CHAPTER 3 COMPANY PROFILE 3.1 Short History of The …thesis.binus.ac.id/Asli/Bab3/Bab 3_09-31.pdf · domestic contractors such as PT Rekayasa Industri and PT Inti Karya Persada Teknik.

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CHAPTER 3

COMPANY PROFILE

3.1 Short History of The Company

PT. Pupuk Kujang was established on June 9, 1975 with the capital of US$ 260 million,

US$ 200 million from the loan of Iran Government, and US$ 60 million from

Indonesian Government Co-Financing (PMP). The loan from Iran Government was paid

fully in 1989. The first development of Pupuk Kujang plant then named Kujang 1A with

capacity of 570,000tons/year of urea and 330,000 tons/year of ammonia in production

had been implemented by main contractors; that is Kellog Overseas Corporation (USA)

and Toyo Engineering Corporation (Japan). The development of this Kujang Plant 1A

was performed within 36 months. In accordance with Government Regulation Number

28 of 1997 and based on The Extraordinary Meeting of Shareholders on July 25, 1997,

PT Pupuk Kujang became the subsidiary of PT Pupuk Sriwijaya, and it has been

approved to sell 10 share certificates of PT Pupuk Sriwijaya to PT Pupuk Kujang owned

by Yayasan Kesejahteraan Warga Kujang.

The age of plant that got older and older makes a consequence to the higher charge of

maintenance and more increasing downtime. To overcome the problem it requires a

large fund especially or replacement and recondition of some main equipment. To

anticipate the problem, PT Pupuk Kujang has arranged the action plan in order that the

continuity of business can remain to run. One of plans which have been implemented

was the replacement of urea reactor in 2001 and the development of Kujang Plant 1B.

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The development of Kujang Plant 1B with the production capacity of 570,000 tons/year

for urea and 330,000tons/year for ammonia had been implemented by the main

contractor that is Toyo Engineering Corporation (Japan) and to be supported by two

domestic contractors such as PT Rekayasa Industri and PT Inti Karya Persada Teknik.

The development of Kujang Plant 1B was performed within 36 months from October 1,

2003 to September 6, 2005. Besides from equity owned by PT Pupuk Kujang, the

financing of this project was obtained from the loan of Japan Bank for International

Cooperation (JBIC) in the amount of JPY 27,048,700,000.

3.2 The Main Business Activity of PT Pupuk Kujang and Organizational

Structure

3.2.1 Business Activity

PT. Pupuk Kujang has two plants producing Ammonia and Urea, Kujang plant 1A and

Kujang plant 1B. Both plants have the capacity of 330,000 tons ammonia and 570,000

urea per year. Both plants of ammonia process main raw materials of liquid natural gas

and air to become ammonia and carbon dioxide gas, then both materials were dispatched

to urea plant to be processed to become urea pills.

To maintain the reliability of plant operation, it was made appropriately and precisely-

planned predictive and preventive maintenance program, and critical equipment –

substitute program carried out in the annual repair. The program was attached in quality

management system of ISO 9001:2000 and SNI 19-9001:2001, which has been applied

consistently since 1998. In addition technically 30 years-aged Kujang plant 1A may be

operated till 2017, and to support the evaluation of reliability of plant, the management

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of PT Pupuk Kujang had appointed Pasaman Soeparman Chemical Engineering

Consultant to carry out the plant audit, the recommendation of which will performed in

stages when performing the annual repair.

On supporting the production process, PT Pupuk Kujang have reliable Human

Resources who are the strategic assets of the Company, therefore the Human Resources

management from the early working to the retirement is the one interested matters. At

the end year 2007 Pupuk Kujang had employees of 1,059 persons or increased 53

persons compared with at the end of 2006 for 1,006 persons. The additions were caused

by the recruitment of employees as the substitute to who would be retired and the needs

organization development.

