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SUPPLY CHAIN PERFORMANCE ANALYSIS OF PT X WITH SUPPLY
CHAIN OPERATIONS REFERENCE (SCOR) METHOD
Introducttion:
Increasing competition in the industrial sector requires a company to continuously
improve its performance. Companies can continue to compete if they have advantages over
other companies. These competitive advantages include cost, raw material inventory,
accuracy of quantity and time of ordering. One of the performance improvements that can be
made is by applying the principles of efficiency and effectiveness in the supply chain. The
supply chain is a series of activities carried out to meet consumer needs. These activities need
to be integrated with each other so that no losses occur in an industry.
The implementation of efficiency and effectiveness principles in the supply chain can
be done by evaluating the current industrial supply chain performance. Supply chain
performance measurement is carried out to optimize the supply chain model applied in an
industry. Measurement and assessment of supply chain performance aims to support goal
design, work evaluation, and determine future steps at the strategic, tactical and operational
levels. The short-term goals of improving organizational performance in supply chain
management are increasing productivity, reducing inventory, and reducing cycle time
(Suhong et al. 2014). One approach to measuring supply chain performance that can be used
is the Supply Chain Operations Reference (SCOR).
The application of the SCOR model can identify supply chain performance indicators
by showing the company's supply chain process, so that it can be used as an evaluation in
improving performance (Kurien and Qureshi 2012). Company performance is calculated
through the performance matrix adapted from SCOR version 11.0 and multiplied by the
weight of each matrix. The multiplication between the matrix value and the matrix weight
will produce a score. The achievement score can then be used as an evaluation and basis for
determining solutions to improve company performance.
Increasing competition is no exception in the food and beverage industry. The food and
beverage industry has a regular production and delivery schedule to meet consumer demand.
Therefore, a food and beverage industry needs to apply the principles of efficiency and
effectiveness in the supply chain to be successful in competition. PT X is one of the
companies engaged in the food sector such as the manufacture of premix flour and chocolate.
PT X, which has expanded its market to several countries, needs a performance evaluation of
its supply chain. Performance evaluation on the supply chain is expected to help improve
company performance and be able to compete in the industrial world. Therefore, through the
analysis of PT X's supply chain performance, it is hoped that PT X can improve the
company's performance and can remain competitive in industrial competition.
Supply Chain Management
The supply chain is all activities carried out in order to obtain raw materials into semi-
finished and finished goods which will then be sent to consumers through the distribution
system (Siagian 2005). Supply chain management is a system approach to organize the
overall flow of information of goods and services from raw material suppliers to
manufacturers and storage warehouses to consumers (Burt et. al. 2003). Supply chain
management is cyclical and runs continuously along with the company's business processes.
The business processes include material flow, information flow, and financial flow
(Fredendall and Hill 2001). Material flow includes the flow of goods from suppliers to
consumers including returns, servicing, recycling and disposal. Information flow includes the
transmission of purchase and delivery reports. Financial flow includes credit card
information, schedules, and payment terms. Various efforts are made so that the processes in
the supply chain can be carried out effectively and efficiently to maximize the value that can
be obtained by consumers and to achieve a sustainable profit (Arif 2018).
The components of supply chain management according to Turban et. al. (2004) consist
of three main components, namely upstream supply chain, internal supply chain, and
downstream supply chain. Upstream supply chain includes the activities of companies with
raw material producers and procurement as their main activities. The internal supply chain
includes the activities of putting goods into the warehouse to transforming raw materials into
products. The main activities in this component are production management, manufacturing,
and inventory control. Downstream supply chain includes all the activities of delivering
products to end consumers. The main activities in this component are distribution,
warehousing, transportation, and after sales service.
Supply Chain Operations Reference
Evaluation of supply chain performance can be done using several approaches, the
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Supply Chain Operations Reference (SCOR) model is an approach used by nearly 70% of the
industry to evaluate and improve the company's supply chain performance (Stewart 1997).
The SCOR model has a unique framework that combines supply chain business processes,
matrices, best practices, and technology into an integrated structure to support the
communication process between supply chain actors and improve the effectiveness of supply
chain management activities so that they can run optimally (Supply Chain Council 2012).
