How Does COVID-19 Impact the Supply Chain Management of the E-Commerce Industry in Indonesia?

How Does COVID-19 Impact the Supply Chain Management of the E-Commerce Industry in Indonesia?

Salman Yusuf ^1*

1 School of Business Management, Bandung Institute of Technology, Bandung, Indonesia

*Corresponding Author: salman_yusuf@sbm-itb.ac.id

Accepted: 15 August 2022 | Published: 1 September 2022

DOI:https://doi.org/10.55057/ijbtm.2022.4.3.7

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Abstract: COVID-19 had created a major shift in how conventional, brick-to-mortar, and any business in general to operate. With the changes occurring in the business industry, several factors are required for organizations to survive with the sudden change. One of the key elements is to implement the use of digital technology. With the ever growing phenomena of digitalization, implementing these matter becomes a necessity especially amid pandemic. In correspondence to the adaptation of the business sector, a growing industry has shed light during this age, which is e-commerce. Being a platform that is based electronically through the internet, the usage of e-commerce has grown significantly, especially in one of the world’s most overlooked e-commerce market, Indonesia. Being the biggest user of e-commerce in South East Asia, Indonesia has the potential to utilize this business sector to its fullest. The impact of the pandemic will directly impact the e-commerce businesses in Indonesia through its supply chain management sector. With the concurrent growth of digitalization and the regulations of COVID-19 in Indonesia, the supply chain management has the ability to improve its work processes by implementing digital technology. With the many variables of digital technology, implementing it to the functions of supply chain management will differ from business to business. This research will dissect the different utilization of digital technology in the supply chain management of e-commerce businesses in Indonesia. It will also investigate the impact that COVID-19 has on the e-commerce businesses in Indonesia. This research will utilize a descriptive design framework with a longitudinal time scale. It will consist both quantitative and qualitative data through only secondary method of research.

Keywords: COVID-19, Supply Chain Management, E-commerce, Digitalization, Impact ___________________________________________________________________________

1. Introduction

1. Introduction 1.1 Background

COVID-19 outbreak, a phenomenon that shifted the world in a variety of ways. Being one of the biggest outbreaks in recent years, having a death toll of over 6 million and over 500 million recorded cases as of April 2022, the COVID-19 pandemic has become the world’s biggest external factor in social globalization (New York Times, 2022). This corresponds with the many changes that the world had stumbled upon which are but not limited to the changes in health and safety regulations in different countries, changes in the pharmaceutical industry in a major course, causing havoc in day-to-day activities, and also change how businesses operate.

The pandemic forced the global industry to adapt towards the situation, pushing businesses to

become more agile in order to survive the global phenomenon. With the scope of businesses, the outbreak stagnates heavily on physical activities which then affects the transaction of buying and selling via person-to-person, operations, logistics, and even going to conventional or brick-to-mortar businesses.

Out of the many operations that have been impacted by the outbreak, the commerce motion has been one of the biggest activities that had been forced to shift heavily. Commerce itself is described as being the term of buying and selling, generally exchanging goods or services on a large scale with businesses or entities being involved (Chen, 2021). It is a global activity that most businesses perform and an activity that consumers do either to fulfill their needs or wants.

Touching more on the effect on commerce, this activity is severely hindered through its demand uncertainty, obstruction in access of transactions, and also supply chain disruption. Out of all the factors listed, the most visible change to consumers is the access of transaction which generally occurs effortlessly in conventional stores.

Digitalization has been a major shift for businesses to adapt towards the current condition of globalization. Digitalization itself refers to the process of transitioning to a digital business by utilizing digital technologies to modify a business model and give or maintain revenue while still providing value (Gartner, 2022). The use of digital technologies has been applied in different sectors and industries across the world. As an example, in the education sector, virtual learning and learning materials provided online are achieved through the effect of digitalization. Another example is in the manufacturing sector, where factories utilize artificial intelligence to help extend the growth production efficiency and effectiveness in production.

Also in the marketing sector, where businesses now employ the use of social media to help promote their product, service, and brand. Most importantly, the importance of digitalization towards the commerce sector.

With the utilization of digitalization, a new term for the action of buying and selling has emerged, known as Electronic Commerce or e-commerce for short. As the name suggests, e- commerce is the digitalization process of the commerce activity, which is to conduct the trade of buying and selling through the internet by using telecommunication devices such as computers, smartphones, and tablets (Bloomenthal, 2021). The e-commerce activity is conducted regularly from different actions such as buying and selling through an online medium. The idea of e-commerce itself has begun years before the pandemic had occurred.

However, with the growing demand and usage of e-commerce due to the pandemic where conventional transactions are less viable, online commerce stores have taken stardom in today’s digital age.

The term e-commerce is generally concluded as strictly the process of transaction through an online media, while the whole entirety of it is often called e-business. Often times, the phrases

"e-business" and "e-commerce" are confused with one another, In fact, the two terms are not interchangeable. Simply expressed, e-commerce refers to online buying and selling, whereas e-business refers to all online transactions (Khurana, 2020). Although it branches out in a similar lane of an idea, both terms cannot replace each other. In regards to this explanation, e- commerce becomes a subset of electronic business. Both categories of business are relevant in today’s day and age, however, the term that will be discussed in the paper will refer to the definition of e-commerce.

