JAM 15, 3 Received, March 2017 Revised, June 2017 August 2017 Accepted, September 2017

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1 Mira Astuti Ariharti, Musa Hubeis, Suryahadi JAM 15, 3 Received, March 2017 Revised, June 2017 August 2017 Accepted, September 2017 SUPPLY CHAIN MANAGEMENT IN THE DEVELOPMENT OF MICRO, SMALL AND MEDIUM ENTERPRISES COMPETITIVENESS OF PROCESSED FOOD Mira Astuti Ariharti Ministry of Farm Musa Hubeis Departement of Management, Faculty of Economics and Management, Institut Pertanian Bogor Suryahadi Departement of Nutrients and Food Technology, Institut Pertanian Bogor Abstract: this study aims to identify factors that affect the internal and external Supply Chain Management (SCM), Supply Chain analyze raw materials, systems of production and distribution of products, SCM appropriate strategy for SMEs. The method used in this study is descriptive analysis, Internal Factor Evaluation (IFE), External Factor Evaluation (EFE), the analysis Internal External (IE), the analysis of Strengths, Weaknesses, Opportunities, and Threats (SWOT) and Quantitative Strategic Planning Matrix (QSPM). The number of respondents in this study at 15 institutions established by purposive sampling technique. The results of observations elected five SMEs Processed Food of Sambal. IFE matrix visible strength of production capacity per day which is owned SMEs can overcome the weaknesses of human resources quality elements quite well. While the total score of the matrix EFE (2.435) showed SMEs were able to respond to opportunities distribution network of products on line and minimize the threat of raw material price fluctuations, as well as the position of SMEs Processed Food of Sambal on IE matrix, is in quadrant V, namely to preserve and defend by using strategies market penetration and product development. SCM development strategy according to the results of the analysis and SWOT matrix QSPM generate a key strategic priority, namely inventory management effective and efficient methods First in First out (FIFO) and facilitated by the distribution network of products on line. Journal of Applied Management (JAM) Volume 15 Number 3, September 2017 Indexed in Google Scholar Correspondention Author: Mira Astuti Ariharti, Ministry of Farm DOI: / ub.jam Keywords: Supply Chain Management, Food Processing, Competitive, MSMEs Surabaya is one of the big cities in Indonesia that popular with Micro, Small, and Medium Enterprises (MSMEs) Food Processed various commodities and growing rapidly. According to Law No. 20 of 2008 MSMEs has the criteria that the micro scale with a maximum net worth of 50 million and maximum annual sales of Rp 300 million, small scale with a maximum net worth of Rp 500 million and a maximum sales of Rp 2.5 billion, and medium scale with a net worth of Rp 10 billion and maximum annual sales of Rp 50 billion. In addition, people in the majority of Surabaya City prefer 422 JOURNAL OF APPLIED MANAGEMENT 422VOLUME 15 NUMBER 3 SEPTEMBER 2017

2 Supply Chain Management in The Development of Micro, Small and Medium Enterprises Competitiveness food preparations with a spicy flavor, so that the effect on the increased consumption of sauce as a complement to the dish. Supply Chain (SC) is a set of activities in the form of entities/facilities associated with the process of transformation and distribution of goods ranging from the earliest raw materials from nature to finished products to end consumers (physical network). Supply Chain Management (SCM) is a method, tool, and management approach (Anwar, 2013). According to Pujawan (2005), the main objective of the SCM is to deliver goods or products in a timely manner in order to satisfy consumers, reduce costs, improve all SC outcomes rather than just one company, reduce time, and centralize planning and distribution activities. Lack of information on raw materials and auxiliary ingredients in sambal making and lack of coordination between MSMEs of Sambal processed foods have an effect on SCM. SCM plays a role in determining policy in the field of food. Research on MSMEs of Sambal Processed Foods in Surabaya City was made because the problems encountered in the field were not yet identified internal and external factors affecting SCM, no SC raw material information, product and distribution system, and no implementation of SCM Strategy as appropriate. The objective of the study was to identify internal and external factors affecting SCM, analyze raw materials