Productivity Improvement of Small Scale Medium Enterprises (SMEs) on Food Products: Case at Yogyakarta Province, Indonesia

Transcription

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 Productivity Improvement of Small Scale Medium Enterprises (SMEs) on Food Products: Case at Yogyakarta Province, Indonesia Dewi Kurniawati*, Henry Yuliando Department of Agro-Industrial Technology, University of Gadjah Mada, Jl Flora 1, Bulaksumur, Yogyakarta, Indonesia Abstract Small and Medium Enterprises have a central role for national economic. Unfortunately, it still has a domain of low productivity, as well as for SMEs on food products. This study is aimed to identify the factors that influence performance in correspond to increase the productivity of SME on food products. The analysis is based on a fuzzy DEMATEL and ANP as a hybrid MCDM. The objects are SMEs on food products located at Yogyakarta province, Indonesia. The result shows that the most critical factor of the SME performance is human resource. This finding also supports argument that non-monetary reasons play more important role than financial reasons The Authors. Published by by Elsevier B.V. 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 Peer-review Mada. under responsibility of Jurusan Teknologi Industri Pertanian, Fakultas Teknologi Pertanian, Universitas Gadjah Mada Keyword: SMEs; performance; productivity; hybrid MCDM; fuzzy 1. Introduction Small Scale Medium Enterprises (SMEs) have an important role Indonesian economic (Bhasin, 2010; Gunawan 2012; Hamdani, 2012; Indrawati, 2012; Pawitan, 2012; Setyaningsih, 2012). Sharman and Wadhawan (2009) stated that the importance of the SMEs sector is even recognized around the world because it can significantly improve the * Corresponding author. Tel.: address:dewikurniawati.didi@gmail.com The Authors. 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

2 190 Dewi Kurniawati and Henry Yuliando / Agriculture and Agricultural Science Procedia 3 ( 2015 ) social and economic systems in a variety purposes. The increasing number of SMEs can support the economic to be stronger. In Indonesia, SMEs have contributed over 75% of national income and occupied 97% national employment (National Cooperative Department, 2011). This number reflects that SMEs prosecute to be carefully developed due to wide variances of labor skill and technology adopted in contrast to the customer requirements over the products of food (Setyaningsih, 2012). The question is what about Indonesia SME situation and how the performance work out. Taking into account this problem, it needs multi criteria to be considered. Hence, a multi-criteria decision making (MCDM) approach proper to be applied. A MCDM model has been widely applied to solve many multi criteria problems (Tsai et al 2011). Yang et al (2008) said if a MCDM is more suitable for evaluating and improving problems in the world than previously available methods. According to Pribadi and Kanai (2011) the government of Indonesia needs to reformulate their policy in strengthening and regulating the small firms in Indonesia. The government should dedicate more effort to eliminate SMEs boundaries and decide the effective way for helping SMEs to develop their strengths and potentials (Irjayanti and Aziz, 2012). This statement briefly shows that there are several criteria that should be incorporated to delegate more productive SME in Indonesia. Therefore, this study is aimed to identify factors that significantly influence the performance of SME which responsible to increase the productivity. This research mainly focused on SME on food products located at Yogyakarta Province, Indonesia. 2. Methods The analysis in this study combines Decision Making Trial and Laboratory (DEMATEL), and Analytic Network (ANP) as a hybrid MCDM model for evaluating and improving problems related to SMEs performance. A hybrid MCDM is not only dealing with problems of interdependence factors and feedback but also improves the normalized supermatrix to suit the real world (Tsai and Kuo, 2011; Yang et al, 2008; Huang and Tzeng, 2012; Liao et al, 2014). DEMATEL was used to identify complex relationships and build a network structure among the factors, whereas ANP was used to determine criteria weights with dependence factors and feedback. On the other hand, fuzzy model can helps decision makers to reduce uncertain factors in the assessment, especially for qualitative factors. The correspondences employed for answering the questionnaire are experts in a related field. The ANP method was used to determine the factors relative weights. The ANP includes all relevant factors and decision-making alternatives to form a network that incorporates feedback and interdependent relationships. Because of the interdependency, the factors that are less important individually might turn out to be more important when evaluated collectively. This study used fuzzy technique to acquire the structure of MCDM problems. The fuzzy judgment was used to assess by the experts (decision makers). The fuzzy linguistic scale is described on table 1 and 2. Table 1.Linguistic Scale and Triangular Fuzzy Number in Fuzzy DEMATEL Linguistic term Influence score Triangular fuzzy number No influence (No) Very low influence (VL) Low influence (L) High influence (H) Very high influence (VH) (0, 0, 0,25) (0, 0,25, 0,5) (0,25, 0,5, 0,75) (0,05, 0,75, 1) (0,75, 1, 1) Table 2.Linguistic Scale and Triangular Fuzzy Number in Fuzzy ANP Linguistic Scale Triangular fuzzy numbers (l, m, u) Reciprocal Extremely important (9) Very important (7) Important (5) Slightly important (3) Equally important (1) (8, 9, 9) (6, 7, 8) (4, 5, 6) (2, 3, 4) (1, 1, 2) (1/9, 1/9, 1/8) (1/8, 1/7, 1/6) (1/6, 1/5, 1/4) (1/4, 1/3, 1/2) (1/2, 1, 1)

