from the
researcher to the company and future research.
CHAPTER IV
DATA COLLECTION AND PROCESSING
4.1 Risks Identification
4.1.1 Brief history of Company
PG. Modjopanggoong is one of the sugar business units under the auspices of PTPN X
(Persero) under the ministry of State-Owned Enterprises (BUMN). PG. Modjopanggoong was
firstly established in 1852 by a Dutchman named Mr. Dinger. In 1957 ownership of PG.
Modjopanggoong turned to the Government of Indonesia with a State-Owned Enterprise called
PPN until 1968. In 1968 Act No. 23 of 1978 issued the transfer of PPN to PT. Perkebunan
(Persero), for the working area of Surabaya and Kediri into one, namely PT. Perkebunan XXI-
XXII (Persero). In 1996 after the issuance of PP No. 5 of 1996 merged under PT Perkebunan
Nusantara X (Persero). PG Unit Location. Modjopanggoong is in Tulungagung Regency,
Kauman District, Sidorejo Village. The main product of the PG unit. Modjopanggoong is white
crystal sugar, in Bahasa called as Gula Kristal Putih (GKP). Besides PG's main products.
Modjopanggoong is also a byproduct of dregs and drops. The main raw material used to
produce GKP is sugar cane. PG Modjopanggoong production system can be seen in Figure 4.1
as follows:
33
34
Figure 4.1 PG. Modjopanggoong Production System

Source: PG. Modjopanggoong
4.1.2 Organizational Structure in Unit PG. Modjopanggoong
The implementation of whie crystal sugar production, there are several departments involved
in the successful running of milling operations in Unit PG. Modjopanggoong, the picture is
shown on Figure 4.2.
35
GENERAL MANAGER
MANAJER MANAJER KEUANGAN

MANAJER TANAMAN MANAJER INSTALASI MANAJER QA MANAJER SDM
PENGOLAHAN DAN UMUM
AGRONOMI MESIN TEKNIK PROSESING PERENCANAAN BAHAN BAKU SDM
TEBANG ANGKUT BANGUNAN / GD GUDANG PRODUKSI PEMBUKUAN BAHAN OLAHAN
TRANSPORTASI LIMBAH SEKUM
TU HASIL
Figure 4.2 Organizational Management in PG. Modjopanggong
Job description of each department in unit PG. Modjopanggoong explained as follows:
1. Bagian Tanaman
Bagian Tanaman is one department in unit PG. Modjopanggoong that responsible with all
related to the raw material sugarcane (BBT) procurement activity. Procurement of raw
material sugarcane starts from the process of sugarcane cultivation to harvesting and
transporting sugar cane which meets the criteria to be supplied to sugarcane milling
machines at PG. Modjopanggoong. Good quality standard of sugar cane raw material, sweet,
fresh and clean (MSB).
2. Bagian Instalasi
Bagian Instalasi is responsible for the operations of milling activities at PG.
Modjopanggoong such as electricity in the production process, milling machines,
production schedule of the machine, kettle and maintenance of the machines used in
grinding operations.
3. Bagian Pengolahan
Bagian Pengolahan is responsible for the process of processing raw material sugarcane
(BBT) which is taken as a white sugar crystal. In addition to the process of processing sap
into GKP, this part is also responsible for waste processing.
36
4. Bagian Administrasi, Keuangan, dan Umum (AKU)

Bagian AKU responsible for the flow of funds and work at PG. Modjopanggoong. There
are four sub-sections that have their respective responsibilities such as Planning and Control
(PP), Accounting, Secretariat & General, and Administration of Results and Warehouses.
5. Bagian Quality Control and Assurance (QA)

Bagian QA responsible for On Farm and Off Farm activities. On Farm activities are
activities carried out starting from the procurement of raw material sugarcane such as
mapping in sugarcane cultivation areas, while Off Farm is a milling operation where this
part is responsible for the quality and standard of sugar that is suitable for sale based on
Indonesian National Standard (SNI).
6. Bagian Sumber Daya Manusia (SDM)

Bagian SDM responsible for managing the emphasis on employee salaries, coordination
between sections, providing training, and employee performance evaluation at PG.
Modjopanggoong.
4.1.3 Supply Chain mapping in PG. Modjopanggoong
In the process of producing sugar in unit PG. Modjopanggoong, the Sugarcane that supplied
into milling cane is imported from three sources, including the Public's Sugar Cane (TR),
Company unit Sugar Cane (TS), and Sugar Cane Outside the Region. In order to maintain the
quality of raw material sugarcane, there is always coordination with working partner or
stakeholders between internal parts and stakeholders, one of which is a sugar cane farmer.
In the supply chain of GKP in PTPN X, there are three actors that involve in the supply
chain scope; namely, sugarcane farmers, industry, and the investor. Sugarcane that produced
in each unit in PTPN X such as PG. Modjopanggoong in the cane growing process is carried
out by sugarcane farmer then it is supplied in milling machine to produce white crystal sugar,
then marketed in the office center to the broker. In general, the supply chain activity in sugar
industry is the same, the flow sugarcane supply chain from sourcing the sugarcane until it is
produced into sugar and sold in market can be seen on figure 4.3:
37
Cane Cultivation/Cane Harvesting and

Milling Marketing
Growing Transport
Figure 4.3 Supply Chain activity in PG. Mojopanggong until marketed by Office Center
Source: adapted from (Everingham, et al., 2002)
In the milling operations of sugarcane, unit PG. Modjopanggoong conducted production

based on the capability of sugarcane supplied in the Tulungagung area, but sometimes depends
on the Director decision from the office center. Unit Modjopanggong just have responsibility
to produce sugar as much as it can in order to fulfil GKP demand in Indonesia.
4.1.4 Mapping Business Process of Procurement Activity
Mapping of business processes in raw material procurement activities was carried out through
interviews and discussions with Assistant Manajer Tanaman. The SCOR model was adopted
for mapping the business process of raw material sugarcane procurement activity start from
Plan, Make, Source, Deliver, and Return. The purpose of business process process mapping is
to make it easier to identify risks in procurement activities raw material sugarcane in the scope
of supply chain in Bagian Tanaman, so that the emergence of risks in each activity of
procurement can be known. Based on the results of interview with Assistant Manajer Tanaman,
business processes are obtained in the procurement of goods in Table 4.1 as follows.
Table 4.1 Procurment activity in unit PG. Modjopanggoong based on SCOR

Business Sub Process Detail Activity
Process
Planning Activity in scope of
Bagian Tanaman
Making Base Number/ Work Plans and Corporate Prognose/ Forcast the
Plan
Budgets (RKAP) Cultivation Area
Prognose/ Forcast total amount
of sugarcane
Survey to the cultivation region
Find out the situations and
Regional Orientation conditions in the region about
community activity,
Source occupation, and crops that are
often cultivated
Counseling with the farmers in
Regional Partnership Meeting Forum (FTK) / order to convey the objectives
Counseling
38
Business Sub Process Detail Activity

Process
such as to ask community to
cultivate sugarcane
Collecting the data of the

farmers that interested and
Candidates of Area and Farmer (CPCL) Data
agreed to register their field to
Collection
collaborate with PG.
Modjopanggoong
Area registration, and check the
properness areal (usually work
Registration of Area with QA deparment to make
map of registered area using
GPS)
PG. Modjopanggoong give
credits or loan for working
Dropping Production Facilities costs to the proper farmers (ex:
fertilizer, medicine for
sugarcane, etc.)
Realization or implementation
of sugarcane cultivation and
Realization of Working Costs
using the production facilities
Make such as fertilizer
Growing the sugarcane in
Plant Maintenance cultivation phase until maturity
phase
Training and visits the
sugarcane areal and give
Training and Visits
training wheter the sugarcane
has fulfill the standard
Business Valuation conducted
Business Valuation in December (Taksasi Desember)
in every December
Business Valuation conducted
Business Valuation in March (Taksasi Maret)
in every March
Take the samples of sugarcane
to check the maturity of the
cane and appropriate to be
Preliminary Analysis
harvested or crop
Create schedule for cutting
schedule
Sugarcane Harvesting Schedule Harvesting realization
Transport and supply the
Deliver standard sugarcane to PG.
Sugarcane Transportation to the Factory
Modjopanggoong and ready to
mill
4.1.5 Risk Identification
Identification of risk events in this study was carried out by observation and interview with the
Assistant Manajer Tanaman based on the risk events that occur on procurement activities.
39
Then, identification of risk agents from each risk event is conducted. The risk events and risk
agents that have been mapped then were consulted to the Manager Tanaman who authorized
to make policies on the scope of raw material cane procurement for confirmation whether the
identified risks relevant or need to be added based on Manajer Tanaman opinion as the expert.
After being confirmed by Manajer Tanaman, the results of the classification of risk agents and
risk events in the PG. Modjopanggoong is 14 risk events and 20 risk agents. The list of risk
events as shown in Table 4.2.
Table 4.2 Identify Risk Events in procurement acitivity

SCOR Risk Events
Farmers are not interested in growing sugarcane
Source
The total area registered is less than the target
The risk of gardening costs payment is disrupted
The operational cost of gardening is high
The maturity of sugarcane is uneven
Some stages of cultivation are not carried out, and usage of alternative
fertilizers are not suitable
Make
The potential of sugarcane pol is reduced, slow maturity phase
Mechanization system cannot be applied in cultivation & low
productivity
The harvesting schedule does not match with maturity of sugarcane
Raw material sugarcane supplied is insufficient with milling cane
demand (Jam berhenti A)
The quality of raw material sugarcane is not as expected
Deliver Cannot apply mechanization in harvesting process
Potential of non-performing loans
Sugar that belongs to Manufacturer (GMPG) cannot achieve target
(RKAP)
After identifying the risk events in the procurement activity, then assess to the risk events
that disrupt procurement activities. Assessment of risk events was carried out to measure the
severity level of the risks’ impact on procurement activities in unit PG. Modjopanggoong. By
adopting the FMEA method, assessment process was conducted by giving a scale of 1-5 to the
severity level of risks’ impact on procurement activities in Bagian Tanaman, where scale 1 is
very small (insignificant) while the scale 5 is very large (catasthropic) so that it is potentially
harmful or has big contribution in disturbing procurement activity.
40
Table 4.3 Risk Assesment on Risk Events

SCOR Risk Events Code Severity
Farmers are not interested in growing sugarcane E1 5
Source
The total area registered is less than the target E2 5
The risk of gardening costs payment is disrupted E3 4
The operational cost of gardening is high E4 4
The maturity of sugarcane is uneven E5 4
Several stages of cultivation are not carried out, and usage E6 4
of alternative fertilizers are not suitable
Make The potential of sugarcane pol is reduced, slow maturity E7 4
phase
Mechanization system cannot be applied in cultivation & E8 3
low productivity
The harvesting schedule does not match with maturity of E9 4
sugarcane
Raw material sugarcane supplied is insufficient with E10 5
milling cane demand (Jam berhenti A)
The quality of raw material sugarcane is not as expected E11 4
Deliver Cannot apply mechanization in cutting process E12 2
Potential of non-performing loans E13 4
Sugar that belongs to Manufacturer (GMPG) cannot E14 5
achieve the target (RKAP)
After identifying risk events, the next step is to find out the sources of risk or risk agents
that cause risk events. Based on the results of observations and interviews with experts, there
were 20 risk agents that triggered risk event were approved by the expert. Assessment of risk
agents is also carried out based on the FMEA method by experts with a scale of 1-5 for risk
agents, where scale 1 rarely to occur and 5 is almost certain to occur. The Risk Agents list can
be seen in the Table 4.3 The questionnaire given to the expert can be seen in the attachment.
Table 4.4 Risk Agents

