As
‘simple researcher’, I would like to say thank you to many other parties to
whom I took the sources. Ms. Zendy Wijaya is the kind people who showed me the
way to get many data and information from the business. Thanks to Ko Whisnu
Wibisono (Zendy’s older brother) as the owner and manager of the business
Co-Cow Milk that we will comprehend at the moment with its realed theories to
learn more about Risk Management.
As
usual author, I have a hope that this paper will not be used for this
presentation only, but also for our further part of learning. It is really a
privilege to pour many things in the class. The issue about ‘Risk Management:
Between Theories and Practices’ is hoped to be discussed altogether. I hope it
is useful. God bless all of us.
I.
Company Profile
Official
Name : Co-Cow Milk
Establishment
Date : November 2011
Address
(Phone) : Mosez Gatot Kaca Street, Colombo
Shophouse Complex, Block B19—B20, Jogjakarta
Ownership
Information : At the moment, Whisnu Wibisono is
the rightful owner of Co-Cow Milk with Lisa Hapsari (older sister), 50% jointed
with Kuncoro for 2 years contract
Facebook : Co-Cow Milk
Core
Product(s) : Food, Snacks, and Milk Beverages
Types of
Products : a. Food
and Snacks (many types of toasted bread, fried bread, toasted banana,
tape—Bahasa Indonesia--Dense Chocoball, Banana Mozzroll, Rock’n Roll Beef,
Platinum Sausage Roll, Nugget, Orak-Arik Sausage, Somie, Omellete Special,
Nasoke, Indomie Special)
b. Beverages (many types fruit milk with
chocolate or cheese, special blended milk—with Oreo, various chocolates, and
biscuits—Hot milks, Coffee, and others—tea, ginger, or even beers)
c. Sevices (simple cafe layout with customer
service as one of core competitiveness and lots of wood installations to
support Co-Cow Milk as hang out stop)
Number
of Employee(s) : 4 (included Whisnu and Kuncoro)
and 1 shopper (Lisa)
Operational
Hours : Monday—Thusday (1 PM—10PM)
Friday
and Saturday (1PM—12PM)
Brief
Vision : One of aims that both owners and
managers of Co-Cow Milk want to achieve is personal owner of shop since they
still rent the place of business. By doing so, manager believed that it is
going to significantly grow their long term profit.
II.
Company’s Business Overview
The history started on November 2011 when a hobby of the present
owner of Co-Cow Milk (Whisnu) to drink many unique beverages and eat snacks led
him to understand the need of youth (especially in Jogjakarta) to hang out with
several simple snacks and beverages. At the same time, he only found one place
for consumers to find milk cafe and he considered that the taste of the milk is
not that good with its types. From the time on, Whisnu decided to start the
business of milk cafe with some personal improvements and designs he made.
“The activity of
buying and selling goods and services, or a particular company that does this,
or work you do to earn money (Cambridge Advance Learners’ Dictionary)” can
be our definition how to describe and elaborate more about this company’s daily
processes. Our ability to know the nature
and characteristics of the business must be useful to fatherly analyzing its
risks. To
specify our context in this subtitle, I believe that these points of view will
briefly be able to give us birds’ view of Co-Cow Milk business[1]:
A.
Financial and Accounting Practices
B.
Operations Management
C.
Human Resource Management
D.
Marketing Management
A.
Financial and
Accounting Practices
Recall, Co-Cow Milk is family proprietorship where at the moment
Whisnu Wibisono and Lisa Hapsari (siblings) are the owners. From natural
essence of Financing and Accouting perspective, we will see Co-Cow Milk based
on:
1.
Investment
Decisions
There were three times for this company to
execute their capital concerning fixed assets. This means that this company has
expanded their capital for three times for all the time:
a.
November 2011 was the first time when they
spent only aroud 10 millions rupiahs to establish the business as merely home
industry in Kaliurang.
b.
February 2012 was when Co-Cow Milk moved to
Mosez Gatot Kaca street with 1 rented shophouse. At the time 40 millions rupiah
were spent.
c.
June 2012, Co-Cow Milk expanded to 2-form
rented shophouse as 1 cafe. This was the time when they also decided to buy
their most significant assets (around 1/3 of fixed assets expenses) : cafe
kitchen set. At this time, they spent again 40 millions rupiah.
d.
For the whole investments with current
business development, Whisnu targeted BEP (Break Even Point) in ±1 more year.
2.
Financing
Decisions
The first
source of capital was Albert Kurniawan (Lisa Hapsari’s husband). In general,
this company is family-financed business. Thus, there is no agreement of debt
among families. At the first time, Albert spent around 10 milions to establish
the business.
a.
