Available online at ScienceDirect. Agriculture and Agricultural Science Procedia 3 ( 2015 )

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1 Available online at ScienceDirect Agriculture and Agricultural Science Procedia 3 ( 2015 ) The 2014 International Conference on Agro-industry (ICoA) : Competitive and sustainable Agroindustry for Human Welfare A Sustainable Partnership Model among Supply Chain Players in Wooden Furniture Industry Using Goal Programming Muh. Hisjam a,b, *, Adi Djoko Guritno c, Nunuk Supriyatno c, Shalihuddin Djalal Tandjung c a Ph. D Candidate in Environmental Science, The Graduate School, Gadjah Mada University, Jl. Teknika Utara, Yogyakarta 55281, Indonesia b Dept. of Industrial Engineering, Fac. of Engineering, Sebelas Maret University, Jl. Ir. Sutami 36A, Surakarta 57126, Indonesia c The Graduate School, Gadjah Mada University, Jl. Teknika Utara, Yogyakarta 55281, Indonesia Abstract Sustainability in industry is very important. Hence we proposed apartnership of sustainable model among supply chain three players and proposed 13 goals in the model. We used goal programming to achieve the goals. To illustrate the model, we conducted a numerical trial based on our observations in export oriented wooden furniture industry in Central Java, Indonesia and we gave different weightings among the goals. The results show that more weighting to social or environmental makes better goal achievements in almost all goals than the results achieved from the same weighting or the more weighting only to the economic aspects Published The Authors. by Elsevier Published B.V. by Elsevier This is an B.V. open access article under the CC BY-NC-ND license ( Peer-review under responsibility of Jurusan Teknologi Industri Pertanian, Fakultas Teknologi Pertanian, Universitas Gadjah Peer-review Mada. under responsibility of Jurusan Teknologi Industri Pertanian, Fakultas Teknologi Pertanian, Universitas Gadjah Mada Keywords: sustainable partnership model; wooden furniture industry; goal programming; supply chain; sustainability; 1. Introduction Recently sustainability becomes more important both in theory and practice so the research on this topic is interesting. Hahn, and Kühnen (2013) expresses that sustainability becomes more interesting topic. Sustainability is an interesting topic in business, due to the recent condition of more growing customers that concern environmental and social aspects and also multi-national companies run actions to assure the sustainability of the business. Document * Corresponding author. Tel.: ; fax: address: hisjam@uns.ac.id Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license ( Peer-review under responsibility of Jurusan Teknologi Industri Pertanian, Fakultas Teknologi Pertanian, Universitas Gadjah Mada doi: /j.aaspro

2 Muh. Hisjam et al. / Agriculture and Agricultural Science Procedia 3 ( 2015 ) search results using keyword sustainable supply chain in SCOPUS website on June 21, 2014 shows that the documents found from 2010 to the middle of 2014 are increasing. It shows that the research topic of sustainability, - especially sustainable supply chain- is interesting. The terminology of sustainability in this paper covers the three aspects of sustainability those are economic, social and environmental aspects (Teuteberg, F., and Wittstruck, D., 2010; United Nations General Assembly, 2005). The forestry industry is one of the industry sectors that found many problems related to the sustainability. The problems are issues related to supply, production, marketing, labor equality, conflict with the community around the forest, its impact to the environment, etc. (Guritno, and Murao, 1999; Casson and Obidzinski, 2002; Armstrong, 2004; Ewasechko, 2005; Loebis, and Schmitz, 2005; EMG, 2006; Hisjam et al., 2010, Hisjam et al., 2011, Hisjam et al., 2012 a ). What beyond the problems are about the partnership. This paper proposes asustainable partnership among supply chain players. The article consists of six sections. In the Introduction, we discussed some academic issues that become the base of our proposed research. In the next section, we described the problem, the entities involved and the aspects considered in the Problem Description. Next, in the Research Methodology, we explained how we proposed the model of the system. The fourth section provides the Solution Method, Numerical Example, and Results and we discussed it in the fifth section that is the Discussion. The sixth section is dedicated to the conclusion that we concluded our finding and further development of the paper. 2. Problem Description The problem in this paper is the increasing foreign buyers that demand the product that's produced by manufacturers with raw material that supplied by the supplier that concern not only economic aspect, but also social and environmental aspects. The foreign buyers also have commitments for the sustainability. Hence it is necessary to model a sustainable partnership model among the supply chain players. The problem becomes more complicated because each aspect will influence other aspects and decision in one player will impact to other players. To illustrate the model, we took a case study where Forest Management Unit of Perum Perhutani as the supplier, Wood Manufacturer of Perum Perhutani as the manufacturer. Those players are located in Central Java Province, Republic of Indonesia. Buyer of the Wood Manufacturer has a role as the buyers that are from abroad. 3. Research Methodology Due to considering three aspects and three players, so the model is multi-objectives model. Goal Programming (GP) is a one of the suitable tool for to analyze the achievement of the goals that sometimes conflicting among the aspects and among the players. In Goal Programming (GP), the objective function is to minimize positive and negative deviations. The goals are expressed in (3) to (7), and in (9) to (15). (1) PS ck b k PC. FH i MC ( TFA FTH ) HC. (2) ii jj k K i I ii jj k K CLF CSC PSCF PISC RSC PS N 1 P1 TPS (3) CSC N 2 P2 PSC. PS (4) PSCF N P PPS. PS (5) 3 3 PISC N P PSPI. PS 4 4 RSC N P PR. PS 5 5 (6) (7)