Focusing on the e-commerce industry as a whole, companies from around the world had taken the opportunity to build an empire through the growth of digitalization. Some examples of the

biggest e-commerce companies are Jeff Bezos’ Amazon, China’s multinational technology company, Alibaba, and also Indonesia’s most visited marketplace, Tokopedia. These companies do not limit themselves to having e-commerce operations, however, what they are known for is because of their superior utilization of supply chain management for its e- commerce activity. This new business model has taken storm into the business world, where competition is increasing due to the high demand the industry holds. The relevancy of e- commerce is also critical, as the number of digital purchasers continues to rise every year as internet availability and usage grow fast throughout the world. In 2020, more than two billion individuals will have bought goods or services online, with global e-commerce sales exceeding 4.2 trillion dollars (Coppola, 2022). The usage of e-commerce has also been significantly growing as global retail e-commerce sales were estimated to be over 4.9 trillion dollars in 2021.

Over the following four years, this value is expected to increase by 50%, reaching $7.4 trillion by 2025 (Chevalier, 2022). From the given numbers and analysis, e-commerce is an industry to be examined vividly, as it continues to grow in a significant manner, with users and sellers coming in from across the world. It also participates a substantial amount in digital economic growth.

Taking into consideration, Indonesia’s e-commerce market specifically has also been plummeting, with internet users reaching above 50% of the total population, the market for e- commerce has seen an upward growth. With a total revenue of $43 billion, a market growth of 32 percent in 2021 and contributing to a global growth rate of 29 percent, Indonesia is the ninth largest e-commerce market, ahead of Canada and just falling short of India (EcommerceDB, 2021). Major e-commerce businesses in Indonesia includes Tokopedia, JD.ID, Shopee, and Bukalapak. These major companies have managed to participate in the extensive growth that Indonesia has. Having a substantial upward growth rate, Indonesia outshines its neighboring countries, In fact, Indonesia has the biggest market volume for e-commerce in South East Asia.

This corresponds heavily with the growth of middle class, access to technology, and also the COVID-19 outbreak.

As a brief explanation, supply chain management is the process that changes raw materials into finished products that are included in the management of the flow of products or services. It entails actively simplifying a company's supply-side processes in order to increase customer value and achieve a competitive edge in the market (Fernando, 2022). Being the example of how supply chain management could be relevant, is the effectiveness of Amazon, the largest e-commerce platform in the world, on how they utilize its logistics, processes, and workflow.

Amazon has long placed supply chain management as a priority. This is an area where the majority of businesses do not place a high focus on. As a result, even if businesses start off strong, they struggle to maintain their momentum in the long term. It is noteworthy that, as being one of the first companies to enter the internet retail market, Amazon has maintained its reputation and goodwill through its services until current time. It has the largest client base of any online retail shop that can verify consumer satisfaction. As a result, it can be concluded that for an online retail store's long-term existence, supply chain management is a critical component that has shown to be the key to success for Amazon (Bharadwaj, 2019).

With the evolution of this new business model, and also effects from the pandemic, a change in approach will occur, especially in the supply chain segment. Bringing things into consideration, the way a company approaches this unique business model will be different as consumers and sellers do not meet in face-to-face transactions. This creates a difference in the way supply chain and logistics operate in conventional businesses and e-commerce ones. With the growth of e-commerce in itself as well as the mentioned pandemic, some companies in the

industry have managed to adapt towards the situation by being agile and flexible, which results in major benefits. However, the factors that affect these companies may vary depending on the country. As for Indonesia, the status of supply chain management is seeing its growth as more and more companies starts to put supply chain as a priority for success. Looking into an example of an analysis on the impact of supply chain management and flexibility in agriculture businesses in Indonesia, a research discovered that supply chain management has an impact on company performance, while supply chain flexibility has a direct impact on firm performance.

The competitive advantage variable fails to be a mediator of a company's performance. Farm firms must adopt supply chain management and supply chain flexibility effectively since both will help them address the issues they encounter in Indonesia. Another research has shown that excellent supply chain management and supply chain flexibility implementation can help agriculture companies enhance their performance. Competitive advantage must be built through the consideration of supply chain management, where it can create a major impact on company performance (Itang et al., 2022). This further explains the necessity of having an efficient and effective supply chain in businesses, especially in Indonesia.

1.2 Problem Statement

The implementation of digitalization towards different businesses is proven to be effective and efficient, however, the process of applying and implementing it would narrate a different story.

During the course of the COVID-19 outbreak, businesses are required to be agile and flexible in order to adapt in the global condition. With the stagnated process of brick-to-mortar businesses, implementation of technology and digitalization becomes one of the essential factors in shifting businesses to survive with the pandemic wave. In the case of e-commerce businesses, which it operates digitally through the use of technological devices and the internet, the implementation of digital transformation would be more convenient and accessible. In spite of this, the COVID-19 outbreak becomes an external factor where it hinders the process of logistics and supply chain. Different types of companies has failed to develop future plans that is possible to address the types of supply chain and logistics disruptions caused by the phenomena of COVID-19, as a result, firms all over the world have reported unpredictable delays in receiving materials from a specific location due to insufficient supply chain information (Paul and Chowdhury, 2020). Other factors, such as supplier consolidation, lower manufacturing costs, and risk mitigation, have reduced available stocks and contributed to the current situation of scarcity (Dolgui and Ivanov, 2020). This creates a new problem where not only businesses are required to shift on how they operate, but also to create an efficient workflow and supply chain to withhold the given condition of impracticality, limited resource accessibility, and increase in demand globally.

Having considered a strict protocol and regulations for COVID-19, Indonesia experiences a huge shift in its commercial operations. This directly impacts the e-commerce business and its supply chain.

