Skip to main content
SpringerLink
Log in

Supply Chain Competitiveness in Food Industry: An Indonesian Case

  • Chapter
Supply Chain Design and Management for Emerging Markets

Abstract

In this study, it is of great interest to determine the supply chain competitiveness in Indonesia. We limit our study to the food industry only, due to the facts that the food industry is a major industry in terms of its contribution to national GDP and is still lacking in its supply chain competitiveness. The objective of this paper is to present the current state of supply chain competitiveness of the food industry in Indonesia. We use four perspectives to measure the supply chain competitiveness: cost, differentiation, sustainability, and infrastructure. While cost and differentiation measure the performance perspective of supply chain competitiveness, sustainability measures the demand perspective of the future supply chain, and infrastructure is the requirement perspective of supply chain competitiveness.

Using the Analytic Hierarchy Process (AHP) and Analytic Network Process (ANP), our empirical analysis in the food industry finds that infrastructure is the most important perspective that determines supply chain competitiveness, followed by differentiation, cost and sustainability. Having learned that the infrastructure is a major constraint in Indonesia, the players in the food supply chain place more emphasis on differentiation rather than on cost in creating their supply chain competitiveness. Our calculation using 12 criteria from the four perspectives shows that the food supply chain in Indonesia is highly competitive with the weight factor of 0.825. These findings suggest that even in markets lacking good logistics infrastructure, the players in the supply chain can still be competitive.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution

Subscribe and save

Springer+ Basic
$34.99 /Month
  • Get 10 units per month
  • Download Article/Chapter or eBook
  • 1 Unit = 1 Article or 1 Chapter
  • Cancel anytime
Subscribe now

Buy Now

Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 84.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Hardcover Book
USD 109.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Similar content being viewed by others

Notes

  1. 1.

    Indonesia is like typical countries in the region where food establishments are all over the place, especially in the big cities. The food supply chains are reliant on people’s appetite of food. In all modern shopping malls, there are always many food courts offering many kinds of foods, from local Indonesian food to Oriental and Western food. Not only in the food courts do people enjoy the food but they can also go anywhere else with cheaper prices. This strong demand factor helps food supply chains remain competitive in spite of poor infrastructure.

  2. 2.

    This case is developed based on the co-author, Elliot Simangunsong’s research in 2008 and 2012.

  3. 3.

    See Footnote 2.

  4. 4.

    Prasetiya Mulya Business School, a leading business school in Indonesia, has coached and supervised many companies in implementing business improvement projects. Most of the projects are in the area of cost reduction.

  5. 5.

    In a current interview (January, 2012) with senior supply chain practitioners in the Indonesian food industry, it is known that transportation cost is in the range of 20–30 % of COGS.

  6. 6.

    For any local companies partnering with foreign principal companies, green campaigns and corporate social responsibility become their effective selling point to the public. Even though the degree of importance of sustainability is the lowest among the perspectives, sustainability is likely to be the determinant factor in future supply chain competitiveness.

  7. 7.

    Fisher (1997) on “What is the right supply chain for your product?” gives two mutually exclusive supply chain strategies for companies. Depending on the types of the product, either functional or innovative, the supply chain strategy is efficiency for functional products and responsiveness for innovative products.

  8. 8.

    Many foreign franchised food restaurants like KFC, McDonalds and Pizzahut differentiate their products from their principals by offering more products that are more tasteful to the Indonesian’s tongue. For example, as fried chicken is the favorite food of many Indonesian, not only does KFC serve fried chicken, but McDonalds serves it as well. This kind of product innovation works very successfully in Indonesia.

References

  • Amit, S., Soundar, K., Mark, G., & Usha Nandini, R. (2005). Supply-chain networks: A complex adaptive systems perspective. International Journal of Production Research, 43(20), 4235–4265.

    Article  Google Scholar 

  • Arvis, J. A., Mustra, A. M., Ojala, L., Shepperd, B., & Saslavsky, D. (2010). Connecting to compete 2010: Trade logistics in the global economy. Washington, DC: The World Bank.

    Google Scholar 

  • Ayres, L. (2008). Semi-Structured interview. Thousand Oaks, CA: Sage.

    Book  Google Scholar 

  • Aziz, I. J. (2005). A regional cooperation to support financial crisis management and prevention: An application of a model with uncertainty and feedback influences. The International Journal of Organizational Analysis, 13(3), 196–215.

    Article  Google Scholar 

  • Bank Indonesia. (2011). 2011 Economic report on Indonesia. Department of Economic Research and Monetary Policy.

    Google Scholar 

  • Bank Indonesia. (2012). Exchange rates on transaction. Retrieved July 25, 2012, from http://www.bi.go.id

  • Beamon, M. B. (1999). Measuring supply chain performance. International Journal of Operations and Production Management, 19(3), 275–292.

    Article  Google Scholar 

  • Beer, S. (2001). Food and society. In J. F. Eastham, L. Sharples, & S. D. Ball (Eds.), Food supply chain management: Issues for the hospitality and retail sectors (pp. 21–36). Oxford: Butterworth-Heinemann (Chapter 2).