3 156 Muh. Hisjam et al. / Agriculture and Agricultural Science Procedia 3 ( 2015 ) ii jj kk N 6 P 6 AAC AV (8) PM f F m M f F jj p FC. CSF. w f f F m M FP. w CMC PIMC f F jj m M p m j f F jj c f (9) PM 7 N 7 P TMP (10) CMC N P PMC. PM 8 8 PIMC N P PMPI. PM 9 9 ( 1 CSF ) w N P TPS (13) f F mm N 11 P11 ff jj W N V 12 P ff pp d 10 pf N 13 P TPLSF (16) Those goals are economic, social and environmental goals. Economic goals are Goal 1 (supplier), Goal 7 (manufacturer), and Goal 11 (buyer). Social goals are Goal 2, 3, 4 (supplier), Goal 8, 9 (manufacturer), and Goal 12 (buyer). Environmental goals are Goal 5, 6 (supplier), Goal 10 (manufacturer), and Goal 13 (buyer). Those goals should be equal to, less than or bigger than their target. Those goals are expressed subsequently as follows: Goal 1: supplier s profit is log selling subtracted by planting, maintenance, harvesting, Corporate Social Responsibility (CSR), insurance and Personal Protective Equipment (PPE) for labor, reforestation costs and profit sharing with the community around the forest. It must be maximized to be bigger or equal to its target. Goal 2: supplier s CSR is a certain percentage of supplier s profit. It must be equal to its target. Goal 3: profit sharing with the community around the forest is a certain percentage of supplier s profit. It must be equal to its target. Goal 4: supplier s fund for insurance and PPE for labor is a certain percentage of supplier s profit. It must be must be bigger or equal to its target. Goal 5: supplier s fund for reforestation is a certain percentage of supplier s profit. It must be must be bigger or equal to its target. Goal 6: supplier should cut forest area less than or equal to its target. Goal 7: manufacturer s profit is furniture and Finger Joint Lamination (FJL) selling subtracted by production cost of furniture and FJL, and subtracted by Corporate Social Responsibility (CSR), insurance and Personal Protective Equipment (PPE) for labor. It must be bigger than or equal to its target. Goal 8: manufacturer s CSR is a certain percentage of manufacturer s profit. It must be equal to its target. Goal 9: manufacturer s fund for insurance and PPE for labor is a certain percentage of manufacturer s profit. It must be maximized to be bigger or equal to its target. Goal 10: manufacturer should minimize unused scrap less than its target. Goal 11: manufacturer s production must be equal to buyer s demand. Goal 12: buyer deserves to pay additional price based on the percentage of wood log sourcing from sustainable forest. The target is the availability of the additional price. Goal 13: buyer deserves to pay additional price if both supplier and manufacturer provide CSR fund in certain amount. The target is the availability of the additional price. (11) (12) (14) (15)

4 Muh. Hisjam et al. / Agriculture and Agricultural Science Procedia 3 ( 2015 ) There are 7 hard constraints considered in the model. The hard constraints limit in achieving the goals that mentioned before. The hard constraints considered in the model are expressed subsequently as follows: Constraint 1 is that production of furniture cannot exceed the manufacturer s capacity. Constraint 2 is that total wood log used is equivalent to log that required to produce furniture demand. Constraint 3 is that scrap of the furniture production is the residue of raw material that cannot be used for further production and calculated based on the value of the conversion. Constraint 4 is that manufacturer s demand of wood log to produce furniture can be supplied by the supplier. Constraint 5 is that supply of wood log k by supplier considering the conversion factor from log to furniture. Constraint 6 is that buyer deserves to pay additional price if both supplier and manufacturer provide CSR in certain amount. Constraint 7 is that an additional price that deserves to be paid by the buyer based on percentage of wood log sourcing from sustainable forest. 4. Solution Method, Numerical Trial, and Results Extended Lingo/Win32 Release with Educational License is chosen to solve GP formulation of the model. In this computational study, we analyzed whether data submitted to the model can achieve all goals of the supplier, the manufacturer and the buyer. To solve the GP formulation was used simplex method. The procedure to solve this model are as follow: a. Determine initial target level for all goals. b. Apply simplex method to minimize deviation variable. c. Check whether all goals are satisfied. d. If satisfied, then finished and we get the results. e. If not satisfied, then adjust the target level for goal with the biggest deviation and return to step b until all goals are satisfied. Using data from our observations, interviews, and secondary data source, we run a computer program. Fortunately, all goals are satisfied. Then we conducted some scenarios. The first run where all goals have the same weighting we named it as scenario 1. We give double weighting to economic goals and we named it as scenario 2. We give double weighting to social goals and we named it as scenario 3. We give double weighting to environmental goals and we named it as scenario 4. Table 1 lists the results of the scenarios. 5. Discussion In Table 1, we can compare among the scenarios. It shows that scenario 3 and 4 give relatively better results in most goals compared to scenario 1 and 2. Scenario 3 gives a double weighting to social goals and the result shows that it increases not only a social goal achievement but also economic and environmental goals. Scenario 4 gives a double weighting to environmental goals and the result shows that it increases not only an environmental goal achievement but also economic and social goals. Proposition: In a sustainable supply chain industry where the players involved have had a commitment to three aspects of sustainability, giving greater priority to social and the environment aspects will improve not only social or environmental aspects itself but also improve other aspects, included the economic aspect. Proof: From formula (2) to (16) and the possibility of increasing in profits by increasing on the value of the social and environmental although it needs extra expenses, due to a certain related incentive price related to social and environment aspect as expressed in the hard constraint 6 and 7.

