System Dynamic Model of Production Control in Indonesia’s Robusta Coffee Downstream Agroindustry (A case study)

Abstract

The small-scale downstream agroindustry of Argopuro robusta coffee often faces problems related to suboptimal production management. The Kahyangan Robusta Coffee Processing Unit (called UPH) produces roasted and ground coffee and has the same problem, often being unable to meet market demand, having excess product and raw material inventory, and quite high production costs. The purpose of this study is to design a system dynamic model for production control that can guarantee the fulfillment of market demand for roasted and ground coffee, reduce excess inventory, and lower production costs. The research results show that until 2025, UPH is still unable to meet market demand (stockout occurs) of 66,25 kg (roasted coffee) and 57,04 kg (ground coffee), product stock volume of 24,6 tons, and total production costs of Rp. 1,34 billion. A policy scenario was developed to handle this unsatisfactory situation by regulating the production rate of roasted and ground coffee through variable settings for the amount of downstream product safety stock, ‘inventory adjustment time’, and ‘time to update demand’. The results of the model simulation show that monthly demand has been met without stockouts. There were savings in production costs of up to 14% and stock reductions for raw materials of 42%, roasted coffee of 14%, and ground coffee of 27,36%. The model has proven to be useful for inventory optimization and cost management. UPH can follow up by controlling the production rate according to the level of downstream product stock so that it can increase its competitiveness.