In further way, Lisa and Whisnu were able to
establish 40 milions rupiah as additional investments. This was when the
business was moved to Mosez Gatot Kaca with only 1 shophouse.
b.
After looking for some business relations,
Whisnu was able to sign contract of other 40 milions rupiah of additional
capital from jointed partner: Kuncoro. Mr. Kuncoro was signed for two years
agreement of getting 50%:50% net income. It is obvious that right after the
contract dues, there will be no longer share of net income of the business.
Spontaneously, Whisnu stated that the business is still able to both cover the
amortization of capital and generating other net income to be shared.
c.
For information, there is no single debt
practiced by this company, both from Banks or from society, instead of 40
milions rupiah shares by Kuncoro.
3.
Working
Capital Management and Daily Accounting Practices
a.
All bookkeeping activities are done manually
by owners (Whisnu and Lisa) where there is no computerized accounting
information system. Meanwhile, familly’s account and Co-Cow Milk’s account have
been distinguished in their reports. Even if owners want to pick Co-Cow Milk’s
produtcs, they have to pay with their own pocket money. This has been done in
order to promote clear transparency of business cash flows. So, all receipts
and invoices are representative for their financial performances and gap is
minimized between reported income and actual income of the business.
b.
There are several layers to use the operating
net income (after being substracted by all expenses). The layers are listed
based on priority:
o
Retained Earnings: used as aerial surveilance
cash. This cash is usually used to cover sudden demand and/or installation
maintenance cost.
o
Capital Liabilities: by using management judgment, Co-Cow milk is
continuously trying to cover their capitals spent for the 3 significant cash
outflows of the business. So, they allocate some portion of operating income to
be shared among shareholders. In this case, there are two shareholders: family
party (Lisa and Whisnu) and Kuncoro, as 2-year-contracted shareholder.
o
Net income: The rest operating income after
going through the two priorities are called net income. This net income again
is shared between two shareholders’ parties. Recall, the proportion of allocating
both capital liabilities and Net Income are 50%-50% between two parties. Co-Cow
Milk is proven to be still profitable after going through those layers
(eventhough hasn’t reached break-even point of cash outflow).
Operating Income Allocation
B.
Operations
Management
Instead of concerning very broad view of operations management, at
the moment Supply Chain Management will be our main discussion of the business
operations. Remember, in SCM (Supply
Chain Management), there are two disciplines[2]: PRM (Partners
Relationship Management) and CRM (Customers Relationship Management). Let us
see them:
1.
Partners
Relationship Management (PRM)
We may
deal in advance that PRM is any flow of supply from raw materials until be
ready to be processed. The most important PRM stakeholder is suppliers. Let us
see the brief PRM model of this business:
I hope the
chart can be understood simply. Things that should be aware of are that: (1)
every process is based on how many / much the orders are so it has been a great
challenge for managers to maintain the level of supplies store. It is still
common for snack supplies where they may endure for longer period of days, even
weeks. The unique challenge is from the milk itself. They can only endure for
38 hours. It has been more challenging again to set up the flexibility between
demand and supply scheduling; (2) At the moment, in OM strategy, Co-Cow milk
sets their supplies merely from two suppliers: Kaliurang Economic Cooperatives
(Koperasi Kaliurang) and UGM Economic
Cooperatives (Koperasi UGM). They
also had dissapointing stories about quality of milk they can have from those
suppliers. They used to have three suppliers but as the time went on, the
supplier tried to minimize costs by mixing the milk with coconut extracts (santan). Because relations were built
well—trustworthy—Co-Cow Milk could not cover the loss of aroud 45 litres of
fresh milk at that time since for the developing business, quality is essential
to obtain and retain customers; (3) Snacks and Milks are freshly made from
orders where it seems that waiting-line hasn’t been a problem for this business.
2.
Customers
Relationship Management (CRM)
This
ranges from the ordering and process the material until transacttion is
finished in cashier. Here is the model:
The model
explains automatically how operations are done to run the business. The unique
thing I want to emphasize is the statement ‘CASHIER = SALES PROMOTION’. This
means that Co-Cow Milk use the cashier to receive feedbacks from its customers
while promoting some sales exhibition, for example discounts or member card.
This also shows how human factors are essential to manage in the business
performance.
C.
Human Resource
Management
Despite
being a developing business over the time, human resource is one of key factors
of the business to retain its movement. In this section, we will summarize the
essence of HR strategies to build motivation and commitment for employees as
Co-Cow Milk partners that is built in two objectives: obtaining and retaining employees[3],
while making them productive to the business. Briefly, management has been
doing for them with these two strategies:
1.