The SCOR model was used by several researchers such as Setiawan et al. (2011), Lestari et
al. (2016), and Zangoueinezhad (2011) to make strategic decisions and evaluate supply chain
performance more thoroughly. The SCOR model integrates three main elements of
management, namely business process reengineering, benchmarking, and process
measurement
In addition to these five core processes, SCOR has performance attributes.
Performance attribute is a cell of attributes used to assess the supply chain process from
different perspectives. There are five attributes used in assessing the performance of the
supply chain using the SCOR method. Within one attribute, there are several matrices that
can be used as performance measurement matrices. The performance attributes include
reliability, responsiveness, flexibility, cost, and asset management efficiency (Supply Chain
Council 2012). Reliability is the ability to perform tasks as expected. Responsiveness is the
speed of the supply chain to provide products to consumers. Agility is the ability to respond to
market changes to gain a competitive advantage. Asset management efficiency is the
efficiency of the company in managing assets to meet demand (Kazrahman and Oztaysi
2014). The application of the SCOR method to supply chain management is to provide a
comprehensive observation and measurement of the supply chain process. In addition, this
method can calculate the weakest link and identify possible improvements (Harelstad et al.
2004). Zangoueinezhad (2011) mentioned that the SCOR method can also maximize supply
chain visibility, which includes efficiency and rapid response to customer demand.
Framework of Thought:
The increasing competition in the premix flour industry requires companies to
continuously improve company performance. Performance improvement can be done by
identifying the supply chain structure and analyzing the supply chain performance that occurs
in the company. Identification of the supply chain structure is expected to provide an outline
of the structure, business processes, management and resources of the supply chain. Analysis
of supply chain performance is expected to help improve company performance by providing
solutions to several aspects of the supply chain that have not met the target so that they can
achieve the predetermined target. The performance of the supply chain is determined by the
SCOR method, the attributes and performance matrix are adopted from the SCOR model
which is adjusted to the conditions of the supply chain and then will be used for its
performance assessment. The results of structure identification and performance calculation
are evaluated to determine the solution to the problems that occur in the premix flour supply
chain.
Data Type and Source:
The types of data used in this research are primary data and secondary data. Primary
data is in the form of qualitative and quantitative data obtained through in-depth interviews,
field observations, and documentation at the company. Secondary data is data obtained
through literature studies, internet searches, journals, and relevant supporting documents. The
data needed in this research are as follows
1. Supply chain configuration data includes network structure, business processes,
r e so u r c e s , and supply chain management. Other supporting data such as company
profile, production process, headcount data, and product types.
2. The source of data for calculating supply chain performance is a performance matrix of
reliability, responsiveness, agility, and asset management efficiency attributes.
3. Data weighting matrix calculation of supply chain performance by organizing the results of
interviews with the company.
4. Supply chain performance data which includes the actual value of the supply chain
performance calculation matrices, the target achievement set by company management, and
the calculation value of the entire matrix.
5. Secondary data both empirical and theoretical to determine improvement solutions from the
evaluation of supply chain performance calculation results.
Data Analysis Procedure
Supply Chain Analysis
Supply chain analysis was conducted by conducting interviews and direct observations
in the field. The analysis was conducted by identifying four elements of the supply chain
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(Vorst 2006). The four elements can describe the supply chain in a structured way, these
elements are
1. The network structure describes the scope of the chain and the roles of chain members as well
as the agreements that make up the chain.
2. A chain business process is a structured and measurable set of business activities to produce
certain outputs for consumers or markets.
3. Network and chain management describes the coordination and management of network
structures to carry out processes in the supply chain by members.
4. Chain resources are used to produce products and deliver them to consumers.
The supply chain analysis framework can be seen in Figure 2.
A set of matrices used to express the company's strategy is called performance attributes. The
performance attributes used in this study can be seen in Table 1. The work attributes used are
obtained from interviews with the company.
Performance Matrix Weighting
Determining the weight of the matrix is done by interviewing the company. Weighting
is done with a subjective approach where the weight value is determined based on the
subjectivity of the source (Kusumadewi et al. 2006). Weighting is done by considering the
level of importance of one matrix with another matrix called a ranking scale (Rahayu 2013).
The company will rank the matrix from high importance to low importance, the company will
then determine the weight of the matrix through direct opinion.