The implementation of a good supply chain workflow will benefit businesses as a whole, looking into e-commerce businesses in Indonesia, it will also be a necessity to put supply chain and logistics as a priority. This means that the factor of digitalization and social globalization will take part in this process. However, as the occurrence of the COVID-19 pandemic is inevitable, the growth of the supply chain in e-commerce businesses will be affected. By this, I created several questions based on the problem, which are:

• What are the issues that e-commerce businesses face in adapting towards the pandemic, especially in their supply chain management?

• How does digitalization improve supply chain management in e-commerce businesses?

• Hypothetically, what will be different in the e-commerce business if the pandemic was not present?

2. Research Objective

By the common occurrence of growth among e-commerce platforms across the world, especially in Indonesia, the e-commerce sector becomes one of the most important industries to help maintain the process of buying and selling in Indonesia. It has almost become a necessity in Indonesia to maintain this process due to the factors mentioned previously. As the pandemic in Indonesia contains strict regulations and protocols, the e-commerce market becomes one of the only viable options to do purchasing activities to fulfill needs and wants for the population.

This research that I will conduct is to create a specific analysis regarding the supply chain management of e-commerce in Indonesia. Multiple analysis has been conducted regarding the supply chain management of e-commerce in general and also the impact of COVID-19 towards the supply chain management of different business sectors. Utilizing and comprehending existing theories and data will help me conduct the research necessary to fulfill my analysis.

My research will act as a bridge in order to identify the positive and negative impacts that the outbreak had created, specifically, on e-commerce businesses in Indonesia. It will also contain comparisons from existing data regarding the management of supply chain in e-commerce around international companies. The major outline of the research will be dissected into multiple key points, which are:

• Identify key factors that COVID-19 has on the e-commerce market in Indonesia.

• Identify key elements of supply chain management in the e-commerce industry that have adapted to the outbreak.

• Determine the impact of the pandemic on the growth of e-commerce businesses in Indonesia.

• Identify the importance of supply chain management towards the success of e-commerce businesses.

• Create a recommendation and conclusion based on analysis and findings.

3. Literature Review

3.1 Growth of Digitalization

With the growth of digitalization, not only day-to-day activities are affected, but also entrepreneurship and organizational tactics. These categories are being affected by digital technology progressively. Terms such as mobile devices, media platforms, the Internet of Things (IoT), and softwares are just a few of the tools incorporated into digital technology.

With these tools, the occurrence of digitalization gave rise to digital business models, which can all lead to new business prospects. In the current state of new business models, different opportunities also rises from the new form of firms. In addition, digitalization acts as a new phenomenon that helps people to think differently. Furthermore, digitalization alters the logic of value generation (Matalamäki, 2021). According to the same study, the impact of digitalization to an organization is divided into 5 parts, which are: Organizational Structure, Digital Innovation, Organizational Learning, Organizational Agility, Business Ecosystem.

The factors of digitalization that impacts an organization resemble the dependency a business has in this current age. New business models are also emerging due to the utilization of digital technology and tools. This creates a new dynamic in the industry gives more opportunities for

businesses to find their spot in the market. Given the implications of digital technology for organizations, as mentioned before, there are multiple factors that will impact the business. It implies that businesses who utilize the growth of digitalization often adhere a sustainable competitive advantage over those that disregard it. This further explains the necessity of digital technology utilization for businesses (Matalamäki, 2021).

The traditional notion of entrepreneurial and managerial decision-making is challenged by digital technology, resulting in a dynamic corporate environment. It is tough to assess the extent of digitalization in an organization. However, based on the company’s own understanding, a business might claim to be digitally advanced, but the real level of digitalization may be different from its claim. Firms use digitalization to respond favorably to client requests and to support customer activities. It is frequently utilized to boost productivity by lowering operating expenses (Lenka et al., 2017). The use of digitalization is further interpreted in this study, where it is mentioned that companies generally utilize digitalization as a form to help its operation in becoming more productive and efficient. Digitalization could also decrease the cost of operations for the company’s general activity whether it be manufacturing, research, development, or even marketing. This target of achievement could be enabled if the tools of digitalization are properly employed.

The global industrial revolution has evolved from its initial idea. It has been fundamentally experienced by generations including 4 accepted industries. However, as of current date, with the emerging growth of different technology and its advancement, the term Industry 5.0 has been noticed progressively. In its idea, the Industry 5.0 started in the year 2020, (Piacentini et al., 2021), the evolution of the industry is divided into 5 parts, which are: Industry 1.0, Industry 2.0, Industry 3.0, Industry 4.0, Industry 5.0.

3.2 E-commerce

As the definition of e-commerce varies depending on the author, one of the definition it has is the economic activity on a digital platform (Tagliavini et al., 2001). However, My analysis will use a slightly different definition of E-commerce, which is the electronic expansion of traditional company activities. Having to utilize information technology (IT), the prominence of IT has enabled firms to improve internal efficiency and grow their operations internationally, allowing them to overcome geographical constraints. Activities that were not feasible before can now be operated due to the attendance of e-commerce. Even with the generally accepted term of e-commerce, its global definition often differs slightly. In some cases e-commerce might be viewed as the process of transaction through an online platform, while at times, e- commerce is considered to be the entirety of the activity, which includes buying, selling, marketing, payment, etc. It is often mismatched with the term e-business which generally describes the whole entirety of the process, while e-commerce is simply defined as the activity of buying and selling through an online media. With e-commerce being such a broad industry, the transaction activity is generally dissected into 5 categories, which are: Business to Business (B2B), Business to Consumer (B2C), Consumer to Consumer (C2C), Consumer to Business (C2B), Business to Government (B2G).