Reward
Strategy
This may
be one of significant strategies of Co-Cow Milk to maintain its sustainable
high quality of service personally by rewarding its employees well. For this
kind of business, employees are able to be paid for Rp50.000 / day for working
from 12 PM—10PM++. By setting above average wages, managers believe that
employees are more motivated and as far as Co-Cow Milk exists, there has been
no complains about the wage system in Co-Cow Milk.
2.
Leader
Figure
Personally,
I thought that this strategy is unique but effective to be done in Co-Cow Milk. Whisnu said that he has
a role not to carelessly command his employees but to show them how to serve
customers in advance: from mopping floor, washing dishes, communicate with
customers, and so forth. He believes that by doing those services in advance,
his employees must respect him more. Thus, without being commanded, they can
work well instantly.
D.
Marketing
Management
There are
some marketing strategies[4] types conducted by the company to
understand and create their best value to customers:
1.
Marketing
Communication
Marketing
communication is mainly built in shop layout and installations, advertisements,
personal approach, sales exhibition, and sales promotion. Those factors are
believed to create one strongest marketing weapon to this business: word-of-mouth
marketing.
2.
Customers’
Perception Quality Control
By looking
at all products they offer, we can have an insight that every product might not
have been sold well. It is correct and management acknowledged that it is
essential for them to match and learn customers’ taste (or even from the way
they name the products). Regularly, Co-Cow milk will evaluate each product
performance (aging) every two moths to innovate and / or realizing some
aspirations from its customers.
III.
Company’s Risks and Risk Management
1.
Defected Milk Supplies
There is one psychological condition served by
suppliers to maintain he relationship to its business customers is that they
always deliver the milk supplies by themselves directly to Co-Cow Milk.
Somehow, management said that this condition is actually useful for them as
business customers, but they have a feeling to limit them giving feedbacks to
suppliers. Thus, even if the supplies are bad, Co-Cow Milk has never asked for
property loss claim.
Manager said that for all this time, communication
relations between parties are the key and when defected milk supplies occurs,
Co-Cow Milk still directly throw them all away and give ‘limited’ ffeedbacks to
suppliers. Fortunately, this only happened to the ex-supplier out of the
present suppliers of Co-Cow Milk. Thus in this risk, risk reduction and risk sharing are
performed. How to reduce the risk? Share it to several suppliers and provoke
them to have continuous good service.
2.
Overdue Shopping Supplies
This is really challengin for this kind of
business. How they can manage it? Inventory preventive management and control
management are essentials[2]. When shopping, the longest due date is
prioritized and when come into storage, control them by using basic principle
of ‘judged’ EOQ has been realized—risk avoidance and risk control.
3.
Poor Equipment Maintenance
This risk is significant to the business since
the biggest investment is from the kitchen equipment. So far, management makes
sure that equipments are all insured for at least 1 year, strated from previous
2 moths—risk transferring—and having scheduled / even daily maintenance
program, even if in holidays for employees and / or owners to maintain them
well—risk
reduction.
4.
Employee Equipment and Supplies Control
Carelesness
In doing its controls, management always put a
principle of coordination. Thus risks might be shared to several layers
(employees). It is done to reduce the risk of control
inaccuracy.
5.
Personal Loss by Pure Risks among Employees
and Owners
So far Co-Cow Milk has no single personal
insurance for any of its employees or even owner. Thus, it is obvious that they
have been trying merely to retain the risk personally.
6.
Suppplies Control: concerning the endurance
accross different supplies, especiallty short period of milk endurance.
To reduce this risk, management distribute its
order release in smaller amount of milks which is shared between the two of
suppliers. That’s why communication is essential for both of parties. Per day,
Co-Cow Milk can release order for Rp500.000,00 to match with the demand
flexibility. For milk they are only kept in usual refrigerator, but not in the
freezer because quality is considered more than the risk of having
shorter-endured supplies. Thus, management in one side accept the risk of having
it, but in the other hand overcome it by giving superior service speculatively.
7.
Loss Incurred from Transportation Pure Risks
For shop transportation, which is separated
from Co-Cow Milk statements but the expenses are included, they transferred the
risk to insurer for the whole credit years (started from this year).
8.
Lost Incurred by Broken Furnitures and
Electronic Device Layout
Management considered that this factor is one
of keys to provide better service in designing the layout of Co-Cow Milk. Thus,
so far the management still control the risk by maintaining them (reduce the risk) and anticipate the risk
by directly connected to parties who made all of them to take care of anything
might happen to the furnitures.
For TVs and other electronic devices (screen projector,
and lamps), they are all insured for at least 1 year started from the middle of
the year.
9.
Cost of ‘Preman’
Recently, it has been a clear thins that there
has to be a good allocation for this kind of cost but in the location and based
on the relations built by the owner, so far they have been able to avoid
the risk
10.