Determination of Achievement Target
Determining achievement targets is done by interviewing the company. Determining
achievement targets can also be done with a benchmarking process. Benchmarking is the
process of comparing the company's current condition with the condition of the most
advanced competitor company in its field (best in class in performance). However, if
comparative data from competitors is difficult to obtain, then benchmark data can be obtained
from the targets set and to be achieved by the company without having to compare them with
other companies. The target set by management will then be used to calculate the value of the
matrix achievement against the target.
Performance Calculation
The performance calculation begins by assessing the performance matrix that has been
selected through interviews with the company. The matrix value obtained is the actual value
of the matrix that occurs in the company today. The actual value will be compared with the
achievement target to get the current matrix achievement value. There are two formulas used
in calculating the matrix achievement value, which are as follows (modifying the calculation
formula from Disnaker (2013)).
Determination of improvement solutions is carried out by evaluating the results of
performance calculations. Some aspects of supply chain performance that have not yet
reached the company's target are re-examined in the derivative matrix. Derived matrices with
low achievement values will be identified to find out the problems that occur in these
matrices. Problems are used as the basis for determining the right solution to improve future
supply chain performance. Improvement solutions are determined through discussions with
the company and literature studies so that a thorough understanding of the problems and
appropriate improvement solutions can be obtained.
Company Overview
PT X is a private company founded by Mr. Solichin in 1953 which was formerly named
PT Prambanan Kencana. In 1983, PT Prambanan Kencana changed its name to PT Soelindo
Sejahtera Utama which produced cake ingredients targeting the home industry market. In
1985, PT Prambanan Kencana established PT X which produces premix and whippy cream
products in small scale for the household target market.
In 1988, PT X expanded its business by producing chocolate under the brand name
Colatta which can be applied to cakes, breads and other sweets. Colatta has been designed as
a product of international quality and global competitiveness. Therefore, Colatta is produced
through excellent quality standards through the implementation of ISO 22000 and HACCP
Codex for food safety and ISO 9001 for quality assurance. Colatta's production process uses
modern equipment and technology, a reliable workf o r c e in their fields and in accordance
with GMP (Good Manufacturing Process).
PT X has two types of products: chocolate and powder. Powder products, for
example, such as instant premix flour. However, the core product of PT X itself is divided
into three types of products, namely Colatta compound chocolate, Colatta counverture and
Colatta choco chips/buttons. As for some processed food products produced by PT X, namely
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Colatta (block chocolate), Bendico (cocoa powder), and Haan (instant premix flour). PT X
cooperates with PT Zeelandia Indonesia and PT Prambanan Kencana for marketing and
distribution, with market coverage covering domestic areas to various countries such as
Malaysia, Thailand, Brunei Darussalam, Vietnam, United Arab Emirates, the Netherlands to
Spain.
Supply Chain Member
Supply chain members include all companies and organizations related to the company
either directly or indirectly through suppliers or customers from the point of source of raw
materials to the point of consumption (Marimin and Slamet 2010). Members involved in the
process of making and marketing premix flour are raw material providers, PT X, distributors,
retailers and agents, and consumers. Raw material providers include several material
suppliers used in the production of premix flour, namely wheat flour suppliers, coloring
suppliers, flavor suppliers, fat suppliers, and other material suppliers. Second, PT X as a
company that produces premix flour. PT X carries out various processes from receiving raw
materials, inspection, to production to produce premix flour products. The series of processes
are carried out to meet consumer demand for premix flour products. The third is the
distributor as a distributor of premix flour from PT X. Distributors make deliveries to various
consumers, which based on their business units are divided into two, namely B2B and B2C.
The fourth is retail and agents where both members also act as distributors of premix flour to
end consumers. The last member of the PT X supply chain is the consumer. Consumers of PT
X are households, bakeries, cafes, hotels and restaurants.
Supply Chain Entities:
1. Products
The products produced by PT X are very diverse, but the focus of this research is on
premix flour products. The premix flour produced by PT X is divided into several types,
namely cake mix, dessert mix, food ingredient, and donut mix. Dessert mix consists of ice
cream, pudding, caramel flan, and whip cream. The food ingredient consists of baking
powder, cocoa powder, baking stabilizer, and palm sugar.