The occurrence of electronic commerce has altered the dynamics of the business environment.

It has also opened a new way for people and companies to do business with one another dramatically. With the addition of e-commerce, it has given fresh opportunities for businesses and a chance to increase or maintain competitive advantage, especially for entrepreneurs. E- commerce has the ability to create a low-cost approach in order to reach people all over the world. It then creates a realm of possibility for entrepreneurs to compete with huge corporations

(Khan et al, 2016). By the explanation of this existing study, not only does e-commerce create a revolutionary way for entrepreneurs to connect with the consumers, but also to provide a hint of chance for businesses to compete with major companies. This level of impact would create a degree of dynamic that would lead to an increase in e-commerce usage. As the benefits of e- commerce can be appealing, more entrepreneurs will diverse its attention and put eyesight on this platform.

Businesses considering or undergoing an e-commerce transformation should evaluate the effect of adoption and innovation. Transforming into the e-commerce industry, multiple factors are needed to be noticed in order for the succession of the new business model to take place as it will be considered a new entity in the business market. While shifting business models will certainly provide a significant number of things that need to be considered, there are 5 existing common theories in order to identify the most important factors of e-commerce adoption (Rahayu and Day, 2015). These 5 theories are listed as follows: Technological, Organizational, and Environmental Framework (TOE), Theory Reasoned Action (TRA), Theory of Planned Behavior (TPB), Technology Acceptance Model (TAM), Diffusion of Innovation Theory (IDT).

3.3 Indonesia’s State and Potential in E-commerce

The e-commerce industry takes part in a worldwide market, ranging from different ends of the world. It accumulates the market from both developed and emerging countries. The top 10 biggest market for e-commerce ranges from a mix of both types of countries. China, the United States, and Japan are among the biggest market holders of e-commerce as being the developed countries, while India, Mexico, and Indonesia are representatives of the developing countries (Freedman, 2022). Being a staple in the market for developed countries, e-commerce businesses that operates in the developed listed countries has managed to exploit their resources in order to attain the dominant market share. With this, those businesses has managed to utilize most of the important aspects that goes into the adaptation of e-commerce. However, looking at the other end of the list, the countries that are categorized as developing countries has a market yet to be exploited. With this, there will be a gap in the potential future success that might be acclaimed to those e-commerce businesses operating in the categorized countries.

Taking a look into Indonesia, which is claimed to be an overlooked e-commerce market, it has the spark and potential in becoming a titan in the e-commerce industry for emerging countries (Kaplan, 2022). Indonesia’s main potential is dissected into 4 primary reasons, which are:

Quantity of Population, Geographical Features, Geographical Convenience, Future Economic Power.

These 4 reasonings become the key factor in the potential that Indonesia has in becoming a leading market for e-commerce in Asia and also as an emerging country. Starting with the first reason, which is the population of the country. Indonesia is listed as the 4th most populated country falling just behind of the United States. For a relatively small country (in comparison with the top 3 most populated countries of China, India, and the United States), Indonesia has a plethora amount of potential human resources. Other than it being a potential for human resources, looking in the other end, it could be a big opportunity for the market itself. Having the population Indonesia has will enable e-commerce businesses to enter a market with a big quantity of individuals in them. This creates a big pool of market with the backing of plenty of human resources. In correspondence to the population number, Indonesia’s second reason for the e-commerce market is its geographical features. Containing more than 13 million islands in the country, Indonesia is considered to be the world’s biggest archipelago nation. With the

many divided parts of the country having to be crossed through air or sea freight, Indonesia’s distinct characteristics provide another reason for the market to demand the features of e- commerce. By this, it creates a sense of gap in the market, as an example, a citizen might live on the far edges of a certain island in Indonesia where there is limited access to purchase his/her wanted goods. The closest possible way is for the individual to travel to the capital of Indonesia, Jakarta. However, this would cost a lot as he/her would need to pay attention to the travel expenses and living costs of traveling there. With the emergence of e-commerce, this person could just gain access to a mobile device, laptop, or computer, and an internet connection, which can be utilized to purchase an order through an e-commerce media available to them.

With Indonesia being located in the center of South East Asia, it has close relations with its neighboring countries. The Association of Southeast Asian Nations (ASEAN) also becomes a supporting factor for Indonesia to grow in general. Being located close to countries such as Australia, Japan, and China also creates a level of convenience that Indonesia could benefit a lot from. These countries could be beneficial as they can support each other by providing technological advances, insights, raw materials, ease the process of imports and exports, and many more. Last but not least is the factor of the future economic power that Indonesia will have. The known group of BRIC countries (Brazil, Russia, India, and China) which is considered to be the important players of economic prominence, an adaptation of it is created, which is known as MINT countries. The countries listed here are Mexico, Indonesia, Nigeria, and Turkey. These countries are listed to have a potential in terms of their rapid economic growth. This is due to several factors, which are demographic, economic, and also geographic reasons (Kartiwi and Macgregor, 2008). With the realization of these factors, Indonesia not only has a stellar geographic position and a major potential in demographic quantity, but also Indonesia has been recognized by the global community as being one of the few countries that have the opportunity to grow economically in a rapid manner. The factors of Indonesia’s potential in the e-commerce market are solidified from the existing research that was dissected.

