Proposed contract manufacturing strategy for Baby Food Industry using Kepner-Tregoe and Analytic Hierarchy Process (AHP) Approach

https://doi.org/10.35912/ijamis.v2i1.3044
Published: Jun 11, 2025

Abstract:

Purpose: This study aims to determine the most appropriate contract manufacturing strategy for PT. SA to ensure sustainable fulfillment of its MA baby food products, amidst regulatory changes and operational risks from overseas production.

Methods: A mixed-method approach was employed, integrating qualitative methods (interviews and FGDs with Subject Matter Experts using Kepner-Tregoe and Why Tree analysis) and quantitative techniques through the Analytic Hierarchy Process (AHP). The criteria used for decision-making included cost, schedule, delivery, capacity, capability, and quality.

Results: The AHP analysis identified schedule (32.95%) and cost (30.31%) as the most influential criteria. For short-term resolution, the strategy “Produce in existing contract manufacturing and distribute using a 3rd party trader” scored the highest (49.56%). For long-term sustainability, “Terminate existing manufacturing and produce in alternative local contract manufacturers in Indonesia” was the optimal choice (31.55%).

Conclusion: Selecting the right strategy helps mitigate sales loss risk (up to IDR 97 billion annually), ensures product availability, and aligns with government import restrictions. Each alternative was evaluated for feasibility, risks, and potential savings.

Limitation: This study is specific to PT. SA’s baby food segment and may not fully generalize to other industries or products with different supply chain dynamics or regulatory constraints.

Contribution: The study contributes a structured decision-making model using Kepner-Tregoe and AHP to optimize contract manufacturing strategies, supporting firms in navigating supply chain disruptions under regulatory pressure.

Keywords:
1. Analytical Hierarchy Process
2. Contract Manufacturing
3. Decision Making
4. Kepner-tragoe
5. Why Tree Diagram
Authors:
1 . Dhenok Puspita Zahara
Institut Teknologi Bandung, Indonesia
2 . Gatot Yudoko
Institut Teknologi Bandung, Indonesia
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How to Cite
Zahara, D. P., & Yudoko, G. (2025). Proposed contract manufacturing strategy for Baby Food Industry using Kepner-Tregoe and Analytic Hierarchy Process (AHP) Approach . International Journal of Accounting and Management Information Systems, 2(1), 1–23. https://doi.org/10.35912/ijamis.v2i1.3044
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Vol. 2 No. 1 (2024): February
Articles
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References

