SCM 300_ASU_ASSIGNMENT 2024_DEVELOPMENT OF FMCG DISTRIBUTOR SUPPLY CHAIN MANAGEMENT AT PT TIGARAKSA SATRIA TBK IN THE DIGITAL ERA

DEVELOPMENT OF FMCG DISTRIBUTOR SUPPLY CHAIN

MANAGEMENT AT PT TIGARAKSA SATRIA TBK IN THE DIGITAL

ERA

Introduction:

The Fast Moving Consumer Goods (FMCG) industry in Indonesia is considered

one of the most attractive industries with sales of more than US$10 billion as the country's

middle class grows. FMCG has long been considered one of the driving factors of economic

movement, and the numbers show promising potential with the sale of cheap and fast-selling

goods (Ogunlela 2016). With more than 263 million people and more than half of them in

their productive years, this positive trend is expected to continue as the spending growth rate

reached 11.8% in the period 2010-2015 and the average growth of the FMCG retail industry

reached 10.8% in 2015. This positive growth also extends to areas outside of Java and rural

areas which are experiencing a surge in demand for effective logistics in these regions. There

is some variation in the annual growth for certain products, such as the food industry which

posted 38% growth as of August 2016 but only 12% for the household appliances industry.

FMCG products have successfully contributed 18.5% to the national GDP in 2016 and this

data is also reinforced by McKinsey's data which estimates that by 2022, the value of the e-

commerce market in Indonesia will reach USD $65 billion (approximately IDR 948 trillion).

This industry advancement has enabled FMCG businesses to reach buyers from all regions of

Indonesia on a digital platform, unhindered by distance and time factors. "Every year, the

benchmark for e-commerce sales continues to increase significantly. The efficiency gained

also takes into account a series of processes in the supply chain (Kumar 2014) that are

integrated with e-commerce and the way products are advertised (Zhang 2014).

Supporting the industry was the Ministry of Commerce, which laid the groundwork

for market expansion in both the domestic and global arenas. The government stepped up law

enforcement efforts to ensure consumer protection and standardized compliance with trade

regulations in the domestic market. The government also promoted ease of doing business

through a series of fiscal and monetary policy innovations, infrastructure expansion, and

micro, small and medium enterprise (MSME) development. The implementation of

negotiations with trade organizations and bilateral agreements with many countries continues

to improve Indonesia's position in the global FMCG market. FMCG with large sales and

relatively small margins has strengthened the Indonesian economy.

Another opportunity worth monitoring is the growth of digital marketing where

new product launches and FMCG product innovations as well as consumer handling run on

digital platforms (social media) and have the potential to boost profits to new heights. The

world economy is currently in a phase of radical business transformation. This transformation

leads to technology that brings great changes so that the phenomenon of the collapse of

conventional businesses occurs abroad and domestically, including Indonesia. Jack Ma

(founder of Alibaba Group) is optimistic that Indonesia's government and entrepreneurs can

immediately enter the all-digital business ecosystem by utilizing the latest technology. The

formation of partnerships with the government and several entrepreneurs in Indonesia took

place at a meeting in Nusa Dua, Bali on October 13, 2019. The partnership included a big

plan with a more complex system among FMCG business players (Litke 2019).

Successful companies in the future are companies that use high technology and are

able to utilize this technology for business progress (Chen 2019). Digital development makes

the e-commerce business grow rapidly, including in Asia (He 2013). Indonesian consumers

have many choices for their electronic entertainment, not only television but the internet is

already accessible to almost the entire archipelago. Many FMCG players also utilize this

momentum to communicate with their consumers. The growth of e-commerce is significant,

although still small. The number of people buying online in Indonesia grew from 2 percent in

2017 to 6 percent in 2018. More and more Indonesian consumers see the benefits and

advantages of shopping online especially for baby needs and premium personal care

products.

One of the FMCG companies in Indonesia, PT Tigaraksa Satria Tbk (TGKA), also

has an e-commerce channel although currently the contribution is still small at 2%, the rest is

through offline channels by 98%. The Tigaraksa company was established in 1919, more than

100 years old in 2022. The sales revenue table with details per product category of the

company from 2020 to 2022 is presented in Table 1.1.

Tigaraksa's Pareto business is contributed from the baby & child nutrition product

category whose sales in the last three years ranged from 74.57% to 80.16%. From the baby &

child nutrition category, there are three principals, namely: Sari Husada, Nutricia and Wyeth.

While the best-selling product for more than a decade is from the sale of SGM brand products

from Sari Husada with a contribution of more than 60% of Tigaraksa's overall sales. In

carrying out its operations as a distributor, Tigaraksa is equipped with the necessary

infrastructure such as an adequate transportation fleet, storage areas in various locations,

competent human resources and the latest information technology. In cities where the

company has branches, sales and distribution of products are carried out directly by the

company's branches to traditional outlets (wholesalers, large/medium/small shops and

warung) and modern outlets (hypermarkets, supermarkets, and mini markets).

If there is no branch in a region or city, then sales and distribution activities are

carried out through sub-distributors throughout Indonesia. Sub-distributors are partners of the

company with the main task of distributing goods, both to traditional outlets and modern

outlets in demarcated areas has been determined by the company for each sub-distributor.

Tigaraksa also implements a fully computerized and uniform policy, sales supervision, and

administration system for all sub-distributors, so that it can be integrated with SAP and

Sinbad (the master system used by the company).

According to Ogunlela (2018) the importance of integrated supply chain

management (ISCM) impacts the FMCG manufacturing industry and how ISCM has

improved overall business and economic performance in countries that have implemented it,

e.g. USA, Canada, UK, Malaysia and India. This will further help provide insights into the

application of ISCM in the FMCG industry and suggest ways in which SCM professionals

can improve their competitiveness, customer service and profits. This research contributes to

the practice of supply chain theory through the identification of gaps in relation to the

implementation and adoption of ISCM in the FMCG manufacturing industry in Nigeria.

Table 1.2 shows the FMCG links which are mostly also about Supply chain

Management (SCM), Supply chain Visibility (SCV) and Blockchain. Table 1.2 shows the

research gap. The review results of the six journals above mention the importance of ISCM

and blockchain in its role in SCM in several industries, including the manufacturing industry.

There are only a few journals that discuss the role of ISCM in the FMCG industry.

Previous studies such as Lee and Rim discuss the importance of supply chain

visibility (SCV) to help supply chains run effectively and efficiently, while Gabriel et al

discuss the importance of integrated supply chain management (ISCM) in FMCG

manufacturing companies in Nigeria on customer service and management decision making.

Antonios Litke et al. and Princess Helo discuss the role of blockchain in the supply chain. For

this reason, research on the FMCG supply chain in Indonesia needs to be carried out

considering that until this research is written, no one has discussed the supply chain of FMCG

companies in Indonesia as a whole, plus this research discusses the important role of

digitization in the integration process both within the company and with external parties. The

combination of digitalization and integration is considered capable of accelerating the

integration process.

The FMCG industry in Indonesia is currently considered as one of the attractive

industries with a sales value of Rp. 380.16 trillion in 2016 (Nielsen Indonesia Survey). The

implementation of ISCM itself is proven to be able to improve overall business and economic

performance in other countries (Ogunlela 2018), this can be seen from the trend of the FMCG

industry changing its supply chain form to Integrated Supply chain such as Walmart. Based

on the explanation in the background above, the researcher assesses the need for adaptation

and supply chain changes to FMCG distribution companies (Tigaraksa Satria Tbk) related to

the changes above and the strategies carried out to be able to increase sustainable company

growth in this industrial era 4.0. The researcher's temporary synthesis is that it is necessary to

change the supply chain using ISCM. The research topic that the researcher took was

"Development of FMCG Distributor Supply Chain Management at PT Tigaraksa Satria Tbk

in the Digital Era".

Problem Formulation:

FMCG are consumer goods that have a fast turnover even very fast on the

merchandise shelf. Goods included in FMCG are those that are usually the daily needs of

consumers. Products categorized in FMCG are products that can sell very quickly and the

implication is high turnover in production activities.