Being considered a developing country, Indonesia’s e-commerce industries are roughly divided into 2 categories. The first one being the big developed organizations which encompasses most of the transactions in Indonesia’s e-commerce activity, while the other category are the Small Medium Enterprises (SMEs). Generally, these 2 categories are present do to the inclusion of a higher rate of technology utilization. The developed organizations has managed to understand the broader spectrum of the e-commerce adaptation. Not disregarding SMEs that also understand the adaptation of e-commerce, but an existing study by (Salwani et al., 2009) mentioned that there are 3 factors that creates a sense of reluctancy in SMEs to adopt the technological advances of e-commerce towards their businesses.

In addition to its potential, Indonesia has a significant increase in Internet users in the previous years. A research conducted by Hootsuite and We Are Social states that until January 2021, the number of internet users in Indonesia has reached 202.6 million people. This number increased by 15.5% when compared to 2020. When compared to last year, the number of internet users in Indonesia increased by 27 million people. When compared to the total population of Indonesia, this number of internet users translates to 73.7 percent. This means that the overall number of users of the Internet in Indonesia has increased significantly (Angriani, 2021). With the increase in usage of Internet, the Indonesian e-commerce market becomes a bigger opportunity for it to grow. The combination of the potential that Indonesia has would complement the market growth for e-commerce.

By the same research from We Are Social, it is also worth mentioning that for the year 2021, Indonesia has become the highest usage of e-commerce in regards to its population percentage

in the world. Having a number of 88.1% of its total population, Indonesia’s e-commerce user is regarded as the highest in the world, followed by the United Kingdom at 86.9% and Philipines at 86.1%. The percentage that Indonesia has is considered miles ahead, where the world’s average sits at around 78.1%. This further explains the relevancy and potential that the Indonesian market has in its e-commerce industry.

With different types of e-commerce platforms focusing on different sectors of the market, Indonesia’s highest accessed platforms varies accordingly. The following table is a brief look into Indonesia’s biggest e-commerce players.

Figure 1: Top 10 E-commerce Platforms in Indonesia

As seen on the table above, Indonesia’s e-commerce industry is led by two established firms, which is Tokopedia and Shopee. As a brief explanation, Tokopedia is considered to be the most famous platform for e-commerce transactions. It is based in Indonesia and founded at 2009 by Tanuma Wijaya and Leontinues Alpha Edison. The platform focuses on B2C and C2C operations which allocates a broad range of Indonesia’s market. The platform claims to have reach 99% of the cities in Indonesia, making it very accessible to every citizen. Following the number 1 spot is Shopee. Shopee was founded in 2015 and is a Singaporean based technology company. However, on its launch, it already reached several South East Asian countries including Indonesia. Shopee provides a platform with payment and logistic support. It also claims to be a safe place for transaction with its feature which minimizes risks. The third is Bukalapak. Bukalapak was founded just a year after Tokopedia, which is in 2010. The Indonesian based organization focuses on supporting businesses of SMEs through its platform (Medium, 2021). This explains the competitive industry the Indonesia has in its e-commerce sector. Having this form of competitiveness, the industry will grow in a healthier manner as competition is tight among the firms.

3.4 Relevancy of Supply Chain Management in E-commerce

The sector of supply chain has grown to be one of the fastest-growing fields across the nation.

In fact, based on the research of the U.S. Bureau Labor of Statistics, the supply chain field has the opportunity to grow faster in comparison to other business fields. Employment of people working in the area has a projection of 30% from 2020 to 2030. Further adding to this statement, (Boyle, 2021) explains that the demand for supply chain personnel has sky-rocketed due to the COVID-19 pandemic. A case of empty warehouses and depleting inventories caused by the outbreak had created struggles for businesses to adapt with the shifting condition. As a case, retail stores such as Walmart had been struggling to find its ground to adapt with the case of Pandemic. They had to utilize their own cargos in order to keep up with the demand.

With the growth of the supply chain sector being present, its definition needs to be clarified further. Generally speaking, supply chain is the process of pushing a raw material from its initial state until it ends with the end consumer with the involvement of different firms. It includes several components such as wholesaler, supplier, transportation, warehousing, manufacturer, raw materials, assemblers, etc in order to fulfill the process. Independent firms generally participate in different segments of the process, with the goal to fulfill the end user’s demand (La Londe and Masters, 1994). This definition is supported by the Chartered Institute of Procurement and Supply, which states that a supply chain, in its most basic form, is the set of operations that an organization must do in order to deliver goods or services to the customers.

A supply chain focuses on the essential processes necessary to turn raw materials into completed products or services. Another definition of a supply chain is explained as made up of numerous companies, both upstream or supply and downstream or distribution, as well as the final customer (Christopher, 1992). By this, the general definition can be agreed that supply chain acts as the whole process of turning raw materials into a finished product or service up until it is received by an end customer.

The term supply chain itself can then be dissected into 3 categories. Which are: Direct Supply Chain, Extended Supply Chain, Ultimate Supply Chain.

By this definition, the term Supply Chain Management (SCM) also emerges. While defining the clear meaning of this term also varies depending on the author, (Monczka et al., 1998) explains that SCM is the activity of managing the process of the supply chain. Generally, separate materials functions must generally report to an executive responsible for managing the overall materials process, and cooperative partnerships with suppliers across various tiers are required. SCM is a concept that the major objective is to implement and manage the flow, control, purchasing, and procurement of materials across various functions and many layers of suppliers using a whole systems approach. This definition correlates with the general definition of supply chain. This definition is also further supported by another author that implies that SCM is the management which connects the demand of the customers with the output the organization can create through its raw materials, manufacturing process, responsiveness, etc.