3 Dewi Kurniawati and Henry Yuliando / Agriculture and Agricultural Science Procedia 3 ( 2015 ) Result and discussion SMEs need to measure their performance to maintain their existence and development over the business. Mostly SMEs in Indonesia have a traditional way in terms of their production process, technology and marketing (Indarti dan Langenber, 2004 in Hamdani 2012). They face problems in quality of human resource, technology, knowledge, facility, capital access, imbalance competition, market access and information (Bhasin, 2010; Hamdani, 2012, Adiningsih, 2004, Indrawati, 2012, Tambunan, 2011). In addition, mostly SMEs in developing country such as in Indonesia have a low penetration to develop their business. However, they need to increase the performance and to develop their business so that they will be ready to face globalization such as Asean Economic Communnity (AEC) 2015 (Hamdani, 2012). Based on several literature reviewed it can be constructed that criteria which assumed to significantly influence the performance of SMEs on food products are listed on following Table 3. Table 3. Factors that used to assess the SMEs performance Clusters Factors A. Raw Material Production B. Marketing and Distribution (Irjayanti, 2012; Bhasin 2010) C. Technology (Production Process)(Hamdani, 2012). Human D. Motivation E. Education/experience (Hamdani, 2012; Chowdhury et al, 2013 ) F. Partnership (Hamdani, 2012). G. Business Regulation and Restriction (Karpak and Topcu, 2010). H. Financial support Business (Hani et al 2012; Adiningsih, 2004; Karpak and Topcu 2010) Environment I. Government Policy (Tambunan, 2011). J. Business Competition (Karpak and Topcu, 2010; Hamdani, 2012) 3.1 Fuzzy DEMATEL The assessment of interdependence relationship among the factors by decision makers (respondents) is the input of Fuzzy Model. The research framework is depicted on Fig. 1. The DEMATEL method gives a result of interrelationship among analysed factors. References Factors FDEMATEL FANP Fig 1. Research Framework The threshold value is 0.27, which means not all factors could be converted at the impact-diagraph map. It can be said that any factor that equal or more that this threshold have a relation to others. The result of DEMATEL analysis is considered to build a networking model for fuzzy ANP as shown in Fig. 2.

4 192 Dewi Kurniawati and Henry Yuliando / Agriculture and Agricultural Science Procedia 3 ( 2015 ) (1) Impact Diagram Map among Clusters Productive Human Business Environment (2) Impact Diagram Map for Productive Cluster A B A. Raw material B. Marketing and distribution C. Technology (production process) C (3) Impact Diagram Map for Human Cluster D E D. Motivation E. Education/experience (4) Impact Diagram Map for Business Environment Cluster G H J F F. Partnership G. Business regulation and restriction H. Financial support I. Government policy J.. Business Competition I Fig 2. Impact Diagram Map among Clusters and in the Various Clusters 3.2 Fuzzy ANP The input of Fuzzy ANP is the paired-ratio between considered factors. The development of paired-ratio matrix is based on fuzzy DEMATEL output. The weight is used to examine the crisis factors to improve SMEs performance. The recapitulation of local and global weights as can seen on Table 4. The global weights should be considered as interdependent relationship between factors, which are defined by crossing the interdependence matrix with weight local matrix of factors. Table 4. Recapitulation of Local and Global Weight Clusters Productive Human Business Environment Factors Local Global Weight Weight Priority Raw material Marketing and distribution Technology (production process) Motivation Education/experience partnership Business regulation and restriction Financial support Government policy Business Competition Global weight describes the priority or factors influence to improve SMEs performance. Table 4 also reflects the critical factors to improve SMEs performance which are motivation, education/experience, government policy, business competition, and technology. Meanwhile, factors that have weight 0.1 are assumed have a weak influence. It can be said that motivation is highly appreciated as a trigger to SMEs on food products to move forward by creating innovation. This is correspond to the motivation to have higher income, expense flexibility, flexibility in time spending, and to provide family security (Rachmania, 2012). Moreover, Wager and Ziltener (2008) argued that entrepreneurs or SMEs are motivated and self-realization and independency. They eager to enhance status income, economic contribution and its impact, upholding tradition and securing income. This motive influences the Indonesian SMEs performance as well. Their interest to have their own business through SMEs platform is because of income and self-independency. Previous studies showed the relationship of education or experience and entrepreneurship. Educated personal have a strong passion to have high earning and choose self-employment to be independent in their human capital (Bhattacharjee et al, 2008). Government, research centers, and universities should give a contribution in applying knowledge and knowhow for SMEs. This could help SMEs to increase productivity, shorten time production, raise the quality, and able to compete. This finding gives argument that non-monetary reasons play a more important role than financial reasons. Based on Karpak and Topcu, (2010) The entrepreneur characteristics in SME as well as motivation, managerial

5 Dewi Kurniawati and Henry Yuliando / Agriculture and Agricultural Science Procedia 3 ( 2015 ) skills and technical know-how are influential factors related to performance. Similar with Anggadwita and Mustafid (2014), entrepreneurial aspect is one of critical success factors in running a business. Competence of human resource is important to face new challenges in market competition. In fact, SMEs role for Indonesian economic is very tremendous, but government s policies and regulations are still need to be improved. Government should think seriously type of development programs and promotions as a strategic plan. However, Indonesia still face problem related to transportation system that influences the shipping cost (Irjayanti, 2012). Indonesia has been involving free trade zone, so that SMEs are not only competing with local product but also with abroad product that to some extent have higher quality and cheaper. Products of SMEs are losing their competitiveness, especially in term of price and quality (Pawitan, 2012). Many SMEs have no ability to apply technology that can help them to have be efficient. This is mainly due to the lack provision and financial access for SMEs to adopt newer technology. 4. Conclusion This study attempted to prioritize critical factors that influence SMEs performance. Motivation in entrepreneurship to work out in SMEs platform is believed to be the most influencing factor to the success of SMEs on food products in sustaining their businesses. Factors such as education, government policy, business competition, and technology are supporting factor that enable SMEs to enhance their competitiveness as well. The most critical factor of the SME performance is human resource. This finding argues that non-monetary reasons play more important role than financial reasons. The government needs to eliminate the boundaries and encourage the development of SMEs through supporting policies in financial access, facilities and infrastructure. References Adiningsih, S., Regulasi dalam Revitalisasi Usaha Kecil dan Menengah di Indonesia. Laporan Tim Perencanaan Pembangunan Hukum Nasional Kelompok Bidang Hukum Ekonomi dan Industri. Anggadwita, G., Mustafid, Q. Y., Identification of Factors Influencing the Performance of Small Medium Enterprises (SMEs). Procedia Social and Behavior Sciences 115 page Bhasin, B. B., Venkataramany, S., Globalization of Entrepreneurship: Policy Considerations for SME Development in Indonesia. International Business and Economic Research Journal Volume 9 Number 4. Bhattacharjee, A., Bonnet, J., Le Pape, N., Result, R., Entrepreneurial Motives and Performance: Why might Better Educated Entrepreneurs be Less Successful? The Research Laboratory Working Paper.University of Cergy-Pontoise, France. Bourletidis, K., Triantafyllopoulos, Yiannis., SMEs Survival in time of Crisis: Strategies, Tactics, and Commercial Success Stories. Procedia Social and Behavioral Sciences Chowdhury, M. S., Alam, Z., Arif., M. I., Success Factors of Entrepreneurs of Small and Medium Sized Enterprises: Evidence from Bangladesh. Business and Economic Research ISSN Volume 3 No 2. Hamdani, J., Wirawan, C., Open Innovation Implementation to Sustain Indonesia SMEs. Procedia Economics and Finance Irjayanti, M., Aziz, A. M., Barrier Factors and Potential Solutions for Indonesia SMEs. Procedia Economics and Finance Liao, C. W, Yeh, T. M, Pai, F. Y Using a Hybrid MCDM Methodology to Identify Critical Factors in New Product Development. Springer Verlag London. NueralComput&Applic 24: Mawardi, M. K , The Factors of SME Cluster Development in a Developing Country: The Case of Indonesian Clusters ICSB World Conference. Stockholm, Sweden. Nobar, M.N, Steak, M., and Tafti, A.F., 2011.Selecting Suppliers of 2nd Layer Suppliers by Utilizing FANP Procedure. International Journal of Business and Management.6(2): Pawitan, Gandhi., Characteristic of Small Medium Manufacturing Industries In the Era Of ACFTA: case Study from West Java. Procedia Economics and Finance Rachmania, I, N., Rakhmaniar, M., Setyaningsih, S., Influencing Factors of Entrepreneurial Development in Indonesia. Procedia Economics and Finance Setyaningsih, S , Using Cluster Analysis Study to Examine the Successful Performance 6 in Indonesia. Procedia Economics and Finance 4 (2012) Siringoringo, H., Prihandoko, Tintri, D., Kowanda, A., Problems Faced by Small and Medium Business in Exporting Products. Delhi Business Review Volume 10 No 2. Tambunan, T. T. H., Development of Small and Medium Enterprises in a Developing Country: The Indonesian Case. Journal of Enterprising Communities: People and Places in the Global Economy Volume 5 No 1 pp Tsai, W. H., Kuo H. C. H., Entrepreneurship Policy Evaluation and Decision Analysis for SMEs. Expert Systems with Applications

6 194 Dewi Kurniawati and Henry Yuliando / Agriculture and Agricultural Science Procedia 3 ( 2015 ) Tsai, W. H., Lee, P. L., Shen, Y. S., Hwang, E. T. Y., A Combined Evaluation Model for Encouraging Entrepreneurship Policies. Ann Oper Res DOI /s Tzeng, G. H., Huang, C. Y., Combined DEMATEL Technique with Hybrid MCDM Methods for Creating the Aspired Intelligent Global Manufacturing and Logistics Systems. Springer Science Business Media. AnnOper Res 197: Yang, Y.P.O., Shieh, H.M., Leu, J.D., Tzeng, G.H., A Novel Hybrid MCDM Model Combined with DEMATEL and ANP with Applications. International Journal of Operations Research Vol. 5, No. 3, Wager, K., Ziltener, A., The Nascent Entrepreneur at Crossroads: Entrepreneurial Motives as Determinants for Different Types of Entrepreneurs. Working Paper. Swiss Institute for Entrepreneurship.