Occurrence
Code Risk Agents
(Oi)
A1 Sugarcane cultivation margins is less competitive than other 4
commodities
A2 Many areas of sugarcane crops have shifted to schools, houses, 2
industries, etc.
A3 The price of sugar is very volatile 4
A4 Long Bureaucracy 3
A5 Several farmers are reluctant to register their sugarcane with PG. 4
(contract bound)
41
Occurrence
Code Risk Agents
(Oi)
A6 Credit agreements among PG, Bank and Sugarcane Farmers 3
Community Cooperative (KPTR) is not repaid timely
A7 The Banking party is requested PG. as availst 5
A8 Credit submission is not in accordance with works on field 3
A9 Narrow cultivation area 4
A10 Gardening labors are less skillled and limited 4
A11 Farmers lack financing and other production facilities (seeds, 4
fertilizer, medicines, etc.)
A12 Technical irrigation is not available in the most of cultivation 4
area
A13 Several farmers are reluctant to allow preliminary analysis 4
A14 Many of planting data of sugarcane variety are less accurate 3
A15 Stem lengthening phase and maturity phase are inhibited 2
A16 The number of indigenous sugarcane areas is limited 5
A17 The location of sugarcane areas is farm from PG. and scattered 5
A18 Registered sugarcane which has been harvested is delivered to 5
competitors (Brown Sugar & Sugarcane shelter)
A19 The amount of sugarcane supplied has not been achieved 5
according to RKAP
A20 The sugarcane yield has not been achieved according to RKAP 2
4.2 Data Processing using House of Risk
In the data processing step, there are 2 methods that are employed, namely the House of Risk
phase 1 to determine the priority of the cause of risks (risk agents) and compose the risk
mitigation strategy in the HOR phase 2. Researcher using ANP to select the best alternatives
of risk mitigations strategy by considering sustainability dimensions criteria. In processing data
on the HOR phase 1, the data involved is risk agents and risk events, while in HOR2 phase is
to compose risk mitigation strategy. Furthermore, by using ANP the data involved is risk
mitigation strategies as the alternatives with sustainability dimensions (social, economic and
environment) as criteria that be considered based on appropriate journal and expert suggestions
to select the best strategy for reducing risk and maintain company sustainability.
4.2.1 Data Processing using HOR1
After assessing the Risk Events and Risk Agents, the next step is processing data in the House
of Risk phase 1. At the HOR1 stage, an assessment of the correlation between the Risk Agents
and Risk Events is based on the level of correlation between risk agents or sources of the risk
42
and causes of the risk agents which is risk events. The correlation values was carried out the
same as the HOQ process with a scale of 0, 1, 3, 9. A value of 0 is given if there is no
relationship between risk agent and risk events; a value of 1 is given if there is a small
correlation, a value of 3 is given if there is a moderate correlation; and a value of 9 is given if
the relationship between the source of risk and the incidence of risk is very high. By applying
equation 2.1, the ARP calculation results can be seen as ARP calculation 1-9 below. For
processing HOR1 as shown in the Table 4.5
1. ARP 1 = 4 x [(9 x (5 + 5 + 5)) + (3 x (3 + 4)) + (1 x (4 + 4 + 4 + 2))] = 740
2. ARP 2 = 2 x [(3 x 5) + (1 x (5 + 5 + 4 + 3 + 4 + 4 + 2 + 4 + 5))] = 134
3. ARP 3 = 4 x [(9 x (5 + 5 + 5)) + (3 x (4 + 5 + 5)) + (1 x (3 + 4 + 2 + 4))] = 724
4. ARP 4 = 3 x [(3 x (5 + 5 + 4)) + (1 x (5 + 4 + 4 + 5))] = 180
5. ARP 5 = 4 x [(9 x 5) + (3 x (5 + 4 + 5)) + (1 x (5 + 4))] = 384
6. ARP 6 = 3 x [(9 x 4) + (3 x (5 + 5)) + (1 x (3 + 4 + 4))] = 231
7. ARP 7 = 5 x [(9 x 4) + (1 x (5 + 4))] = 225
8. ARP 8 = 3 x [(3 x (4 + 4)) + (1 x (3 + 5))] = 96
9. ARP 9 = 4 x [(9 x (5 + 3 + 2)) + (3 x (5 + 5)) + (1 x (4 + 4 + 4 + 5))] = 548

Table 4.5 House of Risk Phase 1
A1 A2 A3 A4 A5 A6 A7 A8 A9 A10 A11 A12 A13 A14 A15 A16 A17 A18 A19 A20 Si
E1 9 1 9 3 3 3 0 0 3 0 1 1 0 0 0 0 0 0 0 1 5
E2 9 1 9 3 9 3 1 0 9 1 1 0 0 0 0 0 0 0 0 1 5
E3 1 1 9 3 3 9 9 3 1 0 3 0 0 0 0 0 0 0 0 0 4
E4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3 0 0 0 0 0 4
E5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3 0 0 4
E6 0 0 0 0 0 0 0 0 0 0 9 0 0 0 0 0 0 0 0 0 4
E7 0 0 0 0 0 0 0 0 0 0 3 0 0 0 0 0 0 0 0 0 4
E8 3 1 1 0 0 1 0 1 9 3 3 3 0 0 0 0 0 0 0 0 3
E9 1 1 3 0 0 0 0 0 1 0 0 0 3 9 0 0 0 0 0 0 4
E10 3 1 3 1 1 0 0 0 3 0 3 0 0 0 0 9 3 9 3 1 5
E11 1 1 1 1 0 1 1 0 1 3 1 0 3 9 3 0 3 1 1 0 4
E12 1 1 1 0 0 0 0 0 9 0 0 0 0 0 0 0 0 0 0 0 2
E13 3 1 1 1 1 1 0 3 0 0 0 0 0 0 0 0 0 3 0 0 4
E14 9 3 3 1 3 0 0 1 1 0 0 0 0 1 1 9 0 9 9 9 5
Oj 4 2 4 3 4 3 5 3 4 4 4 4 4 3 2 5 5 5 5 2
ARPj 740 134 724 180 384 231 225 96 548 104 392 56 96 231 58 450 135 590 320 120
Rank 1 14 2 12 7 9 11 17 4 16 6 20 18 10 19 5 13 3 8 15
43
4.2.2 Pareto Chart
In this research, the pareto principle was adopted to find out the 80% of the entire identified
risk agents which potentially disrupting in Bagian Tanaman. The pareto principle is used to
find which risks that categorized as prioritezed risk that need to be treated or mitigated. In order
to categorized which prioritized risk and non-prioritized, the ARP value of each risk agents
need to be ranked based on the weight or ARP value. The higher ARP value of risk agent, the
higher rank will be. The result of HOR phase 1 is sorted from the highest ARP to the smallest
ARP in Table 4.6 below. The 80% of risk agents with the highest ARP value are categorized
as prioritized risk that need to be treated.
Table 4.6 Result of HOR1 sorted from highest ARP
Cummulative
Code Risk Agents ARPj Cummulative
Percentage
A1 Sugarcane cultivation margins are less 740 740 12.73
competitive than other commodities
A3 The price of sugar is very volatile 724 1464 25.18
A18 Registered sugarcane which is cut down is sent 590 2054 35.33
to competitors (Brown Sugar & Sugarcane
shelter)
A9 Narrow cultivation area 548 2602 44.75
A16 The number of indigenous sugarcane areas are 450 3052 52.49
limited
A11 Farmers lack financing and other production 392 3444 59.24
facilities (seeds, fertilizer, medicines, etc.)
A5 Several farmers are reluctant to register their 384 3828 65.84
sugarcane with PG. (contract bound)
A19 The amount of sugarcane has not been achieved 320 4148 71.35
according to RKAP
A6 Credit agreements between PG, Bank and 231 4379 75.32
People's Sugarcane Farmers Cooperative
(KPTR) are not timely
A14 Many of planting data of sugarcane variety are 231 4610 79.29
less accurate
A7 The Banking party is requested PG. as avails 225 4835 83.16
A4 Long Bureaucracy 180 5015 86.26
A17 The location of sugarcane areas is farm from 135 5150 88.58
PG. and scattered
A2 Many areas of sugarcane crops have shifted to 134 5284 90.88
schools, housing, industries, etc.
44
45
Cummulative
Code Risk Agents ARPj Cummulative
Percentage
A20 The sugarcane yield has not been achieved 120 5404 92.95
accoring to RKAP
A10 Garden labors are less skillled and limited 104 5508 94.74
A8 Credit submission is not in accordance with 96 5604 96.39
works on field
A13 Some farmers are reluctant to allow preliminary 96 5700 98.04
analysis
A15 Stem lengthening phase and maturity phase are 58 5758 99.04
inhibited
A12 The most of located land is not technically 56 5814 100.00
irrigated
Based on the Table 4.6 above, there are 10 risk agents which categorized as prioritized risk and
10 risks agent categorized as non-prioritized risk. The result of HOR1 in Table 4.6 then
visualized into Pareto chart in Figure 4.4 below.
Aggregate Risk Potential (ARP)

800 100.00
700 90.00
80.00
600
70.00
500 60.00
400 50.00
300 40.00
30.00
200
20.00
100 10.00
0 0.00
A1 A3 A18 A9 A16 A11 A5 A19 A6 A14 A7 A4 A17 A2 A20 A10 A8 A13 A15 A12
ARPj Cummulative Percentage
Figure 4.4 Pareto Chart of ARP
The pareto chart above represents the degree of importance to reduce the likelihood of risk
agents’ occurrence. Certainly, the company have to prioritize those with highest ARP value.
Determination of risk priorities was carried out using the Pareto 80:20 rule in which resulted
10 risk agents which have big impact in the activities of raw material sugarcane procurement
activity need more attention to be responded.
46
4.2.3 HOR2 Composing Risk Mitigation Strategies
Since the Risk Agents with high priority has been found, researcher dicussed with the Manajer
Tanaman to determine which options are suitable to respond the prioritized risk which
contribute greatly disrupt the procurement activity in company supply chain. The list of risks
response is on Table 4.7.
Table 4.7 Preventive Action for Risk Response
Response Code Preventive Action
Expanding the company unit’s sugarcane area (TS) and

PA1
managed directly by PG. Modjopanggoong gradually
Risk Provide sufficient costs for the costs of working on,
PA2
Reduction production facilities, medicines, etc.
PA3 Increase the amount of sugarcane outside rigion
PA4 Increasing partnership with local sugarcane farmers
Acceptance PA5 Accept the risk
The chosen options to respond the risks in this case study are risk reduction and risk
acceptance. Since the risk treatment for risk agent A3 and risk agent A5 are not available, the
company has to accept the risk as mentioned in Table 4.7 with code PA5. For the rest of
prioritized risk agents, risk mitigations strategies (PA1, PA2, PA3, PA4) were composed to
reduce the risk agents and lead to maintain company supply chain sustainability. In order to
select the best strategy for reducing risk and maintain company SC sustainability, ANP method
was employed to make decision in multicriteria environement based on available risk
mitigation strategies.
4.3 The Best Strategy Selection using ANP
4.3.1 Build the ANP model
The ANP model designed in this research consists of three levels which is the same as AHP
model namely, the goal which is to select the best risk mitigations strategy; criteria that consists
of three bottom line of sustainability; namely, social, economic, environmental; then followed
by creating sub-criteria of each criteria and the selected alternatives (PA1, PA2, PA3, PA4)
47
obtained from HOR2 stage. The sub-criteria of each sustainability dimensions adopted from
(Neven, 2014; Jenkins et al., 2015) as mentioned in Chapter II and combined with subcriteria
expected by the Manajer Tanaman to select the best risk mitigation strategy for reducing risk
and maintain sustainability. The network model as shown in Figure 4.5 below.
Figure 4.5 Network Model of Best Risk Mitigation Strategy Selection
Based on the Figure 4.5, each cluster consists of set of nodes and arc. The nodes represent sub-
criterion of each criteria formed as clusters and arcs represents directed causal influences
between connection nodes. Each sub-criteria leaf is given code to adjust the size fit with this
research paper as follows in the Table 4.8 and Table 4.9 and Table 4.10 below.
Table 4.8 Economic Sustainability Sub-Criteria

Code Sub-Criteria Economic
C1 Benefit Sharing Across Value Chain
C2 Cost of Goods Reduction
C3 Increase Company Profitability
C4 Increase Sugarcane Cultivation Productivity
C5 Increase Sugarcane Quality
C6 Increase Sugarcane Quantity
48
Table 4.9 Environmental Sustainability Criteria

Code Sub-Criteria Environment
N1 Appropriate Land Use
N2 Climate Change Mitigation & Adaptation
N3 Efficient Water Use
N4 Reduce Pollution and Waste
Table 4.10 Social Sustainability Criteria

Code Sub-Criteria Social
S1 Giving Incentives to Local Community
S2 Improve Walfare of Local Community
S3 Protected health, safety, and human right for workers
S4 Provide Employment Opportunity
4.3.2 Pairwise comparison and Consistency Test
The second step after construct the the ANP model is carried out pairwise comparison. In this
research, pairwise comparison was carried out based on the standard of Saaty’s 9-point scale.
Then the criteria which have been pairwise compared need to check the consistency value. As
mentioned in chapter two the value of inconsistency has to be less than 10% or 0.1 that
represents the data is consistent. Yet, if collected data has been pairwise compared but the the
result of inconsistency test is more than 0.1, researcher need to repeat data collection stage until
the result of inconsistency test is less than 0.1.
A. Prioritization of the main criteria
The second stage after construct the ANP model, it is necessary to conduct pairwise
comparison among the main criteria to find out which criteria of sustainability dimensions
need to be prioritized. Table 4.11 represents the pairwise comparison matrix of the three main
criteria of sustainability dimensions, and also the inconsistency test to ensure the data
collection is acceptable with value less than 0.1. Based on the result in Table 4.11, it can be
interpreted that economic sustainability is considered equally to moderately more important
than the environmental, and is moderately more important than social sustainability.
Moreover, the environemental sustainability is equally as important as social sustainability.
49
Table 4.11 Pairwise Comparison of the three main criteria w.r.t. Goal
Economic Enviromental Social Priority
Inconsistency
Sustainability Sustainability Sustainability Weight
Economic
1 2 3 0.5499
Sustainability
Enviromental 0.0176
1/2 1 1 0.2402
Sustainability
Social
1/3 1 1 0.2098
Sustainability
B. The Economic Sustainability Criteria and Sub-Criteria
According to literature review shown on Figure 2.3 in Chapter II, Economic outcomes within
sustainability dimensions in sugar production consists of profitability and equitable benefit
sharing all along the supply chain (FAO, 2014; Jenkins et al., 2015). Besides, the Manajer
Tanaman as the expert accepted them as sub-criteria and added several sub-criteria to reduce
the risks in procurement and lead company to sustainability by considering cost of goods
reduction, increase productivity of sugarcane, increase quality of cane supplied and increase
quantity of cane supplied. Therefore, the sub-criteria in the cluster of Economic sutainability
within ANP model consists of benefit sharing across the supply chain, cost of goods
reduction, company profitability, sugarcane quality, sugarcane quantity and sugarcane
cultivation productivity. Pairwise comparison of each nodes/sub-criteria within Economic
Sustainability Cluster shown in the Table 4.12.
Table 4.12 Pairwise Comparison of Sub-Criteria within Economic Sustainability

C1 C2 C3 C4 C5 C6 Priority Weight Inconsistency
C1 1 1/4 1/4 1/5 1/4 1/4 0.0418
C2 4 1 1 1/2 2 3 0.2029
C3 4 1 1 2 3 3 0.2813
0.06463
C4 5 2 1/2 1 3 4 0.2720
C5 4 1/2 1/3 1/3 1 1/2 0.0939
C6 4 1/3 1/3 1/4 2 1 0.1081
Furthermore, since each sub-criterion in the cluster has interdependence with other sub-
criteria, the curved arc in Figure 4.5 represents connections among the nodes within the
Economic Sustainability Cluster or called as inner dependent. The collected data from
questionnaire can be called consistent or no correction in judgements if the value of
50
inconsistency index is less than 0.1. The result of pairwise comparison of Economic
Sustainability in summary sub-criteria are shown in Table 4.13. The the matrix of pariwise
comparison and the inconsistency index test in detail are shown in detail Appendix A.
Table 4.13 Result of Pairwise Comparison within Economic Sustainability Cluster

Inconsistency Consistency
Code Sub-Criterion
Index Check
C1 Benefit Sharing Across Value Chain 0.047 Consistent
C2 Cost of Goods Reduction 0.075 Consistent
C3 Increase Company Profitability 0.060 Consistent
C4 Increase Sugarcane Cultivation Productivity 0.032 Consistent
C5 Increase Sugarcane Quality 0.017 Consistent
C6 Increase Sugarcane Quantity 0.042 Consistent
C. Environmental Sustainability
According to literature review shown on the Figure 2.3 in Chapter II, the Environmental
outcomes in sugar production sustainability dimensions consists of, efficient water use,
reduce pollution and waste, appropriate land use and climate change mitigation and
adaptation. Based on discussion with Manajer Tanaman, this research adopts them as sub
criteria within Environmental Sustainability Cluster. Pairwise comparison of each nodes/sub-
criteria within Environmental Sustainability Cluster shown in the Table 4.13.
Table 4.14 Pairwise Comparison for sub-criteria within Environmental Sustainability

N1 N2 N3 N4 Priority Weight Inconsistency
N1 1 1/3 2 3 0.2597
N2 3 1 2 3 0.4576
0.06175
N3 1/2 1/2 1 2 0.1789
N4 1/3 1/3 1/2 1 0.1038
criteria, the curved arc in Figure 4.5 represents connections among the nodes within the
Environemental Sustainability Cluster or called as inner dependent. The collected data from
inconsistency index is less than 0.1. The result of pairwise comparison of Environment
Sustainability in summary sub-criteria are shown in Table 4.15. The the matrix of pariwise
comparison and the inconsistency index test in detail are shown in detail Appendix B.
51
Table 4.15 Result of Pairwise Comparison within Environmental Sustainability Cluster

Code Sub-Criterion
Index Check
N1 Appropriate Land Use 0.052 Consistent
N2 Climate Change Mitigation & Adaptation 0.052 Consistent
N3 Efficient Water Use 0.009 Consistent
N4 Reduce Pollution and Waste 0.000 Consistent
D. Social Sustainability
According to literature review shown on the Figure 2.3 in Chapter II, the social outcomes in
sugar production sustainability dimensions consists of, secure land rights, protected health,
safety and human rights for workers, no child or forced labor, Giving Incentives to Local
Community and gender equity. After discussed with Manajer Tanaman, this research adopted
protected health, safety, and human rights for workers and Giving Incentives to Local
Community as sub criteria within Social Sustainability Cluster. Furthermore, the other sub-
criteria added into Social Sustainability based on Manajer Tanaman consideration are
Improve Walfare of Local Community and Provide Employment Opportunity. Pairwise
comparison of each sub-criteria within Social Sustainability Cluster shown in the Table 4.14.
Table 4.16 Pairwise Comparison for sub-criteria within Social

S1 S2 S3 S4 Priority Weight Inconsistency
S1 1 1/3 2 4 0.4912
S2 3 1 1 1 0.1612
0.06395
S3 ½ 1/2 1 1/2 0.1582
S4 1/3 1/3 1/2 1 0.1894
criteria, the curved arrow in Figure 4.5 represents connections among the nodes within the
Social Sustainability Cluster or called as inner dependent. The collected data from
inconsistency index is less than 0.1. The result of pairwise comparison of Social Sustainability
in summary sub-criteria are shown in Table 4.17. The the matrix of pariwise comparison and
the inconsistency index test in detail are shown in detail Appendix C.
52
Table 4.17 Result of Pairwise Comparison within Social Sustainability Cluster

Code Sub-Criterion Inconsistency Consistency
Index Check
S1 Giving Incentives to Local Community 0.000 Consistent
S2 Improve Walfare of Local Community 0.052 Consistent
S3 Protected health, safety, and human right for workers 0.000 Consistent
S4 Provide Employment Opportunity 0.052 Consistent
E. Pairwise Comparison of Alternatives
As mentioned in the Table 4.7, the preventive actions to respond the risks are used to mitigate
risks and used as the alternatives in ANP model. In this stage the alternatives are pairwise
compared w.r.t. all leaf of sub-criteria in each criteria cluster of sustainability dimensions.
Since the structure is the same as AHP, the alternatives are pairwise compared to find out the
priority weight based on sub-criteria within each sustainability clusters. The result of pairwise
comparison of alternatives w.r.t. the entire leaf of sub-criteria is shown in Table 4.18. For the
pairwise comparison matrix, the priority weight and inconsistency index test are shown in
Appendix D in detail.
Table 4.18 Pairwise Comparison Alternatives w.r.t Sub-Criteria

Code Sub-Criterion
Index Check
C1 Benefit Sharing Across Value Chain 0.044 Consistent
C2 Cost of Goods Reduction 0.079 Consistent
C3 Increase Company Profitability 0.042 Consistent
C4 Increase Sugarcane Cultivation Productivity 0.066 Consistent
C5 Increase Sugarcane Quality 0.058 Consistent
C6 Increase Sugarcane Quantity 0.074 Consistent
N1 Appropriate Land Use 0.060 Consistent
N2 Climate Change Mitigation & Adoption 0.060 Consistent
N3 Efficient Water Use 0.033 Consistent
N4 Reduce Pollution and Waste 0.030 Consistent
S1 Giving Incentives to Local Community 0.033 Consistent
S2 Improve Walfare of Local Community 0.033 Consistent
S3 Protected health, safety, and human right for workers 0.054 Consistent
S4 Provide Employment Opportunity 0.060 Consistent
53
F. Pairwise Comparison of Sub-Criteria w.r.t. Alternatives
In order to complete the super matrix, it is required to conduct pairwise comparison the sub-
criteria in cluster with respect to alternatives cluster. The arcs from four nodes in alternatives
cluster toward all of leaf of sub-criteria within each sustainability cluster shown in Figure 4.5
represents there are feedback which can be conducted using ANP instead of AHP. The
summarized pairwise comparison and priority weight of fifteen subcriteria w.r.t. the four
alternatives respectively are shown in Table 4.16 and the calculation are shown in Appendix
E in detail.
Table 4.19 Pairiwise Comparison Criteria w.r.t. Alternatives

