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Electronic Supply Chain Management Application Analysis in Retail Industry
Aang Angga Sugara1, Anton Mulyono Azis1*
1 Management, Ekuitas Business School Bandung Indonesia
*Corresponding Author: [email protected]
Accepted: 15 July 2020 | Published: 31 July 2020
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Abstract: This research aims to evaluate the application of e-SCM in the retail industry in Bandung, West Java, Indonesia. The focus of the research is to find out the effectiveness level of e-SCM implementation, identify the inhibiting factors for the successful implementation of e-SCM, and find the results of optimization performed on e-SCM applications. This research was done as a descriptive qualitative method by utilizing three analytical tools, namely:
flowchart, fish bones diagram, and transition tables. Data analysis was performed on observations and interviews of store managers, supervisors, sales administrators, and related suppliers, as well as sales and purchasing documents from the retail industry. The results showed that although the application of E-SCM in the retail industry was following the standards of experts, its utilization was not optimal, indicated by the number of damaged products, unsuitable items received and ordered, and undeliverable goods. Secondly, factors that causes the lack of optimal implementation of e-SCM including work methods, human, working environment, machinery, and company culture. The e-SCM application also results in the optimization of reduced product destruction due to expiration by 68.8%, reducing mismatch of products shipped or damaged by 62.5%, and reduction of failed deliveries of requested products by 72.2%.
Keywords: E-SCM, Inhibiting factors, Optimization
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1. Introduction
Information technology has become a key element in competitive strategies in many businesses (Daneshvar and Ramesh, 2010). Technology integration throughout the company enables information users within the company to have access to the information needed promptly and the right decision-making (Cascio and Montealegre, 2016; Azis, 2017). This kind of technology is also utilized in managing the supply chain as the form of electronic supply chain management (e-SCM). E-SCM is a management concept in which a company seeks to utilize internet technology to integrate all of its business partners, especially those related to the supply system of raw materials or resources needed in the production process (Valverde and Saade, 2015).
One industry that has implemented this e-SCM system is the retail industry. The technology is used to integrate business processes within the company, which includes product operations and distribution. The implementation of the e-SCM system is synergized to optimize and add value to the function of the supply chain which includes planning, purchasing raw materials, inventory, information, production, distribution, and shipping, which can improve company performance effectively and efficiently (Hayati, 2015). But the
reality on the ground, the application of e-SCM is still not optimal because there are still many damaged products and many unsent orders. Hence this research aims to evaluate the application of e-SCM in the retail industry in Bandung, West Java, Indonesia. The focus of the research is to find out the effectiveness level of e-SCM implementation, identify the inhibiting factors for the successful implementation of e-SCM, and find the results of optimization performed on e-SCM applications.
2. Literature Review: The Important Role of Electronic Supply Chain Management
Supply Chain Management is a set of activities and related decisions to integrate suppliers, manufacturers, warehouses, transportation services, retailers, and consumers efficiently (Herjanto, 2008: 308). While Electronic Supply Chain Management is the integration of the company's business partners by utilizing the internet (Saputro, 2018). as a collaborative use of technology to improve business to business processes, and improve speed, capability, control in real-time, and customer satisfaction (Turban, 2008:309).
According to Gde et al. (2018), the application of e-SCM must cover 4 functions, namely customer and service management, manufacturing and supply chain planning, supplier relationship management, and logistics resource management. (1) Customer and Service Management is providing ways in which a relationship with the customer is established, customer service allows customers to place orders online, providing resources for customer information such as product availability, delivery dates and order status. (2) Manufacturing and supply chain planning is the manufacturing process of producing goods is done by historical forecasting, with e-SCM currently producing goods based on consumer needs so that procurement of goods becomes more effective and efficient. (3) Supplier relationship management is the process of a company's relationship with its suppliers. (4) Logistic resource management as facilitating and monitoring the movement of goods and services from suppliers, manufactures, distributors, retailers, and to the end consumers.
Furthermore, according to Yonata and Robert (2015), the application of e-SCM in the company has several features including edit profiles, purchase orders, customer orders, view stock, add suppliers, invoices, invoices, view criticisms, and suggestions. (a) Edit profile, this feature allows companies to update the profile of the company. (b) Purchase order, one of the features in which a company can place orders for products or raw materials to suppliers, in which there is a dateline date so that delivery can proceed by company expectations. (c) Customer order, in this feature the admin can see various product orders made by consumers and there is a dateline date. (d) View stock, this feature allows the company to see the stock of goods that are in the warehouse and also update it if there are items that have just been purchased or have been produced. (e) Add supplier, a feature used by the company to input the supplier's company name, this feature is created because not all suppliers can be a company subscription. So in making an account must be done by the company. (f) Invoice, this feature allows companies to send invoices through the Internet to suppliers without having to print the invoice. (g) Invoice, the invoice feature also makes it easy for companies to send invoices to consumers via the Internet without having to use courier services individually to send invoices to consumers. (h) Feedback & complaints, a feature where companies can see various complaints given by consumers to improve the company's service and product quality.