The FMCG sector in Indonesia itself shows very promising prospects, to win

market competition in the FMCG sector requires good supply chain management. Other

factors that make businesses in the FMCG sector more promising are the rapid penetration of

smartphones, urbanization, and the growth of disposable income.

Looking at marketing and supply chain management (SCM), there will be many

challenges, such as the burden of high production turnover and abundant market quantity

volume, especially with so many similar products, it will be difficult to ensure that customers

will be loyal to FMCG products from one brand. There are several supply chain issues that

FMCG companies need to address to align current demand and supply requirements.

Lacking end-to-end visibility and collaboration, the consumer goods market,

especially those belonging to the FMCG industry sector, is currently quite complex and

highly volatile. Therefore, having multi-level visibility for companies in this sector is

important. With increased visibility, two-way collaboration will be established. This is often

a supply chain issue in the FMCG industry. Visibility here means that companies have real-

time data on shipments and receipts, information on stock, and what products are in

increasing demand so that supply chain stability can be maintained.

Product innovation and fulfillment in the supply chain, an ability to differentiate

oneself among the various options available in the market is important so that a product can

stand out in the eyes of consumers. This supply chain issue is clearly related to the innovation

from customers. Supply chain fulfillment has now evolved into a market that requires players

to come up with brilliant ideas in order to compete in this vast market. In the strategy of

maintaining the stability of supply chain fulfillment, a good management of each division is

needed, starting from the people who are engaged in the field to find out demand patterns,

warehouse people, to customer service management must be integrated and become one unit.

Business actors who have long been involved in the world of supply chain have a system that

is used to interpret all information in order to harmonize the performance between divisions.

Inability to synchronize supply chain tiers, another supply chain problem is that

many companies are still unable to coordinate supply and demand because they do not have

access to accurate and real-time data from their supply chain parties. Planning and

coordinating demand across different tiers of the supply chain is necessary to ensure that the

right product is delivered to the right location at the right time. This is also an important

factor in fulfilling customer orders.

Delivery system is a very important activity to overcome supply chain problems

and ensure that the stock of FMCG products is maintained. Ideally, FMCG companies should

provide their own delivery fleet, because high turnover will cause the delivery fleet to be very

busy, but problems arise when the number of orders is large and the schedule and fleet

arrangements are not running well. Attached is the sales data of FMCG distributors taken

from the Indonesian stock exchange web as attached in Table.

Despite the overall decline in household spending in Indonesia. However, there

was a two percent increase in the fresh food and FMCG sectors, so the FMCG sector is still

growing strongly with restrictions on outdoor activities that make consumers shop more to

meet their household needs (Fajriyani 2021). Table 1.3 shows that Tigaraksa has a fairly high

turnover value of 10.86 Trillion in 2020, below Unilever, Mayora, Indofood, Enseval and

Tempo. However, at the same time Tigaraksa became the company with the highest sales

revenue decline of -12.66 percent when other competitors such as Unilever and Indofood

managed to grow in 2020. It is certainly interesting to make Tigaraksa an object of research

that represents the FMCG distribution industry in Indonesia.

Based on initial observations, this decline itself occurred due to some of the same

problems as above, namely as follows: the inability to synchronize demand and supply, a

delivery system that is not fast enough according to consumers because many systems are

still manual, data access that is not realtime, and a lack of coordination between internal

companies.

Data on the order entry system in the Tigaraksa channel carried out by outlets of

214,024 outlets is still mostly done manually, namely 64%, resulting in several problems

such as delays in delivery, unable to meet the needs and expectations of outlets. And of

course this also affects decision making which is not fast enough. The small number of

outlets that use this application and web also results in a lack of supply chain integration both

with Tigaraksa as a distributor and with the principals. Below is data on the number of outlets

that use the web, applications or those that are still manual and can be seen in Table.

Management Development:

Development is a continuous effort and effort in improving the quality of human

resources through knowledge, training, education, and coaching (Riadi 2016). Development

is also known to improve the competencies and qualifications possessed by managers and

employees. Development is usually carried out by companies for employees in steps or stages

or the process of adjusting to the growing technological advances.

By doing this development, it is hoped that the HR of a company will be able to

encourage the achievement of organizational or company goals which will have an impact on

improving performance in the organization or company (Fransisca and Asepta 2018). Before

adopting model-based HR development competencies, it is important to consider

motivational aspects in improving employee performance (Istiantara 2019). To ensure that

workers or employees in the company have the necessary knowledge, abilities, and skills to

meet the needs of the work performed, human resource development management is an

activity that must be carried out in the organization (Khoirunnisa 2016).

Khoirunnisa (2016) said that there is management development consisting of two

levels, namely macro and micro. Where improving the quality and potential of human labor is

what is meant by "macro human resource development" which is a tool of national

development. While micro development management, on the other hand, refers to planning,

teaching, and management that lead to human resource development.

Supply Chain Management:

According to Heizer and Rander (2004), the supply chain is the management of

activities in order to obtain raw materials into goods in process or semi-finished and finished

goods and then deliver these products to consumers through the distribution system. These

activities include the traditional purchasing function plus other important activities that relate

between suppliers and distributors. According to (Chopra 2004), the supply chain consists of

all parties involved, directly or indirectly, in meeting customer demand. The supply chain

includes not only manufacturers and suppliers, but also transporters, warehouses, retailers,

and customers themselves. Within the respective organizations, such as manufacturers, the

supply chain includes all functions involved in receiving and fulfilling customer demand.

These functions include, but are not limited to new product development, marketing,

operations, distribution, finance, and customer service.

There is a wider use of the acceptance of supply chain management and a

comprehensive viewpoint of supply chain management. Supply chain management is directly

related to the complete cycle of raw materials from suppliers to production, warehouse, and

distribution then all the way to consumers. While companies improve their competitive

ability through customization Product, high quality, cost reduction, and speed to market are

given additional emphasis on the supply chain. According to Pearce and Robinson (2016)

value chain analysis is a description of how a business can create value for the parties

involved, especially end consumers, by examining the contribution of different activities in

doing business to that value.

According to Porter (1985), value chain analysis is a form of strategy used by

companies to better understand the competitive advantages possessed by these companies,

using value chain analysis is the right way to find out where the value provided by the

company to its consumers lies. Pujawan et al. (2010) explained that the supply chain is one of

the important strategies in building the competitive advantage of organizations and

companies.

Supply chain management is a very important concept for business success,

because integration in SCM can reduce the company's operational costs (Flynn et al. 2010)

and increase efficiency (Danese and Romano 2011). Competitive advantage can be achieved

by an organization through several functional units. SCM is considered to improve customer

service (Boyaci and Gallego 2004) and indirectly leads to cost reduction (Vickery et al.

2003).

The term supply chain management was first proposed by Oliver and Weber in

1982. According to Oliver and Weber (1982), supply chain is a physical network, while

supply chain management is a method, tool, or management approach. Levi et al. (2000)

define management as an approach used to achieve efficient integration of suppliers,

manufacturers, distributors, retailers, and customers.

According to Pujawan et al. (2010) supply chain management is an integrative

method or approach to managing the flow of products, information, and money that integrally

involves parties from upstream to downstream. The main activities that are included in the

SCM classification are:

1) Activities to design new products (product development) and activities to obtain raw

materials (procurement)

2) Activities to plan production and inventory (planning and control) and activities to

carry out production (production)

3) Activities of making deliveries (distribution)

According to Christopher (1998), supply chain management is divided into four

stages of development:

1) there is no functional interdependence,

2) company already start realize the importance of integration

planning although in a limited field

3) there is integration of planning and supervision of all related functions in one

company, as well as the integration of planning and supervision of all related

functions in one company.

4) illustrates the true stage of supply chain integration, i.e. the total integration in

concept, planning, execution, and supervision of management that has been

achieved.