SC, product production and distribution systems, and develop appropriate SCM strategies for MSMEs Processed Foods of Sambal. RESEARCH METHODS The research was conducted in April 2016 until August 2016 and located in Surabaya City. In this research, there are 4 stages of implementation. The first stage is to identify the flagship MSMEs in Surabaya and then to observe the selected MSMEs. The second stage is to analyze SC raw materials, production systems, and product distribution. The third stage is to analyze the internal and external factors associated with SCM MSMEs Processed Foods of Sambal. These factors are translated through the Internal Factor Evaluation (IFE) and External Factor Evaluation (EFE) matrix, then ana- lyzed by Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis to determine the strengths, weaknesses, opportunities, and threats faced by the owner MSMEs Processed Foods of Sambal. The last stage is the selection of SCM development strategy by using QSP matrix followed by implementation of SCM strategy to improve the development and performance of MSMEs. Data Collection Primary data has been obtained from interviews or communication and observation. Secondary data have been obtained from the literature and documents related to the research. Field observation was conducted on 30 samples of MSMEs of Processed Cooked Foods in Surabaya by purposive sampling technique proposed by Roscoe (1975) and Sevilla (2007), to determine the number of samples used by the following formula. n = N / (1 + N (e) 2 ) n = 30 n = number of examples N = total population e = limit of error tolerance N = 32 (AMJ Active Member), e = 5% With 15 respondents consisting of Ministries, Department of Cooperatives and MSMEs, Universities, Food and Beverages Association of East Java (AMJ), Banking, MSMEs Representatives, Suppliers of red and cayenne, Suppliers of onion and garlic, Suppliers of tomatoes, Roa fish supplier, Suppliers of plastic bottles and boxes, Outlets, Distributors, Retailers, and Consumers. Processing and Analysis of Data Completed questionnaires, tabulated data, analyzed descriptively to obtain characteristics of MSMEs Processed Foods of Sambal in Surabaya, and analysis of strategy formulation with IFE and EFE matrix, IE matrix, SWOT analysis and QSPM analysis (Rangkuti, 2005 and David, 2009). RESULTS AND DISCUSSION MSMEs Processed Foods of Sambal The results of observation of 30 MSMEs of DIKTI ACCREDITED SK NO. 36a/E/KPT/2016 ISSN:

3 Mira Astuti Ariharti, Musa Hubeis, Suryahadi Processed Food in Surabaya City were selected Sambal Cuk, Sambal Bu Yudi, Sambal DD1, Sambal Bu Christina R., and Sambal Bu Sandra. Characteristics of the five MSMEs Processed Foods of Sambal are with the Production Capacity per day kg, with details of Sambal Christina (200 kg), Sambal Cuk (100 kg), Sambal Bu Susilaningsih (50 kg), Sambal Bu Sandra (30 kg), and Sambal Yudi (15 kg). The raw materials used are fresh chili (75%), garlic (15%), shrimp paste (7.5%) and other supporting materials (2.5%). The main raw materials and other supporting materials are obtained from the surrounding area except for the supporting raw materials of Roa fish is the supporting raw material from North Sulawesi Province. The main raw material supply chain for MSMEs Processed Foods of Sambal with large-scale from farmers directly to processors. MSMEs Processed Foods of Sambal with medium and small scale has a supply chain from farmers to collectors proceeded to suppliers in the market. A number of workers 2-25 people with junior high school education. Workers come from the area around Surabaya City. Product Price Sauce products are sold at affordable price Rp 17500/bottle up to Rp 35000/bottle. MSMEs Production Process with large-scale and medium-sized enterprises have used machines and small-scale businesses using manual tools. It has a brand as an identity to distinguish between MSMEs Processed Foods of Sambal with each other. Product distribution is done with a distribution network for product marketing expansion. Distribution networks ranging from distributors, retailers, outlets, resellers, restaurants, consumers, and through social media (on line). Legality is not yet complete, or only has Licensing Household Industry and not all of them have Halal Certificate. Support from banks in the form of lending, while from government agencies, SOEs and Universities in the form of socialization of the importance of licensing, implementation of quality