2. Market
Market demand for premixed flour products is known to increase every year. This is
due to the increase in small, medium and large-scale businesses in the food sector. The
increasing number of businesses is in line with the increasing demand for premix flour.
3. Stakeholders
All parties involved in supply chain activities either directly or indirectly are members
of the premix flour supply chain. However, individuals, groups, or organizations that have
interests and are involved in an activity or project are called stakeholders (Sumarto 2003).
Stakeholders who play a role in the upstream part of this supply chain are suppliers of raw
materials used in making premix flour. Stakeholders who play a role in the downstream part
of the supply chain are PT X and industries and food services such as cafes and restaurants.
PT X plays a role in the process of making premix flour while industry and food service play
a role in processing premix flour into derivative products which will then be sold on the
market.
4. Competitive situation
The demand for premix flour is increasing every year along with the growing food
business. However, PT X has several competitors in the production of premix flour,
according to the Ministry of Industry in 2013 there were 13 large and medium industries for
the premix flour category in Indonesia. Therefore, the right strategy is needed to overcome
competition so that PT X can be superior to its competitors. Some strategies that can be
applied according to Siagian (2005), namely product differentiation, cost pioneering, and
rapid response. Product differentiation is done by trying to create a unique product or at least
better than existing products. Cost pioneering can be done by trying to minimize product
prices without reducing the quality of existing products. This can be done by process
innovation, reducing manufacturing costs, and making products correctly. Rapid response can
be done by being flexible, reliable, and responsive to change. One example is by
guaranteeing the timeliness and quantity of orders so that consumers give confidence in the
performance of PT X.
Business Process:
Supply chain business processes from a push-pull view. Process demand from the company.
Companies do push and pull based on their business units. Business units with consumers in
the form of industry and food service perform the pull process, while business units with
consumers in the form of retail and agents perform the push process.
Supply Chain Structure Management:
Structural management that occurs in the premix flour supply chain occurs formally.
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Contractual agreements bind the actors in the supply chain. Contractual agreements between
supply chain members are made through various terms and conditions on products,
information, and flow of funds to facilitate business transactions (Inosa 2016). Contractual
agreements that occur between some suppliers and the company are written agreements that
bind the purchase price and quantity. As for some suppliers, the agreement is not in writing
and the transaction process is carried out based on forecasts or purchases as needed.
Contractual agreements that occur between companies and consumers are written agreements
that bind the time of purchase. In addition to contractual agreements, structural management
also includes the transaction system. The transaction system applied both between suppliers
and companies and companies and consumers is a due system. Payment is made after the
goods are received and within the period agreed by both parties.
Transaction Process:
1. Raw Material Ordering
PT X's raw materials are obtained from several material suppliers used in the premix
flour production process. The pattern of transactions carried out with suppliers is divided into
three ways, namely purchases with a contract agreement system that binds price and quantity,
purchases with a 3-month forecast without a contract, and spot purchases where purchases
are as needed. Payment from the company to suppliers is made with a due system, on average
30 days after the product is received by the company.
2. Raw Material Receipt
Raw materials that have been ordered are then received within the agreed time. The
process of receiving raw materials needs to pay attention to several quality parameters such
as color, particle size, moisture content, foreign body contamination, microbiology,
expiration date, packaging conditions, and development conditions.
PT X produces premix flour on a make to stock basis. Consumers can place orders to
PT X in two ways. The first way is for the B2B group, ordering is done using the Stock
Replenishment System (SRS) where when the product stock level is below the agreed stock
limit, the company needs to place a purchase order (PO) to PT X. The second way is for the
B2C group, orders are made using POs by distributors with an agreed period of time.
Payment from consumers and distributors is made with a due system, on average 30 days
after the product is received by the consumer.
Supply Chain Resources
1. Physical
Physical resources owned by PT X include land, buildings, raw material warehouses,
finished product warehouses, production rooms, offices, machinery, trucks, cars, and forklifts.
2. Human Resources
Human resources involved in the premix flour industry reach 85 people. PT X
employees receive training such as hazard training and ISO training from the company so
that the premix flour production process can run well and smoothly.
3. Technology
Technology is practical and systematic knowledge that increases society's capacity to
produce goods and services, embodied in productive skills, organizations, and machines
(Yaumi 2018). PT X applies technology in the production of premix flour, one example is the
use of mixer machines, filing machines, and packing machines in the production process as
well as the use of forklifts to move finished products to the storage warehouse.