Activities carried out in supply chain management have several important factors

such as information sharing, long term relationships, cooperation and also process

integration (Heizer and Render 2005). The existence of Accurate information sharing will speed

up the process of supply chain management activities from suppliers to the hands of end consumers,

while long-term relationships can be created by the continuous relationship between all parties

involved in the supply chain management network and with good cooperation will benefit all parties,

so that supply chain activities can be concluded to include the supply of goods from suppliers to

manufacturers to the fulfillment of orders from customers. Therefore, it can be said that the backbone

of an organization is supply chain management.

Fast Moving Consumer Goods (FMCG)

The definition of FMCG is divided into two types of retail businesses aimed

directly at end users (Ogunlela and Lekhanya 2016), namely:

1) FMCG, FMCG are short-lived products that demand to be replaced over a period of time.

Everyday utilities such as soap and other toiletries, packaged food & beverages, milk,

bread and others. The characteristics of FMCG are products that generate profits with

low margins, but have high sales volumes, are basic needs and fast consumption and

repeated purchases.

2) Fast moving consumer durable (FMCD), are products that are more durable and do not

wear out quickly, having utility value over a period of time. For example: Consumer

electronics such as microwaves, washing machines, etc. Characteristic of FMCD: the life

expectancy of these products is longer than FMCG products, has a good profit margin in

sales, easy storage due to its durable nature, but the sales volume is low. FMCG which is

easy to sell and with high sales volume is a basic need whose consumption is repetitive,

of course this is an opportunity for anyone who wants to enter this market.

FMCG Market Opportunities in Indonesia:

Indonesian consumers are the 'busiest' consumers when compared to consumers in

other countries. Over the course of a year, Indonesian consumers shop more than 400 times

or about 31 times a month or almost every day. This shows how lucrative the FMCG market

is in Indonesia.

Based on a survey conducted by research company Kantar Worldpanel on 7

thousand households for 70 FMCG product categories (food or non-food products) every

week in Indonesia, about trends in Indonesian consumer behavior, it turns out that there are

four types of customer loyalty in Indonesia, namely 100% loyals, shifting loyals (loyalty

between two brand choices), split loyals, and switchers (who like to change brands).

The use of consumer reach point (CRP) metrics to measure how many households

around the world buy a brand (penetration) and how often (average number of times a

consumer buys a brand product). The method is unique in that it combines penetration and

frequency to help FMCG companies gain a clear understanding of their brand reach globally.

It looks at how many times their brand has made it into consumers' shopping carts, and

provides important guidance on which regions offer the most opportunity.

According to Fabrice Carrasco, Managing Director of Indonesia-Vietnam-

Philippines Kantar WorldPanel (KWP), most Indonesians have a consumptive behavior and

love new items, even willing to spend part of their income to buy new trending products. The

proliferation of FMCG companies that offer products in small sizes (sachets), large

packaging products offer great potential in increasing the consumption level of Indonesian

consumers. Products in sachet packaging have yet to be replaced, especially in attracting new

consumers to try a brand. The market potential of the FMCG industry in Indonesia, based on

the prediction of Euromonitor (a global market research company), is said to have 80 million

consumers or 40% of the total consumers in ASEAN in the next 15 years. If various crucial

issues such as inflation, political stability, infrastructure, corruption, and convoluted

bureaucracy can be resolved, Indonesia will certainly become a country that must be

'controlled' by any industry player in the world.

The Digital Age

Integrated Supply Chain Management (ISCM)

ISCM is a set of important processes that interpret and integrate various systems,

such as information flows, human resources that are influential in blockchain, financial

systems from suppliers to consumers, and vice versa (Ogunlela and Lekhaya 2016). The

concept of integrated in ISCM is the bringing together of two or more organizations to

perform joint activities in the supply chain (Forslund and Jonsson 2007). The need for

organizations to come together through integration, driven by global competition and the

demand for effective customer service, as organizations do not run separately or in isolation,

but rather in a coordinated and collaborative manner, to improve performance or as a

network, is referred to as a supply chain (Fantazy et al. 2010).

Effective supply chain integration will help organizations to achieve improved

operational performance (Wong et al. 2011). The goal of ISCM is to ensure effective

coordination of internal and external processes through collaboration among stakeholders, in

a way that promotes seamless operations, to enhance the organization's competitive

advantage. Now individual businesses no longer compete separately within the overall

business, but as links in the supply chain (Fantazy et al. 2010). Organizations can improve

their customer service, logistics, cost reduction, improved inventory levels, and

competitiveness if demand and supply data are effectively disseminated through ISCM

procedures. Integrated supply chain management is the level at which a focused company

strategically works with its key supply chain partners and cooperatively manages

interorganizational processes to maximize customer value (Zhu et al. 2018). The existence of

ISCM allows organizations to improve customer service, logistics, cost reduction, inventory,

and organizational competitiveness. The supply chain in an integrated ISCM collaborates

with key supply chain partners and collaboratively manages inter-organizational processes to

deliver maximum value to customers (Zhu et al. 2018). Effective ISCM will help

organizations achieve improved operational performance (Wong et al. 2011). Manzouri et al.

(2011) explained that the implementation of ISCM indicates that an organization does not

have adequate training, poor communication among its stakeholders, lack of trust leading to

inadequate information sharing, poor internal cost management of key processes,

organizational culture, poor relationships between people and technology initiatives, poor

coordination of people when implementing technological changes, government policies

affecting international trade that conflict of interest among partners who are members of the

organization supply chain.

Some of the most relevant differences between supply chain and integrated supply

chain according to Quintana and Quintana-León (2021) are that the flow of information

circulating in traditional supply chains revolves around availability and demand, which is

reflected in the price offered and communicated directly between two individuals. In an

integrated supply chain approach, the real demand for product and process needs must be

shared online, with all businesses connected in the chain, so that they can proactively jointly

improve future supply chain performance. The same can also be done in a negative context if

there is a problem in the integrated supply chain, then each individual or business in the

chain can collaborate to solve it. ISCM itself can exist because of technological developments

including functional advances and cost reductions for computer technology, remote access,

and increased networking capabilities, which allow for increased information flow.

Effective ISCM will assist businesses in achieving improved operational

performance as integration enhances organizational competitiveness (Wong et al. 2011;

Bagchi et al. 2005). Power (2005) asserts that integration should characterized by

collaboration, cooperation, trust, information flow, and the use of technology, with a focus on

managing chains rather than individual processes.

USAID (2011) reveals that supply chain integration focuses on how to improve

efficiency and reduce or eliminate redundancies along the value chain, so as to improve

product availability to customers and considers a total approach that considers the active

elements in a system, along with how the various characteristics are interrelated. An

integrated supply chain also needs to ensure that the overall supply chain performs better, by

ensuring all attributes that serve as inputs for an efficient supply chain, are not characterized

simply by the assurance that products are available to customers. It should instead be

characterized by agility, clear roles and responsibilities, streamlined processes, visibility of

information, trust, collaboration and alignment of goals.

There are three levels of integration structure in the supply chain. First, the

functional level is integration within several company functions. For example, integration in

the purchasing, inventory or marketing functions. Second, the internal level is integration

within the various functions of the company which aims to enable the internal company to

produce products or services efficiently. Third, the external level is the integration of the

company both to suppliers and consumers so that the flow of raw materials flows smoothly

and finished products can be consumed by consumers at the expected quality, time, quantity

and location (Frohlich and Westbrook 2001).

According to (Vorst 2006), there are four basic elements of the supply chain that

can be identified to analyze the supply chain. The four elements will describe, analyze and or

develop a structured supply chain, the four elements are:

1) Supply Chain Structure, this chain structure that limits the scope of the supply chain

and describes the supply chain actors and an institution that are interrelated to form a

network and describe their respective roles. Analyzing this supply chain structure

aims to find out which supply chain actors play an important role in the success of the

supply chain process.

2) Business Process Chain, the business process chain is a series of business activities

that occur in the supply chain aimed at producing a certain output, which can be a

type of physical product, service or information designed in a structured manner for a

customer. This element distinguishes business processes such as new product

development, marketing, finance and customer relationship management.

3) Network and chain management that symbolizes a coordination and management

structure in the implementation process that involves supply chain actors in the

implementation process. The management system and behavior of supply chain

elements are barriers that will affect the trust, commitment and openness of each

supply chain actor.

4) Chain resources are resources that play a role in producing products and distributing

to consumers including human resources, machines, information, information systems and

information infrastructure involved in its implementation.

Supply chain integration is based on a division of activities that occur in the chain

of suppliers, companies and consumers. Where ISCM can be seen from the level of structure

and dimensions. Narasimhan and Ajay (2001) explain that the discussion of supply chain

integration consists of dimensions, consumer integration, information integration, distribution

and logistics integration, supplier integration and purchasing integration.

Frohlich and Westbrook (2001) explain that integration is operated on the basis of

8 different types of activities that are generally used by a company to integrate its operations

with its suppliers and consumers, namely:

1) Access to the planning system

The integrative variable aims to determine whether there is access to suppliers and consumers

in the company's planning system. Joint planning will have a significant impact on the

success of the supply chain.

2) Joint process planning

A work or activity flow structure that indicates how the company carries out its tasks and

activities. The level of process integration in the supply chain is a measurement tool for

the company's organizational structure.

3) Shared Electronic Data Interchange access

The use of information technology to coordinate all elements of the supply chain from

suppliers to consumers can achieve a level of integration called competitive advantage

that is not available in traditional logistics systems.

4) Knowledge of Inventory Mix Level

Companies need to store goods, especially finished goods, in proportional quantities because

the inventory of goods consumes more costs than the inventory of semi-finished goods.

5) Packaging Customization

The more types of goods and the number of companies offered, the higher the competition in

the market, where the main determinant of competition is consumers who are free to

make choices from the various choices of goods and services available on the market.

6) Frequency of delivery

Shipping frequency is a primary activity in the value chain. Where this activity contributes to

the creation of production, sales and distribution to buyers. The value chain reflects the

concept that goods and services will increase in value as the stages they go through

increase.

7) Use of logistics tools

The connection with suppliers and consumers is seen in the use of various logistics tools to

speed up the movement of goods and services.

8) Third-party distribution role

Distribution of products or services is easier to do if there is cooperation with third parties in

the form of agents or retailers. The use of third parties also pressurizes distribution more

efficiently than it is done by the company itself.

Digital Supply Chain (DSC):

The complexity of the dynamic environment forces each retail supply chain

including FMCG to operate with different strategies to meet the changing needs of consumers

with ever-increasing service levels that they expect. Collaboration, digital technologies,

humanized logistics operations, partnerships, information sharing, and operational

capabilities facilitate better demand and supply balancing, thereby reducing costs resulting in

higher levels of satisfaction for customers (Pereira and Frazzon 2020). Fluctuating demand

and supply practices therefore require digital technologies to strengthen information

management processes, and data analytics during and post COVID-19 for informed decision-

making (Lohmer et al. 2020).

Sharma et al. (2021) suggest that the adoption of digital technologies will help

organizations develop smart and resilient supply chains to improve transparency and

responsiveness. Transparency and responsiveness are key focus areas for developing

resilience strategies during and post COVID-19 situations. Digital supply chain will improve

collaboration among supply chain partners and support the change process to meet consumer

and market demands. This requires supply chain partners to know what is being produced,

moved and stored at any given time. Organizations need to increase the use of new

technologies such as IoT, blockchain, augmented reality, robotic, big data analytics. These

technologies will support organizations to address the existing SC vulnerabilities due to

COVID- 19.

The world is currently facing the 4th industrial change, known as Industry 4.0.

Based on Mckinsey Global Institute's analysis, Industry 4.0 has a huge and broad impact,

especially on employment sector, where robots and machines will eliminate many jobs in the

world. This era of industrial revolution must be addressed by industry players wisely and

carefully (Perera 2018).

This industrial era through connectivity and digitization is able to improve

manufacturing chain efficiency and product quality. This industrial revolution will also

eliminate 800 million jobs worldwide by 2030 as they are taken over by robots. This could be

a threat to Indonesia as a country with a high labor force and unemployment rate. The

government needs to address these changes appropriately through the formulation of

strategies that are able to increase the competitiveness of the national industry while creating

more jobs.

The fourth industrial revolution is characterized by artificial intelligence, super

computers, genetic engineering, nanotechnology, automated cars, and innovation. These

changes are occurring at an exponential pace and will impact the economy, industry,

government and politics. This era will increasingly show the world has become a global

village. Industry 4.0 is a term first coined in Germany in 2011 that is characterized by the

digital revolution. This industry is a digitally connected industrial process that includes

various types of technology, ranging from 3D printing to robotics that are believed to be able

to increase productivity. The three industrial revolutions that have occurred are characterized

by:

The invention of the steam engine and railroad 1750-1930;

The invention of electricity, communication, chemistry and oil 1870-1900;

The invention of computers, the internet, and mobile phones 1960-present.

The emergence of the steam engine in the 18th century has succeeded in drastically

accelerating the economy which in a period of two centuries has been able to increase the per

capita income of countries in the world to six times. The second industrial revolution is

known as the technological revolution. This revolution was characterized by the large-scale

use and production of iron and steel, the widespread use of steam power and the telegraph

machine. Petroleum was discovered and widely used and the first period of electricity. The

manufacturing industry has transitioned into a digital business in the third revolution. Digital

technology has taken over the media and retail industries. The third industrial revolution

changed the relationship and communication patterns of contemporary society. This

revolution has shortened distance and time, this revolution emphasizes real time.

A major leap forward has occurred in the industrial sector in the era of the fourth

industrial revolution, where information and communication technology is fully utilized.

Business models are undergoing major changes, not only in the production process, but also

throughout the industrial value chain. The Industry 4.0 roadmap states that Indonesia is

committed to building a globally competitive manufacturing industry through accelerating the

implementation of Industry 4.0.

4.0. This was marked by the launch of Making Indonesia 4.0 as a roadmap and

strategy for Indonesia to enter the current digital era. The Ministry of Industry designed

Making Indonesia 4.0 as an integrated roadmap to implement a number of strategies in the

digital era entering the Industry 4.0 era. The implementation of Industry 4.0 aims to create

more sustainable economic growth.

The roadmap consists of five industries that are the focus of implementation,

namely: Food and Beverages (F&B)/Fast Moving & Consumer Goods, Textiles, Automotive,

Electronics, and Chemicals. These five industries are the backbone of the economy that are

expected to be able to provide a large leverage effect, increase competitiveness, and make a

real contribution to the Indonesian economy. Making Indonesia 4.0 contains 10 national

initiatives that are cross-sectoral in nature to accelerate the development of the manufacturing

industry. Indonesia has started the process of adapting to Industry 4.0 by increasing the

competence of human resources through a link and match program between education and

industry.

This effort is carried out synergistically between the Ministry of Industry and

related ministries and institutions such as Bappenas, the Ministry of BUMN, the Ministry of

Manpower, the Ministry of Education and Culture, and the Ministry of Research, Technology

and Higher Education. The Ministry of Industry has set four strategic steps in facing Industry

4.0. The steps that will be implemented are: First, encouraging the workforce in Indonesia to

continue to improve their abilities and skills, especially in using internet of things technology

or integrating internet capabilities with production lines in industry. Second, the use of digital

technology to boost productivity and competitiveness for small and medium industries

(SMIs) to penetrate the export market through the E-smart IKM program. Third, more

optimal utilization of digital technology in national industries such as Big Data, Autonomous

Robots, Cybersecurity, Cloud, and Augmented Reality.

Encouraging technological innovation through startup development by facilitating

business incubation so that there are more technology-based entrepreneurs in Indonesian

regions. The implementation of industry 4.0 by the Minister of Industry targets to achieve a

big national vision. The vision outlines, namely, bringing Indonesia into the top 10

economies by 2030, restoring the industry's net export rate of 10 percent, increasing labor

productivity by twice the increase in labor costs, and allocating two percent of GDP for

technology research and development activities and innovation, or seven times the current

level.