assurance system, and technical guidance. Supply Chain Raw Materials, Production Systems, and Product Distribution Supply Chain on MSMEs Processed Foods of Sambal that is starting from the supplier then go to MSMEs, then go to distributors, then go to retail, then go to an outlet, and last go to the consumer. Supply Chain on MSMEs Processed Foods of Sambal has performed its function as proposed by Indrajit and Djokopranoto (2003). In Figure 1. It is seen that Roa fish supply is obtained from North Sulawesi Province and other raw materials from the surrounding area (Keputren Market, Surabaya). In the production system, only one MSMEs Processed Foods of Sambal is still manual, while the other four have used the machine. The five MSMEs Processed Foods of Sambal use an on line distribution line to reduce costs and be more accessible to Sambal DD1 Supply of Raw Materials (Market of Keputren) + Roa Fish (Sulawesi Utara) Sambal Christina (Land Open Plan) Sambal Cuk Sambal Bu Sandra Sambal Yudi Figure 1 Supply of Raw Materials 424 JOURNAL OF APPLIED MANAGEMENT VOLUME 15 NUMBER 3 SEPTEMBER 2017

4 Supply Chain Management in The Development of Micro, Small and Medium Enterprises Competitiveness Sambal DD1 Processing Product Packaging Sambal Christina (Land Open Plan) Sambal Cuk Machine Bottle Sambal Bu Sandra Sambal Yudi Manual Sachets Figure 2 Production Systems Outlet Figure 3 Product Distribution Sambal DD1 Sambal Christina (Land Open Plan) Sambal Cuk Sambal Bu Sandra Sambal Yudi Ritel Online Distributor Reseller Restoran Konsumen all levels of society wherever they are. Factors of Strengths, Weaknesses, Opportunities, and Threats The strength and weakness factor in the IFE matrix, overall ranges from 1.0 to 4.0, with an average value of 2.5. Values below 2.5 indicate that internally MSMEs are weak and values above 2.5 indicate strong internal positions of MSMEs. The strength and weakness factor in the IFE matrix in Table 1 with the total score (2534) indicates the internal position that influences the strong MSMEs Processed Foods of Sambal in Surabaya. The probability and threat factors in the EFE matrix in Table 2 as a whole of 4.0 values indicate that MSMEs are able to respond to existing opportunities and avoid threats in the industrial market. A te-low 1.0 indicates that the strategy MSMEs can not take advantage of opportunities or can not avoid the threat. Opportunity and threat factors in EFE matrix with the total score (2,435) indicate external positions affect MSMEs Processed Foods of Sambal in Surabaya. IFE Matrix Analysis Table 1 shows 10 internal factors derived from the main strength of production capacity per day (0.496) making MSMEs Processed Foods of Sambal able to grow compared to four other strengths, namely purchasing raw materials and supporting materials (0.408), warehousing and inventory levels (0.406) delivery schedule of raw materials and products (0.309), and product innovation (0.247). The highest quality element of Human Resources with the highest score (0.202) as the main weakness is not an excuse for the development of MSMEs Processed Foods of Sambal. This can be DIKTI ACCREDITED SK NO. 36a/E/KPT/2016 ISSN:

5 Mira Astuti Ariharti, Musa Hubeis, Suryahadi Table 1 Results of IFE SCM Matrix Analysis of MSMES Processed Foods of Sambal Competitiveness in Surabaya City Internal Factors Weight Rating Score (a) (b) (axb) A. Strength 1. Production capacity per day 0, , Purchase of raw materials and supporting materials 0, , Product innovation 0, , Warehousing and inventory levels 0, , Schedule delivery of raw materials and products 0, ,309 B. Weakness 6. Limited capital 0, , Simple technology 0, , Legality is not yet complete 0, , Quality assurance systems that have not been implemented 0, , Low quality of human resources 0, ,202 Total 1,00 2,534 Table 2 Results of Matrix Analysis of EFE SCM MSMES Processed Foods of Sambal Competitiveness in Surabaya City External Factors Weight Rating Score (a) (b) (axb) A. Opportunities 1. Product distribution network on line 2. Methods of acceptance and expenditure of raw materials, as well as products with FIFO 3. Choosing a supplier by evaluating its performance 4. After-sales service 5. Banking / PT / BUMN / Local Government / Dinas / Ministry support 0,117 0,107 0,104 0,098 0, ,468 0,321 0,312 0,294 0,300 B. Threats 1. Supply of fluctuating raw materials 2. Raw material prices fluctuate 3. Quality of raw material is inconsistent 4. Competition with the same business actor 5. Implementation of bureaucracy by adminstrative not maximal yet 0,107 0,095 0,087 0,084 0, ,107 0,190 0,174 0,168 0,101 Total 1,00 2,435 minimized by providing training to the Human Resources. The other four main weaknesses are limited capital (0.158), quality assurance system has not been implemented (0.104), legality is not complete (0.103), and technology is still simple (0.100). EFE Matrix Analysis The result of EFE matrix analysis in Table 2 has obtained 10 external factors with the main op- 426 JOURNAL OF APPLIED MANAGEMENT VOLUME 15 NUMBER 3 SEPTEMBER 2017

