risk management

UD Golden Prima Food

     

        UD Golden Prima food is one of  two Charoen Pokphand Indonesia company’s distributor in Yogyakarta. It is located on Ikip PGRI road, Yogyakarta. This company is owned by Anton Iswanto Kusuma.

        UD Golden Prima Food’s head company, Charoen Pokphand Indonesia, is the company who produces frozen foods with the brands of Golden Fiesta, Fiesta, Champ, and Okey. Here the products of Charoen Pokphand Indonesia:

 

         UD Golden Prima has a responsibility to distribute all these frozen food  products from Charoen Pokphand Indonesia to the third parties in Yogyakarta only. The third parties are divided into two, they are distributor and retail.  Distributor here means a distributor who buying products from UD Golden Prima Food, not an official distributor that belongs to Charoen Pokphand Indonesia. Usually the distributor also buying products from another brand (So Good, etc). Retail means retailers like Alfamart, Indomart, Superindo, not Carefour, Hypermart, and Lotte mart.

The Business and The Fluctuation of Rupiah

 

        UD Golden Prima Food’s  job, in normal condition, looks like quite simple. It just has to take the frozen food products from the head company which located in Semarang by account payable and then sells the products to the third parties in Yogyakarta with higher price to get profits and after the third parties pay, UD Golden Prima Food has to pay the head company. UD Golden Prima doesn’t have to think about competitor because the head company has made a policy in which a distributor is prohibited to steal the third parties’ from another Charoen Pokphand distributor. 

        In other hand, if it can not be able to reacch the target sales, the head company will warn UD Golden Prima Food and may be kick UD Golden Prima Food from distributor. The fact, UD Golden Prima Food’s job is not that simple. The head company of UD Golden Prima Food already set a target sales for UD Golden Prima Food. If UD Golden Prima Food able to reach the target, of course there will be reward for it.

        UD Golden Prima Food gets affected by the fluctuation of the Rupiah. Actually the source of effect comes from the head company which is Charoen Pokphand Indonesia company. The cost of production of frozen food products are increase because some raw materials’ price increase, then it affects to the selling price of the product itself. Then, UD Golden Prima Food’s debt will increase because it has to pay more for the same amount of items of the products from the head company and has to sell the products in higher price to the third parties. Based on the data through interview with the owner, UD Golden Prima Food has just increased the selling price of the products about 2%(two percents) until 5%(five percents) depend on the products.

The Risk Management of Fluctuation

        Facing the fluctuation of Rupiah in Indonesia, UD Golden Prima Food has already prepare two steps. UD Golden Prima Food accepts the offer from Charoen Pokphand Indonesia to owe more money and the maturity date extension. Then, UD Golden Prima Food offer a maturity date extension to the third parties if the third parties agree to buy the same number of item as usual.

        UD Golden Prima Food accepts to owe more money from Charoen Pokphand Indonesia because UD Golden Prima Food needs to keep the number of items reach or above the target to sell. Just like the third parties, UD Golden Prima Food has to pay more for the same number of item, so if Charoen Pokphand Indonesia doesn’t lent some money, UD Golden Prima Food’s  velocity of money will be disturbed. More money will help UD Golden Prima Food ready to sell the products as or above the target sales because UD Golden Prima Food has enough items in inventory.

        The extension of maturity date  helps UD Golden Prima Food to keep its business working well. With the extension, UD Golden Prima Food also gives a maturity date extension to the third parties. However UD Golden Prima Food has to persuade the third parties to keep buying in the same number of items, and the maturity date extension as the lure. This is why a good relationship is very needed between UD Golden Prima Food and the third parties. The owner of UD Golden Prima Food usually talk directly to several important third parties in personal so they can clarify about the problem and talk about their needs.

        The result of decreasing 7% in number of sales means the owner has succed enough in persuade the third parties. The result may be worse if the owner doesn’t persuade the third parties in a good approach. UD Golden Prima Food may lose number of sales but the owner told that it is still accepted and still reach the target, but of course the number of  items in inventory will be increase temporary. UD Golden Prima Food just has to manage the number of items for the next order. Still, there is a probability the number of orders will decrease or increase.

       Another steps that UD Golden Prima Food takes to manage the number of items left in inventory is by selling directly the frozen foods(products) to consumer and sells to a new third parties. UD Golden Prima Food accepts personal order from consumers, and of course the price is cheaper than the price in the third parties. UD Golden Prima Food permitted to looking for a new third parties as long as not belong to another distributor of head company. Small retail stores is the best way to decrease the number of items in inventories in emergency situation like this, because even they don’t buy much but still better to sell rather than to keep.

 

Opinion

        UD Golden Prima Food is good enough in managing the risks. It turns the positive risk, optimize it and create a chance for itself to decrease the level of negative risk. Risk may can not be eliminated from business but it is still possible to be reduced.

        Just like UD Golden Prima Food, it optimizes the help that Charoen Pokphand Indoensia offers, then it creates its own method to help its own business by creating a good relationship with the third parties. The number of sales of UD Golden Prima Food is a prove that UD Golden Prima Food is not fail in managing the risk.

        However the price of Charoen Pokphand Indonesia’s products will not come back to the old price. UD Golden Prima Food has an extra job in the future. UD Golden Prima Food has to keep communicate with the third parties to prevent missunderstanding in price. UD Golden Prima food must convince the third  parties that step by step the market will adapt the new price  and also maybe UD Golden Prima Food can offer an help if they need.