A McKinsey survey (March 2017) of 300 leaders of leading companies in

Southeast Asia showed that 9 out of 10 respondents believed in the effectiveness of Industry

4.0 and almost no one doubted it, but when asked if they were ready for the change, only 48

percent felt ready. This move towards Industry 4.0 will benefit the private sector. Large

integrated manufacturers will be able to optimize and simplify their supply chains. Digitally

operated manufacturing systems will also open up new market opportunities for SMEs

providing technologies such as sensors, robotics, 3D printing, or machine-to-machine

communication technologies. Industry 4.0 can be a way to regain infrastructure

competitiveness for developed countries. Industry 4.0 can help simplify the supply chain

production, which in this case is needed to deal with rising labor costs in developing

countries.

The national industrial sector needs to improve a lot, especially in the aspect of

mastering technology which is the key to determining competitiveness. There are five main

technologies that support the development of the Industry 4.0 system, namely the Internet of

Things, Artificial Intelligence, Human-Machine Interface, robotic and sensor technology, and

3D Printing technology. These five elements must be mastered by Indonesian manufacturing

companies in order to compete. The government must also anticipate the negative impacts of

Industry 4.0 such as disruptive technology. The presence of disruptive technology will make

big changes and will gradually kill traditional businesses. The role of Industry 4.0 is also

questionable when viewed from the symptoms of global de-industrialization that have

occurred recently. This is due to the increasing role of the service sector.

The combination of projected economic growth not accelerating and the declining

role of the manufacturing sector has raised doubts about the prowess of Industry 4.0 (Xu

2018). Industry 4.0 also has a negative impact on job creation. Only Singapore is ready for

this new industrial era. If the government decides to adapt to the Industry 4.0 system, then the

government must also think about its sustainability. Do not let the implementation of this

digital industrial system only become a burden because it cannot be optimally utilized. Many

things must be prepared such as: the role of decision makers, governance, risk management

of system implementation, public access to technology, and security factors of the

implemented system.

The government must also prepare a data collection system with integrity,

determine the total price/cost of system ownership, prepare a legal umbrella and protection

mechanism for personal data, set service level standards, develop a strategic roadmap that is

applicable and anticipatory, and have design thinking to ensure industry sustainability (Xu

2018). The world has now entered the era of the fourth industrial revolution. The industrial

revolution made a big leap in the industrial sector, information and communication

technology was fully utilized. Indonesia must be able to adopt this Industry 4.0 and prepare

the right strategies in all sectors to be able to compete.

Indonesia has committed to building a globally competitive manufacturing industry

through the accelerated implementation of Industry 4.0. This was marked by the launch of

Making Indonesia 4.0 as a roadmap and strategy for Indonesia to enter the digital era. The

Ministry of Industry designed Making Indonesia 4.0 as a roadmap to implement a number of

strategies in an integrated manner. This revolution also has negative impacts, besides being

able to accelerate economic growth. It will disrupt conventional businesses and reduce the

demand for labor. The government must prepare anticipatory strategies against various

possibilities that will negatively impact the national economy. The DPR RI needs to

encourage the government to prepare various matters related to the inevitable implementation

of Industry 4.0.

This supply chain concept cannot be separated from information technology as a

new vehicle that can integrate systems in managing supplier networks to be more effective and

affordable to a wider and different area. The beginning of the development of this supply

chain began in the era of the industrial revolution in 1890 with the emergence of the term

"logistics" and then in 1927 as a strategy to increase production efficiency gains, the logistics

system developed into a mass production system in a product, from here supply chain

management began to be introduced with the term Supply chain Management (SCM).

SCM developed with the introduction of the barcoding method in 1952 by Norman

Woodland and Bernard Silver in the United States as a form of method to improve the

efficiency of the distribution system. Gene Thomas created a planning system for production

material needs or known as MRP (Material Requirement Planning) in 1960 and the

Electronic Data Interchange (EDI) system began to be developed until in 1990 the EDI

system experienced a development stage into an ERP (Enterprise Resource Planning) system.

This ERP era continued until the end of the 21st century by expanding internet-based

collaboration. The encroachment of ERP into this era of globalization has widened the

distribution network so that the goals of efficiency and productivity are achieved through

competitive advantages among suppliers, added value, and reduced costs. In the late 1990s

outsource hosting technology began to develop with the emergence of ASP software for the

On-Demand model and around 2003 - 2006 the SaaS Service Software model. The next thing

to enhance creativity, information sharing, and collaboration among users Web 2.0 is defined

as a trend in the use of the World Wide Web.

These six major movements can be observed in the evolution of supply chain

management studies, namely the eras of creation, integration, globalization, specialization

phases one and two, and SCM 2.0 These phases are shown in Table 2.1. The six-stage

evolution era illustrates that in certain eras which strategies are emphasized. For example, in

the sixth era information technology is given priority and industrial engineering plays a role

in the supply chain (Lassaveni et al. 2008). The threshold of the industrial era 4.0 results in

supply chain changes in the supply chain itself as well as the evolution, process methods and

tools that manage it in a new "era". This era is the road to Digital Supply chain (DSC), a

combination of process methodologies, tools and delivery options to guide companies to their

results quickly as complexity and speed increase in the supply chain due to the effects of

global competition, rapid price fluctuations, short product life cycles, expanded

specialization, monitored scarcity, and the area can all be monitored from any place (Lee and

Rim 2016).

According to Legner et al. (2017), digitization refers to the process associated with

converting analog signals into digital models and the impact of this technology caused by

adoption and operation. Digitalization has started to gain considerable attention from

organizations around the world, as it brings superior benefits to various companies.

Digitalization in the supply chain enables maximum use of digital technology to plan and

execute transactions, communications, and actions (Sanders and Swink 2019). Digital

technology in the supply chain

These generally include big data analysis (BDA), manufacturing technologies with

sensor systems, decentralized agent-based control, robotics, augmented reality, advanced

tracking and tracing technologies, and 3D printing (Ivanov et al. 2019). Additive

manufacturing or 3D printing for example, leads to the possibility of producing modules,

components, and even final products in one place, and basically anywhere in the supply chain

(Li et al. 2017). These digital technology applications increase the speed, efficiency and

resilience of the supply chain. Resilience 360 at DHL enables comprehensive disruption risk

management by mapping the end-to-end supply chain, building risk profiles, and identifying

critical points to initiate mitigation activities and generating near real-time alerts on incidents

that could disrupt the supply chain (DHL 2018).

Industry 4.0 in the digital supply chain as exemplified by customer-oriented

companies such as e-commerce, digital marketing, social media, and customer satisfaction

services. Every aspect of business will be transformed through integrated systems in

manufacturing development, marketing and sales, other internal operations, as well as new

business models based on these advancements in the end. We are progressing towards a

complete digital ecosystem (see Table 2.1). This ecosystem will be based on the full

implementation of various digital technologies - cloud, Big Data, Internet of Things, 3D

printing, and others.

Soft System Methodology (SSM):

Soft systems methodology (SSM) is an approach to solving complex unstructured

problem situations based on holistic analysis and systems thinking. It is also a participatory

methodology that can help different stakeholders understand each other's perspectives. The

focus of SSM is to create a system of human activities and relationships within an

organization or group in order to achieve common goals. Systems thinking is a

transdisciplinary field that emerged in response to the limitations of technical approaches in

the reduction process to solve problems. SSM was developed during the 1980s by

organizations or institutions that realized that the top-down mechanical approach to

organizing management did not work quickly enough to change the surrounding environment.

SSM is used to facilitate the change process in many private sector and public organizations.

SSM is based on the premise that if a person participates in a process of

discovering a problem situation and ways to improve it, then that person is more likely to

understand the expected development, feel ownership of the problem, and be committed to

changing it SSM is a methodology suited to helping an organization clarify their goals and

then design a system of human activities to achieve that goal. The SSM methodology is based

on a seven-stage process that starts from clarifying an unstructured problem situation through

designing a system of human activities that are expected to help improve the situation, where

these seven stages are:

Stage 1: Situation Considered Problematic, the intended problem is more

appropriate to be called a problem situation, because generally the problem to be solved is

more than one, thus the need to identify one by one. This stage finds unstructured problems

and problems that are revealed, analyzed using rich picture and problem structuring

methods/techniques in finding problem situations, with problems known through direct

interviews and distributing situational analysis questionnaires.