Furthermore, according to Rudy et al. (2008), the factors causing the lack of optimal implementation of e-SCM are inaccurate of raw material transaction data, difficulty in
47 finding information on raw materials needed, errors in entering the number of raw materials ordered to suppliers, inventory control system is not good thus allowing product vacancies, a lack of integration between the insides of the company which results in information flowing slowly to hamper the smooth process of fulfilling orders, and the work culture that is applied that hinders the process of changing the new work system.
According to Honni et al. (2008), the factors causing the non-optimal implementation of e- SCM are the work environment, work culture, the length of time required to process customer orders, raw material data sent is often incomplete or inaccurate, human error occurs where employees enter incorrect data for note or report, a communication error with retailers and suppliers because the company's data is not integrated with the data owned by the supplier, retailers who want to order are often hesitant because they do not know the production capacity that can be provided by the supplier.
Furthermore, the key factors in optimizing internet-based systems include information systems, knowledge, character, responsibility, and trust (Alianto and Wijaya, 2014), communication, HR management, training and education, user capabilities, commitment, work environment and user experience and knowledge (Permadi and Handoko, 2015), optimization in the implementation of internet-based work systems is highly dependent on the process of planning, implementation, adaptation, supervision, work environment, work culture and work methods (Hartiningsih, 2016).
3. Research Methodology
Three construct variables are defined based on previous studies, namely the application of the e-SCM, inhibiting factors, and optimization of the application. The use of the e-SCM system as a tool for integration between companies and suppliers is intended to meet the company's operational needs to be more effective and efficient and to be optimal in its application. The indicators in the application of e-SCM are system quality, consisting of reliability, stability, and efficiency, as well as information quality consisting of eligibility, usability, and ease of use.
In the second sub-variable, there are several indicators namely the environment (internal and external), culture (supervision, working systems, and attitudes towards the application of information technology), humans (use of the system and understanding of information from the system), and machines (hardware, software, networking system). Meanwhile, indicators of the third sub-variable are the number of goods destroyed, the quantity of conformity of the shipment, and the suitability of the goods requested and shipped.
Thus, this research was done as a descriptive qualitative method by utilizing three analytical tools, namely: flowchart, fish bones diagram, and transition tables. While data collection techniques are done through interviews, questionnaires, observations (Sugiyono, 2018: 137) to store managers, supervisors, sales administrators, and related suppliers, as well as sales and purchasing documents from the retail industry.
4. Finding and Discussion
This section starts with Figure 1 that shows the main display and interface on the e-SCM system used. This application has several functions including customer and service management, manufacturing and supply chain planning, supplier relationship management, and logistics resource management. By this application implementation, the retail industry
optimizes and adds value to the function of the SCM including planning to purchase raw materials, inventory, information, production, distribution, and delivery, which can improve company performance effectively and efficiently (Hayati, 2015). However, the application of e-SCM is still not optimal because there are still many products that are destroyed due to the expiry date, especially for fast food products. Furthermore from the interview result also stated that the e-SCM application was not optimal, because of frequent system errors, so that administrative staff had to wait 1-2 hours for system improvement.
Figure 1 e-SCM Application Interface
The picture shows the main display on the e-SCM system used. First customer and service management, consists of several functions, including online order processing, by making purchase orders received by suppliers; contact management, consisting of supplier data and history; account management, used to provide detailed information about sales activities that occur; and opportunity management, used to see the level of sales of goods which is also for the forecasting process. The next display in the application is manufacturing and supply chain planning, with several functions, namely manufacturing planning, which provides accurate data to support the decision making process in procurement and production planning, and provides a mathematical model for determining the number of products and raw materials to be ordered, and production and process management, which is a system that provides information to suppliers about the suitability of product shipments in terms of quality and quantity, where if it is not appropriate, the system can provide information to revise, accept, or reject the product being shipped.
The next menu in the e-SCM system used is supplier relationship management, which consists of seven functions, namely procurement history, which shows various information about the amount of product inventory based on company statistical records, such as transactions, purchase order status, and supplier data. Accounting, relating to information about the status of payments to suppliers. Purchasing planning, to make purchase planning to suppliers. Supplier search, relating to data about suppliers ranging from name, address, telephone number, and email address, the purchase order configuration and tracking function to order products by making purchase orders that will be sent to suppliers electronically.
Logistics used for order delivery products. Performance measurement serves to determine the level of effectiveness of product flow that occurs and can measure various reports that are always made every month, such as production reports, sales reports, as well as product purchase reports to suppliers.
49 The final menu in this application is logistics resource management, with functions including warehouse management, functioning in managing and optimizing existing product inventory, as well as providing a warning to make purchases of products that reach a minimum amount of stock. Transportation Management functions to provide product delivery information from suppliers to distribution centres and send travel letters and invoices for goods.