    Chapter  Google Scholar 

  • BPS-Statistics. (2009). Trends of the selected socio-economic indicators of Indonesia. http://www.bps.go.id

  • BPS-Statistics. (2010). Trends of the selected socio-economic indicators of Indonesia. http://www.bps.go.id

  • BPS-Statistics. (2011). Trends of the selected socio-economic indicators of Indonesia. http://www.bps.go.id

  • BPS-Statistics. (2012, June). Monthly report: Socio-economic data (25th ed.). http://www.bps.go.id

  • Carter, C. R., & Rogers, D. S. (2008). A framework of sustainable supply chain management: Moving toward new theory. International Journal of Physical Distribution & Logistics Management, 38, 360–387.

    Article  Google Scholar 

  • Christopher, M., & Towill, D. R. (2000). Supply chain migration from lean and functional to agile and customized. Supply Chain Management: An International Journal, 5(4), 206–2013.

    Article  Google Scholar 

  • Cruz, J. M., & Matsypura, D. (2009). Supply chain networks with corporate social responsibility through integrated environmental decision-making. International Journal of Production Research, 47(3), 621–648.

    Article  Google Scholar 

  • Cuthbertson, R., & Piotrowicz, W. (2011). Performance measurement systems in supply chains: A framework for contextual analysis. International Journal of Productivity and Performance Management, 60(6), 583–602.

    Article  Google Scholar 

  • Data Consult. (2007, January). Indonesian commercial newsletter. Data Consult (Indonesia) Ltd.

    Google Scholar 

  • Data Consult. (2011, March). Indonesian commercial newsletter. Data Consult (Indonesia) Ltd.

    Google Scholar 

  • Duclos, L. K., Vokurka, R. J., & Lummus, R. R. (2003). A conceptual model of supply chain flexibility. Industrial Management & Data Systems, 103(6), 446–456.

    Article  Google Scholar 

  • Eisenhardt, K. M., & Graebner, M. E. (2007). Theory building from cases: Opportunities and challenges. Academy of Management Journal, 50(1), 25–32.

    Article  Google Scholar 

  • Ellis, S. C., Henry, R. M., & Shockley, J. (2010). Buyer perception of supply disruption risk: A behavioral view and empirical assessment. Journal of Operations Management, 28, 34–36.

    Article  Google Scholar 

  • Fisher, M. L. (1997). What is the right supply chain for your product? Harvard Business Review, March–April, 105–116.

    Google Scholar 

  • Fisher, M. L., Hammond, J. H., Obermeyer, W. R., & Raman, A. (1994). Making supply meet demand in an uncertain world. Harvard Business Review, 72(3), 83–93.

    Google Scholar 

  • Geiger, T. (2011). The Indonesia competitiveness report 2011: Sustaining the growth momentum. Geneva: World Economic Forum.

    Google Scholar 

  • Gunasekaran, A., Patel, C., & Tirtiroglu, E. (2001). Performance measurement and metrics in a supply Chain Environment. International Journal of Operations & Production Management, 21(1/2), 71–87.

    Article  Google Scholar 

  • Harker, P. T., & Vargas, L. G. (1990). Reply to remarks on the analytic hierarchy process. Management Science, 36, 269–273.

    Article  Google Scholar 

  • Holmberg, S. (2000). A system perspective on supply chain measurement. International Journal of Physical Distribution & Logistics Management, 30(10), 847–868.

    Article  Google Scholar 

  • Kaplan, R. S., & Norton, D. P. (1992). The balanced scorecard–measures that drive performance. Harvard Business Review, January/February, 71–79.

    Google Scholar 

  • Maloni, M., & Brown, M. (2006). Corporate social responsibility in the supply chain: An application in the food industry. Journal of Business Ethics, 68(1), 35–52.

    Article  Google Scholar 

  • Markley, M. J., & Davis, L. (2007). Exploring future competitive advantage through sustainable supply chains. International Journal of Physical Distribution & Logistics Management, 37, 763–774.

    Article  Google Scholar 

  • Mason-Jones, R., Naylor, B., & Towill, D. R. (2000). Lean, agile or leagile? Matching your supply chain to the marketplace. International Journal of Production Research, 38(17), 4061–4070.

    Article  Google Scholar 

  • Porter, M. E. (1980). Competitive strategy: Techniques for analyzing industries and competitors. New York: Free Press.

    Google Scholar 

  • Pujawan, I. N. (2004). Assessing supply chain flexibility: A conceptual framework and case study. International Journal of Integrated Supply Management, 1(1), 79–97.

    Article  Google Scholar 

  • Qi, Y., Boyer, K. K., & Zhao, X. (2009). Supply chain strategy, product characteristics, and performance impact: Evidence from Chinese manufacturers. Decision Sciences, 40(4), 667–695.

    Article  Google Scholar 

  • Reiner, G., & Trcka, M. (2004). Customized supply chain design: Problems and alternatives for a production company in the food industry. A simulation based analysis. International Journal of Production Economics, 89(2), 217–229.