Also, the aim is to create a form of middle ground with the end customers and the firm. As generally, the end customers will have the highest expectations while the firm tries to maintain the level of inventory, low unit cost, and high level of customer service. This creates a form of conflict and mismatch between both parties, and the goal of supply chain management is described as being the idea to bridge both goals (Stevens, 1989). While the meaning of supply chain management has already been defined, it is often confused with the general definition of managing materials and control in manufacturing. An analysis by (Houlihan, 1988) suggests that there are 4 major differences in this area, which are: General view of supply chain management, Objective, Perspective, Approach.

The recent growth of e-commerce has helped to expand the logistics market and promote the development of logistics-related technologies. With the general connection both industries have, it is deemed to help each sector grow. On the other side, modern logistics has become the most important tool for improving material flow efficiency and lowering distribution costs in a variety of industries. In the field of e-commerce logistics, several approaches have been utilized in order to develop growth in the business (Bask et al., 2012).

The relevancy of the logistics management with the e-commerce industry becomes one of the most important connection in the business venture. The importance of logistics efficiency and effectiveness correlates heavily with the customer loyalty of the e-commerce market. The

connection of both industries is considered to be much closer in comparison with other business segments (Ramanathan, 2010). The correlation of e-commerce and logistics is further fortified by (Joong-Khun Cho et al., 2008) where the study explains that a the logistics capacity of a company creates a distinct positive impact towards the overall performance of the business. It also affects the total performance of logistics an e-commerce market has. As the importance logistic performance impacts heavily on the overall performance of the company, the aim needed for the function of logistics is significantly higher for e-commerce orders. This integrates the use of logistics service heavily, as the usage will directly affect the end customer.

Generally speaking, customers expects and demands the upmost responsive logistics. Due to this, the level of customer that proclaims logistic performance as a crucial factor in the overall succession of the transaction is high (Esper et al., 2003).

The utilization of supply chain management in the development of e-commerce has taken the industry to grow into new heights. With this, the use of supply chain needs to be applied through the employment of strategies. In the concept of supply chain, different strategies adhere for different purposes of businesses. The analysis of (Fisher, 1997) explains that supply chain strategies are affected by the type of product or service, demand, life cycle, and variety. From the different aspects that would enable certain businesses to implement specific types of supply chain strategies, it would benefit the firms by providing less expense and a more efficient operation overall. With this, the supply chain strategies are categorized into 4, which are: Lean Supply Chain, Agile Supply Chain, Flexible Supply Chain, Responsive Supply Chain.

3.5 Hypotheses

Based on the existing research of all the necessary terms and analysis, the inclusion of a hypothesis will help my research further. With the implementation of hypotheses, the following chapter of findings and discussion will act as an answering tool to help with my analysis. Listed are the hypotheses created based on the literature review:

• Hypothesis 1: The implementation of technological advancement in the supply chain management of e-commerce helped the industry to survive and benefit of the COVID-19 outbreak.

• Hypothesis 2: The pandemic created a rise in demand and userbase for e-commerce in Indonesia.

• Hypothesis 3: Supply chain management capabilities will increase the growth of the e- commerce industry in Indonesia.

4. Research Design and Methodology

4.1 Research Design

During the course of this research, I will be implementing a longitudinal type of research in correspondence with the timescale. As the research will include comparisons of similar data over a certain period of time, using a longitudinal type for the data gathering process would be ideal. Next, I will conduct a descriptive type of research. A deductive logic of research will be implemented in this research. It will start from a theory and ends with the confirmation of the theory. It will answer the theory through an analysis of existing data and theories. It will correlate heavily with the topic of research and benefit the process of analysis.

4.2 Research Method

I will utilize both quantitative and qualitative data for my research. This is correspondent to the descriptive type of research. Both types of data will be gathered through the secondary method, which is to collect existing datas from different sources such as web surfing, academic articles, journals, published online interviews, etc. Both types of data will provide factual numbers but also insight on the specific topic.

5. Discussion

5.1 Digital Growth in Indonesia: A Comparison of Before and After The COVID-19 Outbreak

As mentioned before, the growth of Internet users in Indonesia had been growing significantly over the years. In this analysis, a comparison breakdown between the year 2019 (outbreak had not globalize), 2020 (first year of outbreak), and 2021 (second year of outbreak). Even when the first initial case of COVID-19 had begun in China at 2019, it only had globalize to Indonesia in the following year. As the first recorded case in Indonesia was at March 2020 (Gorbiano, 2020).

After comprehending the statistics of digital growth in Indonesia for 3 years, the following table is created specifically to compare the growth rate.

Table 1: Digital Growth in Indonesia

Digital Growth in Indonesia 2019 vs 2020 vs 2021 (In Millions)

2019 2020 2021

Total Population 268.2 272.1 274.9

Mobile Phone Connections 322.7 338.2 345.3

Internet Users 150 175.4 202.6

Active Social Media Users 150 160 170

Based on this table, the growth of Indonesia’s digital technology usage has been growing over the past years. Every relevant aspect listed resembles the growth in a different way. For instance the number of Internet users in Indonesia gas been increasing notably, with a growth of around 25 million each year. The number of active social media users has also gone up around 10 million every concurrent year. In correlation with its growth, the subscription of mobile devices has significantly increased also in all 3 years. Correlating with the pandemic, the usage of these technology has been boosted majorly. In fact, the Minister of Communication and Information of Indonesia explained that during the COVID-19 pandemic, there were restrictions on mobility and physical activity. It has changed the way people live, communicate to access and seek information sources from the media. The growth of Indonesia’s digital usage has not only been visible to the eyes by numerical data, but also experienced and felt by Indonesia’s Minister of Communication and Information. This validates the growth of digital usage in Indonesia and the affect that COVID-19 has on it. With the growth of digitalization, it affects directly towards the growth of Indonesia’s e-commerce industry as well.

5.2 Growth of Indonesia’s E-commerce Industry: A Comparison of Before and After The COVID-19 Outbreak

Seeing the growth of Indonesia’s potential in the e-commerce industry based on the previous section, it can be explained that the growth are due to different factors. During the start of the COVID-19, in which it began to strike Indonesia in early 2020, the e-commerce market has

already been popularized all across Indonesia. However, it continued to grow massively in the following years.

The following table is created specifically to understand better the growth of Indonesia’s e- commerce market.

Table 2: E-commerce Market in Indonesia E-commerce Market in Indonesia 2019 vs 2020 vs 2021

2019 2020 2021

Purchased Consumer Goods via E-commerce (in million) 107 168.3 138.1

Average Annual Spend per User (in million) $89 $111 $219

Value of The Consumer Goods E-commerce Market (in billion) $9.536 $18.76 $30.31

It can be analyzed from the data above that Indonesia’s e-commerce market is growing. With the massive jump in users during each year, the growth of the market is inevitable. By the number of usage alone, the e-commerce platform becomes one of the most viable option for Indonesian citizens to purchase goods or services. With the start of the COVID-19 pandemic, Indonesia’s strict regulation has managed to shift consumers to change their purchasing option.

With the concurrent growth of e-commerce, the platform has seen a significant increase in user base during the start of the strict regulations in Indonesia. The CEO of Blibli (one of the biggest Indonesian e-commerce platform) has stated that “Before COVID-19, e-commerce was just an option. But for now, it is an important feature for retail stores and manufacturers to sell products through an e-commerce platform so that they are able to maintain their business. This will have a long term impact which is positive because consumers will be more accustomed to shopping online”. This explains the further increase in Indonesia’s e-commerce user base.

In correspondence with its user base, the average annual spend per user has also increase significantly over the 3 year comparison. From its initial value at $89 million per user to being more than double in the next 2 years. This means that the purchase value of the consumer goods which are bought by the customers has significantly grew. With the conitnouation of the growth trend, the value of the e-commerce market in Indonesia itself has also grown tremendously.

Valuing at around $9 billion in 2019, the e-commerce market has been growing steadily.

However, with the impact of COVID-19, the value had skyrocket to its current value of $30.31 billion. This further proves the rise in demand of the e-commerce market in Indonesia and its impact towards consumer purchasing options.

With the statistics and the support claim of a CEO in one of the most established e-commerce businesses in Indonesia, it can be expressed that the annual market for e-commerce has seen an increase. This is firstly due to the overall demand growth of the market, but also the impact that COVID-19 has had on the strict regulations in Indonesia. This affected the sudden skyrocket growth as mentioned before. This also further proves that Indonesia’s e-commerce market is not something to be overlooked. However, with the constant growth of the demand and overall market, the e-commerce businesses themselves needs several adjustments in order to adapt to the sudden increase in demand, especially in its supply chain management.

5.3 Factors of Digital Growth that Impacts Supply Chain Management

The correlation of digitalization with the logistics of supply chain management has been admitted to creating a next level of growth for businesses. Specifically speaking, in the e- commerce industry, the use of technology directly impacts the performance of a supply chain which will also impact the performance of the company overall. While there are many elements

in comprehending the use of technology, from an e-commerce business perspective, its supply chain management requires the implementation of 3 key elements. These elements are: Big Data Analytics, Internet of Things (IoT), Cloud Computing.

Based on the existing analysis of (Graham et al., 2013), it is stated that the supply chain management in e-commerce logistics requires a lot of computation power to come up with effective solutions or key decisions. The 3 listed technologies has the potential to be able to improve and change e-commerce logistics into a more widespread deployment, allowing established firms and small and medium-sized businesses (SMEs) to reap the benefits of the digital era. This analysis supports the claim of the 3 key elements that need to be implemented for a supply chain in the e-commerce sector. Diving deeper into those 3 key elements, firstly there is Big Data Analytics. Big Data Analytics is a term that explains the data sets that are generally large in number or complex that traditional data processing technologies or methodologies cannot control efficiently, or in the term “too much to handle” (Ciobanu et al., 2014). The process of analyzing the big data will be used to help the supply chain management of the e-commerce business to create a more efficient and effective decision making in the future. Related to the Big Data Analytics, the information that would be attained to be analyzed is gathered by the use of Internet of Things (IoT). IoT refers to a network of physical things, electronics, vehicles, structures, and other items implanted with technological sensors that would enable them to connect and share data in an intelligent environment (Xu et al., 2014).

By implementing the IoT in the operations of the supply chain management, data gathering and processing will be simplified as the technologies used will correspond with one another. By doing so, the Big Data is then used to make use of the information gathered through the IoT.