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  1. Ariawan, Y., & Yudoko, G. (2023). Proposed Strategy of Mro Optimization in Cost-Effective Program By Using Kepner-Tregoe Analysis and Analytical Hierarchy Process (AHP). JEMIS (Journal of Engineering & Management in Industrial System), 11(2), 105-120. doi:https://doi.org/10.21776/ub.jemis.2023.011.02.3
  2. Canco, I., Kruja, D., & Iancu, T. (2021). AHP, a Reliable Method for Quality Decision Making: A Case Study in Business. Sustainability, 13(24), 1-14. doi:https://doi.org/10.3390/su132413932
  3. Chaube, S., Pant, S., Kumar, A., Uniyal, S., Singh, M. K., Kotecha, K., & Kumar, A. (2024). An Overview of Multi-Criteria Decision Analysis and the Applications of AHP and TOPSIS Methods. International Journal of Mathematical, Engineering and Management Sciences, 9(3), 581-615. doi:https://doi.org/10.33889/ijmems.2024.9.3.030
  4. Duvvuru, A., Balachandra, R., Zeid, A., & Kamarthi, S. (2012). A System Dynamics Model for Studying Manufacturing Outsourcing Cost Dynamics. International Journal of Rapid Manufacturing, 3(1), 36-55. doi:https://doi.org/10.1504/IJRAPIDM.2012.046573
  5. Goepel, K. D. (2018). Implementation of an Online Software Tool for the Analytic Hierarchy Process (AHP-OS). International journal of the analytic hierarchy process, 10(3), 469-487. doi:https://doi.org/10.13033/ijahp.v10i3.590
  6. Govindaraju, R., & Sinulingga, J. P. (2017). Pengambilan Keputusan Pemilihan Pemasok di Perusahaan Manufaktur dengan Metode Fuzzy ANP. Jurnal Manajemen Teknologi, 16(1), 1-16. doi:https://doi.org/10.12695/jmt.2017.16.1.1
  7. Kepner, C. H., & Tregoe, B. B. (1997). The New Rational Manager Princeton Research Press.
  8. Noviyanti, N., & Tricahyono, D. (2024). Business Ecosystem Development in Corporate Business Strategy. Jurnal Bisnis dan Pemasaran Digital, 4(1), 41-56. doi:https://doi.org/10.35912/jbpd.v4i1.4524
  9. Palma-Mendoza, J. A. (2014). Analytical Hierarchy Process and SCOR Model to Support Supply Chain Re-Design. International Journal of Information Management, 34(5), 634-638. doi:https://doi.org/10.1016/j.ijinfomgt.2014.06.002
  10. Pandya, E. J., & Shah, K. (2013). Contract Manufacturing in Pharma Industry. Pharma Science Monitor, 4(3), 123-134.
  11. Petrillo, A., Salomon, V. A. P., & Tramarico, C. L. (2023). State-of-the-Art Review on the Analytic Hierarchy Process With Benefits, Opportunities, Costs, and Risks. Journal of Risk and Financial Management, 16(8), 1-16. doi:https://doi.org/10.3390/jrfm16080372
  12. Puspitasari, N. B., & Febriani, V. (2024). Integration of the AHP-TOPSIS Approach in Material Supplier Selection. Paper presented at the E3S Web of Conferences.
  13. Putri, S., & Utama, A. A. (2024). Reliability Improvement Process Case Study: PT HMS Tbk. Jurnal Bisnis dan Pemasaran Digital (JBPD), 3(2), 107-124. doi:https://doi.org/10.35912/JBPD.v3i2.4512
  14. Rahim, Z. A., Voon, B. H., & Mahdi, R. (2016). Exploring the Dimensions of Contract Manufacturing Service Quality for the F&B Industry. Procedia-social and behavioral sciences, 224, 76-83. doi:https://doi.org/10.1016/j.sbspro.2016.05.403
  15. Rosmeli, R. (2018). Dampak Infrastruktur Terhadap Ketimpangan Pembangunan Antar Daerah di Provinsi Jambi. Jurnal Sains Sosio Humaniora, 2(1), 79-84. doi:https://doi.org/10.22437/jssh.v2i1.5284
  16. Saaty, T. L. (1980). The analytic hierarchy process, New York: Mcgrew hill. International, Translated to Russian, Portuguesses and Chinese, Revised edition, Paperback (1996, 2000), Pittsburgh: RWS Publications, 9, 19-22.
  17. Saaty, T. L., & Vargas, L. G. (2012). Models, methods, concepts & applications of the analytic hierarchy process (Vol. 175): Springer Science & Business Media.
  18. Sahoo, S. K., & Goswami, S. S. (2023). A comprehensive review of multiple criteria decision-making (MCDM) methods: advancements, applications, and future directions. Decision Making Advances, 1(1), 25-48.
  19. Schmidt, K., Aumann, I., Hollander, I., Damm, K., & von der Schulenburg, J.-M. G. (2015). Applying the Analytic Hierarchy Process in healthcare research: A systematic literature review and evaluation of reporting. BMC Medical Informatics and Decision Making, 15(1), 112.
  20. Serrat, O. (2017). Knowledge Solutions: Tools, Methods, and Approaches to Drive Organizational Performance: Springer Nature.
  21. Taherdoost, H., & Brard, A. (2019). Analyzing the Process of Supplier Selection Criteria and Methods. Procedia Manufacturing, 32, 1024-1034. doi:https://doi.org/10.1016/j.promfg.2019.02.317
  22. Tavana, M., Soltanifar, M., & Santos-Arteaga, F. J. (2023). Analytical Hierarchy Process: Revolution and Evolution. Annals of Operations Research, 326(2), 879-907. doi:https://doi.org/10.1007/s10479-021-04432-2
  23. Tzeng, G.-H., & Huang, J.-J. (2011). Multiple Attribute Decision Making: Methods and Applications: CRC press.
  24. Ubed, R. S., & Raharjo, T. (2024). An Integration of BSC and AHP for creating VOE’s Barriers of Entry Strategy. Annals of Human Resource Management Research, 4(2), 97-109. doi:https://doi.org/10.35912/ahrmr.v4i2.1757
  25. Wu, D., Tannen, M., Anyu, J., Ivanov, S., & Xu, F. (2022). Contract Manufacturing, Market Competition, and Labor Productivity in Us Manufacturing Industries. Operations Management Research, 16(1), 377-390. doi:http://dx.doi.org/10.1007/s12063-022-00317-0