    Article  Google Scholar 

  • Saaty, T. L. (1980). The analytic hierarchy process. Pitsburgh, PA: RWS Publication.

    Google Scholar 

  • Schorr, J. E. (1998). Purchasing in the 21st century. New York: Wiley.

    Google Scholar 

  • State Secretariat of the Republic of Indonesia. (2010). Profile of Indonesia. Retrieved February 8, 2010, from http://www.indonesia.go.id/en

  • Swafford, P., Ghosh, S., & Murthy, N. (2000, November). A model of global supply chain agility and its impact on competitive performance. Proceedings of the 31st National DSI Meeting, Orlando, FL, pp. 1037–1039.

    Google Scholar 

  • Toni, A., & Tonchia, S. (2001). Performance measurement systems: Models, characteristics and measures. International Journal of Operations & Production Management, 21(1/2), 46–70.

    Article  Google Scholar 

  • Webster, K. (2001). The scope and structure of the food supply chain. In J. F. Eastham, L. Sharples, & S. D. Ball (Eds.), Food supply chain management: Issues for the hospitality and retail sectors (pp. 37–54). Oxford: Butterworth-Heinemann (Chapter 3).

    Chapter  Google Scholar 

  • Wilding, R. (1998). The supply chain complexity triangle: Uncertainty generation in the supply chain. International Journal of Physical Distribution and Logistics Management, 28(8), 599–616.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Center for Asian Supply Chain Competitiveness, Prasetiya Mulya Business School, Jakarta, Indonesia

    Ade Febransyah & Elliot Simangunsong

Authors
  1. Ade Febransyah
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Elliot Simangunsong
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Ade Febransyah .

Editor information

Editors and Affiliations

  1. Said Business School, University of Oxford, Oxford, Oxfordshire, United Kingdom

    Wojciech Piotrowicz

  2. Said Business School, University of Oxford, Oxford, Oxfordshire, United Kingdom

    Richard Cuthbertson

Appendices

Questions for Review and Discussion

  1. 1.

    What are the four perspectives used in determining supply chain competitiveness in this study? Can those perspectives be used for sectors other than the food industry?

  2. 2.

    Since infrastructure is still the major problem in emerging economies, how can players in the food industry in Indonesia still be competitive? What is their supply chain strategy?

  3. 3.

    How can players in the food industry learn from the findings of this study?

  4. 4.

    What is the multi criteria decision-making approach employed in this study? What are the advantages and shortcomings of this approach in determining supply chain competitiveness?

  5. 5.

    It is found from this study, that there is no clear cut strategy in the whole supply chain of the Indonesian food industry. As the supply chain goes downstream, it is more [on?] differentiation; at the more upstream side of supply chain, players are more [on?] cost. Will it happen in other industry’s supply chains too, i.e. in the automotive or electronics industries?

  6. 6.

    Sustainability is still considered to be the least-important perspective in determining the competitiveness of the food supply chain in Indonesia. However, some problems in business ethics are identified in this study. Collusion among suppliers is one of them. Do you think that this problem is typical in emerging economies (or not)? Is there any simple and innovative way to alleviate the problem?

  7. 7.

    Even though differentiation outweighed cost as the influential perspective of supply chain competitiveness, the practice of product commoditization is inevitable leading to the practice of chasing a cheap price. How can players in the supply chain differentiate themselves from others? What kind of differentiation strategy is worth pursuing?

  8. 8.

    Of all the elements explaining perspectives for supply chain competitiveness, greenness is still trivial to players in the supply chain. Do you think that this is the case in emerging economies?

Appendix 1: Pairwise Comparison Matrix for the Degree of Importance of Supply Chain Perspectives

w.r.t Supply chain competitiveness

Cost

Differentiation

Sustainability

Infrastructure

Cost

   

1.50

Differentiation

1.55

 

3.00

3.51

Sustainability

2.00

   

Infrastructure

  

2.80

 

Appendix 2: Pairwise Comparison Matrices with Respect to Each Perspective of Supply Chain Competitiveness

figure a
figure b
figure c

Appendix 3: Level of Competitiveness with Respect to Elements of Supply Chain Perspectives

w.r.t the criteria below

Importance of high competitiveness compared with low competitiveness

Procurement

4.99

Operations cost

7.26

Transportation cost

3.57

Quality

4.51

Availability

3.33

Service level

4.72

Greenness

1.80

Business ethics

4.07

Social responsibility

3.93

Customs clearance

2.08

Communication

6.37

Transportation infrastructure

6.69

Rights and permissions

Reprints and permissions

Copyright information

© 2015 Springer International Publishing Switzerland

About this chapter

Cite this chapter

Febransyah, A., Simangunsong, E. (2015). Supply Chain Competitiveness in Food Industry: An Indonesian Case. In: Piotrowicz, W., Cuthbertson, R. (eds) Supply Chain Design and Management for Emerging Markets. Springer, Cham. https://doi.org/10.1007/978-3-319-05765-1_6

Download citation

Publish with us

Policies and ethics

Search

Navigation