However, communicating this processed information will not be ideal if it were to be just placed in a stationary device. In correspondence to this, the use of Cloud Computing will further enhance the versatility and ease of access spread of the processed information. Looking into Cloud Computing itself, it is defined as a space that allows technological devices such as computers to connect in order to exchange information, resources, and data willingly. Through this, the on-demand access of the information required will be provided in a shared pool with different settings to adhere with the specifications needed (Armbrust et al., 2010). All of this will act as the expected future requirements that will be necessary for increasing productivity, efficiency, and effectiveness in the supply chain management of e-commerce.

5.4 Supply Chain Management of E-commerce Businesses in Indonesia

Cost reduction, capital reduction, and service enhancement are the three goals of supply chain management. The objective of cost reduction, of these three purposes, suggests that by implementing supply chain management, organizations may reduce logistical costs, for example, by choosing cost-effective transportation modes/models, distribution techniques or systems, warehousing, standards, and services. Supply chain management will be able to improve firm performance by increasing the rate of return on capital, similar to the capital reduction objectives (Siagian, 2005).

An existing research on the Indonesia Stock Exchange 2014 has also identified that the impact of supply chain management on corporate performance has shown a positive correlation. This demonstrates that the higher the amount of supply chain management adoption inside a firm, the better the organization's performance will be. According to the findings, supply chain management improves competitive advantage directly. The higher the level of supply chain management implementation inside a firm, the more superior it will be to competitors. In results, a competitive advantage will be created which has a favorable impact on corporate

success. This demonstrates that the more superior a firm is to its competitors, the better its success will be. (Wulandari, 2016).

Professor Omar Hussein, highlighted that e-supply is extremely beneficial to businesses in their current state. Because lockdown forces everyone to work from home, technological systems must be used to facilitate the supply of essential products. Companies must adapt by optimizing the flow of supply and demand data across the e-supply chain. In Indonesia, e-commerce platform providers such as Tokopedia, Bukalapak, Lazada, Shopee has managed to integrated the e-supply chain system in its work processes. As an addition, Leontinus Alpha Edison, Vice Chairman and Co-Founder of Tokopedia, stated the pandemic had an influence on altering customer behavior into e-commerce. According to him, the COVID-19 outbreak has accelerated and substantially accelerated digitalization in Indonesia. It can be confirmed that the COVID-19 had directly affect how supply chain functions in the e-commerce sector, especially in Indonesia. It is also worth mentioning that the primary factors that were affected due to the outbreak is the logistics. Activities such as inventory management, transportation, and distribution becomes one of the biggest challenges the supply chain process has to undergo amid COVID-19. Due to the strict regulations of COVID-19 in Indonesia, the mentioned e- commerce businesses above had to primarily focus their attention in comprehending these rules.

6. Conclusion and Recommendation

6.1 Conclusion

The continuation of the growth towards digitalization has affected the world to shift globally.

It has created a dynamic to different aspects of life and activities. Starting with the simplest of actions, to the most complex motion. Industries have changed in implementing the use of digital technology. School and universities has applied technology through its use of electronic classroom, studying platform, and education materials, while the health sector has implemented the use of Artificial Intelligence and intricate machineries to improve its operations. Following the trend of technological application, the e-commerce sector has also utilize different advancements to upgrade its work flow.

Digitalization has been developing along with the implementation of Industry 4.0 in businesses.

Generally, different types of businesses apply the use of digitalization accordingly with its business model. As the biggest pandemic in the name of COVID-19 had occurred in the past years, multiple conventional and brick-to-mortar businesses had been forced to shift its operation in becoming more digital. The e-commerce industry is no exception, with having the basis of digital technology in its business, the operations of e-commerce has the potential to grow simultaneously with the growth of digitalization.

With the variations of different regulations that encompasses different countries, the impact of COVID-19 will not be congruent in each nation. Looking into Indonesia, the regulation for the outbreak has been considerably strict. This occurrence limits the options for logistic operation and face-to-face transaction to ensue. This leads to the force of adoption towards technology further for businesses. Specifically mentioning the e-commerce sector in Indonesia, its utilization of technology had grown due to the presence of the pandemic. The use of technology will also act as a competitive edge, as there is a competitive atmosphere in Indonesia’s e- commerce industry. Different factors allocate for different purposes in terms of the technology implementation in the e-commerce industry. Particularly, the supply chain management of the business will directly be impacted with the usage of digitalization. Big Data Analytics, Internet of Things, and Cloud Computing are among the key adaptation factors that the supply chain

management of an e-commerce business need to integrate in order to positively shift with the digital era. The inclusion of these terms are deemed necessary to adapt with the current condition and also relevant for future operations.

The analysis has proven that the COVID-19 has directly impact the demand for e-commerce use and consumption. With this information, it can be concluded that the outbreak had significantly increase the demand for e-commerce in Indonesia, which leads to the innovation and improvement of the e-commmerce businesses through the use of digitalization and technology in its supply chain management. As mentioned, the supply chain management acts as a key factor on the success of the e-commerce businesses due to its impact on customer satisfaction. Different supply chain strategies can be applied according to the firm’s vision, however, generally speaking, an e-commerce business utilizes the responsive supply chain in order to fulfill the customer’s demand in the best way and least time possible. Supply chain management implements the use of these technologies to be more efficient, effective, and to reduce expenses.

6.2 Limitation and Recommendation

A limitation in this research is the methodology. This current analysis is limited to the use secondary data.

My recommendation for further research is to combine the mixture of both primary and secondary data. By implementing a primary source of data with the sample of Indonesia’s e- commerce businesses, the analysis will include the specific factors that impacted the change in different organizations’ supply chain management. Implementing primary samples will enable the research to be more direct towards a specific firm.

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