3.2.2 Performances in Inventory Cycle (spare parts division)

PT Pupuk Kujang has not aware about the internal control system that they have and

based on the research and observations, PT Pupuk Kujang does not have certification on

internal control system. However, PT Pupuk Kujang already implemented good

corporate governance or GCG as the standard to keep and maintain the company on

doing good businesses. They also got certification for ISO 9001 (a set of internationally

agreed standards that provide guidelines for a Quality Management System), ISO 14001

(certification for environmental awareness management), and other certification

regarding the quality of the product. This thesis does not discuss about the product of PT

Pupuk Kujang, but this thesis discussed about how to maintain the tools or plant to

produce the product, which were the flow of spare parts for Plant 1A and Plant 1B.

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Inventory Procedures in PT Pupuk Kujang

All business activities in PT Pupuk Kujang depended on IFS (Industrial and Financial

System) since this company is an industrial and manufacturing company, using IFS can

be considered as good choices. More about IFS, IFS is one of the world’s leading

providers of component-based business software developed using open standards. Since

1983, IFS have been a provider of business applications focused on meeting the needs of

selected industries. Today, IFS operates in two areas: lifecycle management, where asset

and product lifecycle management are critical issues, and midmarket ERP, which covers

distribution and manufacturing in midsize companies. IFS’ flexible software, IFS

Applications easily integrates with other business software, as well as to new

technology. By using open standards – not proprietary solutions – IFS give companies

the freedom to mix the leading technology from other first-class vendors to gain the

most cost-effective solution (IFS - Industrial and Financial Syatems).

The main activity on Inventory cycle regarding factory’s spare part is to provide

inventory wherever user needs. On this thesis, the author only focused on spare parts

inventory cycle in the company since the raw material to create or produce fertilizer are

only gas pressure, air and water, and the author has an opinion not to measure those raw

material, because it is hard to measure the inventory.

There are three types or three methods regarding the inventory spare parts procurement:

1. Direct Appointment (Penunjukan Langsung), procurement of goods or services

conducted through inquiry and quotation to one of the vendors. Direct election

(Penujukan langsung) can be implemented by meeting the requirements, the

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requirements are: if the purchase price below or equal to Rp 50,000,000; it has to be

specific goods and it has to be in emergency situation. (Refer to Appendix A)

2. Direct Selection (Pemilihan Langsung), procurement of goods or services conducted

through the election of at least 3 (three) vendors enter the bidding by submitting

inquiry beforehand. Directly chosen (Pemilihan langsung) can be implemented by

meeting the requirements, the requirements are: if the purchase price between Rp

50,000,000 – Rp 400,000,000 and the goods or services can only be supplied by the

manufacturer, official agency, a distributor or a company that is believed can do the

work by the perpetrator. (Refer to Appendix A)

3. Bidding (Pelelangan), procurement of goods or services conducted by comparing 3

(three) bidder to enter the bidding of the provider goods or services that are listed or

not listed in DRP (Daftar Rekanan Perusahaan) in accordance with business

qualifications envisioned and conducted in an open meeting and through the mass

media and billboard companies. Bidding method or situation can be implemented if

it is meet the requirements, and the requirements are: if its common goods and

services and if the purchase price higher than Rp 400,000,000. (Refer to Appendix

B)

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FIGURE 3.1 – Inventory Cycle Flowchart in PT Pupuk Kujang SOURCE from PT Pupuk Kujang Data, 2007

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3.2.3 Corporate Governance

Assessment to Good Corporate Governance (GCG) at PT Pupuk Kujang for the period

2007 was performed on 1 November 2007 to 18 December 2007 by Financial and

Development Supervision Board (BPKP) West Java representative. Assessment results

indicates that implementation of GCG principles at PT Pupuk Kujang got “GOOD”

category with the score 85.59 from the target 100. PT Pupuk Kujang resolves to

implement GCG principles in all its activities. This commitment is confirmed because it

is expected that (GCG) implementation will be beneficial for the company and all

stakeholders, among others are:

1. The increasing of performance of company through good and transparent decision-

making process.

2. To increase efficiency of company’s operational and to increase service to

stakeholders.

3. To increase corporate image as well as customer and stakeholder satisfaction.

Such principles of good corporate governance are transparency, accountability, fairness,

and responsibility applicable in all working units within the company in the level of

employees, board of directors and board of commissioners.

Board of Commissioners

Board of commissioners of PT Pupuk Kujang includes Independent Commissioners

should constitute Company’s organ functioning to supervise generally and particularly

as well as to advice the Board of Directors in operating the company.

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The supervision duty of Board of Commissioners should be divided into five supervision

fields, they are:

a. Coordination and Strategic Policy Fields, include supervisions, self assessment of

Board of Commissioners and determining of strategic policies cover among others

on raw material supply (natural gas), market development, management system

implementation, and product development (complex fertilizer)

b. Production and Marketing Fields, include supervision towards production and

factory maintenance, market development and reposition of distribution factory

c. Human Resources and General Fields, include implementation of completing of

organization, workload analysis of the employee, Partnership and Environment

Development Program (PKBL), as well as environmental conservation and security.

d. Technique and Development Research Fields, include technology, raw material

supply (natural gas), factory rejuvenation, procurement of critical equipment and

procurement plan audit.

e. Finance and Legal Fields, include supervision towards gas payment guarantee

(SBLC), adequacy of Work Capital Credit, Cash flow, supervision towards legal

compliance, management system development, and organization development.

In performing its duty and function, Board of Commissioners should be assisted by

Audit Committee. This committee should be headed by one of members of Board of

Commissioners and should have two members other than commissioner appointed by

Board of Commissioners (PT Pupuk Kujang, 2007).

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Boards of Directors

Board of Directors should constitute company’s organ fully responsible to Company’s

management pursuant to the purpose and objective of company and Good Corporate

Governance principles as well as to represent the Company in or out of court. In

performing its duty, Board of Directors should always try to increase efficiency and

effectiveness of company, to control, to keep, and to manage property of company. The

division of power and responsibility of each Director should be as follows:

1. President Director, should act for and on behalf of the company, be responsible of

the entire performance of main functions of board of Directors in managing the

Company that includes:

a. To make general policy of the company and to take strategic decisions as well as to

coordinate Board of Directors

b. To manage the company related to the development of:

i. Production activity

ii. Technical and Development Activities

iii. Financing Activity

iv. Human Resources and General Activities

v. Internal Audit Activity

vi. Corporate Secretary Activity

vii. Business/ management/ operation corporation activity with third party

viii. Partnership activity

ix. Public Relations Affair and Environment Development Activities

x. Security Activity

xi. Legal and Administration Activity

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xii. To lead and represent the company in and out of court

2. Director of Production, should be responsible for the entire performances of

functions of Directorate of Production, among others are to make policy, to take

strategic decision and to develop production activities, to maintain, to supervise, the

process, inspection, material as well as safety activity and environmental.

3. Director of Technique and Development, should be responsible or the entire

performance of functions of Directorate of Technique and Development, among

others are to make policy, to take strategic decision and to develop construction

activities, factory equipment industry. Factory services, architectural, management

system, procurement, and to establish development activity.

4. Director of Finance, should be responsible for the entire performance of functions

of Directorate of Finance, among others are to make policy, to take strategic

decision, and to develop marketing activities, finance, accounting, risk management

and information technology activity.

5. Director of Human Resources and General, should be responsible for the entire

performance of functions of Human Resources and General, among others to make

policy and to take strategic decision, to develop Human Resources activities, to

develop Human Resources, Healthy and general activities.