Alternatives Cluster
Index Check
Economic 0.033 Consistent
PA1 Environment 0.069 Consistent
Social 0.058 Consistent
4.3.3 Create Supermatrix
After each sub-criteria and alternatives have been pairwise compared and the inconsistency
value is acceptable which is less than 0.1, the next stage is to create supermatrix. Supermatrix
consists of three stage; namely, unweighted supermatrix, weighted supermatrix and limit super
matrix. Supermatrices consists of the nodes inside clusters that sorted in alphabetical order
across the top and down the left side formed as matrix.
In general, the first step in super matrix is unweighted supermatrix. The initial
supermatrix or unweighted supermatrix is shown in Table 4.20. For instance, the priorities of
the elements in Economic Sustainability Criteria represents with Code C w.r.t. Goal are shown
54
in the first row first coloumn from left. The result shown that C3 has the highest value which
is 0.281 over other sub-criteria within Economic Cluster. The value itself is obtained from the
pairwise comparison on the nodes within the Economic Sustainability Cluster. This may be
interpreted with statement, “C3 is slightly preferable than C4; moderately preferable than C2
and it is also dominant preferred than C1, C5 and C6.
The next supermatrix is weighted supermatrix. The unweighted supermatrix which

composed of several eigenvectors are summed up to 1.0 then must be weighted and transformed
to a matrix in which each of its columns sums to unity. To distinguish the difference,
unweighted supermatrix is shown in Table 4.20 and weighted supermatrix is shown in Table
4.21.
The last step in of supermatrix is Limit Matrix. The weighted supermatrix is raised to
limiting power to get global priority vectors. In order to find the value in limit suparmatrix, the
equation 2.8 in Chapter II is adopted. The limit supermatrix is shown in Table 4.22
4.3.4 Synthesize
After supermatrix stage has finished, the next step is to synthesize the model. The computations
synthesize command displays the final results in three ways as shown in Figure 4.6. Raw
coloumn represents level of priority from limit supermatrix in Table 4.22, Normals coloumn
represents the normalized results from cluster coloumn and Ideals coloumn results obtained
from deviding the values either the normalized or limiting columns by the largest value in the
column (Adams & Saaty, 2016). Based on this result, the highest priority value of Risk
Mitigations Strategies in Alternatives Cluster will be selected to treat the priority risks from
data processing using HOR1 in the scope of procurement activity. The overall synthesized
shown in Figure 4.6 below.
Figure 4.6 Overall synthesized priorities for the Alternatives

Table 4.20 Unweighted Super Matrix of Risk Mitigation Strategies
Goal Criteria Alternatives
Best C1 C2 C3 C4 C5 C6 N1 N2 N3 N4 S1 S2 S3 S4 PA1 PA2 PA3 PA4
Goal Best 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
C1 0.042 0.000 0.085 0.079 0.064 0.085 0.079 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.050 0.355 0.359 0.333
C2 0.203 0.077 0.000 0.188 0.122 0.127 0.147 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.083 0.058 0.131 0.126
C3 0.281 0.261 0.133 0.000 0.324 0.330 0.300 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.204 0.208 0.071 0.087
C4 0.272 0.344 0.302 0.336 0.000 0.330 0.223 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.266 0.194 0.075 0.210
C5 0.094 0.217 0.178 0.212 0.255 0.000 0.251 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.184 0.092 0.152 0.078
C6 0.108 0.102 0.302 0.185 0.235 0.127 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.212 0.095 0.213 0.166
N1 0.260 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.249 0.540 0.600 0.000 0.000 0.000 0.000 0.203 0.439 0.410 0.461
Criteria
N2 0.458 0.000 0.000 0.000 0.000 0.000 0.000 0.594 0.000 0.297 0.200 0.000 0.000 0.000 0.000 0.485 0.146 0.301 0.262
N3 0.179 0.000 0.000 0.000 0.000 0.000 0.000 0.249 0.594 0.000 0.200 0.000 0.000 0.000 0.000 0.171 0.311 0.171 0.124
N4 0.104 0.000 0.000 0.000 0.000 0.000 0.000 0.157 0.157 0.163 0.000 0.000 0.000 0.000 0.000 0.141 0.104 0.118 0.153
S1 0.491 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.249 0.143 0.249 0.487 0.123 0.534 0.458
S2 0.161 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.429 0.000 0.429 0.594 0.208 0.289 0.102 0.240
S3 0.158 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.143 0.157 0.000 0.157 0.096 0.420 0.218 0.116
S3 0.189 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.429 0.594 0.429 0.000 0.208 0.168 0.145 0.185
PA1 0.000 0.235 0.323 0.541 0.502 0.559 0.533 0.502 0.469 0.511 0.454 0.508 0.508 0.443 0.502 0.000 0.000 0.000 0.000
PA2 0.000 0.217 0.159 0.154 0.252 0.238 0.181 0.138 0.252 0.131 0.197 0.154 0.154 0.183 0.138 0.000 0.000 0.000 0.000
Alternatives
PA3 0.000 0.097 0.086 0.076 0.102 0.102 0.124 0.090 0.084 0.111 0.107 0.093 0.093 0.096 0.090 0.000 0.000 0.000 0.000
PA4 0.000 0.452 0.431 0.230 0.143 0.102 0.161 0.270 0.194 0.247 0.242 0.245 0.245 0.278 0.270 0.000 0.000 0.000 0.000
55
56
Table 4.21 Weighted Super Matrix of Risk Mitigation Strategies

Goal Best 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
C1 0.023 0.000 0.042 0.040 0.032 0.043 0.040 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.027 0.191 0.193 0.180
C2 0.112 0.039 0.000 0.094 0.061 0.063 0.073 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.045 0.031 0.070 0.068
C3 0.155 0.130 0.066 0.000 0.162 0.165 0.150 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.110 0.112 0.038 0.047
C4 0.150 0.172 0.151 0.168 0.000 0.165 0.112 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.144 0.105 0.040 0.113
C5 0.052 0.108 0.089 0.106 0.128 0.000 0.125 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.099 0.050 0.082 0.042
C6 0.059 0.051 0.151 0.092 0.117 0.063 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.115 0.051 0.115 0.090
N1 0.062 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.125 0.270 0.300 0.000 0.000 0.000 0.000 0.033 0.072 0.067 0.075
Criteria
N2 0.110 0.000 0.000 0.000 0.000 0.000 0.000 0.297 0.000 0.148 0.100 0.000 0.000 0.000 0.000 0.079 0.024 0.049 0.043
N3 0.043 0.000 0.000 0.000 0.000 0.000 0.000 0.125 0.297 0.000 0.100 0.000 0.000 0.000 0.000 0.028 0.051 0.028 0.020
N4 0.025 0.000 0.000 0.000 0.000 0.000 0.000 0.079 0.079 0.082 0.000 0.000 0.000 0.000 0.000 0.023 0.017 0.019 0.025
S1 0.103 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.125 0.071 0.125 0.145 0.037 0.159 0.136
S2 0.034 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.214 0.000 0.214 0.297 0.062 0.086 0.030 0.071
S3 0.033 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.071 0.079 0.000 0.079 0.028 0.125 0.065 0.035
S4 0.040 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.214 0.297 0.214 0.000 0.062 0.050 0.043 0.055
PA1 0.000 0.117 0.162 0.270 0.251 0.280 0.267 0.251 0.235 0.255 0.227 0.254 0.254 0.222 0.251 0.000 0.000 0.000 0.000
PA2 0.000 0.108 0.080 0.077 0.126 0.119 0.091 0.069 0.126 0.066 0.099 0.077 0.077 0.091 0.069 0.000 0.000 0.000 0.000
Alternatives
PA3 0.000 0.048 0.043 0.038 0.051 0.051 0.062 0.045 0.042 0.055 0.054 0.046 0.046 0.048 0.045 0.000 0.000 0.000 0.000
PA4 0.000 0.226 0.215 0.115 0.072 0.051 0.081 0.135 0.097 0.124 0.121 0.122 0.122 0.139 0.135 0.000 0.000 0.000 0.000
57
Table 4.22 Limit Matrix of Risk Mitigation Strategies

Goal Best 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
C1 0.048 0.048 0.048 0.048 0.048 0.048 0.048 0.048 0.048 0.048 0.048 0.048 0.048 0.048 0.048 0.048 0.048 0.048 0.048
C2 0.039 0.039 0.039 0.039 0.039 0.039 0.039 0.039 0.039 0.039 0.039 0.039 0.039 0.039 0.039 0.039 0.039 0.039 0.039
C3 0.071 0.071 0.071 0.071 0.071 0.071 0.071 0.071 0.071 0.071 0.071 0.071 0.071 0.071 0.071 0.071 0.071 0.071 0.071
C4 0.082 0.082 0.082 0.082 0.082 0.082 0.082 0.082 0.082 0.082 0.082 0.082 0.082 0.082 0.082 0.082 0.082 0.082 0.082
C5 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.059
C6 0.061 0.061 0.061 0.061 0.061 0.061 0.061 0.061 0.061 0.061 0.061 0.061 0.061 0.061 0.061 0.061 0.061 0.061 0.061
N1 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034
Criteria
N2 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034 0.034
N3 0.026 0.026 0.026 0.026 0.026 0.026 0.026 0.026 0.026 0.026 0.026 0.026 0.026 0.026 0.026 0.026 0.026 0.026 0.026
N4 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015
S1 0.057 0.057 0.057 0.057 0.057 0.057 0.057 0.057 0.057 0.057 0.057 0.057 0.057 0.057 0.057 0.057 0.057 0.057 0.057
S2 0.057 0.057 0.057 0.057 0.057 0.057 0.057 0.057 0.057 0.057 0.057 0.057 0.057 0.057 0.057 0.057 0.057 0.057 0.057
S3 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030
S4 0.054 0.054 0.054 0.054 0.054 0.054 0.054 0.054 0.054 0.054 0.054 0.054 0.054 0.054 0.054 0.054 0.054 0.054 0.054
PA1 0.160 0.160 0.160 0.160 0.160 0.160 0.160 0.160 0.160 0.160 0.160 0.160 0.160 0.160 0.160 0.160 0.160 0.160 0.160
PA2 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.062
Alternatives
PA3 0.032 0.032 0.032 0.032 0.032 0.032 0.032 0.032 0.032 0.032 0.032 0.032 0.032 0.032 0.032 0.032 0.032 0.032 0.032
PA4 0.080 0.080 0.080 0.080 0.080 0.080 0.080 0.080 0.080 0.080 0.080 0.080 0.080 0.080 0.080 0.080 0.080 0.080 0.080
CHAPTER V
ANALYSIS AND DISCUSSION
5.1 Identified Risks in Procurement Activity
Regarding to the research that has been conducted, there are 14 risk events with the level of
severity caused by each risk events itself and 20 sources of the risk or risk agents with the level
of occurrence or likelihood that causes risk events that shown in Table 4.3 and Table 4.4. Risks
that have been identified within the scope in Bagian Tanaman, potentially disrupting
procurement activity of raw material sugarcane possibly affect the amount of raw material
sugarcane that supplied into sugarcane milling machine in Unit PG. Modjopanggoong.
Based on the SCOR model that adopted in this study, there are 2 risk events in the source
process business, then there are 7 risk events in the make business process, and the last there
are 5 risk events in the deliver business process. The mapping of risk events using SCOR model
was limited to the scope of procurement activity, so that identified risks are limited ranging
from finding land for sugarcane cultivation, sugar cane production or cultivation until transport
sugarcane from the cultivation site to the manufacturer to be supplied in the sugarcane milling.
Based on the results, the risk events identified in each business process were then
assessed to be grouped into category based on the level of impact caused. In the process of risk
assessment that has been carried out in Chapter IV, there are 4 risk events that have a severity
level 5, 8 risk events with severity 4, 1 risk with severity 3 and 1 risk with severity 2, for more
details, see table 5.1. Furthermore, the source of risk or risk agents that have been identified
were also assessed to be classified based on likelihood or occurrence of risks. There are 5 risk
agents that have level of occurrence with value 5, there are 8 risk agents with level of
58
59
occurrence with value 4, there are 3 risk agents with level of occurrence with value 3 and 3 risk
agents with level of occureence with value 2. For more details, see table 5.2
Table 5.1 Category of Risk Events based on Level of Severity

Rank Severity Level Risk Events
1 Insignificant
2 Minor E12
3 Moderate E8
4 Major E3, E4, E5, E6, E7, E9
5 Catastrophic E1, E2, E10, E14
Table 5.2 Category of Risk Agents based on Level of Occurrence

Rank Occurrence Risk Agents
1 Rare -
2 Unlikely A2, A15, A20
3 Possible A4, A6, A8, A14
A1, A3, A5, A9, A10,
4 Likely
A11, A12, A13
5 Almost certain A7, A16, A17, A18, A19
5.2 Risk Prioritization using HOR
In order to find out the prioritized risks in the raw material sugarcane procurement activity in
Unit PG. Modjopanggoong, data processing of HOR phase 1 was conducted. Both of risk
events and risk agents were used as input in HOR framework phase 1. The assessment which
conducted in HOR phase 1 is based on combination of FMEA and HOQ. In FMEA phase, the
risk events and risk agents assessed using FMEA scale to find out the severity level of risk
events and occurrence level of risk agents. Furthermore, the risk agents and risk events are
assessed based on their correlation using HOQ scale. Since one risk agent could lead more than
one risk events, reducing risk agents' occurrence would typically prevent several risk events to
occur (Pujawan & Geraldin, 2009). Risk Agents’ priority need to be responded in HOR phase
1 is ranked based on the score of Aggregate Risk Potential (ARP). The higher ARP value of
Risk Agents; the higher rank the risk to be prioritized. After ARP value of each Risk Agents
has been obtained from data processing, it visualized into Pareto Chart to determine the risk
60
that has dominant impact in the raw material sugarcane procurement activity. By using pareto
rule 80:20, 80% of total ARP which contributes in disrupting procurement activity were picked
to be prioritized to be responded. The list of prioritized risk agents is on the table 5.3 below:
Table 5.3 Rank of Prioritized Risk based on ARP value
Cummulative
Code Risk Agents ARPj
Percentage
A1 Sugarcane cultivation margins are less 740 12.73
competitive than other commodities
A3 The price of sugar is very volatile 724 25.18
A18 Registered sugarcane which is cut down is sent 590 35.33
to competitors (Brown Sugar & Sugarcane
shelter)
A9 Narrow cultivation area 548 44.75
A16 The number of indigenous sugarcane areas are 450 52.49
limited
A11 Farmers lack financing and other production 392 59.24 Prioritized
facilities (seeds, fertilizer, medicines, etc.) Risk
A5 Several farmers are reluctant to register their 384 65.84
sugarcane with PG. (contract bound)
A19 The amount of sugarcane has not been achieved 320 71.35
according to RKAP
A6 Credit agreements between PG, Bank and 231 75.32
People's Sugarcane Farmers Cooperative
(KPTR) is not repaid timely
A14 Many of planting data of sugarcane variety are 231 79.29
less accurate
Based on the calculation of HOR phase 1 in Chapter IV, the ARP value of each risk agent
obtained. The priority rank of risk agents is based on the magnitude of the ARP value of each
risk agent in Table 5.3. The result shows that there are two risk agents with ARP more than
700, two risk agents with ARP value between 700 and 500, four risk agents with ARP value
between 500 and 300 and the rests have ARP value below 300. Further analysis shows that
there are ten risk agents contribute about 80% of total ARP. Description of prioritized risk
agent in Table 5.3 as follows:
1. Sugarcane cultivation margins are less competitive than other commodities (A1)
Risk Agent A1 has the highest ARP score which is 740 and also contributes 12.73%
affecting procurement activity of the entire risk agents, therefore it becomes the 1st rank
61
of risk agents that need to be prioritized. Risk Agent A1 has high correlations with several
risk events namely; farmers are not interested in growing sugarcane (E1), the total area
registered is less than the target (E2), Sugar that belongs to Manufacturer (GMPG) cannot
achieve target (RKAP) (E14). The risk events that identified are mostly caused and
affected by sugarcane cultivation margins are less competitive than other commodities.
When the margins of sugarcane cultivation reduce and cannot compete with other
commodities, farmer’s interest level in growing sugarcane also reduces. Besides, the less
sugarcane cultivation margins also the less the target of total area that registered, then the
sugar that produces in PG. Modjopanggoong also reduces and cannot achieve RKAP
target. Risk agent A1 also has moderate correlations with several risk agents; namely,
mechaization system cannot be applied in cultivation & low productivity (E8), raw
material sugarcane supplied is insufficient with milling cane demand (Jam berhenti A)
(E10). Risk agent A1 also influences application of mechanization and insufficient
cutting capacity but the impact in risk event is not big. Risk Agents A1 also has low
correlations with several risk events; namely, the risk of gardening costs payment is
disrupted (E3), the harvesting schedule does not match with maturity of sugarcane (E9),
the quality of raw material sugarcane is not as expected (E11), cannot apply
mechanization in harvesting process (E12).
2. The price of sugar is very volatile (A3)

Risk Agent (A3) has the second highest ARP which is 724 and also contributes 12.45%
with cumulative percentage 25.18% of entire risk agents that affecting procurement
activity. Risk agent A3 has high correlations with several risk events; namely, farmers
are not interested in growing sugarcane (E1), total area registered is less than the target
(E2), the risk of gardening costs payment is disrupted (E3). When the price of sugar is
easily volatile, that will affect the level of intest for farmers to cultivating or growing
sugarcane, similarly with the total of registered sugarcane field also less then target, and
also the gardening costs payment is disrupted because it influences the farmers’ income.
Risk agent A18 also has moderate correlations with several risk event that are, the
harvesting schedule does not match with maturity of sugarcane (E9), raw material
sugarcane supplied is insufficient with milling cane demand (Jam berhenti A) (E10),
sugar that belongs to Manufacturer (GMPG) cannot achieve target (RKAP) (E14). Risk
agent A18 also has low correlations with several risk events; namely, mechanization
system cannot be applied in cultivation & low productivity (E8), the quality of raw
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material sugarcane is not as expected (E11), cannot apply machanization in cutting

process (E12), potential of non-performing loans (E13).
3. Registered sugarcane which is cut down is sent to competitors (Brown Sugar &
Sugarcane shelter) (A18)
Risk agent A18 has the third highest ARP which is 590 and also contributes 10.15% with
cumulative percentage 35.33% of entire risk agents that affecting procurement acitivity.
Risk agent A18 has high correlations with raw material sugarcane supplied is insufficient
with milling cane demand (Jam berhenti A) (E10) and Sugar that belongs to
Manufacturer (GMPG) cannot achieve target (RKAP) (E14). Risk events that mentioned
above significantly triggered by the existance of competitors Brown Sugar industry and
sugar shelter. When the sugarcane farmers supply the mature cane to the competitors, the
demand of cane milling machine in PG. Modjopanggoong which is 2850 TCD cannot be
fulfilled and can cause idle time and cost production redundant. Risk agent A18 also has
moderate correlations with the maturity of sugarcane is uneven (E5) and potential of non-
performing loans (E13). Risk agent A18 also has low correlations with the quality of raw
material sugarcane is not as expected (E11).
4. Narrow land area (A9)

Risk agent A9 has the fourth highest ARP which is 392 and also contributes 9.42% with
Risk agent A9 has high correlations with several risk events; namely, the total area
registered is less than the target (E2), Mechanization system cannot be applied in
cultivation & low productivity (E8), Cannot apply machanization in harvesting process
(E12). Narrow land area potentially has big impact with the total registered area less than
target because the amount of cultivated sugarcane will be less than target. The narrower
area, the more difficult application of mechanization in cultivation and cutting process,
because the mechanization needs large field. Risk agent A9 also has moderate
correlations with two risk events; namely, farmers are not intersted in growing sugarcane
(E1) and raw material sugarcane supplied is insufficient with milling cane demand (Jam
berhenti A) (E10). Risk agent A9 also has low correlations with several risk events;
namely, the risk of gardening costs payment is disrupted (E3), The harvesting schedule
does not match with maturity of sugarcane (E9), the quality of raw material sugarcane is
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not as expected (E11), Sugar that belongs to Manufacturer (GMPG) cannot achieve target
(RKAP) (E14).
5. The number of indegeneous sugarcane areas are limited (A16)

Risk agent A16 has the fifth highest ARP which is 450 and also contributes 7.74% with
Risk agent A16 has high correlations with risk events raw material sugarcane supplied is
insufficient with milling cane demand (Jam berhenti A) (E10) and sugar that belongs to
Manufacturer (GMPG) cannot achieve target (RKAP) (E14). When the number of
indigenous sugarcane areas are limited, that would affect the fulfillment of cane milling
demand. When supply of sugarcane to milling cane demand cannot be fulfilled, it also
makes the idle capacity, redundant cost production and redundant energy. Moreover, the
sugar that produced by PG. Modjopanggoong will be less than RKAP, and it prone of
bankcruptcy of the company.
6. Farmers lack of financing and other production facilities (seeds, ferlitizer, medicines,
etc.) (A11)
Risk agent A11 has the sixth highest ARP which is 392 and also contributes 6.75% with
Risk agent A11 has high correlations with risk event several stages of cultivation are not
carried out, and usage of alternative fertilizers are not suitable (E6). Farmers lack of
financing and production facilities causes several stages of cultivation are not carried out
or delayed and also the usage of alternative fertilizers is not suitable because of lack of
budgets in order to cultivate the sugarcane. Risk agent A11 also has moderate correlations
with several risk event that are, the risk of gardening costs payment is disrupted (E3), the
potential of sugarcane pol is reduced, slow maturity phase (E7), mechanization system
cannot be applied in cultivation & low productivity (E8) and raw material sugarcane
supplied is insufficient with milling cane demand (Jam berhenti A) (E10). Risk agent
A11 also has low correlations with farmers are not intersted in growing sugarcane (E1),
the total area registered is less than the target (E2), the quality of raw material sugarcane
is not as expected (E11).
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7. Several farmers are reluctant to register their sugarcane with PG. (contract bound) (A5)
Risk agent A5 has the seventh highest ARP which is 384 and also contributes 6.60% with
Risk agent A5 has high correlations with the total area registered is less than the target
(E2). Reluctance of farmers to register their sugarcane with PG. Modjopanggoong
directly affecting the total area that must be registered less than target. If the farmers are
reluctant to make a contract bound with PG. Modjopanggoong that will reduce total area
of sugarcane field that must be supplied to PG. Modjopanggoong. Risk agent A5 also has
moderate correlations with farmers are not intersted in growing sugarcane (E1), the risk
of gardening costs payment is disrupted (E3) and sugar that belongs to Manufacturer
(GMPG) is not in accordance with RKAP (E14). Risk agent A5 has low correlations with
raw material sugarcane supplied is insufficient with milling cane demand (Jam berhenti
A) (E10) and potential of non-performing loans (E13).
8. The amount of sugarcane has not been achieved according to RKAP (A19)
Risk agent A19 has the eighth highest ARP which is 320 and also contributes 5.51% with
Risk agent A19 has high correlations with sugar that belongs to Manufacturer (GMPG)
is not in accordance with RKAP (E14). The amount of sugarcane has not been achieved
according to RKAP directly causes sugar production decrease then sugar that belongs to
PG. Modjopanggoong automatically cannot achieve RKAP as targeted. Risk agent A19
also has moderate correlations with raw material sugarcane supplied is insufficient with
milling cane demand (Jam berhenti A) (E10) and low corralations with the quality of raw
material sugarcane is not as expected (E11).
9. Credit agreement between PG, Bank and Sugarcane Farmer Community Cooperative
(KPTR) are not timely (A6)
Risk agent A6 has the ninth highest ARP which is 231 and also contributes 3.97% with
Risk agent A6 has high correlations with the risk of cultivation costs payment is disrupted
(E3). When the credit agreement among company and stakeholders are not paid timely
that would affecting cultivation cost payment is disrupted, such as the delay in several
cultivation processes. Risk agent A6 also has moderate correlations with farmers are not
intersted in growing sugarcane (E1) and the total area registered is less than the target
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(E2). Besides, risk agent A6 has low correlations with several risk events that are
mechanization system cannot be applied in cultivation & low productivity (E8), the
quality of raw material sugarcane is not as expected (E11) and potential of non-
performing loans (E13).
10. Many of planting data of sugarcane variety is less accurate (A14)