Shop Conflagration and Overuse of Electricity
Lots of things may be the hazard to get this
disaster occurs. That’s why coordination has been done to prevent this
disaster, where the buildings themselves haven’t been insured by the owner.
Thus, it is Co-Cow Milk personal responsibility to prevent it by reducing the
risk of getting conflagration. The attempt may vary from electricity control
thoroughly by both owners and employees every day (also in holiday) and the
electricity device is located in safe position (high position) where there is
limited electricity contacts.
11.
Flood and Other Environmental Hazards
To reduce the risk of flood, Co-Cow Milk was
buuilt on higher position and for other environmental hazards, management still
ignores them.
12.
Dispute of Customers Parking Area
Because of narrow business position, it is a
challenge to see that any shop customer will come to any place. In this case,
the risk
can be transferred ‘indirectly’ to the parking man.
13.
Shop Cleanliness: since limited empoyees and
high requirement of good cafe layout are necessarry in the keep-going business
process.
Maybe, this risk is the most frequent thing to
have. The bad thing is when the cafe is looked very dirty where might result in
customers’ going away. The management manages this risk in: (1) Completing
cleaning session right after each table is emptied. Usually, they will come out
with complete cleaning attributes, and; (2) frequently doing a total cleaning
every 2 months with all the installations.
14.
Broken Building Materials
The way to reduce and anticipate the risk are
almost the same with the installation, where management counts on its building
clients.
15.
Employee Cheating in Supplies and Cashflows
Recent way is still by coordination principles
of getting works done. Of course, instead of protected money, invoice and
receipt control is essential to be done frequently every day. That’s why the
risk maight be minimized.
16.
Gap Between Reported and Actual Financial
Statements
So far, management promotes a clear
understanding to distinguish even owners account apart from Co-Cow Milks. Thus,
every day and every moth, Co-Cow milk may have transparent cashflows reports.
This is the way to reduce the risk and so far the management could say that they
have never failed to do this.
17.
Inventory Miscommunication
Every daily, weekly, and mothly transaction
and cash controls are the key to reduce the risk of getting gap between what
are stored and what are reported to be stores. This is the way to reduce
the risk.
18.
Late Supplies Delivery
At
the moment, they have no risk management for this risk.
19.
Inappropriate Condition of Serving Customers:
never to spill out the big cup milks to the floor and / or customers or
injuries.
Of course instead of keeping fit in working,
management provides complete dish towel and tissues on every table to
anticipate the risk of having such accident for the heavy cup of glass. Of
course with complete cleaning dish tools (brooms, etc.). Unfortunately, they
have no Aid Box yet (P3K).
20.
Having Less Priority of Supplies Distribution
Recently, Co-Cow Milk has the same priority
level as society unit entities (koperasi-koperasi unit daerah) to have the milk
supplies. At the moment, they get the milk from Koperasi Kaliurang and Koperasi
UGM as the highest-level distributor of milk in Jogjakarta. Thus, they have
minimized the risk by being able to reach the supply position.
IV.
My Personal
Opinions
In my perspective, for that business age
Co-Cow Milk has been performing impressively, especially when I saw either that
the owner managers are all S-1 degrees minimum where the CEO is from management
study program. I am very happy to hear how he shared his experience about the
management, especially when human resource might be the way to manage business
(but speculative risks).
However, the business still needs to think
further to be better off and promote assured feelings among the employees and
owner. The use of personal insurance in this business is still really zero. The
manager said to me that it has been because of price reasons and risk of being
lazier to work, they haven’t done it yet. It is the same as the use of building
insurance. They are all still in high-cost reasons, even though there is still
no historical experience of conflagration in the area, the risk is still
possible for the are that have lots of electricity installation. For the
possibility of late delivery of milk, I suggest the company to set up shift of
suppliers if the risk occurs with settled agreements. For overall, I am
satisfied with the business for giving me lots of lessons.
References
[1]Ferrell,
O. C., et al. 2008. Business: A Changing World. 7th Edition. China:
McGraw-Hill International Edition
[2]Heizer,
Jay and Barry Render. 2006. Operations Management. 8th Edition.
United States of America: Pearson International Edition
[3]The
Association of Business Executives. Strategic
Human Resource Management: Advanced Diploma in Business Administration Study
Manual. London: ABE
[4}Ferrel,
O.C. Michael D. Hartline. At.all.2002. Marketing Strategy 2nd editions.
Canada: Thompson Learning
[5]Darmawi,
Herman. 2000. Manajemen Risiko. 6th Edition. Jakarta: Bumi Aksara
[6]Aven,
Terje. 2003. Foundations of Risk: A Knowledge and
Decision-Oriented Perspective. First Edition. John Wiley & Son, Ltd.