Furthermore, from all the functions and processes described above, the researcher concludes that the application of e-SCM is largely following the theory expressed by Gde et al. (2018) and Rudy et al. (2008). Where the application includes 4 functions, namely customer and service management, manufacturing and supply chain planning, supplier relationship management, and logistics resource management, however, it has not yet reached consumers, because, in the customer management function, customers cannot place orders online or see online products only. Meanwhile, the application of e-SCM is not fully under the theory revealed by Yonata and Robert (2015) which mentions functions such as edit profiles, purchase orders, customer orders, view stock, add suppliers, invoices, invoices, view criticisms and suggestions. From the research results, it is proven that some functions have not been implemented, namely profile editing, customer orders, and criticism, and suggestions.
The next discussion relates to the factors that cause the non-optimal application of e-SCM in the retail industry. From the results of the analysis using a fishbone diagram, the factors causing the non-optimal application are obtained, consisting of factors: work methods, human, working environment, machinery, and company culture. From the results of the supplier interview for the nonconformity of the goods is due to inspection and supervision that is less strict and not repeated. Inspection and supervision are carried out only when the supplier administration staff receives product requests from the store to the production department, then the packing department does not do the checking and re-checking but immediately puts the ordered product in the box, intending to save time because the delivery schedule must be carried out before at 8 a.m. every day. Furthermore, the second factor is employees who do not adhere to procedures. For example, loss and damage to the product before it arrives at the store due to a driver who does not obey the procedure and is not careful in running the car and causes the product to be damaged.
The next factor, which is human, consists of employee errors in using the system in determining forecasting market needs, resulting in over-inventory, which results in the destruction of many products, or vice versa when the product runs out when consumers need it. Furthermore, the low accuracy of employees in operating the system results in frequent mistakes in making purchase orders, for example, the demand for goods should be 100kg, apparently written 10kg or vice versa. The next thing is related to employee discipline in the operation of the system. Direct observations found that employees did not use historical needs or historical sales, but based on estimates. For this reason, employees reasoned that work would be done quickly and could do other work, even if it resulted in inaccurate information.
The third factor is the work environment that is felt to be less comfortable and the fourth factor is related to the specifications of the machines used that require certain specifications to avoid crashes. Furthermore also the use of the Internet networks in integrating with the supplier system, where the speed and stability of the network greatly affect the speed of information transmitted. The final factor, namely the company culture, is not yet developed in
adaptive and pleasant work culture and makes employees happy. Determination of this culture makes productivity in implementing the system more optimal.
Furthermore, from the above factors, the retail industry has optimized the system only in three factors, namely work methods, human factors, and company culture. This is due to other factors that require considerable time and costs and require approval from the top management. Furthermore, the results of the optimization of the application of e-SCM through the improvement of work methods and increased discipline and accuracy, as well as company culture through increasing mutual assistance, obtained a decrease in the number of products destroyed, mismatched products, and un-shipped products. The e-SCM application- optimized in reducing product destruction due to expiration by 68.8% from average 199 pcs to 62 pcs, reducing mismatch of products shipped or damaged by 62.5% from average 40 pcs to 15 pcs, and reduction of failed deliveries of requested products by 72.2% from average 18 times to 5 times within a month.
Furthermore, it can be seen from the results of the fishbone diagram analysis that the causes of the non-optimal application of e-SCM can be improved in several ways. In the work method factor, especially in supervision, it can be optimized by providing assistance and checking regularly every process that is carried out. The human factor can be improved by increasing the ability knowledge, increasing the level of accuracy, and assistance when operating the e-SCM system. While the engine factor can be improved by increasing the specifications of the computer used, especially the hardware used to conform to the minimum specifications that must be met and repair the network used.
5. Conclusions and Recommendation
Based on research variables and indicators, the quality of the retail industry's e-SCM system in Bandung, West Java is already reliable and efficient compared to conventional work methods but not yet stable, and for the quality of the information presented it is decent, useful, and easy to understand, and seen from the functions of e-SCM applied is largely following the theories put forward by experts. After analysing the causes of the ineffectiveness of the application of e-SCM, it can be known factors of work methods, human, working environment, machinery, and company culture to be the cause of the non- optimal e-SCM system. The e-SCM application also results in optimization of reduced product destruction due to expiration by 68.8% from average 199 pcs to 62 pcs, reducing mismatch of products shipped or damaged by 62.5% from average 40 pcs to 15 pcs, and reduction of failed deliveries of requested products by 72.2% from average 18 times to 5 times within a month.
For further research and for the application of the e-SCM system to be more optimal, it is also advisable to examine the effectiveness of the operational assistance factor and the special network stability used in its operation. Judging from the results of the analysis of the main factors causing the application of e-SCM that have not been optimal, it is also proposed to examine work methods related to e-SCM and research on employees' knowledge.
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