4. Capital
PT X is a large company so the capital required is large. Capital financing of premix
flour production is mostly done independently. The rest of the financing is filled with funds
provided by investors.
PT X Premix Flour Supply Chain Performance
Supply chain performance measurement will provide a great opportunity to improve
and develop supply chain management in all industries (Bolstorff and Rosenbaum 2003).
Various studies have shown that industries that objectively control and monitor their
performance will be more successful than industries that do not measure at all (Poluha 2007).
The measurement of PT X's supply chain performance in this study was conducted using the
SCOR method. SCOR is a method developed by the Supply Chain Council as a cross-
industry performance measurement model (Wigaringtyas 2013).
Performance measurement starts with determining the weight matrix and attributes one
matrix with another. The comparison results show the order of the matrix from high to low
importance, the determination of the weight will then be carried out by the company through
direct opinion. The performance measurement process is continued by comparing the actual
value of the matrix and the target set by management. Setting targets from management is
done to determine the extent of PT X's premix flour supply chain performance that occurs
today. The results of the comparison will produce a matrix achievement value which can be
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seen in Appendix 4. The matrix achievement value is then multiplied by the matrix weight
and summed to get the supply chain performance value. The SCOR structure model in this
study can be seen in Figure 4 where the structure model has four performance attributes and
three levels of performance matrices. The reliability attribute has a weight of 0.35, the
responsiveness attribute has a weight of 0.2, the agility attribute has a weight of 0.15, and the
asset management attribute has a weight of 0.3.
The multiplication of target achievement values and matrix weights is done from the
lowest to the highest matrix, namely from level three, level two, and level one. Level one
matrices are the main form of measurement data at higher levels. The matrix can be seen as a
link to the performance attributes. Level one matrices are the result of aggregate calculations,
where calculations are based on level two matrices and so on. Lower level matrices are used
to determine the deviation between performance and plan (Poluha 2007). The results of
calculations on level two and three matrices from this study can be seen in Appendix 5. The
total value of the calculations from the matrices in Appendix 5 was then used in the
calculation of the level one matrix. The results of the calculation of the level one matrix will
produce attribute values that will be used in calculating the value of supply chain
performance. The calculation is done by multiplying the attribute value by the weight of the
performance attribute which can be seen in Table 2.
PT X Supply Chain Performance Improvement Solution
Determination of improvement solutions begins with analyzing the derived matrices of
t h e three attributes that have been suggested from the results of performance calculations.
Derived matrices with low target achievement values from each attribute will then be
discussed with the company. The discussion is carried out to find out the problems that occur
in the matrix. The problems in the matrix will then be used as the basis for determining the
improvement solution. The first improvement is made to the responsiveness attribute with a
value of 87.90. This attribute has three derived matrices with low values, namely identify
sources of supply cycle time, release finished product to deliver cycle time, and receive and
verify product by customer cycle time.
The first matrix is identify sources of supply cycle time. The problem that occurs in this
matrix is the time required for negotiations with old suppliers. The improvement solution that
can be done is repeating negotiations until an agreement is reached where both parties benefit
and can reduce cycle time at PT X. Good relationships with suppliers are important, with
good relationships it is expected that suppliers will participate in cost reduction training,
value engineering efforts, and process improvements (Mahadevan 2010).
The second matrix is the release finished product to deliver cycle time. The problem
that occurs in this matrix is the limited number of employees who can check the quality of
finished products, resulting in product queues. The improvement solution that can be done is
by adding employees if the demand is getting higher. A new team will be formed to
participate in checking the product so that the product queue can be resolved. The short-term
solution that can be done is the addition of employees by outsourcing, this method provides
additional company management capacity without the need to think about buildings,
equipment and people. This method offers flexibility by encouraging variable costs and
eliminating fixed cost investments at the beginning (Leeman 2010). However, the
outsourcing method has the disadvantage that sometimes the rights of workers are not
fulfilled by the company providing outsourcing services. An alternative solution is to
cooperate in outsourcing with the Manpower Office (Disnaker). The cooperation is to
encourage companies to improve the performance of workers by providing training and the
Manpower Office to provide jobs good is important in order to create good cooperation
between companies and consumers.