5 158 Muh. Hisjam et al. / Agriculture and Agricultural Science Procedia 3 ( 2015 ) Conclusion We proposed a sustainable partnership model that involved three players. Those are supplier, manufacturer and buyer. In the model we proposed 13 goals and 7 hard constraints. We used goal programming to solve the problems. The results show that it is better to give more weighting to social or environmental than to give the same weighting or the more weighting only to the economic aspects. Further research can be conducted in other sector of industry by modifying some goals and hard constraints. Acknowledgements Table 1. The results of the scenarios. Criteria Scenario 1 Scenario 2 Scenario 3 Scenario 4 Goal Goal Goal Goal Goal Goal Goal Goal Goal Goal Goal Goal Goal 13 GF (0.35) GF (0.35) GF (0.2) GF (0.2) Indoor (0.35) Indoor (0.35) Indoor (0.2) Indoor (0.2) Thanks to the Perum Perhutani Unit I Central Java and ASMINDO Komda Solo Raya that have been become the partners in the research. References Armstrong, G.W., Sustainability of Timber Supply Considering the Risk of Wildfire, Forest Science 50:5, Casson, A., Obidzinski, K., From New Order to Regional Autonomy: Shifting Dynamics of Illegal Logging in Kalimantan, Indonesia. World Development 30: 12, Emerging Markets Group (EMG), EU Furniture Market Study Summary, USAID : The United States Agency for International Development, pdf.usaid.gov/pdf_docs/pnadh793.pdf, retrieved on 24 Maret Ewasechko, A.C., Upgrading the Central Java Wood Furniture Industry: A Value-Chain Approach, International Labor Organization. Guritno, A.D., Murao, K., The Observation of Log Export Banning Policy in Indonesia: Conditions, Problems, and Alternative Solutions, J. For. Res. 4, Hisjam, M., Ota, I., Guritno, A.D., Simon, H., Tandjung, S.D., Comparing the Practices of Forest Product Certification between Perum Perhutani And Yusuhara Forest Owner s Cooperative, 3rd Gadjah Mada Ehime Network International Seminar : Sustainable Bio-resources for Global Welfare, August 7-8, Nusa Dua Beach Hotel, Bali, Indonesia, Hisjam, M., Guritno, A.D., Simon, H., Tandjung, S.D., A Framework for The Development of Sustainable Supply Chain Management for Business Sustainability of Export-Oriented Furniture Industry in Indonesia (A Case Study of Teak Wooden Furniture in Central Java Province), 1st International Conference on Industrial Engineering and Service Science, September, Hotel Lor In, Solo, Hisjam, M., Guritno, A.D., Tandjung, S.D., 2012 a. The Development of Sustainable Supply Chain Model of The Relationship between Wood Supplier with Furniture Industry in Indonesia, Teknosains 1:2, Hisjam, M., Guritno, A.D., Supriyatno, N., Tandjung, S.D., 2012 b. A Sustainable Supply Chain Model of Manufacturer-Buyer Relationship in Export Oriented Furniture Industry in Indonesia, Civil and Environmental Research 2: 5, Hahn, R., Kühnen, M., Determinants of sustainability reporting: a review of results, trends,theory, and opportunities in an expanding field of research, Journal of Cleaner Production 59, 5-2. Loebis, L., Schmitz, H., Java furniture makers: Globalisation winners or losers?, Development in Practice 15: 3 & 4, Teuteberg, F., and Wittstruck, D., A systematic review of sustainable supply chain management. Multikonferenz Wirtschaftsinformatik 2010, 203. United Nations General Assembly, 2005 World Summit Outcome, Resolution A/60/1, Retrieved on: