OPTIMIZING PRODUCT COMBINATION TO MAXIMIZE PROFIT BY USING LINEAR PROGRAMMING (A FOCUS ON UD. SEHATI IN TULUNGAGUNG)

Abstract

Due to the scarcity principle of resources, management of small and mediumsized enterprises in Indonesia need to deeply understand the importance of business forecast in managing the use of limited resources for effective and efficient production hence the main business goal, profit, can be maximized. This objective can be achieved through the application of linear programming optimization models in their resources allocation and utilization. This research mainly aims to analyze the optimal product combination of soy sauces “Koki Dollar 629” produced by UD. Sehati Tulungagung in order to maximize their profit. Through a quantitative method, this research is conducted. The computational experiments in this research contains data and information of the unit costs, contribution margin, maximum resources capacity, individual product’s absorption rate, and other constraints that are related to the production of soy sauces “Koki Dollar 629”. And all of the data obtained is processed and analyzed through simplex method maximization with the aid Production and Operations Management (POM) software version 3 for windows. This research finds that there are four out of seven products are considered to be profitable to produce. It is also revealed the range to which UD. Sehati may increase or decrease the coefficient of objective function and the right-hand side value of the constraints without changing the optimal solution that has previously achieved through sensitivity analysis. For the other three products which are resulted in the zero production, further analysis and consideration from the management of UD. Sehati is needed to make them profitable as well. From the result interpretation, the researcher makes some suggestions to UD. Sehati. The first is to consider about additional production capacity therefore production volume can be increased, then to reduce cost of some products by looking for alternative resources which are cheaper, and the last is to expand the market to get more customers which lead to the higher profit of the business.