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Audit Committee

Audit committee of PT Pupuk Kujang was formed by Decision of Board of

Commissioners number: 11/KP/PK/DK/IV/2002 dated 3 April 2002 chaired by a

chairman who is a member of Board of Commissioners appointed. Broad outline of

supervision of audit and committee in 2007 should be to assist supervision performed by

Board of Commissioners over the Policy of Board of Directors, they are:

1. To assist Board of Commissioners for ensuring effectiveness of Internal Control

System and that of duty performance of Internal Supervision Unit and External

Auditor.

2. To assess activity and audit results performed by Internal Supervision Unit and

External Auditor.

3. To recommend on Management Control System and its performance

4. To ensure the existence of review procedure satisfying to any information issued by

the Company.

5. To identify the matters which needs attention of Board of Commissioners, and other

duties of Board of Commissioners.

Board of commissioners should jointly construct the selection process in accordance

with the applicable provision in order to appoint Public Accountant Office that will

perform audit to Financial Statement of PT Pupuk Kujang in the fiscal year and to be

submitted to the shareholders for stipulation.

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Corporate Secretary

PT Pupuk Kujang fully realizes the important role of corporate secretary whose duty to

accelerate relationship among company’s organ and relationship between the company

and stakeholders. The company gives rights and powers enabling corporate secretary to

perform its duties effectively. Structurally, corporate secretary shall be responsible and

to give periodical report to the president director.

Duties of corporate secretary should be include:

1. To follow prevailing laws and regulations and to coordinate the performance of

GCG as well as to ensure the company to comply with.

2. To perform duty in case of arrangement of meeting of board directors, meeting

of board directors with board of commissioners and general meeting of

shareholders as well as to provide material for such meetings

3. To bridge the interest of company with that of stakeholder through good

relationship especially with the society around the company.

4. To function as corporate legal affair or legal council

Internal Supervision Unit

Internal Supervision function PT Pupuk Kujang as continuation of range of control of

management duty in supervision field that is to assist duty of board of Directors in

monitoring all company’s activities and ensuring that management supervision system is

running well. Performance of internal supervision and controlling in 2007 was referred

to Annual Supervision Working Program (PKPT) of Internal Supervision Unit referring

to the policy of its supervision, consisting of financial supervision, namely to perform

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financial investigation in accordance with internal audit standard to asses

appropriateness of financial statement pursuant to PSAK and operational supervision to

do operational investigation towards effectiveness of each working unit (sampling) and

working unit directly relates to third party based on risk based audit. During 2007

Internal Supervision Unit has issued 36 Reports of Investigation Result (LHP) and

performed follow up monitoring over the notice/ findings of external and internal audit

results as well as to be counterpart of external auditor.

3.3 Policy and procedures

Code of Ethics of Company

Work relationship among the personnel within the company and relationship with

stakeholder are extremely influential to the achievement of vision and objective of the

company. Based on that matter, PT Pupuk kujang had drafted a standard of values in

business (ethics of business). Ethics of work and ethics of business is extremely

important as reference for all employees, Board of Directors and Board of

Commissioners in performing all working and business activities in order to create

relationship which is harmonious, respectful and responsible each other and to give high

trust within the company or with stakeholders (customer, supplier, government,

neighboring society, etc) so that the objective of company can be achieved.

This code of ethics of company is a commitment for all management staff of PT Pupuk

Kujang along with its employees to be evaluated and renewed dynamically in keeping

with development of values or norms applicable at the company. Ethics of work of PT

Pupuk Kujang is a standard of value or norms used by all employees and management of

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PT Pupuk Kujang in performing daily activity/duty, including regulating relationship

among the employees, board of directors and board of commissioners as well as

individual relationship with the stakeholder. Ethics of works of PT Pupuk Kujang shall

include:

1. Values that must be possessed by each individual, they are: Honesty, Discipline,

Care, Courage and Responsibility, Objective, Loyalty and diligent, Mutual respect,

Cooperative, Fair, Customer service (focus on the customer), Continuous

Improvement.

2. Compliance to law, namely that each individual within the company (employees,

board of directors, board of commissioners) should be obliged to comply with

applicable laws and regulations, both internal and external company regulation.

3. Relationship among the employees

“The company obligates each individual within the company to keep good

relationship to each other in performing the work so it will create harmony and

synergy that support in achieving collective objective (company objective)”.

4. Individual relationship with the stakeholder

“The company stipulates that each individual within the company must always give

priority to customer satisfaction and serve the stakeholder well, respect to each

other, care and fully realize of the respective right and obligation”.

5. Secrecy, transparency and information management.

6. To maintain structure and infrastructure of the company.

“Every individual within the company must keep and maintain every structure and

infrastructure that have been provided by the company”.

7. To keep working environment.

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8. Self-development.

“Each individual within the company should be obliged to develop himself by

improving behavior, intellectually, knowledge, expertise, skill and to always do

continuous improvement.

9. Conflict of interest.

Ethics of business of PT Pupuk Kujang is the standard of value or norm followed by

PT Pupuk Kujang as reference for the company both management and its employees

(as the entity), to have relationship with its environment both internal and external

(stakeholders: customer, supplier, government, etc). Ethics of business of PT Pupuk

Kujang should include:

a. Business Integrity

b. Conflict of interest

c. Conflict of interest in side activity

d. Compliance law

e. Anti corruption

f. Giving donation

g. Relationship with employees

h. Relationship with customer / consumer

i. Relationship with shareholders

j. Relationship with partners / suppliers

k. Relationship with distributor

l. Relationship with neighboring environment and society

m. Relationship with state official

n. Involvement in political activity

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o. Healthy business competition

Implementation of Code of Ethics of the company should be coordinated by corporate

secretary that is also responsible for:

• Ensuring that code of ethics of the company had been implemented well.

• Receiving complaint on violation of code of ethics of the company and trying to

settle as the powers possessed with related party and coordinating with competent

official.

• Giving advice of ethics of necessary in case of violation of code of ethics of the

company.

• Supervising the performance of code of ethics of the company and performing

improvement/completion of code of ethics of the company if necessary.

To ensure the effectiveness of implementation of code of ethics of the company, the

company had also stipulated sanction for each individual/group violates the code of

ethics of the company, provision of which has been regulated in decision of board of

directors on code of conduct and discipline for the employees.

3.4 Existing Problem in The Company

Regarding the production, the existing problem occurred during 2007 production in PT

Pupuk Kujang:

1. Total production of urea in 2007 was increased by 22,525 tons from 851,579 tons to

874,104 tons, however, if compared to the production capacity of both plants of

1,140,000 tons, realization of production in 2007 reach 76.66%. This matter was

caused by external factor outside management and internal factor.

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The external factor cause:

• There was a lack or delay of gas supply from PT Pertamina and PT Odira Energy

Persada for both plant 1A and plant 1B.

• The height of CO2 composition in natural gas causing the loss of production

potency of 20,000 tons urea

• The instability of gas pressure during 2007, so that the production was stopped for

2.12 days or the loss of opportunity to produce urea was 4,750 tons.

• The outage of low electric voltage of PLN caused Kujang 1A plant and Kujang 1B

plant stopped the production during 0.67 daysor the loss of opportunity to produce

urea was 1,500 tons.

The internal factor cause:

In 2007, Kujang plant 1A and Kujang plant 1B suffered several minor technical

difficulties that were operational difficulty of system generator, leakage of subsurface

cooling water pipe due to corrosion and failure of trip system in Kujang plant 1A. Whilst

Kujang plant 1B suffered operational difficulty to force draft Fan A-101 BJT, circulation

line deadlock to concentrator and minor difficulty to Belt Scale and instrumentation

system causing the loss of opportunity to produce in 16,200 tons. However, the internal

factor is not dominant factor causing annual target unreached because total down is still

lower than down time allowed in RKAP 2007.