Stage 2: Problem Situation Expressed, collecting data and information by

conducting observations, interviews, workshops and discussions or focus group discussions

followed by the formulation and presentation of these problems, which are then outlined in

the form of a Rich picture.

Root Definition (RD) Creation:

Stage 3: Root Definitions of Relevant Systems, linking the problem to the existing

system, at this stage looking for relevant sources for the system to be built, identifying the

stakeholders involved, transformation, weltanschaungg (perspective), and the environment to

then build a system definition of human activities needed to improve the problem situation,

followed by making root definitions that explain the process or transformation to achieve the

goal (To do X, by Y, to achieve Z), to test these root definitions by conducting CATWOE

analysis as follows:

C = Customers : the victims or beneficiaries of transformation

A = Actors : those who do transformation

T = Transformation: input output

W = Worldview : that makes the transformation meaningful in context

O = Owners : those with the power to stop transformation

E = Environmental: elements outside the system on which constraints are taken

as given, but nevertheless

Stage 4: Conceptual Models, at this stage building a conceptual model based on

the root definition for each element defined, then building the conceptual model needed to

achieve the ideal goal, the model is described by the activity model, followed by determining

and measuring the performance of the model (efficacy, efficiency, and effectiveness).

Stage 5: Comparisons with Reality, comparing the conceptual system model

created with what happens in the real world and usually new ideas for change will arise

through face validity.

Stage 6: Debate about Change, establish feasible changes, create a public debate

in order to identify feasible changes together with stakeholders of the results of the stages

previously discussed, the result is change, and the change must be systematic (both means

and ends) and feasible to implement.

Stage 7: Action, building an action plan to improve the problem situation. The

Analytical Network Process (ANP) stages will also guide decision making and also consider

aspects of achieving innovation with BPR (Business Process Reengineering).

Supply Chain Operations Reference (SCOR):

SCOR is a reference model that can be used to map and benchmark supply chain

operations. SCOR provides basic process modeling tools, an extensive benchmark database

and guidelines on how to measure supply chain operations. SCOR was developed by the

Supply Chain Council (SCC), a non-profit organization founded in 1996 and initiated by

several organizations or companies such as Bayer, Compaq, Procter and Gamble, Lockheed

Martin, Nortel, Rockwell Semiconductor, Texas Instruments, 3M, Cargill, Pittiglio, Rabin,

Todd and McGrath (PRTM) and Advance Manufacturing Research (AMR). At the beginning

of the council's establishment, it had 69 member companies, but now its members have

reached more than 1000 council companies (2012).

The emergence of SCOR has encouraged researchers to conduct studies on supply

chain performance. Huang et al. (2005) built a computer-assisted supply chain configuration

model. Then Robb et al. (2008) measured the supply chain performance of the furniture

manufacturing industry in China. The SCOR method is considered successful in its

application to the measurement of supply chain performance by the industry.

The performance of the industrial supply chain needs to be monitored every certain

period of time, for example at the end of each year with the aim of maintaining good

industrial supply chain activities, so research on measuring supply chain performance through

various models is developing. Rabelo et al. (2007) built a discrete event model of

manufacturing functions, operational tasks and analyzed the value of the supply chain with a

hybrid simulation between discrete events and continuous and given a ranking value with the

AHP method. Persson and Araldi (2009) conducted research by integrating SCOR using

discrete simulation. This application relies on a set of attributes and parameters that reflect

each aspect. Tako and Robinson (2012) applied discrete event simulation to logistics studies.

Based on the literature review, the results of both studies concluded that discrete simulation

models in supply chains cannot solve problems at the strategic level. This is because the

relationship model is one-way without seeing the cause and effect that affect performance

fluctuations.

According to Persson (2011) SCOR is a static tool that focuses on linear

correlation relationships. This is a weakness of the SCOR method, so it cannot predict future

performance and activities as well as other factors including the relationship between

attributes. Further literature review until the last year has not found any SCOR 12.0-based

supply chain performance measurement studies involving the five attributes. attributes. The

five attributes are reliability, responsiveness, cost, agility and assets management.

Effectiveness is a measure of an organization in achieving better work processes in

completing tasks, while efficiency is the best comparison between a job done and the results

achieved by the job as targeted. Therefore, SCOR version 12.0 provides a framework that

links performance metrics, processes, practices and people into a unified structure. This

framework supports communication between supply chain variables in all aspects and

improves the effectiveness and efficiency of supply chain management. The SCOR method in

its analysis distinguishes the process for analyzing effectiveness where the analysis covers

reliability, responsiveness, and agility, while SCOR for measuring efficiency includes

analysis related to costs and assets. SCOR effectiveness is:

1) Reliability, shows the ability to create quality in accordance with customer expectations.

2) Responsiveness, is the speed to measure performance. Where the company has the ability

to fulfill requests faster than the predetermined target.

3) Agility, is a measure of the ability to be more flexible and adaptive to changes or needs

from consumers.

SCOR efficiency viz:

1. Cost, is the revenue or profit earned by the company so it is important for companies to

have an efficient supply chain management process to maintain company performance.

2. Asset, meaning how a supply chain can be a part of managing assets to generate greater

profits with the use of smaller profits.

The SCOR 12.0 method presents a unique framework of business processes,

performance indicators and technology to support communication and collaboration between

supply chain partners. To increase the utility of SCOR, it is necessary to build a model that

can integrate all related attributes so as to produce a comprehensive supply chain

performance assessment. The attitude that can be taken in this case is that it requires a

dynamic system and can build a pattern of thinking towards a system so that it can integrate

all components.

Analytical Hierarchy Process (AHP)

Analytical Hierarchy Process (AHP) is one of the analytical tools used to help

managerial decision makers. According to Saaty (1980), in general, decision making includes

decisions in the areas of: (1) planning, (2) generation of a set of alternatives, (3) prioritization,

(4) policy selection after finding various alternatives, (5) resource allocation, (6) setting

requirements or needs, (7) forecasting results / outputs, ( 8) system design, (9) performance

measurement, (10) system stability, (11) optimization, and (11) optimization.

(12) conflict resolution. These decision areas are often influenced by various

unstructured factors, thus requiring expert judgment to integrate them into the analysis. Thus,

AHP can be used to analyzing those decision areas. According to Saaty (2001), the principle

of analytic thinking in solving problems is by explicit logical analysis. There are three main

principles in AHP, namely: (1) the principle of hierarchical arrangement; (2) the principle of

priority setting; and (3) the principle of logical consistency.

It is the best scale based on its accuracy as measured by the Root Mean Square

(RMS) and Median Absolute Deviation (MAD) values on various system problems (Saaty

1991). The scale value is to determine the level of importance between elements. Analytical

Hierarchy Process (PHA) which is one of the analytical tools used to assist managerial

decision makers using the Expert Choice 2000 application program.

The creation of the hierarchy in the AHP method is based on the opinions of

experts through experience and literature, as well as the results of confirmation with expert

respondents in their fields using the method of interviews (depth interviews) and discussions.

Data processing and revision were carried out after the questionnaires were collected.

Schematically, the process of making and processing AHP data in research can be described

in the form of a process flow as shown in Figure.

House of Risk (HOR)

The HOR method is divided into two stages, namely HOR 1 and HOR 2 developed

by Pujawan and Geraldin (2009). HOR 1 is used to rank each risk agent (risk agent or cause

of risk) based on the aggregate risk potential (ARP) value, while HOR 2 is used to facilitate

management in prioritizing the handling of risks that have been identified and calculated risk

levels in HOR 1 with the following details:

1) House of Risk Phase 1 (HOR1): Risk Identification

This stage identifies risks that may occur in the business process under study. HOR

1 focuses on ranking the ARP which consists of 3 factors, namely occurrence, severity, and

interrelationship. In other words, this phase focuses on the risk identification process which

includes risk agents and risk events. The steps for applying the HOR 1 model are as follows:

a. Identify the risk event (𝐸𝑖) and risk agent (𝐴𝑗).

b. Measurement of the occurrence scale (𝑂𝑗) of a risk agent. Occurrence expresses

the chance level of the frequency of occurrence of a risk agent that results in the

occurrence of one or more risk events that can cause disruption to business

processes with a certain impact.

c. Measurement of the severity scale (𝑆𝑖) of a risk event on the company's business

processes. This severity value states how much disruption a risk event causes to the

company's business processes.

d. Construct a correlation matrix (𝑅𝑖𝑗) linking the risk event (𝐸𝑖) and risk agent (𝐴𝑗)

with the terms 0-1-3-9 (0: no correlation, 1: weak correlation, 3: moderate

correlation and 9: strong correlation).

e. Calculate the ARP value of 𝐴𝑗 with the formula:

𝐴𝑅𝑃𝑗= 𝑂𝑗 ∑ 𝑆𝑖 . 𝑅𝑖𝑗

f. Determine the ARP rank of each 𝐴𝑗.

g. Pareto diagram generation of 𝐴𝑗 (priority selection of 𝐴𝑗) based on ARP

calculation.

House of Risk Phase 2 (HOR 2): Risk Treatment:

The HOR 2 stage focuses on determining what steps will be taken. The purpose of

this stage is that the company will determine the appropriate form of risk response or

mitigation that is easy to apply, but can reduce the probability of risk agent occurrence. The

steps for applying the HOR 1 model are as follows:

h. The development of preventive actions (𝑃𝐴𝑘) is based on the priority of 𝐴𝑗.

i. Connecting the correlations of 𝐴𝑗 and 𝑃𝐴𝑘 with terms 0, 1, 3 and 9.

j. Calculate the total effectiveness value (𝑇𝐸𝑘) of each 𝑃𝐴𝑘 with the formula:

𝑇𝐸𝑘=∑

(

𝐴𝑅𝑃𝑗

∙

𝐸𝑗𝑘

)

k. Determine the degree of difficulty of application (𝐷𝑘) of 𝑃𝐴𝑘 with a scale of

difficulty of application of 3: low, 4: medium and 5: high.

l. Calculation of the effectiveness to difficulty ratio (𝐸𝑇𝐷𝑘) with the formula:

𝐸𝑇𝐷𝑘 = 𝑇𝐸𝑘⁄𝐷𝑘

m. Determine the priority ranking of 𝑃𝐴𝑘 based on the 𝐸𝑇𝐷𝑘 value.

Pareto Diagram:

Pareto Chart is a diagram developed by an Italian economist named Vilfredo

Pareto in the 19th century. Heizer (2004) says that Pareto diagrams have an important role in

the quality development process. A Pareto chart is a bar graph that shows problems in order

of occurrence. The most occurring problem is indicated by the first bar graph that is highest

and placed on the far left side and so on until the least occurring problem is indicated by the

last bar graph that is lowest and placed on the far right side. Pareto diagrams are often used in

determining and identifying the priority of problems that must be resolved. Problems that

occur the most and often will be the top priority for the company to take action.

The Pareto diagram in this study will be used in making the aggregate risk

potential (ARP) graph which is the result of the HOR phase 1 calculation, and the

effectiveness to difficulty (ETD) graph which is the result of the HOR phase 2 calculation.

This Pareto diagram will help in showing the ranking of ARP and ETD values, where the

highest ARP value shows the risk agent that must be considered the most, and the highest

ETD value will show which risk prevention actions are the most effective to be carried out by

the company.

2.1 Analytical Network Process (ANP)

The Analytical Network Process (ANP) approach has been largely ignored

compared to the AHP (Analytical Hierarchy Process) approach which is linear in structure

and does not accommodate feedback. This is because AHP is relatively simpler and easier to

apply, while ANP is deeper and broader, suitable for complicated, complex decision making

that requires a wide variety of interactions and dependencies.

ANP uses pairwise comparison judgment matrices (PCJM) between similar

elements as a development method of the AHP method. ANP pairwise comparisons are

carried out between elements in components or clusters for each interaction in the network.

ANP is also a mathematical theory that is able to analyze the influence with the

approach of assumptions to solve the form of the problem. This method is used in the form of

a solution with consideration of the adjustment of the complexity of the problem in a

synthesized decomposition accompanied by a priority scale that produces the greatest priority

influence. ANP is also able to explain the dependence factor model and its feedback

systematically. Decision making in ANP applications is by considering and validating

empirical experience. The network structure used, namely benefits, opportunities, costs and

risks (BOCR), makes this method possible to identify, classify and organize all factors that

affect the output or the resulting decision (Saaty 2006).

ANP relies on alternatives and criteria that exist in the implementation of problem

solving. Saaty (2006) also explains the ANP analysis technique, which is to use pairwise

comparison on project alternatives and criteria. The desired thing in ANP is to know the

overall influence of all elements. All criteria must be organized and prioritized in a

hierarchical control or network framework, comparing and synthesizing to obtain a priority

order from this set of criteria. The next stage derives the influence of the elements in the

feedback system with respect to each criterion. Therefore, the results of this influence are

weighted by the importance of the criteria, and added to obtain the overall influence of each

element (Ascarya 2005).

Saaty (1996) states that a feedback network is a structure for solving problems that

cannot be structured using a hierarchical structure. Feedback networks consist of interactions

and dependencies between elements at lower levels. The feedback structure does not have a

linear shape from top to bottom, but looks like a network of cycles in each cluster of each

element and can take the form of looping in the cluster itself. This shape cannot be called a

level. Feedback also has sources and sinks. The source point indicates the origin of the

interest path and is never the destination of another interest path, while the spill point is the

point that is the destination of the interest path and is never the origin for another interest. As

shown in Figure.

A complete network consists of a source node, an intermediate node that originates

from the source node, a cycle node or a path that leads to the sink node, and the final part is

the sink node itself. The ANP structure consists of dependencies between elements of the

inner component (inner dependence) and from dependencies between elements of the outer

component (outer dependence) as shown in Figure 2.8. The existence of a network in an ANP

may be able to represent several problems without focusing on the beginning and the final

continuation as in AHP.

Supermetric ANP will automatically generate the correct weights for criteria and

alternatives if the data used is the priority vector in supermetric. This is a simple way because

it does not require part-by-part thinking on the part of the user. Knowledge of the data and

supermetrics will generate priorities at each point in the model (Saaty 2001). According to

Azis (1990) with feedback, alternatives can not only depend on criteria but can also depend

between one alternative and another. The criteria itself can depend on alternatives and other

factors. Representing feedback in the ANP method requires a large metric called a

supermetrix which consists of several sub-metrics.

The comparison of the level of importance in each element and cluster is

represented in a metric by providing a ratio scale with pairwise comparisons. Each ratio scale

shows the importance comparison between elements within a component and elements

outside the component (outer dependence) or also within the element to the element itself in

the inner component (inner dependence). Each element does not always have an influence on

elements in other components. Elements that have no influence on other elements will give a

value of zero. The metric of pairwise comparison is represented in vertical and horizontal

form and is a stochastic metric called supermetric. Weighting in ANP requires a model that

represents the relationship between criteria or sub-criteria or alternatives. The thing that must

be considered in this weighting is "control". There are two controls, namely hierarchical

control which shows the relationship between criteria and sub-criteria and the second is the

linkage control which shows the existence of a hierarchical hierarchy interrelationships

between criteria or sub-criteria. The combined weight is obtained through the development of

supermetrics.

A system with N components consisting of C interacting elements, denoted Ch

where h = 1, 2, 3, N . Elements that belong to components will be symbolized by eh1, eh2,

ehn. The value of the supermetric is given as a result of the assessment of the priority scale

derived from pairwise comparisons as in AHP. Metrics are structured to describe the flow of

importance between components in both independence and outer dependence. The

importance relationship between elements in the network can be represented following the

supermetric, as shown in Figure 2.9 below.

Each column in Wij is an eigen vector indicating the importance of the element in

the i-th component of the network to an element in the jth component. A value of Wijj

indicating = 0 means that there is no importance for that element. If this is the case then the

element is not used in pairwise comparisons to derive the eigenvector, so only elements that

produce non-zero importance are used.

The three basic principles of ANP are decomposition, comparative judgements,

and hierarchical composition or synthesis of priorities (Ascarya 2005):

The principle of decomposition, which is applied to structure complex problems into a

hierarchical framework or ANP framework consisting of a network of clusters.

The principle of comparative scoring is applied to construct a pairwise comparison of all

combinations of elements within a cluster with respect to its parent cluster. This pairwise

comparison is used to derive the local priority of elements within a cluster in terms of its

parent cluster.

The principle of hierarchical composition or synthesis is applied to multiply the

local priorities of the elements in the cluster by the "global" priority of the parent element,

which will result in the global priority of the entire hierarchy and sum them up to produce the

global priority for the lowest level element (usually an alternative). There are three main

functions of ANP, namely structuring complexity, measurement, and synthesis, in accordance

with its basic principles (Ascarya 2005), namely:

1) Structuring complexity.

ANP serves to deal with complex problems. Since time immemorial, humans have

tried to solve complexity until a simple way was finally found to deal with it. This way of

hierarchically structuring complexity into homogeneous clusters of factors, is so simple that

anyone can easily understand.

2) Measurement into a ratio scale.

Previous decision-making methodologies generally used low-level measurements

(ordinal or interval measurements), while the AHP/ANP methodology uses ratio-scale

measurements that are believed to be the most accurate in measuring the factors that form the

hierarchy. One of the advantages of the ANP approach is the existence of priority

measurements based on ratios and proportions to capture relationships and influences so as to

produce accurate predictions and appropriate decisions (Saaty 2006). Measurement levels

from lowest to highest are nominal, ordinal, interval, and ratio. Each level of measurement

has all the meanings that the lower level has with the addition of new meanings. An interval

measurement does not have the meaning of ratio, but has the meanings of interval, ordinal,

and nominal. Ratio measurements are needed to reflect proportions. Saaty proposed using the

ratio scoring of each pair of factors in the hierarchy to obtain (not directly score) ratio-scale

measurements to maintain the simplicity of the methodology. Any methodology with a

hierarchical structure must use ratio-scale prioritization for elements above the lowest level of

the hierarchy. This is important because the priority (or weight) of an element at any level of

the hierarchy is determined by multiplying the priority of the element at that level by the

priority of its parent element. The product of two interval level measurements is

mathematically meaningless, a ratio scale is required for this multiplication. ANP uses ratio

scales at all the lowest levels of the hierarchy or network, including the lowest level

(alternatives in the choice model).

3) Synthesis

Synthesis is the process of bringing all the parts together into a whole. Its

complexity in critical decision situations, forecasting, or resource allocation, often involves

too many dimensions for humans to synthesize, so we need a way to synthesize. ANP not

only facilitates analysis, but an even more important function of ANP is its ability to help us

measure and synthesize a number of factors in a hierarchy or network (Ascarya 2005).

Decision making with limited information constraints, the synthesis process is the right way

to produce decisions (Saaty 2006). According to Izik et al. (2011) the ANP solution process

has four main steps, namely:

Developing the Decision Model Structure

The problem should be structured and a conceptual model should be created in this

step. Important components must be identified at the beginning. The topmost element

(cluster) is decomposed into sub-components and attributes (nodes). ANP allows

dependencies both within a cluster (inner dependencies) and between clusters (outer

dependencies) (Saaty et al. 2011).

Pairwise comparison metric of interrelated variables

Pairwise comparison of elements within each level is performed against the relative

importance for their control criteria in ANP. The correlation metric is organized based on a

ratio scale of 1 - 9 as seen in Table 2.5. The assessment is carried out for a pair, the mutual

value is automatically assigned to the inverse comparison in the metric, after the pairwise

comparison is completed, the vector corresponding to the maximum value of the constructed

metric is calculated and the priority vector is obtained. The priority value is found by

normalizing this vector. Problems may occur in the consistency of pairwise comparisons in

the scoring process. The consistency ratio provides a numerical assessment of how much this

evaluation may be inconsistent. If the calculated ratio is less than 0.10, the consistency is

considered satisfactory.

Supermetric Counting

After pairwise comparisons are completed, supermetrics are calculated in 3 steps:

Unweighted Supermetrix, created directly from all local priorities derived from pairwise

comparisons between elements that affect each other.

Weighted Supermetrix, calculated by multiplying the value of the unweighted

supermetric by the weight of the corresponding cluster.

The composition of the Limiting Supermetrix, created by scaling the weighted

supermetric until it stabilizes.

Stabilization is achieved when all columns in the corresponding supermetric for

each node have the same value. These steps are performed in Super Decisions software which

is a software package developed for ANP applications. For each subnetwork, the same

procedure is applied and alternatives are ranked.

Weighted Importance of Clusters and Nodes

Determination of the importance weights of the determinants using the

supermetric-limited results of the ANP model. The overall priority of each alternative is

calculated through the synthesis process. The results obtained from each subnetwork are

synthesized to obtain the overall priority of the alternatives.

CONCLUSIONS :

Based on the results of analysis, synthesis, and strategy analysis, it can be concluded that:

1. The existing condition of the FMCG supply chain at PT Tigaraksa consists of suppliers,

FMCG industries, retailers, and end consumers. The products it produces are divided into

four groups, where the products must fulfill a series of checks so as not to reduce their

quality when they reach consumers. The technology used in the supply chain at PT

Tigaraksa is SAP WMS software which focuses on controlling all current warehousing

activities. The current supply chain management is a business to business (B2B) model.

2. Based on the classification value of the performance standard of Monczka et al. 2011,

the performance of the TRS supply chain in 2020 is classified as very good, but based on

the results of the risk analysis, it shows that there is no digitization and integration of

stock data and sales data from all channels or outlets, this is the cause of the risk that has

the most potential to cause disruption to business processes.

3. Based on the results of risk analysis, it shows that the absence of digitized and integrated

stock data and sales data from all channels or outlets is the causative agent of risk that

has the most potential to cause disruption to business processes. The next thing in a row

is that there is no data on stock and sales in real time in all distributor branches and

channels, key initiatives supporting the achievement of targets that are not integrated

between distributors and principals, there is no system in apps or web for returning and

tracking return product orders and the order tracking system and distributor service

levels to outlets are not all digitized in the app or web. These things are certainly related

to integration and digitization issues, so the company is expected to mitigate the most

effective risk by integrating sales, logistics and finance systems. Other mitigation actions

to be carried out based on risk analysis are providing benefits to outlets for the

digitization process, digitalization of outlets and integration of stock and sales data,

integration of key initiatives supporting forecasts and realtime stock checking systems

and tracking orders from distributors to outlets.

4. The main alternative strategy is the integration of sales, logistics and finance systems,

while the second alternative is that distributors provide benefits to outlets for the

digitization process. The main actor is the distributor, then the next influential actor is the

principal. The main obstacles are: lack of integration between sectors and the cost of

investing in digitalization and integration software. The main enabler is: outlet

motivation for digitization, while the next alternative is: information system integration.

The activities that need to be done (activity) are: integration business planning, while the

next alternative is ordering and tracking system.

5. The combination of digitalization and integration process development in the

development of supply chain management is considered a unified process support each

other. Digitalization is considered capable of accelerating the integration process. Likewise,

digitalization without acceleration is not optimal.

SCM 300_ASU_ASSIGNMENT 2024_DEVELOPMENT OF FMCG DISTRIBUTOR SUPPLY CHAIN MANAGEMENT AT PT TIGARAKSA SATRIA TBK IN THE DIGITAL ERA

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