The risk agent A14 also has the ninth highest ARP same with A6 which is 231 and also
contributes 3.97% of entire risk agents that affecting procurement acitivity. Risk Agent
A14 has high correlation with risk events of the harvesting schedule does not match with
maturity of sugarcane (E9) and the quality of raw material sugarcane is not as expected
(E11). If the sample of sugarcane that used in the business process of Analisa
Pendahuluan is not correct, that would impact the the harvesting schedule which taking
the optimal maturity of sugar and also the quality of sugarcane cannot be maximized.
Risk agent A14 also has low correlation with risk event of sugar that belongs to
Manufacturer (GMPG) cannot achieve target (RKAP) (E14), which influence the amount
of raw material sugarcane to achieve RKAP by supplying with low yield.
After data processing using HOR phase 1, it results 10 prioritized risk agents to be responded
in the risk treatment stage. In this study, there are two risk agents with the same ARP value
which is 231; namely, Risk Agent A6 and Risk Agent A14. However, after discussed with
Manajer Tanaman, Risk Agent A6 placed in the higher rank which is 9 and A14 placed in rank
10 because A6 potentially causes bigger impact than A14.
5.3 Analysis of The Best Strategy Selection using ANP
In this stage, after obtained Risk Agents that are given priority to be responded, researcher
determine response how to give treatment to the prioritized risk. According to study conducted
by Curkovic et al. (2013), there are several options included in risk treatment in SCRM based
on ISO 31000:2009 framework, such as acceptance of risk to realize competitive advantage;
avoidance of risk by not engaging in the activity; reduction or removal of the impact or
probability of the risk; distribution of risk by sharing or transferring the risk. In order to respond
the prioritized risk, there are two options that adopted; namely, acceptance the risk as
mentioned in Table 4.7 with code PA5 and risk reduction by composing suitable risk mitigation
strategies mentioned in Table 4.7 with core PA1, PA2, PA3, PA4. There are two risks
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responded by acceptance risk because of company limitation to respond it; namely, volatility
of sugar’s price depending on the market and the economic condition of the country and also
narrow cultivation are which represent the availability area for cultivation. Supply chain risks
involve external risks, such as logistical difficulties, supplier problems, and those sourcing
from governmental actions, and internal risks (operations and primarily policies); these
characteristics are typically categorized as sustainability, therefore collaborate supply chain
risk and sustainability is reasonable to make supply chains more resilient (Rostamzadeh et al.,
2018).
In order to select the proper risk mitigation strategies from four mitigation strategy, it has
to fulfill several criteria that can lead sustainability for the company. Therefore, technical
response is needed in the context of managerial level decision making in the activity of raw
material sugarcane procurement in the company's supply chain. Analytic Network Process is
employed to select the risk mitigation strategy by considering sustainability dimensions based
on value of priority weights, which one is the most suitable to reduce the risk and maintain
company’s supply chain sustainability.
5.3.1 Analysis of Main Criteria
Based on the result on Table 4.11 in Chapter IV, the Economic Sustainability Cluster has the
highest value of prority weight over other main criteria. The result indicates that economic
sustainability needs to be prioritized first over the social and environmental sustainability.
Since Economic sustainability refers to the company business sustainability, the establishement
this company is to utilize agricultural products, especially sugar cane to be processed into sugar
so that the value of the benefits and selling is higher in the market in order to generate profit.
Besides, the pairwise comparison result of Social and Environmental Sustainabilities has the
same priorities as well as the mission and vision of government-owned companies in order to
participate in improving people's welfare and protecting the environment for the good of future
generations.
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5.3.2 Analysis of Economic Sustainability Cluster
Within Economic Sustainability Cluster, there are six sub-criteria; namely, Cost of Goods
Reduction, Increase Company Profitablity, Increase Sugarcane Quality, Increase Sugarcane
Quantity, Increase Sugarcane Cultivation Productivity, Benefit Sharing. Each sub-criterion has
its own function, for instance:
Sub-Criterion Increase Sugarcane Quantity means that the higher amount of raw material
sugarcane supplied, the higher capability to fulfil the milling cane machine demand to produce
electricity as energy for milling operation. Besides, demand fulfilment of the milling cane
machine demand can reduce idle activity of machine to be more productive. So that, this sub-
criterion is needed to be considered as economic aspect to concern with company business to
generate maximum profit. Different from Increase Company Profitability, company
profitability has could be maximized if the amount of sugar production could fulfill demand
from the brokers as customers.
Based on the data processing on Table 4.12 in Chapter IV, sub-criteria Increase Company
Profitability (C3) has the highest value of priority weight which is 0.2813. The second highest
sub-criteria Increase Sugarcane Cultivation Productivity (C4) with priority weight 0.2720 and
followed by Cost of Goods Reduction (C2) with priority weight 0.2029. The inconsistency test
is 0.06463 which is less than 0.1 that indicates the assessment is consistent. However, the
objective of organization or enterprise concern with profit oriented, therefore the criteria that
must be focused on Increasing Company Profitability.
Since the nodes within Economic Sustainability Cluster influence each other, so the
connection is depicted as loop arc which indicates the inner dependence among cluster as
shown in Figure 4.5. Within the Economic Sustainability Cluster, the entire set of criteria is
first compared with respect to their influence on Benefit Sharing Accross Value Chain. Next,
the entire set of criteria are compared with respect to their influence on Cost of Goods
Reduction; their influence on Increase Company Profitability; until their influence on Increase
Sugarcane Quantity. For instance, the pairwise comparison of influence sub-criteria w.r.t.
Increase Company Profitability (C3) resulted Increase Sugarcane Cultivation Productivity (C4)
as the highest priority weight over other criteria as shown in Table A3 in Appendix A.
Therefore, this can be concluded that increasing sugarcane cultivation Productivity would lead
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to increase the yield that increase the amount sugarcane supplied to produce more sugar to be
sold; then it leads to increase the profitability. For the rest of pairwise comparison of nodes
within Economic Sustainability Cluster are shown in Appendix A.
5.3.3 Analysis of Environmental Sustainability Cluster
Based on the data processing on Table 4.13 in Chapter IV, sub-criteria Climate Change
Mitigation & Adaptation (N2) has the highest value of priority weight which is 0.4576. The
second highest sub-criteria Appropriate Land Use (N1) with priority weight 0.2720, followed
by Efficient Water Use (N3) with priority weight 0.1789 and the lowest priority weight is
Reduce Pollution and Waste (N4). The inconsistency test is 0.06175 which is less than 0.1 that
indicates the assessment is consistent. In order to keep sugarcane cultivation sustainable,
climate change mitigation & adoptation is necessary due to climate risk which potentially
disrupt cultivation activity.
Since the nodes within Environmental Sustainability Cluster influence each other, so the
shown in Figure 4.5. Within the Environmental Sustainability Cluster, the entire set of criteria
is first compared with respect to their influence on Appropriate Land Use. Next, the entire set
of criteria are compared with respect to their influence on Climate Change Mitigation &
Adapatation; their influence on Efficient Water Use; and their influence on Reduced pollution
and waste. For instance, the pairwise comparison of sub-criteria w.r.t. Climate Change
Mitigation & Adaptation (N2) resulted Efficient Water Use (N3) as the highest priority weight
over other sub-criteria as shown in Table B2 in Appendix B. Based on the result, it can be
concluded that Efficient Water Use in cultivation activity has big effect to deal with climate
change to be more adaptable. For the rest of pairwise comparison of nodes within
Environmental Sustainability Cluster are shown in Appendix B.
5.3.4 Analysis of Social Sustainability Cluster
Based on the data processing on Table 4.14 in Chapter IV, sub-criterion Giving Incentives to
Local Community (S1) has the highest value of priority weight which is 0.4912. The second
highest sub-criterion Provide Employment Opportunity (S4) with priority weight 0.1894,
followed by Improve Walfare Community (S2) with priority weight 0.1612 and the lowest
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priority weight is Protected Health, Safety, and Human Rights for Worker (S3). The
inconsistency test is 0.06395 which is less than 0.1 that indicates the assessment is consistent.
Social sustainability refers to make a good connection with the stakeholders who involves in
the business process, both internal of company such as employee and external of company such
as sugarcane farmers. Besides, social aspect also considers how to maintain Giving Incentives
to Local Community, especially sugar based on market demand.
Since the nodes within Social Sustainability Cluster influence each other, so the
shown in Figure 4.5. Within the Social Sustainability Cluster, the entire set of criteria is first
compared with respect to their influence on Giving Incentives to Local Community. Next, the
entire set of criteria are compared with respect to their influence on Improve Walfare of Local
Community; their influence on Protected Health, Safety and Human Right for Workers; and
their influence in Provide Employment Opportunity. For instance, the pairwise comparison of
sub-criterion w.r.t. Improve Walfare of Local Community (S2) resulted Provide Employment
Opportunity (S4) as the highest priority weight over other criteria as shown in Table C2 in
Appendix C. Based on the result, it can be concluded that providing employment opportunity
to the community has strong influence to improve walfare of local community over other sub-
criteria. For the rest of pairwise comparison of nodes within Social Sustainability Cluster are
shown in Appendix C.
5.3.5 Analysis of Sub-Criteria w.r.t. Alternatives
In order to serve our understanding of the complexity around us, we must learn to break down
these judgments through more elaborate structures and organize our reasoning and calculations
in advanced but simple ways. Saaty & Vargas (2006) states, although it takes more time and
effort, we must use feedback networks to arrive at the kind of decisions needed to deal with the
future. The ANP is able to take into consideration the impacts of the alternatives on the
importance of criteria and vise versa; moreover, ANP also allows the grouping of similarly-
related elements into clusters which cannot be carried out using AHP. Therefore, the arcs that
connect from risk mitigations strategies in Alternatives nodes to each node within each Clusters
represents as feedback that alternatives are not always influence by the criteria to make
judgement.
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5.3.6 Analysis of Supermatrix
To carry out synthesis, ANP uses a super matrix to represent the influences, relations, weights,
priorities among the elements and clusters in the network model. Each row and column of the
matrix links to an element in the ANP model. This model contains the goal, the criteria or
clusters and their sub criteria or nodes within each cluster, an also the alternatives. Each
coloumn in the super matrix represents the weight of an element from the columns-header with
respect to an element from the row-header (Poh & Liang, 2017). There are three supermatrix
associated with each network; namely, unweighted supermatrix; weighted supermatrix and
limit supermatrix.
The unweighted supermatrix composed of coloumn which consists of several