The second attribute that is evaluated for determining improvement solutions is agility
with a value of 84.76. This attribute has three derived matrices with low values, namely
upside make adaptability, downside source adaptability, and downside make adaptability.
The first matrix is upside make adaptability. The problem that occurs in this matrix is that the
existing machine capacity is less than the total demand. The improvement solution that can
be done is the addition of machines so that production capacity increases and total demand
can be met. T h e second solution is by adding employees so that there are additional work
shifts to meet unmet product demand. The last solution is to prioritize the production of
premix flour types that have high demand in the market.
The second matrix is downside source adaptability. The problem that occurs in this
matrix is that some of the quality of premixed flour raw materials delivered by suppliers is
not in accordance with the standard raw material criteria. One of them is the quality of
carrageenan. Carrageenan is one of the raw materials used in making premix flour. The
quality of carrageenan obtained from suppliers is not good. The improvement solution that
can be done is to make a carrageenan quality standard agreement that is acceptable to the
company and continue to look for other carrageenan suppliers that might be able to meet the
company's needs.
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The third problem is downside make adaptability. The problem that occurs in this
matrix is that the existing machine capacity is less than the total demand. The lack of
machine capacity causes the ability to respond to market changes from the company has not
reached the target set. The improvement solution that can be done is to add machine capacity
so that it can meet the total product demand. The second solution is to add employees so that
there are additional work shifts to meet unmet product demand. Another solution is to focus
production on the type of premix flour products that have high demand in the market.
The last attribute to be evaluated for determining improvement solutions is asset
management efficiency with a score of 82.87. This attribute has three matrices with low cores,
namely inventory days of supply - RM, inventory days of supply - WIP, and percentage
defective inventory. The first matrix is inventory days of supply - RM. The problem that
occurs in this matrix is the lack of existing machine capacity so that raw materials are stored
in the warehouse and become safety stock. The improvement solution that can be done is to
adjust the ordering of raw materials to the capacity of existing machines or by adding
machines to increase production capacity so that the raw materials that have been ordered are
in accordance with their production capacity dependence on the smooth flow of raw materials and
try to minimize inventory (Siagian 2005).
The last matrix is percentage defective inventory. The problem that occurs in this
matrix is that there is a forecasting issue that causes product sales to not match and the
remaining products become bad stock in storage because there is no good handling plan. Bad
stock is then close to expiration and cannot be sold. The solution that can be done is to carry
out an immediate handling plan for products that become bad stock either by selling at half
price or making the product an event prize or gift from the sale of other products. Another
solution is to make improvements to forecasting where market signals are used as the basis
for planning raw material requirements so that they can produce consistent forecasts and
optimal resource allocation (Arif 2018).
Technical Issues in PT X Supply Chain
Other problems experienced by the PT X premix flour supply chain apart from the
derivative matrix are technical problems. The first technical problem is that production
activities increase along with the increase in demand at the end of the month. As a result of
this, relatively more employees and delivery trucks are needed at the end of the month. The
improvement solution that can be done is the addition of outsourced employees through
Disnaker and delivery trucks at the end of the month (Leeman 2010).
The second issue is that the use of wheat flour requires a supply of wheat flour in the
warehouse. Long storage in the warehouse can cause wheat flour to be at risk of being
infested by fleas. The solution is to apply the FIFO system and improve the storage process
such as storing flour on pallet racks at a higher level so that the flour is not directly exposed
to the floor (Ackerman and Bodegraven 2007).
CONCLUSIONS :
The supply chain performance that occurs at PT X shows a value of 90.61. The highest
performance attribute value is obtained by the reliability attribute with a value of 101.3 and
the lowest performance attribute value is obtained by the asset management efficiency
attribute with a value of 90.61.
82.87. The supply chain performance score shows that the performance has not reached the
target set by the company. Improvement solutions are suggested on three performance
attributes that have a difference in score value with the target set by management, namely
responsiveness, agility, and asset management. The difference between the attribute score
value and the target indicates room for improvement. Improvements will be focused on
derived matrices with low achievement values against targets. The improvement solution is
expected to improve PT X's supply chain performance in the future and can increase PT X's
competition in the premix flour industry.
alogin.