6 Supply Chain Management in The Development of Micro, Small and Medium Enterprises Competitiveness portunity of the online product distribution network (0.468), has made product marketing effective and efficient compared to four other opportunities. Another opportunity is the method of acceptance and expenditure of raw materials, as well as products with the First in First out (FIFO) method (0.321), selecting suppliers by evaluating their performance (0.312), Banking / PT / BUMN / Local Government / Dinas / Ministry support (0.300) and after sales service (0.294). Fluctuating raw material prices (0.190) as the main threat can be minimized by managing the availability of raw materials through First in First out (FIFO) method. Four other threats are inconsistent raw material quality (0.174), competition with the same business actors (0.168), fluctuating raw material supply (0.107), and administrative bureaucracy implementation not maximally (0.101). Figure 2 IE Matrix IE Matrix Analysis Based on the total score of IE (2.534) and EFE (2.435) in Figure 2, the position of MSMEs Processed Foods of Sambal is in quadrant V, which is to maintain and maintain for a decrease in sales loss and loss of profit ± 10% of capital, distribution network on line. This shows that MSMEs Processed Foods of Sambal in Surabaya City is good enough to respond to opportunities and reduce threats. SWOT Analysis Based on the strengths, weaknesses, opportunities, and threats obtained through external and internal audits, alternative strategies are formulated. The strategy formulation is done by SWOT analysis in Table 3 Alternative of the resulting strategy. S-O Strategy Strengths - Opportunity is a strategy that uses the power to take advantage of opportunities. Some strategies that can be used are with the distribution network and inventory management. The most effective and efficient distribution network is on line because it is more cost-effective and efficient, and accessible to all levels of society. With on line via the internet, consumers can get product information with a more innovative look. Distribution is important in product marketing and is part of SCM strategy of organic vegetable development in Pengalengan District by Kipdiyah (2013). The most effective and efficient inventory management is to use the First in First out (FIFO) method. The first received receipt of raw materials will be issued first. The method is very good compared to others, evidenced by the acceptance and expenditure schedule. This applies to product acceptance and disbursement. With FIFO, raw mate- DIKTI ACCREDITED SK NO. 36a/E/KPT/2016 ISSN:

7 Mira Astuti Ariharti, Musa Hubeis, Suryahadi rial and product inventory will be more closely monitored in the warehouse. Inventory management is part of production management and becomes the choice of the organic vegetable SCM development strategy in Pengalengan District by Kipdiyah (2013) and Mulyani (2014), through an analysis of the efficiency of the corn supply chain in Grobogan District. W O Strategy Weaknesses - Opportunities is a strategy used by MSMEs Processed Foods of Sambal to overcome weaknesses that have by exploiting opportunities. Some strategies that can be used are with Credit and Technical Guidance. Lending by banks to overcome the capital limitations experienced by MSMEs Processed Foods of Sambal. This is in accordance with the requirements of his business has been running ± two years and a letter of complete licensing. Lending is a form of cooperation with other parties also applied by Mulyani (2014) when analyzing the efficiency of the supply chain of corn in Grobogan District. Technical guidance by relevant agencies is given to MSMEs Processed Foods of Sambal owners and employees free of charge to improve their knowledge and skills. Technical guidance provided can be a way of packing airtight products, how to use mixers