eigenvectors obtained from pairwise comparison of the nodes within the cluster with respect to
a parent node. A parent node may have children in various different clusters, so the priority
eigenvectors are weighted on top of each other in the parent node’s column (Adams & Saaty,
2016). As a result, local priorities of pairwise comparison among the nodes through the network
are used as input in unweighted supermatrix as shown in Table 4.15.
The weighted supermatrix is obtained by multiplying the entire elements in the

component of unweighted supermatrix by matching cluster weight. Since in each column
consists of several eigenvectors which of them sums up to 1.0 (in a column of a stochastic) and
hence the whole column of the matrix may sum to an integer greater than 1.0 (Gencer &
Gu¨rpinar, 2007). Therefore, the first step to get weighted supermatrix need to determine the
primarily interdependence of the clusters on each cluster w.r.t. control criterion. This process
generates an eigenvector of interdependence of clusters with each cluster, then unweighted
supermatrix is multiplied by priority weights from the clusters, which results the weighted
supermatrix.
The limit supermatrix is obtained by multiplying the weighted supermatrix itself until the
result is stable which indicated by supermatrix’s row values has the same value for each column
of the matrix. When the supermatrix’s row values is the same with each column of the matrix,
the limit matrix has been reached out and the matrix multiplication process finish.
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5.3.7 Analysis of Synthesized Supermatrix
Based on the overall synthesized priorities for Alternatives shown in Figure 4.6, the result
shows there are three coloumns that consist of Raw coloumn which gives priorities from
limiting supermatrix; Normals Coloumn shows the results after each component has
normalized; Ideals coloumn shows results obtained by deviding the values in either normalized
or limiting coloumns by the largest value in coloumn (Adams & Saaty, 2016). In this research
the value of Ideals coloumn is picked and the result of each Alternatives (PA1, PA2, PA3, PA4)
respectively is around 1.00, 0.386, 0.200 and 0.500. The result shows that PA1 has the highest
value of global weight over other Alternatives. Hence, it can be concluded that strategy of
Expanding the company unit’s sugarcane area (TS) and managed directly by PG.
Modjopanggoong gradually (PA1) is selected to be the best strategy for reducing risks and lead
to maintain company supply chain sustainability.
5.4 Limitations and Future Research
Basically, the framework that built in this study is the same as HOR framework introduced by
Pujawan and Geraldin; namely HOR phase 1 is used for risk identification and determine the
risk priority based on the weight of ARP value to be mitigated, while HOR phase 2 is used to
determine the risk mitigation priorities based on the ease to be implemented and correlation
with the prioritized risk form HOR1. The difference in this study is HOR phase 2 adopts
sustainability criteria due to risk management and sustainability have relationship to make
supply chain more resilience. In order to choose the best alternative strategy for reducing risks
and maintaing sustainability, this study proposed ANP to Manajer Tanaman as the expert to
make technical response based on multi-criteria decision making because there are connections
among the sub-criteria inside each cluster that consists of sustainability dimensions and its
capability to give feedback among risk mitigations strategies as alternatives and sub-criteria.
Since the time of the study was limited, this study ignores the analysis of costs,
opportunities and risks for consideration of the feasibility of implementing the risk mitigation
strategies made. Therefore, it would be nice if there were a BOCR analysis applied for future
studies.
CHAPTER VI
CONCLUSION AND RECOMMENDATION
6.1 Conclusion
Based on the analysis and discussion in Chapter V, a conclusion can be formulated to answer
the problem that occur in the procurement activity that mentioned in Chapter I. It is stated in
the following statement:
1. Based on the result, there are ten risk agents that highly contribute disrupting raw
material procurement sustainability in PG. Modjopanggoong; namely, sugarcane
cultivation margins are less competitive than other commodities, the price of sugar is
very volatile, registered sugarcane which has been harvested are delivered to
competitors (Brown Sugar & Sugarcane Shelter), narrow cultivation area, the number
of indigenous sugarcane areas are limited; farmers lack financing and other production
facilities (seeds, fertilizer, medicines, etc.), several farmers are reluctant to register
their sugarcane with PG. (contract bound), the amount of sugarcane has not been
achieved according to RKAP, credit agreements among PG, Bank and People's
Sugarcane Farmers Cooperative (KPTR) are not timely, many of planting data of
sugarcane variety is less accurate.
2. Based on the proposed ANP method to facilitate Manajer Tanaman’s decision making
in procurement activity in PTPN X Unit PG. Modjopanggoong supply chain,
“Expanding the company unit’s sugarcane area (TS) and managed directly by PG.
Modjopanggoong gradually” (PA1) has the highest global weight value over other
risk mitigation strategies, therefore this alternative is selected as the best strategy for
reducing the risks and maintaining company’s supply chain sustainability.
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6.2 Recommendation
By applying risk mitigation strategy of Expanding the company unit’s sugarcane area (TS) and
managed directly by PG. Modjopanggoong gradually (PA1), activity of raw material sugarcane
procurement tends to be more controllable. Thus, the entire activity in the sugarcane activity
can be monitored and controlled directly by company, such as maximize the sugarcane
cultivation productivity and reducing the risk of supply sugarcane to competitors by contracted
farmers. Bagian Tanaman as department that plays crucial role in the upstream supply chain
could maintain economic sustainability namely; maximize the amount of supply of raw
material sugarcane to milling cane, maximize quality of sugarcane, increase cultivation
productivity so that the target of RKAP can be achieved by Bagian Tanaman. Besides, the
strategy can help to gain more profit and reduce cost of goods based on economic sustainability
criteria.
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APPENDICES
Appendix A: Pairwise Comparison of nodes in Economic Sustainability Cluster
Table A.1. Pairwise Comparison of Sub-Criteria w.r.t. Benefit Sharing

C2 C3 C4 C5 C6 Priority Weight Inconsistency
C2 1 1/3 1/3 1/3 1/2 0.0771
C3 3 1 1 1 3 0.2607
C4 3 1 1 3 3 0.3439 0.04651
C5 3 1 1/3 1 3 0.2167
C6 2 1/3 1/3 1/3 1 0.1017
Table A2. Pairwise Comparison of Sub-Criteria w.r.t. Cost of Goods Reduction

C1 1 1 1/4 1/3 1/3 0.0849
C3 1 1 1 1/2 1/3 0.1329
C4 4 1 1 3 1 0.3018 0.07544
C5 3 2 1/3 1 1/2 0.1781
C6 3 3 1 2 1 0.3023
Table A3. Pairwise Comparison of Sub-Criteria w.r.t. Increase Company Profitability

C1 1 1/3 1/3 1/3 1/2 0.0791
C2 3 1 1/2 1 1 0.1879
C4 3 2 1 3 1 0.3360 0.06017
C5 3 1 1/3 1 2 0.2123
C6 2 1 1 1/2 1 0.1846
Table A4. Pairwise Comparison of Sub-Criteria w.r.t. Increase Sugarcane Productivity

C1 1 1/3 1/4 1/4 1/3 0.0636
C2 3 1 1/3 1/2 1/3 0.1218
C3 4 3 1 1 2 0.3245 0.03241
C5 4 2 1 1 1 0.2551
C6 3 3 1/2 1 1 0.2349
Table A5. Pairwise Comparison of Sub-Criteria w.r.t. Increase Sugarcane Quality
C1 1 1/2 1/3 1/3 ½ 0.0852
C2 2 1 1/3 1/3 1 0.1269
C3 3 3 1 1 3 0.3305 0.01732
C4 3 3 1 1 3 0.3305
C6 2 1 1/3 1/3 1 0.1269
Table A6. Pairwise Comparison of Sub-Criteria w.r.t. Increase Sugarcane Quantity

C1 1 1/2 1/3 1/3 1/3 0.0791
C2 2 1 1/2 1 1/3 0.1468
C3 3 2 1 1 2 0.2999 0.04212
C4 3 1 1 1 1 0.2232
C5 3 3 1/2 1 1 0.2509
Appendix B: Pairwise Comparison of nodes in Environment Sustainability Cluster
Table B1. Pairwise Comparison of Sub-Criteria w.r.t. Appropriate Land Use

N2 N3 N4 Priority Weight Inconsistency
N2 1 3 3 0.5936
N3 1/3 1 2 0.2493 0.0516
N4 1/3 1/2 1 0.1571
Table B2. Pairwise Comparison of Sub-Criteria w.r.t. Climate Change Mitigation

N1 1 1/3 2 0.2493
N3 3 1 3 0.5936 0.0516
N4 1/2 1/3 1 0.1571
Table B3. Pairwise Comparison of Sub-Criteria w.r.t. Efficient Use Water

N1 1 2 3 0.5396
N2 1/2 1 2 0.2970 0.0089
N4 1/3 ½ 1 0.1634
Table B4. Pairwise Comparison of Sub-Criteria w.r.t. Reduce Pollution and Waste
N1 1 3 3 0.6
N2 1/3 1 1 0.2 0.0000
N3 1/3 1 1 0.2
Appendix C: Pairwise Comparison of nodes in Social Sustainability Cluster
Table C1. Pairwise Comparison of Sub-Criteria w.r.t. Giving Incentives to Local Community
S2 S3 S4 Priority Weight Inconsistency
S2 1 3 1 0.4286
S3 1/3 1 1/3 0.1429 0.0000
S4 1 3 1 0.4286
Table C2. Pairwise Comparison of Sub-Criteria w.r.t. Improve Walfare of Local Community
S1 1 2 1/3 0.2493
S3 1/2 1 1/3 0.1571 0.05156
S4 3 3 1 0.5936
Table C3. Pairwise Comparison of Sub-Criteria w.r.t. Protected Health, Safety and Human
Right for Workers
S1 1 1/3 1/3 0.1529
S2 3 1 1 0.2620 0.0000
S4 3 1 1 0.4611
Table C4. Pairwise Comparison of Sub-Criteria w.r.t. Provide Employment Opportunity

S1 1 1/3 2 0.2493
S2 3 1 3 0.5936 0.05156
S3 1/2 1/3 1 0.1571
Appendix D: Pairwise Comparison of Alternatives
Table D1. Pairwise Comparison of Alternatives w.r.t sub-criteria Benefit Sharing

Priority
PA1 PA2 PA3 PA4 Inconsistency
Weight
PA1 1 1 3 1/2 0.2349
PA2 1 1 3 1/3 0.2166
0.04417
PA3 1/3 1/3 1 1/3 0.0966
PA4 2 3 3 1 0.4520
Table D2. Pairwise Comparison of Alternatives w.r.t sub-criteria Cost of Goods Reduction
Priority
Weight
PA1 1 3 4 1/2 0.3235
PA2 1/3 1 3 1/3 0.1591
0.07889
PA3 1/4 1/3 1 1/3 0.0865
PA4 2 3 3 1 0.4310
Table D3. Pairwise Comparison of Alternatives w.r.t sub-criteria Increase Company

Profitability
Priority
Weight
PA1 1 4 5 3 0.5409
PA2 1/4 1 3 1/2 0.1535
0.04159
PA3 1/5 1/3 1 1/3 0.0758
PA4 1/3 2 3 1 0.2298
Table D4. Pairwise Comparison of Alternatives w.r.t sub-criteria Increase Sugarcane

Cultivation Productivity
Priority
Weight
PA1 1 3 4 3 0.5023
PA2 1/4 1 2 3 0.2524
0.0656
PA3 1/5 1/3 1 1/2 0.1019
PA4 1/3 2 3 1 0.1434
Table D5. Pairwise Comparison of Alternatives w.r.t sub-criteria Increase Sugarcane Quality
Priority
Weight
PA1 1 4 4 4 0.5591
PA2 1/4 1 3 3 0.2376
0.05787
PA3 1/4 1/3 1 1 0.1016
PA4 1/4 1/3 1 1 0.1016
Table D6. Pairwise Comparison of Alternatives w.r.t sub-criteria Increase Sugarcane

Quantity
Priority
Weight
PA1 1 4 4 3 0.5334
PA2 1/4 1 1 2 0.1814
0.07355
PA3 1/4 1 1 1/2 0.1237
PA4 1/3 2 2 1 0.1614
Table D7. Pairwise Comparison of Alternatives w.r.t sub-criteria Appropriate Land Use
Priority
Weight
PA1 1 3 4 3 0.5017
PA2 1/3 1 2 1/3 0.1384
0.05977
PA3 1/4 ½ 1 1/3 0.0901
PA4 1/3 3 3 1 0.2699
Table D8. Pairwise Comparison of Alternatives w.r.t sub-criteria Climate Change Mitigation
and Adaptation
Priority
Weight
PA1 1 3 4 2 0.4692
PA2 1/3 1 3 2 0.2524
0.05977
PA3 1/4 1/3 1 1/3 0.0842
PA4 1/2 ½ 3 1 0.1942
Table D9. Pairwise Comparison of Alternatives w.r.t sub-criteria Efficient Water Use
Priority
Weight
PA1 1 3 4 3 0.5110
PA2 1/3 1 1 1/2 0.1310
0.03276
PA3 1/4 1 1 1/3 0.1105
PA4 1/3 2 3 1 0.2475
Table D10. Pairwise Comparison of Alternatives w.r.t sub-criteria Reduced Pollution and
Waste
Priority
Weight
PA1 1 3 3 2 0.4535
PA2 1/3 1 2 1 0.1972
0.03044
PA3 1/3 ½ 1 1/3 0.1072
PA4 1/2 1 3 1 0.2420
Table D11. Pairwise Comparison of Alternatives w.r.t sub-criteria Giving Incentives to Local
Community
Priority
Weight
PA1 1 3 4 3 0.5080
PA2 1/3 1 2 1/2 0.1545
0.03276
PA3 1/4 ½ 1 1/3 0.0926
PA4 1/3 2 3 1 0.2449
Table D12. Pairwise Comparison of Alternatives w.r.t sub-criteria Improve Walfare of Local
Community
Priority
Weight
PA1 1 3 4 3 0.5080
PA2 1/3 1 2 1/2 0.1545
0.03276
PA3 1/4 ½ 1 1/3 0.0926
PA4 1/3 2 3 1 0.2449
Table D13. Pairwise Comparison of Alternatives w.r.t sub-criteria Protected Health, Safety
and Human Right Workers
Priority
Weight
PA1 1 3 3 2 0.4430
PA2 1/3 1 3 1/2 0.1828
0.05361
PA3 1/3 1/3 1 1/3 0.0959
PA4 ½ 2 3 1 0.2783
Table D14. Pairwise Comparison of Alternatives w.r.t sub-criteria Provide Employment
Opportunity
Priority
Weight
PA1 1 3 4 3 0.5017
PA2 1/3 1 2 1/3 0.1384
0.05977
PA3 ¼ 1/2 1 1/3 0.0901
PA4 1/3 3 3 1 0.2699
Appendix E: Pairwise Comparison of Sub-Criteria w.r.t. Alternatives
Table E1. Pairwise Comparison of Economic Sustainability w.r.t. PA1

C1 C2 C3 C4 C5 C6 Weight Inconsistency
C1 1 1/2 1/3 1/5 1/4 1/4 0.0503
C2 2 1 1/3 1/2 1/3 1/3 0.0833
C3 3 3 1 1 1 1 0.2042
0.03301
C4 5 2 1 1 3 1 0.2662
C5 4 3 1 1/3 1 1 0.1837
C6 4 3 1 1 1 1 0.2123
Table E2. Pairwise Comparison of Environmental Sustainability w.r.t. PA1

Priority
N1 N2 N3 N4 Inconsistency
Weight
N1 1 1/3 2 1 0.2026
N2 3 1 3 3 0.4850
0.06948
N3 1/2 1/3 1 2 0.1712
N4 1 1/3 1/2 1 0.1412
Table E3. Pairwise Comparison of Social Sustainability w.r.t. PA1

Priority
S1 S2 S3 S4 Inconsistency
Weight
S1 1 3 3 3 0.4874
S2 1/3 1 3 1 0.2085
0.05787
S3 1/3 1/3 1 1/3 0.0956
S4 1/3 1 3 1 0.2085
Priority
C1 C2 C3 C4 C5 C6 Inconsistency
Weight
C1 1 3 3 3 3 3 0.3545
C2 1/3 1 1/3 1/3 1/3 1/3 0.0575
C3 1/3 3 1 1 4 3 0.2079
0.07395
C4 1/3 3 1 1 3 3 0.1937
C5 1/3 3 1/4 1/3 1 1 0.0919
C6 1/3 3 1/3 1/3 1 1 0.0945

Priority
Weight
N1 1 3 2 3 0.4393
N2 1/3 1 1/3 2 0.1464
0.04544
N3 1/2 3 1 3 0.3107
N4 1/3 1/2 1/3 1 0.1036

Priority
Weight
S1 1 1/3 1/2 1/2 0.1233
S2 3 1 1/2 2 0.2892
0.06175
S3 2 2 1 3 0.4197
S4 2 1/2 1/3 1 0.1678

Priority
Weight
C1 1 3 3 3 3 3 0.3585
C2 1/3 1 2 2 1/2 1 0.1305
C3 1/3 1/2 1 1 1/3 1/3 0.0711
0.05885
C4 1/3 1/2 1 1 1/2 1/3 0.0750
C5 1/3 2 3 2 1 1/3 0.1518
C6 1/3 1 3 3 3 1 0.2131
Table E8. Paiwise Comparison of Environmental Sustainability w.r.t. PA3
Priority
Weight
N1 1 2 2 3 0.4100
N2 1/2 1 3 2 0.3012
0.06175
N3 1/2 1/3 1 2 0.1709
N4 1/3 1/2 1/2 1 0.1178

Priority
Weight
S1 1 4 3 4 0.5340
S2 1/4 1 1/2 1/2 0.1023
0.03044
S3 1/3 2 1 2 0.2184
S4 1/4 2 1/2 1 0.1452

Priority
Weight
C1 1 3 3 2 3 3 0.3328
C2 1/3 1 3 1/3 2 1/2 0.1264
C3 1/3 1/3 1 1/3 1 1 0.0868
0.06153
C4 ½ 3 3 1 2 1 0.2096
C5 1/3 1/2 1 1/2 1 1/3 0.0782
C6 1/3 2 1 1 3 1 0.1662

Priority
Weight
N1 1 3 3 2 0.4611
N2 1/3 1 3 2 0.2620
0.0656
N3 1/3 1/3 1 1 0.1241
N4 1/2 1/2 1 1 0.1529

Priority
Weight
S1 1 3 3 2 0.4582
S2 1/3 1 2 2 0.2404
0.05361
S3 1/3 1/2 1 ½ 0.1163
S4 1/2 1/2 2 1 0.1851

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MULTIPLE-CRITERIA DECISION MAKING TO SELECT THE BEST STRATEGY

FOR REDUCING RISKS AND MAINTAINING SUSTAINABILITY IN SUPPLY

Submitted to International Program

PTPN X Unit PG. Modjopanggoong

My Thesis Supervisor, Dr. Drs. Imam Djati Widodo, M.Eng.Sc.

International Program, Department of Industrial Engineering, Faculty of Industrial

‫خير الناس أنفعهم للناس‬

Assalamu’alaikum Warahmatullahi Wabarakatuh

Yogyakarta, November 2018

Muhammad Firdaus Saputra

Figure 2.1 Supply chain ........................................................................................................... 13

Agroindustry is an industry that processes materials of plant or animal origin

In order to contribute to the development of national economy in general and state

In agricultural supply chain management has special characteristics; for instance,

Based on the background description above, the application of risk management is

1.2 Problem Formulation

1.3 Reseach Objectives

The objective of this research is to fulfill several objectives as mentioned as below:

1.4 Scope of Problem

1.5 Benefits of Research

There are several benefits of this research as below:

1.6 Systematical Writing

CHAPTER II LITERATURE REVIEW

CHAPTER III RESEARCH METHODOLOGY

CHAPTER IV DATA COLLECTION AND DATA PROCESSING

CHAPTER VI CONCLUSION AND RECOMMENDATION

2.1 Inductive Study

FMEA, Causal Risk Management,

Deductive study or deductive reasoning is testing the existing theory to develop

2.2.1 Supply Chain Management

Figure 2.1 Supply chain

2.2.4 Risk Management

3. Risk identification aims to generate a comprehensive list of risks from different

2.2.5 Supply Chain Risk Management

2.2.6 Sustainable Supply Chain Management (SSCM) in Sugar Enterprises

Sustainable supply chain management (SSCM) comprises the “management of material,

Figure 2.3 Dimensions of Sustainability in Sugar Production

2.2.7 House of Risk (HOR)

In the well-known FMEA, risk assessment is done through calculation of an RPN

2.2.8 Analytic Network Process (ANP)

The Analytic Network Process (ANP) is a generalization of the Analytic Hierarchy

Step 1: Build a hierarchical structure

Step 2: Create a pairwise matrix and calculate the eigenvectors

Where A indicates an n x n pairwise comparison matrix, w is the eigenvector and λmax is

If 0 ≤ CR ≤ 0.1, the judgement of experts is consistent (Saaty, 1996)

Step 3: Form the supermatrices

Step 4: Select the best alternatives solution

3.1 Research Object and Location

3.2 Problem Identification

3.3 Problem Formulation

3.4 Data Collection

This research uses two types of data; namely:

3.5 Data Collection Method

1. Observation and Interview

Observation is used to observe the business process in PTPN X Unit PG.

3.6 Data Processing

3.6.1 House of Risk

Table 3.1 Risk Agent’s occurrence level