and maintenance, and others. Technical guidance is training to improve the quality of Human Resources and implemented also by Retnowati, et al. (2014), in the Strategy of Increasing Fisherman s Performance in Supply Chain of Layur Fish through Development of Insani Capital at Pelabuhan Ratu. S T Strategy Strengths - Threat is a strategy used by MSMEs Processed Foods of Sambal to avoid threats. Some strategies can be done that is with production planning and able to compete. The design of production plays an important role in anticipating the undesirable that can occur during the production process that affects the quality and sales of products. This is related to production capacity, purchase of raw materials, and purchase of supporting materials, raw material quality to reduce the incidence of fluctuating raw material supply, fluctuating raw material prices, and inconsistent raw material quality. Therefore, Planning is a key element of production management aligned with that of Kipdiyah (2013). Able to compete at home and abroad. MSMEs Processed Foods of Sambal must be able to compete with the same business actors, albeit with different business scales. By conducting promotions and product innovation, it is expected to attract consumer interest and can compete at home and abroad. Expanding market access for improved product distribution is the spearhead for MSMEs, undertaken by Oryzanti (2013), in implementing the Farmer Based Vegetable SCM development strategy in Megamendung, Bogor. W T Strategy Weaknesses - Threats is a strategy used by MSMEs Processed Foods of Sambal to avoid threats. Several strategies are done with product standardization and socialization. Standardization of products needs to be done to convince consumers to buy products. The existence of product standardization, then MSMEs Processed Foods of Sambal in Surabaya City has the same product standard with other cities, so it can be accepted by the market at home and abroad. Standardization of products is an effort to expand market access, it is very important and the concern of Oryzanti (2013), in implementing the strategy of developing Farmer-Based Vegetable SCM in Megamendung, Bogor. This is also done by Hidayat, et al. (2014), in the preparation of value added formulation in the supply chain of palm oil. Socialization of licensing arrangements by related agencies. MSMEs Processed Foods of Sambal in Surabaya City only has Licensing Household Industry. Therefore, it is necessary to further socialize the management of Halal Certificate. Government intervention on policy is very influential on the performance of MSMEs, it is done by Mulyani (2014) when doing an analysis of corn supply chain efficiency in Grobogan District. 428 JOURNAL OF APPLIED MANAGEMENT VOLUME 15 NUMBER 3 SEPTEMBER 2017

8 Supply Chain Management in The Development of Micro, Small and Medium Enterprises Competitiveness Table 3 SWOT Matrix External Factors Internal factors Opportunity (O) 1. Product distribution network online 2. Methods of acceptance and expenditure of raw materials and products by Firs in First out 3. Select suppliers and evaluate their performance 4. After-sales service 5. Banking / PT / BUMN / Local Government / Dinas / Ministry support Strength (S) 1. Production capacity per day 2. Purchase of raw materials and materials 3. supporters 4. Product innovation 5. Warehousing and inventory levels 6. Schedule delivery of raw materials and products Weak- S-O Strategy a. The most effective and efficient distribution network (S3, S4, S5: O1) b. Inventory management is more effective and efficient (S1, S2, S4: 02, 03) ness (W) 1. Limited capital 2. Simple technology 3. Legality is not complete yet 4. The quality assurance system has not been implemented 5. Low quality of human resources W-O Strategy a. Lending (W1, W2, W5: O5) b. Technical guidance by related institutions (W1, W2, W5: O1, 02, O5) Threat (T) 1. Supply of fluctuating raw materials 2. Raw material prices fluctuate 3. The quality of raw materials is inconsistent 4. Competition with business actors in the same field 5. Implementation of administrative bureaucracy is not maximized S-T Strategy a. Production planning (S1, S2: T1, T2, T3) b. Competing efforts (S2, S4, S5, T14) W-T Strategy a. Product standardization (W2, W4, W5: T4) b. Socialization of Licensing by the Related Institution (W3, W4, W5, T4, T5) Information: - (Si: Oi) or (Si: Ti) or (Wi: Oi) or Wi: Ti) denotes a combination of the external environment with the internal in generating the choice of strategy - i = 1, 2,... n QSPM analysis The result of QSPM analysis in Table 4 shows eight strategic alternatives that are the priority to be implemented are more effective and efficient inventory management with FIFO method on the highest score (5.5). Furthermore, it is followed by other strategic alternatives, an effective and efficient online product distribution network (5.2), produc- DIKTI ACCREDITED SK NO. 36a/E/KPT/2016 ISSN:

9 Mira Astuti Ariharti, Musa Hubeis, Suryahadi tion planning (5.0), product standardization (4.9), technical guidance by related agencies (4.8), credit granting (4.7), able to compete domestic and foreign scope (4.6), and socialization of licensing arrangements by related agencies (4.5). Priority Strategy of Processed Foods of Sambal Table 4 QSP Matrix No. Alternative Strategy Total value Priority Order 1. Inventory management is more effective and efficient with the FIFO method Product distribution network effectively and efficiently with on line Production planning Product standardization Technical guidance by the relevant agencies Giving credit Able to compete in domestic and foreign scope Socialization of licensing arrangements by related institutions Competitive in Surabaya City CONCLUSIONS AND RECOMMENDA- TIONS Conclusion The internal factor of production capacity per day becomes a source of strength and external factor of online product distribution network becoming an opportunity for marketing expansion affecting Supply Chain Management (SCM) on Micro Processed Foods of Sambal (MSMEs) on Micro, Small, and Medium Enterprises (MSMEs). The appropriate SCM development strategy for MSMEs Processed Foods of Sambal in Surabaya City is an effective and efficient inventory management with FIFO method and facilitated with the online product distribution network. Recommendation Government guidance to MSMEs on performance improvement efforts ranging from planning, management, production, packaging, storage, and product marketing. It also needs to be socialized about the importance of licensing, product standardization and implementation of quality management system to increase the selling value of products and compete in domestic and foreign markets. Technical guidance is required for MSMEs owners and workers to increase their knowledge and skills, both in the use of production tools and the introduction of appropriate technology. REFERENCES Anwar, Sariyun Naja Manajemen Rantai Pasokan (Supply Chain Management): Konsep dan Hakikat. Jurnal Ekonomi 1(4): 1-7. David, Fred. R Manajemen Strategis (Terjemahan) : Konsep. Edisi 12. Jakarta (ID): Salemba Empat. Hidayat, Syarief, Nunung Nurhasanah, and Rizky Ayuning Prasongko Formulasi Nilai Tambah Pada Rantai Pasok Minyak Sawit. Jurnal Teknik Industri. Jurnal Teknik Industri Vol 2, No.3, September Banten: Universitas Sultan Ageng Tirtayasa. Indrajit, Richardus Eko and Djokopranoto Konsep Supply Chain: Strategi Mengelola Manajemen Rantai Pasokan Bagi Perusahaan Modern di Indonesia. Jakarta: PT Gramedia Widiasarana Indonesia. Kipdiyah Siti, Musa Hubeis, and Budi Suharjo Strategi Rantai Pasok Organik Berbasis Petani di Kecamatan Pengalengan, Kabupaten Bandung. Jurnal Manajemen Pengembangan Industri Kecil Menengah, 8(2): Bogor: IPB. Mulyani Sri Analisis Efisiensi Rantai Pasok Jagung Di Kabupaten Grobogan. Tesis. Magister 430 JOURNAL OF APPLIED MANAGEMENT VOLUME 15 NUMBER 3 SEPTEMBER 2017

10 Supply Chain Management in The Development of Micro, Small and Medium Enterprises Competitiveness Agribisnis, Solo: Universitas Sebelas Maret. Oryzanti Parwa Kelayakan dan Strategi Pengembangan Supply Chain Management Sayuran Organik Berbasis Petani di Megamendung, Bogor. Tesis. Program Industri Kecil Menengah. Bogor: IPB. Pujawan, I Nyoman Supply Chain Management. Surabaya: PT. Guna Widya. Rangkuti F Analisis SWOT: Teknik Membedah Kasus Bisnis. Jakarta (ID): PT Gramedia Pustaka Utama. Retnowati Herlina, Anggraini Sukmawati, and Triji Wiji Nuraini Strategi Peningkatan Kinerja Nelayan dalam Rantai Pasok Ikan Layur melalui Pengembangan Modal Insani di Pelabuhanratu. Jurnal Manajemen Pengembangan Industri Kecil Menengah. 9(2): Roscoe, J. T Fundamental Research Statistic for the Behavior Sciencess. (2 nd edition), Holt, Rinehart and Winston. Sevilla, C. G Research Methods. Quezon City: Rex Printing Company. Undang-Undang No 20 Tahun 2008 tentang MSMES. Jakarta. DIKTI ACCREDITED SK NO. 36a/E/KPT/2016 ISSN: