SUPPLY CHAIN RISK MANAGEMENT
EVALUATION ON UNCONTROLLABLE RISKS IN
AUTOMOTIVE INDUSTRY OF
PT. ASTRA INTERNATIONAL –
HONDA SALES OPERATION
By
Ghilmansyah Amri
014201300060
A skripsi presented to
Faculty of Business President University
In partial fulfillment of the requirement for
Bachelor Degree in Economics Major in Management
December 2016
i
SKRIPSI ADVISER
RECOMMENDATION LETTER
This skripsi entitled “SUPPLY CHAIN RISK MANAGEMENT
EVALUATION ON UNCONTROLLABLE RISKS IN
AUTOMOTIVE INDUSTRY OF PT. ASTRA INTERNATIONAL
– HONDA SALES OPERATION” prepared and submitted by
Ghilmansyah Amri in partial fulfillment of the requirements for the
degree of Bachelor Degree in Faculty of Business has been reviewed
and found out to have satisfied the requirements for a skripsi fit to be
examined. I therefore recommend this skripsi for Oral Defense.
Cikarang, Indonesia, December 9th, 2016
Acknowledge by, Recommended by,
Dr. Dra. Genoveva, M.M Filda Rahmiati,MBA Head of Management Study Program Skripsi Advisor
ii
DECLARATION OF ORIGINALITY
I declare that this skripsi, entitled “SUPPLY CHAIN RISK
MANAGEMENT EVALUATION ON UNCONTROLLABLE
RISKS IN AUTOMOTIVE INDUSTRY OF PT. ASTRA
INTERNATIONAL – HONDA SALES OPERATION” is, to be the
best of my knowledge and belief, an original piece of work that has not
been submitted, either in whole or in part, to another university to obtain
a degree.
Cikarang, Indonesia, December 9th, 2016
Ghilmansyah Amri
iii
PANEL OF EXAMINERS
APPROVAL SHEET
The Panel of Examiners declares that the skripsi entitled “SUPPLY
CHAIN RISK MANAGEMENT EVALUATION ON
UNCONTROLLABLE RISKS IN AUTOMOTIVE INDUSTRY
OF PT. ASTRA INTERNATIONAL – HONDA SALES
OPERATION” that was submitted by Ghilmansyah Amri majoring
in Management from Faculty of Business was assessed and
approved to have passed the Oral Examination on December 15th,
2016.
Grace Amin, S.Psi, M.Psi, Psikolog
Chair-Panel of Examiners
Ono Supriadi, Ph.D.
Examiner I
Filda Rahmiati, MBA
Examiner II
iv
ABSTRACT
Supply chains have become more interdependent and complex since the
globalization. Although it has given much advantages, at the same circumstances it
also creates the company becomes defenseless to risk which can affect the adverse
impact for the organization. The disruption on supply chain caused by the
uncontrollable risks which happened several years ago have proven that a small
ripple can cause major waves. When the disruption is not well-controlled by the
company, it will impact the whole supply chain partners. This research objective is
to discover the most effective mitigation strategy that is needed to minimize the
impact of uncontrollable disruption towards the supply chain. The researcher uses
a qualitative approach to achieve the objectives using a case study of the leading
motorcycle automotive distributor and retailer in Indonesia which is PT. Astra
International - Honda Sales Operation. The Miles and Huberman model theory and
SWOT analysis theory is used by the researcher to do the data analysis and data
verification. Analysis reveal that PT. Astra International - Honda Sales Operation
combined risk mapping and financial impact mapping to identify and quantify the
risk as a baseline to create the best mitigation strategies. They also use the
combination of risk sharing, system integration, flexible transportation, and revenue
management as their best mitigation strategies to reduce the impact of
uncontrollable disruptions.
Keywords: Supply Chain Risk Management, Supply Chain, Motorcycle Automotive
Industry, SWOT Analysis, PT. Astra International – Honda Sales Operation
v
ACKNOWLEDGEMENT
The greatest gratitude to Allah SWT for the countless blessing in all the time of my
marvelous life especially during the completion of skripsi. Because of His blessing,
the researcher could accomplish his skripsi as a requirement to obtain a bachelor
degree in President University majoring in Management.
Sincere thanks must go to my mother Darwanis and my father Amri for their
unfailing emotional support, unconditional love, timely encouragement and endless
bless. It is their love that brings the researcher complete the skripsi writing.
Furthermore, there are no proper words to convey my deep proudest gratitude and
respect for my skripsi advisor, Mr. Orlando Santos. He has inspired me to become
an independent researcher and helped me realizing the power of critical reasoning.
His word can always inspire me and bring me to a higher level of thinking. What I
learned from him is not only just how to write a skripsi, but also how to view this
world from a new and different perspective. Without his kind and patient
instruction, it is not possible for me to finish this skripsi writing.
There is no way to express how much it meant to the researcher to have been a
student of President University. These brilliant lecturers inspired me over the years.
Thanks to the examiners of skripsi defense. The critical correction and suggestion
make this skripsi completes correctly. Thanks to all President University lecturers
who have did a great jobs in building the reasearcher characters as a future leader.
Thanks to Ms. Filda Rahmiati, MBA for proving read the researcher skripsi writing
and gave me knowledge to be well prepared in the skripsi defense.
Special thanks must go to Rani Nur Rosulli for her sincere helps and support toward
this skipsi. She has been a superb mentor with valuable wisdoms for the researcher.
Also, thank you to PT Astra International – Honda Sales Operation together with
all the interviewees, Jentya, Toto, Teddy and Hasto for the time and information to
complete this skripsi.
vi
Moreover, the researcher would like to thanks to Shafira Yustianita who have
listened a lot to every single problem during the skripsi writing. She has been the
researcher best friend and great companion who helped, supported, entertained and
encouraged the researcher through the agonizing period in the most positive ways.
Lastly, the researcher cannot forget with the researcher best friend who has spent
an amazing campus life together, Hanif Keanugraha, Alief Ramdhani, Rido Bagas
Julianto, Luqman Gandy, Fajar Putra Ryanda, Fadhlan Imam Vidani, Rifqi, Rizky,
Yoga, Ageng and all of the researcher’s friends that cannot be mentioned one by
one for their kindness and moral support during the skripsi writing. Thanks to
friendship and memories.
Cikarang, Indonesia, December 9th, 2016
Ghilmansyah Amri
vii
TABLE OF CONTENTS
SKRIPSI ADVISER RECOMMENDATION LETTER ............................................. i
DECLARATION OF ORIGINALITY........................................................................... ii
PANEL OF EXAMINERS APPROVAL SHEET ....................................................... iii
ABSTRACT ...................................................................................................................... iv
ACKNOWLEDGEMENT ............................................................................................... v
TABLE OF CONTENTS ............................................................................................... vii
LIST OF TABLES ............................................................................................................ x
LIST OF FIGURES ......................................................................................................... xi
CHAPTER I INTRODUCTION .................................................................................... 1
1.1 Background ..................................................................................................... 1
1.2 Need of Study ................................................................................................ 5
1.3 Statement of The Problems ........................................................................... 7
1.5 Significance of Study .................................................................................... 8
1.6 Scope and Limitation ..................................................................................... 9
1.7 Company Profile .......................................................................................... 10
1.7.1 History ............................................................................................................ 10
1.7.2 Vision, Mission, and Objective ................................................................... 12
1.7.3 Organizational Structure .............................................................................. 13
1.8 Organization of the Skripsi .......................................................................... 15
CHAPTER II LITERATURE REVIEW ..................................................................... 16
Theoretical Review ....................................................................................... 16
2.1.1 Supply Chain Management ......................................................................... 16
2.1.2 Risk ................................................................................................................. 18
viii
2.1.3 Risk Management ......................................................................................... 19
2.1.4 Supply Chain Risk Management ................................................................ 25
Previous Research ......................................................................................... 36
2.3 Research Gap ................................................................................................ 38
CHAPTER III METHODOLOGY .............................................................................. 40
3.1 Research Method .......................................................................................... 40
3.1.1 Case Study ..................................................................................................... 41
3.1.2 Triangulation ................................................................................................. 42
3.2 Research Framework .................................................................................... 43
3.3 Data Analysis ............................................................................................... 44
3.3.1 Data Reduction .............................................................................................. 44
3.3.2 Model Data (Data Display).......................................................................... 44
3.3.3 Conclusion Drawing and Verification ....................................................... 45
3.3.4 SWOT Analysis ............................................................................................ 45
3.4 Research Instrument ..................................................................................... 45
3.5 Data Collection Technique ........................................................................... 46
3.5.1 Primary Data .................................................................................................. 46
3.5.2 Secondary Data ............................................................................................. 47
CHAPTER IV ANALYSIS OF DATA....................................................................... 48
Data Analysis ................................................................................................ 48
4.1.1 Supply Chain Management Design ............................................................ 48
4.1.2 The Supply Chain Uncontrollable Risk Cases .......................................... 55
4.1.3 The Respond toward the Case ..................................................................... 59
4.1.4 Mitigation Strategy on Uncontrollable Risks ............................................ 65
4.1.5 Data Result Analysis (SWOT Analysis in General) ................................ 68
ix
4.1.6 Data Result Analysis (SWOT analysis on SCRM in Automotive
Industry) ........................................................................................................ 69
Interpretation of Result ................................................................................. 71
4.2.1 Supply Chain Risk Management Process .................................................. 71
CHAPTER V CONCLUSION AND RECOMMENDATION ................................ 82
Conclusion .................................................................................................... 82
Recommendation .......................................................................................... 83
5.2.1 PT Astra International – Honda Sales Operation ..................................... 83
5.2.2 Other Companies .......................................................................................... 83
5.2.3 Future Researcher ......................................................................................... 84
REFERENCES ............................................................................................................... 85
APPENDICES ................................................................................................................ 90
x
LIST OF TABLES
Table I-1: Total Car Production in Japan ................................................................ 3
Table II-1: Risk Matrix ......................................................................................... 22
Table II-2: Uncontrollable Supply Chain Disruption Cases ................................. 29
Table III-1: Participants Detail.............................................................................. 46
Table IV-1: TOWS Matrix on General HSO ........................................................ 69
Table IV-2: TOWS Matrix on HSO’s SCRM ....................................................... 71
xi
LIST OF FIGURES
Figure II-1: Supply Chain Process ........................................................................ 17
Figure II-2: Risk Management Process ................................................................. 20
Figure II-4: Treatment of Risk .............................................................................. 23
Figure II-5: Structure of Risk Management Handbook ........................................ 24
Figure II-6: Controllability of Risk and Its Expected Impact ............................... 26
Figure II-7: SCRM Model ..................................................................................... 31
Figure II-8: Risk Mapping .................................................................................... 32
Figure II-9: Risk Matrix ........................................................................................ 33
Figure II-10: Financial Impact Quantification ...................................................... 34
Figure III-1: Research Framework ........................................................................ 43
1
CHAPTER I
INTRODUCTION
1.1 Background
Globalization, nowadays, makes everything interconnected, no matter who the
subjects are and where the subjects come. This process of interaction and
integration has affected on how people, companies, and government of different
nations act and behave toward another. Globalization is not new, individuals and
corporation have invested in enterprises in other countries for centuries. However,
the technological advancement and the policy of the past few decades have spurred
increases in cross-border trade, investment, and migration. It creates everything
farther, faster and cheaper.
Since the coming of the globalization, supply chains have developed to wind up
progressively complex than ever before. Even though it has driven many
advantages, particularly on cost and assets efficiency and productivity
enhancement, at the same time it also affects the company becomes defenseless to
disruption or risk that can have a significant result for the organization. The
organization turns out to be more powerless to disturbance because there are more
parties' involved and fewer data accessible anytime in the production process
(Savitz, 2012)
In some cases, supply chain disruption happened a couple of years ago have shown
that a small ripple can cause major waves. At the point when the disruption is not
appropriately controlled, the risk is undoubtedly affect other parties. According to
Simchi-Levi, a professor of civil engineering at Massachusetts Institute of
Technology (MIT) on the report of Innovative Approaches to Supply Chain Risk
by John, G. (2014), he stated that a collapse in one part of the chain can have a
magnifying effect on every part of the chain.
2
The natural disaster in both of Japan and Thailand in 2011 uncovered organizations'
numbness about the systems of sub-level suppliers and their capacity to convey
whole supply chains to a pounding stop. Even though they had mitigated potential
dangers by having elective tier 1 suppliers, set up found that these organizations
depended on the same pool of tier 2 or tier 3 suppliers.
According to Wade (2011), the Tsunami that hit Japan on 2011 affected a huge
number of organizations around the world and made an expected loss of $200
Million in property, revenue, and supply chain disruptions for other companies. It
creates shortages and shutdowns for some global businesses, particularly on global
companies in the sectors of electronics and automotive since Japan have an
important part of the global supply chain networks. The damage affects the material
supply shortage, power outages, and factory or logistic route on the world industry.
On the electronics sector, the importance of Japan proven by the data from Tett. G
(2011) that stated Japan produces about 30 percent of the world’s flash memory and
about 15 percent of D-Ram memory used in Personal Computer (PC), laptop
batteries, and liquid crystal displays. Japanese electronics makers, including
Panasonic, Sony, and Toshiba, initially conveyed production to a stop after the
catastrophes, expressing that they were suspecting challenges getting raw materials
and access to a consistent power supply for accuracy manufacturing and that their
assembling gear may have experienced harm during the earthquake. (BBC News
Business, 2011)
On the other hand, Mitsubishi Electric took ten days to finish their supply chain
assessment, having, even more, clarity in their supply chain could have permitted
them to respond even quicker. Mitsubishi has done a good respond to the risk event.
Hence, to forecast and prevent such a catastrophic disaster, the organization need
risk management to cope with the vulnerabilities. It would require risk
identification, risk quantification, risk mitigation, and respond.
However, based on Japan Automobile Manufacturers Association (JAMA) (2011),
the Japan disaster only gave a slight effect on the electronics industry. The immense
significant impact encountered the automotive sector since Japan auto industry is
3
the second after China as far as production numbers and unrivaled in term of
quality. Most vehicle production plant suspended operations through the end of
March because of damage to their facilities and the failure to secure a sufficient
electric power supply required for their manufacturing. Japan’s seven big
automakers shut down their production due to growing concern about supply chain
interruptions, power shortages, and export difficulties.
Based on the Table below, there was a slight year-on-year decrease in car
production in Japan. There was 6.3 percent year-on-year decrease between January
2010 and 2011, and 5.5 percent year-on-year decrease between February 2010 and
2011. However, between March 2010 (945,220 units created) and March 2011
(404,039 units delivered), there was a 57.3 percent drop in the production.
Source: Japan Automobile Manufacturers Association (JAMA). “Active Matrix
Database System," 2011
Besides, this catastrophe did not only affected the Japan’s corporation, but the
damage was also experienced by the other country’s corporation. A drop in parts
fabricating in Japan added to parts deficiencies to non-Japanese automotive
company temporary idled production in their plants abroad as they mixed to follow
and figure out whether their supply chain had parts originating from Japan, and to
see if they were at risk for running out on parts and materials. Germany and French
automotive companies which are Opel and Renault were influenced by the
disruption in the certain component that being supplied from Japan. (Automotive
News, 2011) Also, America's General Motors was influenced because of a
Table I-1: Total Car Production in Japan
4
deficiency in parts that were created in Japan. The company cut production at two
U.S. plants due to a shortage of Japanese-made parts. (The New York Times, 2011)
Similar stories happen with Ford soon after the September eleventh, 2001 when
they distribute the raw material and parts into assembling plants. They needed to
idle a few of its assembly lines in the days taking after the terrorist attack, as trucks
stacked with parts bound to these production plants were delayed at the Canadian
and Mexican border. Thus, Ford lost 12,000 units of production. The attack did not
cause the disruptions, but rather by the US Government reaction to the attack by
shutting borders, closing down air travel, and evacuating building everywhere
throughout the nation.
In June 2008, Volvo Cars experienced the same case with another uncontrollable
supply chain risks. As they reported a 28% diminishment in deals contrast and the
same time frame in the prior year, with the greatest loss of around half in its SUVs.
According to Fredrik Arp (2008), cited in Yudha M.P., 2016. The Chief Executive
Officer of Volvo expressed that dollar depreciation decreases the income and the
likelihood for Research & Development.
The above examples are only several cases from the various disruptions impacting
supply chain in the most recent decade. As indicated by John, G. (2014), the
significant disruption during the past couple of years has exhibited how much
modern supply chains are characterized by complex and interdependent
ecosystems.
What begins as a small ripple at some places in the system can transform into a
major wave, making critical disruption for suppliers and the customers along the
way in the chain of supply. The world circumstances push the company to give
huge concern to the risk of the supply chain. Since the critical issue for the success
of any organization, in a supply chain environment, is to ensure the smooth
functioning of each and every entity in the chain by managing risks and disruptions
efficiently (Paul, Sarker & Essam, 2016). Natural disaster, economic, and
government regulation are the uncontrollable factors that could disrupt any
companies in the world, including the businesses in Indonesia.
5
1.2 Need of Study
The object of this study is PT. Astra International-Honda Sales Operation Tbk.
(Astra Motor) which is one of the corporate operation of PT. Astra International
Tbk. that have the function to distribute and retail Honda motorcycle in Indonesia.
Involved in the automotive industry, Astra Motor has given a big contribution to
the industry and Indonesia GDP itself since they are the leading motorcycle retailer,
particularly Honda motorcycle in Indonesia by selling 1/3 of Honda total production
during 2015.
PT. Astra International – Honda Sales Operation (HSO) has been distributed
millions Honda motorcycle to the distribution center or main dealer in 11 regions
and 21 provinces throughout Indonesia from Bengkulu to Papua that is
manufactured by PT. Astra Honda Motor (AHM) as the manufacturer. They also
have 151 dealers, having a role as the retailer which is to sell goods and service that
have given the added value to fulfill the personal, family and end user needs. The
last 2015 average monthly sales are 30,000 units in retail while each dealer got the
unit from the distribution center or main dealer from the particular region.
However, PT Astra International – HSO should consider the risks they have to
encounter when they do the business activities since Indonesia is included in one of
five countries that being a most frequent country hit by natural disaster in the world
based on The Center for Research on the Epidemiology of Disasters (Guha-Sapir,
Hoyois and Below, 2014)
This archipelago nation located on the Ring of Fire where a large number of
earthquakes and volcanic eruptions occur. Around 90% of the world’s earthquakes
and 81% of the world’s biggest earthquakes occur happened along the Ring of Fire
(USGS, 2016). In the recent time, Indonesia additionally confronted the extreme
drought and rain (El Nino and La Nina) which cause the floods and landslide
leading to infrastructure damage, huge business loss, damage of farming food price,
inflation, and financial pressure for Indonesian and deaths. The floods, the drought,
the landslide, the earthquake, tsunami and the forest fires are the natural disaster
that Indonesia usually faced. All these natural disasters and the implications can
6
significantly affect the supply chain process whether it is in on the chain of customer
demand or the distribution flow of the units.
Besides, the weakening Indonesia Rupiah to US dollar also plays a significant factor
in doing the business operation. The Indonesia currency depreciation lead by the
recent world economic vulnerabilities could immensely affect the increasing cost
which leads to the escalating price of the units while the purchasing power remains
stable. In the same time, based on the CEO of HSO, automotive motorcycle industry
also experienced the impact of global economic crisis during 2015 since the vehicle
market trend is decreasing significantly.
Also, the act of the terrorism now being a trend across the world, including
Indonesia. Indonesia shook after the bomb and gun attack in Jakarta and Solo this
early year. Most recently, the IS (Islamic State) formerly Islamic State of Iraq and
Syria (ISIS) together with Philippines-based militant terrorist Abu Sayyaf terrorist
have reached out Indonesia leading by Santoso or Abu Wardah, Indonesia, the
most-wanted terrorist. Even though he is dead already by the gun firefight, the IS
movement in the middle-east is still active doing their act of terrorism through over
the world. There is no certain guarantee for Indonesia on the next place for the act
of terrorism attack. This terrorist act could affect the Indonesia government policy
that could significantly affect the supply chain process because the government
have to respond to enhance the national security.
A supply chain is recognized as a framework composed of interdependent and
upgradeable elements (production facilities, distribution centers, and transport
assets), for which the disruption of an element can contrarily influence the
performance of the entire supply chain (Tummala & Schoenherr, 2011)
As the leading company in automotive industry which have role as the motorcycle
distributor and retailer in Indonesia, the researcher hopes the result of study at PT.
Astra International – Honda Sales Operation (HSO) could be replicated as the
foundation of managing the uncontrollable risks by other practitioners, whether it
is the companies on the same industry or it is the companies on different industry
including the Small – Medium Enterprises (SME’s) in Indonesia.
7
Consequently, the phenomenon above provides the motivation for the researcher to
make an analysis to examine various uncontrollable risk factors, the mitigation
strategy to minimize the disruption impact that should be used by the automotive
company for managing the uncontrollable risk in supply chains and how effective
it is since the uncontrollable risk is going to make a huge negative impact on the
company all in sudden if the risk management is not well-prepared by the
organization.
1.3 Statement of The Problems
It is in this context that discussions in this paper seek to answer these following
questions:
1. What kind of mitigation strategy should be used for managing
uncontrollable risk in supply chains?
2. How effective the mitigation strategy to manage the future supply chain
uncontrollable risk?
1.4 Research Objectives
This research was prepared as an analysis to discover and explain the following
issues:
1. To find out the mitigation strategy that should be used for managing
uncontrollable risk in supply chains
2. To find out the mitigation strategy effectiveness to manage the future
supply chain uncontrollable risks
8
1.5 Significance of Study
The result of this study brings about the advantage of automotive, particularly in
motorcycle industry considering that supply chain risk management is the most
critical business discipline since the chain is long and continue to develop. Natural
disaster, economic, and dynamic of government regulation, each of these
uncontrollable issues legitimize the need for supply chain risk management in every
company.
Hence, the practitioner, in this case, is PT. Astra International – Honda Sales
Operation, can apply the recommended new approach to managing their supply
chain risks derived from the result of this study which is expected to minimize and
mitigate risk in their supply chain business operation while allowing managers to
operate with high-performing standards. The researcher also hope other
practitioners from different industry or even a small-medium enterprise could also
apply the principles and the findings from this study to formulate strategic plans
that helped to minimize the impact of supply chain risk to ensure constant and
uninterrupted supply chain in the business.
This study also give a positive social impact caused by how efficient mitigation of
supply chain risk on minimize supply chain cost and improve customer satisfaction
through the continuous supply chain management. Disruption strategies minimize
the impact of supply chain risk on business performance, which results in
improvements in prices and quality standards from the bottom-up through increased
worker empowerment and involvement (Yao, 2013).
If the managers can improve supply chain risk strategy, the organization can
enhance the lower incomes consumer quality of life since they experience the lower
price (Sekip Altug & van Ryzin, 2014). As a result, their standard of living is going
to be improved as they could afford the products. The mitigation of this supply
chain risk is going to develop the stakeholder engagement, which is essential to
community development.
9
For the researcher, the study contribute to developing a new theory and finding on
supply chain risk management that reveal the critical areas in the educational
process that many researchers were not able to explore. The next researcher also
can use the information in this research as the reference to developing the new idea
and concept in supply chain risk management.
1.6 Scope and Limitation
This research is only investigates the supply chain risk and evaluates the supply
chain risk management within PT. Astra International-Honda Sales Operation. The
focus is on downstream in the supply chain of PT. Astra International-Honda Sales
Operation.
The risks that are evaluated are limited to only uncontrollable risk which results in
supply chain disruption with large potential consequences for PT. Astra
International-Honda Sales Operation Supply Chain process, namely natural
disaster, economic, and government regulation. The focus of the research is to
mitigate the risk to minimize the impact of the risk.
Various reports have been discussed SCRM, however, while exploring the
literature, the researcher is limited to selected frequently cited journals and focuses
on the internet website database. These journals have been characterized into
business review journals, operations management journals, and management
science or operations research type of journals.
There are many methodologies and strategies have been presented and actualized
in the enterprises to ensure the robustness of complex supply chain. To explore all
of them would be an extensive task and require a lot more resources. The selected
strategies are sufficient to give the essence of how supply chains are affected by
certain disruptive events. The selection of research approaches and mitigation
strategies is also based on the results obtained from Research Objective.
10
1.7 Company Profile
1.7.1 History
PT. Astra International – Honda Sales Operation (HSO) has grown in Indonesia for
46 years. It is one of 8 corporate operations of PT. Astra International including
Toyota Sales Operation, Daihatsu Sales Operation, Isuzu Sales Operation, UD
Trucks Sales Operation, BMW Sales Operation, Peugeot Sales Operation, and Astra
World.
It was originally named as Honda Division of Astra International on June 15th, 1970
which has the function to distribute the Honda motorcycle throughout Indonesia.
Currently, Honda Sales Operation distributes the motorcycle to 11 Main Dealers
and also retail them to the end user with 149 dealers, 1700 AHASS workshops and
3100 Parts Shops covering 21 provinces and 117 districts in Indonesia which the
working activity supported by the team in Head Office located in North Jakarta as
the team who make the concept.
Figure IV-1: Source: PT. Astra International - Honda Sales Operation, 2016
11
As a distributor and retailer of Honda motorcycle, Honda Sales Operation comes
up with the brand Astra Motor to attract the customer since it is easy to be perceived.
Astra Motor take the units from
Figure IV-2: Honda Sales Operation Function
Source: PT. Astra International - Honda Sales Operation, 2016
PT. Astra Honda Motor (AHM) which have a role as the manufacturer of Honda
motorcycle. Astra Honda Motor (AHM) have three plants spread across Jakarta and
West Java.
End User
Retailer
Wholesaler
Distributor
Manufacturer
Supplier
Ho
nd
a Sa
les
Op
erat
ion
(HSO
) A
stra
Ho
nd
a
Mo
tor
(AH
M)
12
Table IV-1: Company Profile
Source: PT. Astra International - Honda Sales Operation, 2016
Astra Motor has crafted business records as the highest market share in Main Dealer
motorcycle market and largest dealer network in Indonesia. Furthermore, in the mid
of this year, they also are known as the most innovative automotive company
concerning education and safety riding program in Indonesia.
Table IV-2: HSO Key Highlight of 2015
Source: PT. Astra International - Honda Sales Operation, 2016
1.7.2 Vision, Mission, and Objective
1.7.2.1 Vision
Astra Motor sees themselves in future as the Indonesia preferred Motorcycle Main
Dealer and Retailer who serves beyond customer expectation. As their visions are:
Company Name HSO AHM
Business Area Motorcycle
Distributor
Motorcycle Retailer
Motorcycle
Workshop
Motorcycle Spare
Parts
After Sales Service
Motorcycle Production
Component Production
Component Assembling
Shareholder PT. Astra
International
PT. Astra International,
Indonesia
Honda Company Limited,
Japan
Chief Executive Sigit Prabowo Kumala Yusuke Hori
Motorcycle Direct Retail Sales 371,540 unit
Indirect Sales 989,913 unit
Average Sales Per Month 30,960 unit
Direct Contribution 27.74%
13
“To be preferred main dealer and motorcycle retailer of choice by providing
solutions that exceeding people's expectation."
1.7.2.2 Mission
To accomplish their big visions, they have two strategic missions including:
1. To bring more values to stakeholders
2. To be socially responsible and being environmentally friendly
1.7.2.3 Objectives
In this year of 2016, Honda Sales Operation (HSO) has an objective which is:
1. To have a strong Honda market share 65% which ranked as number 1 in all
categories and all segments.
Moreover, they endeavor to be the pride of the nation in 2020 as their strategic
objectives are:
1. The contribution of Main Dealer sales is 40% of National Honda sales with
market share > 65%
2. The sales of direct outlet contribute 40% to Area of Main Dealer HSO with
16% to National Honda
1.7.3 Organizational Structure
Organizational structure consists of some people to achieve the same objective and
goals which eventually to accomplish the strategic vision of the company. Honda
Sales Operation organizational structure consists of the top-down organizational
structure from a Head Office to the 11 regions of Main Dealers until the 149 Dealers
in 117 districts in Indonesia. Furthermore, in every region they have one chief. Also,
they have one dealer's head in every 149 dealers.
14
This diagram below is the top-down organizational structure that only related to
daily Supply Chain Management activities in Honda Sales Operation.
Figure IV-3: Organizational Structure
Source: PT. Astra International - Honda Sales Operation, 2016
Ch
ief
Exec
uti
ve O
ffic
er
Chief Operation Officer
Retail Division Head
Financial Division Head
Marketing Division Head
Honda Customer Care Center Deartment
Head
Marketing, Logistic, Pricing & Support Department Head
Marketing and Pricing sub
department head
Support sub department head
Logistic (Supply Chain) sub
department head
Supply Demand & Warehouse SPV
Transportation SPV
SPV Supply demand &
Warehouse of main dealer SPV Transportation of
main dealer
SPV Supply demand &
Warehouse of Dealer
Dealer SPV
Transportation of Dealer
Head Office
Main Dealer
Dealer
Honda Sales
Operation
15
1.8 Organization of the Skripsi
The overall discussion of this research is about how the company analyzes and
mitigates the supply chain risk management from uncontrollable factors. On the
first chapter, the researcher discusses the background of the problem and the
importance of why the problem needed to be discussed. The problem is supported
by the theory of the supply chain risk management published literature and
secondary data including research papers and studies to enhance the understanding
of the topic.
This research is in the form of exploratory approach which is discussed in chapter
three. Then, the data that researcher have got from the company is presented in
chapter four. It is elaborated with the literature review to answer the problem that
is discussed which resulted in a conclusion and recommendation of this research
discussion.
16
CHAPTER II
LITERATURE REVIEW
Theoretical Review
2.1.1 Supply Chain Management
Supply chain management (SCM) occurred in late of 1980’s. Most of the companies
at that time get used to the term of “logistic” and “operation management” instead
of supply chain management (SCM) (Hugos, 2013). In the late 20th centuries,
supply chain management has a firm hand only on all aspects of physical
distribution and materials management which included inventory management,
transportation service procurement, materials handling, inbound transportation,
transportation operation management, and warehousing management.
The term of SCM started to use lately by companies because they found out SCM
has a broader understanding more than logistic and operation management. Even,
those two terms are included in the definition of supply chain management. This
term is getting more popular and become more prominent over the past decade since
its comprehensiveness understanding to be used by the companies. As a result,
practitioners and academics have frequently discussed and researched the Supply
Chain Management over the years.
The first definition of supply chain management provided by the Council of Supply
Chain Management Professionals (CSMP). According to Council of Supply Chain
Management Professionals cited in Udbye A. (2015), supply chain management is
a planning and management of all activities comprehensively involved in sourcing
and procurement, conversion, and logistic activities with coordination and
collaboration with the channel partners, which are suppliers, intermediaries, third-
party service providers, and customers. Essentially, supply chain management
integrates all the supply and demand management within and across companies.
17
The second definition of supply chain provided by Sodhi, M. S., & Tang, C. S.
(2012) is the management of material, information, and financial flows through the
supply chain. It includes the coordination and collaboration of processes and
activities across various functions such as marketing, sales, production, product
design, procurement, logistics, finance, and information technology within the
supply chain.
Furthermore, SCM conceptually covers the entire process from the procurement of
raw materials through all the steps to a finished product that reach the end
consumer. Most of the supply chains involve many separate companies, each lined
by their integrity to satisfy the specific need of their end consumer (Chartered
Institute of Purchasing and Supply Knowledge Team, 2013).
Based on the above perspectives, SCM can be concluded as the integrated approach
of planning and execution by moving goods from raw materials stage to the end
user to fulfill the customer requirement demand.
Source: John, G. (2014)
It follows with the coordination and collaboration of processes and activities across
functions within a network of organizations which include the activities, for
example, sourcing, procurement, and supply management inbound and outbound
Figure II-1: Supply Chain Process
18
transportation, warehousing, and inventory control. The supply chain umbrella also
includes another couple of activities such as forecasting, production planning and
scheduling, order processing, and customer service. Critically, it also integrates the
information systems to monitor all of those activities. All these activities, directly
or indirectly, have a function to fulfilling the customer demand.
2.1.2 Risk
Before defining supply chain risk management, it is imperative to define risk at
first. Risks have become an integral part of our society. People, organizations, and
companies have lived with any risk every day. Even though the risks are
unavoidable, the impact of the risk could be minimized. There are a lot of research
papers and discussions defining the idea of risk and uncertainty. The study of risk
started in the seventeenth century, and the probability theory which is the important
method to study risk management nowadays was developed. Many studies
addressed the definitions of risk.
According to Tuncel G. and Alpan G. (2010), risk can be defined as an uncertain
event or set of circumstance which, should it occur, will have an effect on the
achievement of one or more objectives. Furthermore, another defines risk as an
intrinsic property of any decision, and it is measured by a combination of several
factors (severity, occurrence, and exposure), although it is limited to two factors:
severity and frequency of occurrence of potentially damaging accidents that
incorporate some exposure factors (Mazouni, 2008)
Another definition of risk is a probability of disturbance with the negative
consequences of an event (Sharma & Bhat, 2011). The expression of likelihood and
impact of the event which is required some form of qualitative and quantitative
analysis for making decisions concerning adverse consequences to the achievement
of entities’ objective or goals (Berg, 2010).
Therefore, the definition of risk for this research is defined as events or actions that
could adversely impact the organization in which the potential of losses can be
19
estimated, and significant of the outcome should be evaluated for risk mitigation
further which nowadays called as risk management.
2.1.3 Risk Management
The key issue for the success of any organization is to achieve its business
objectives or goals. In order ensure the smooth of each and every function inside
the organization, the managers should be able to manage the uncertainty and
possible disruption that could happen in all the sudden. It is an important
responsibility for the managers since the impact of the disruption is not only block
the organization to achieve the goals and objectives but also create a domino effect
to the decreasing of customer satisfaction, losses a lot of money and employee
layoffs. The activity to manage the risk consist of the integration of identification
of the risk, risk assessment, developing strategies to manage it, and mitigation of
risk using managerial resources (Berg, 2010).
Furthermore, another definition of risk management is a systematic approach to
constructing the best strategy for a company to avoid uncertainty by identifying,
assessing, understanding, acting on and communicating risk issues. According to
Berg, 2010, there are seven steps to risk management, namely:
a. Establishing goals and context,
b. Identifying risks,
c. Analyzing the identified risks,
d. Assessing or evaluating the risks,
e. Treating or managing the risks,
f. Monitor and assess the risks and the risk environment regularly,
20
g. Continuously communicating, consulting with stakeholders and
reporting
Source: Berg, 2010
A. Establishing Context
The objective of this step of planning enables the manager to understand the
external environment and internal culture of the organization completely. The
analysis of constraints and opportunities of the operating environment could be
analyzed by using the tool of SWOT (Strength, Weaknesses, Opportunity, and
Threat) or PESTEL (Political, Economic, Societal, Technological, Environment,
and Legal) as the framework.
B. Risk Identification
After the context has been established, the information gained from the context of
the SWOT or PESTEL framework could be supported to the next stage which
Figure II-2: Risk Management Process
21
identifies the risks that are possible to influence the accomplishment of the
organization objectives. The identification the source of the risk is the most critical
stage in risk evaluation process. The better the understanding of the roots, the better
the results of risk assessment process. Furthermore, the risks management is going
to be the more efficient and significant. The company's managers may apply event
tree logic diagrams and Failure Mode and Effect Analysis (FMEA) as the tools to
identify the risks and evaluates the criticality of conceivable consequences.
C. Risk Analysis
According to European Federation for Welding, Joining, and Cutting (2008), the
risk analysis process commonly follows paths of analysis within an organization
that refer to:
1. The likelihood of the event which is the potentiality of the relative risk
source, the level of the effectiveness of pre-existing control, the extent of
specific possible vulnerabilities, and reaction instrument
2. The seriousness of the consequences which refer to the extension of the type
of the damage and to be involved objectives
Furthermore, the tools that could be used in this stage is the risk matrix. Typical
definitions of the likelihood and consequence are contained in the risk matrix as it
visualized on Table below.
22
Source: Berg, 2010
D. Risk Evaluation
Once the risks have been scrutinized, they can be compared upon the earlier
documented and approved tolerable risk criteria. The conclusion of whether the risk
is acceptable or not are counted acceptable if for examples:
1. The risk is sufficiently low that treatment is not considered viable, or
2. Treatment is not available, e.g. a project terminated by a change of
government, or
3. A sufficient opportunity exists that outweighs the perceived level of threat
4. An adequate opportunity exists that outweighs the perceived level of
threat. If the manager concludes the standard of risk to be acceptable, the
risk may be accepted with no further treatment beyond the usual controls.
Acceptable risks should be monitored and regularly reviewed to assure
they remain acceptable.
Table II-1: Risk Matrix
23
E. Risk Treatment
In this stage, the manager develop the cost-effective options for treating the risks.
The treatment options includes the following conditions:
1. The exclusions/ avoiding of risk: the non-execution of activity that
involves risk that cannot be transferred and is considered as unacceptable
2. The reduction of risk: the likelihood controlling actions that lower the
probability of risk and seriousness of the impact
3. The transfer of risk: The strategy where another party accepts the
responsibility or sharing the risk through contract, insurance, or
partnership/joint venture.
4. The acceptance of the risk: risk is accepted to be retained and managed.
Usually, the risk is accepted if there are great benefits when it is
successful and adverse consequences of the event or action are little
relevance proportionally. Moreover, the resource requirements feature
heavily in this strategy.
Source: Berg, 2010
Figure II-3: Treatment of Risk
24
F. Risk Monitoring
This phase is important as the tool to control and evaluate the effectiveness of the
action that has taken for the sustainability of the organization. Besides, since the
concept of risk is dynamic, the organization needs periodic and formal review. This
step requires the description of how the outcomes of the treatment is measured.
Milestones or benchmarks for success and warning signs of failure need to be
identified. It is vary depend on each organization to set the measurements.
Moreover, the company needs to ensure all the aspect of the risk management
process are reviewed in the certain time span and make a provision for alert to the
newly identified risk. Therefore, the managers will be takins the action using the
risk management steps from the beginning to manage the newly identified risk.
G. Communication
It is vital for the organization in the risk management process to share the
knowledge when they commit to a serious risk management. Risk management is
an integral element of organization´s management. However, for its effective
implementation it is imperative that in its underlying stages, the reporting on risk
management is visible through the framework. The requirements on the reporting
have to be fixed in a qualified and documented procedure, for example in a
management handbook. The substance of the communicative handbook is shown
in Figure below.
Source: Berg, 2010
Figure II-4: Structure of Risk
Management Handbook
25
Hence, this documentation is essential to be the communication tool for all the
stakeholder to shown that the process has been systematic, the methods and scope
identified, the process conducted correctly and that it is completely auditable.
2.1.4 Supply Chain Risk Management
According to Evrard-Samuel (2013), the increasing uncertainty in the business
environment has increased the vulnerability of the supply chain. Supply chain
management is the umbrella of the corporate operation if one event or action disrupt
a single chain along the chain of supply then the domino effect of disruption is
going to be occur until the last chain which is the end user. Hence, the manager
should focus to create a well-managed the supply chain risks to make the end user
does not experience the negative impact of the risks.
Carter, C. R. and Rogers, D. S., (2008) view Supply Chain Risk Management as the
ability of a firm to understand, manage its economy, environment, and social risks
in its supply chain which could be materialized by the adoption of contingency
planning and having resilience and agile supply chain. Similarly, Tang (2006)
expressed it as the management of supply chain risk through coordination or
collaboration among the supply chain partner to ensure profitability and continuity.
Another definition stated by Thun and Hoenig (2011, 243) that Supply Chain Risk
Management characterized by a cross-company orientation aiming at the
identification and reduction of risks not only at the company level but rather
focusing on the entire supply chain. Moreover, Goh, Lim, and Meng (2007, 164–
165) define Supply Chain Risk Management as the identification and management
of risks within the supply network and externally through a coordinated approach
amongst supply chain members to reduce supply chain vulnerability as a whole.
In every supply chain, it is essential to understand the causes and select the best fit
to minimize the risk (Ho, et al, 2015). The reason for these uncertainties is varied
including labor strike, terrorism, customers’ demand, uncertain cost of supplies,
earthquakes, tsunami, landslide, and economic crises with the devaluation of the
currency. For risks that are arising due to the lack of coordination within the supply
26
chain can usually be anticipated and firms can plan for it to a reasonable degree.
Nevertheless, the uncontrollable risks such as the September 11, 2001, terrorism
attack on the World Trade Center clearly cannot be predicted. Additionally, natural
disasters such as tsunamis, earthquakes volcanic eruptions, and hurricanes cannot
be predicted accurately. The figure shows several causes of supply chain
disruptions with its capacity to control and its expected impact.
Source: Charles, et al, (2015)
Thus, as stated by Charles, et al, (2015), two main elements that can be
characterized in supply chain risk management are:
1. Controllable Risk
There are several examples of the SCRM element, namely data security/IT
incidents, customer demand volatility, shortages of raw materials or
components, a bankruptcy of critical supplier, safety & quality incidents, and
fires/strikes/tech problems at supplier sites. It is imperative to know that the
Figure II-5: Controllability of Risk and Its Expected Impact
27
company still can control the consequences of the supply chain risks since the
company can plan for it to a reasonable degree as the anticipation action.
2. Uncontrollable Risk
Meanwhile, every company simply cannot be predicted these uncontrollable
risks. Several examples of them which are:
1) Natural disaster,
The consequence of natural disaster is the leading impacting factors
that give a significant negative disruption consequences on supply
chain process compared to other factors in supply chain risk. For
instance, the earthquake in Japan and the floods in Thailand that
occurred in 2011 provoked huge disadvantages to the economy and
affected the capacity of many industries and logistic system
worldwide. (Wade, 2011)
2) Government Regulation,
The government act to terrorism and the political instability of a
country are another uncontrollable factors contributing to supply
chain risk. The revolutions in Egypt, Libya, and Syria, are good
examples of the political risk. Moreover, to causing volatility in
crude oil prices and restrictions on suppliers within these borders,
this instability also led to the delays in supply shipments. Similarly,
the act of terrorism happened in Jakarta, the capital city of Indonesia
in the early year of 2016.
In addition, regulatory risks that could stem from a lack of
compliance changed or new regulations, and international trade laws
could also disrupt the supply chain process. The risk from
compliance can arise if the suppliers are not abiding by local laws
about the environment, human rights and labor laws, and as a result,
are forced to shut down (temporarily or permanently). Furthermore,
28
the international trade embargoes on certain countries can also drive
toward a supply chain disruption.
3) Economy
Since the advent of globalization, every organization is exposed to
financial risks arising from commodity price volatility and currency
fluctuation. These risks are either direct, hitting the cost of raw
material for manufacturers; or indirect, hitting its support activities
such as transportation. They influenced the overall profitability of
the business as well as its cash flows and its capacity to remain
competitive. However, they can also generate supply chain
disruptions, placing the business at an even prominent risk.
Managers view currency fluctuation as disruptive as the raw material
prices volatility to their supply chain activities. Whether supply
contracts are exposed in local currency or dollar, the supply chain
eventually be affected. As a result, a company's competitive position
can be modified by the currency risk.
Furthermore, this table shows the global supply chain disruption caused by the
uncontrollable risk:
29
Table II-2: Uncontrollable Supply Chain Disruption Cases
Source: Behnezhad, A., Connett, B.I. and Nair, M. (2013)
Nature Event Location Appro.Cost Type of Disruption
Nat
ura
l D
isas
ter
2004 Sumatra-
Andaman
Earthquake
Indonesia $14 billion
Strait of Malacca shrunk in depth
from
4000 feet to 100 feet causing
danger to
navigation by large container
ships
2010
Eyjafjallajokull
Volcanic
Eruption
Iceland Unknown
63,000 flights of 23 European
nations
canceled. Passengers stranded,
machine
parts could not reach factories.
“Hothouse” flowers which
account for
20% of Kenya’s export rotted due
to
flight cancellations
2011 Sendai
Earthquake
Sendai,
Japan $235 billion
Toyota and Honda's factory were
closed.
Shipping companies avoided
Japanese
ports for fear of contamination
due to
nuclear radiation
Gover
nm
ent
Reg
ula
tion
2001 World
Trade Center
Bombing
New York
$ 1 trillion ( for
the US alone
regarding damage)
Ford could not get its
components
delivered from Mexico and
Canada
leading to factories remaining
idle that was causing a 13%
reduction in output.
Toyota too faced the prospect of
closure.
Of factories due to delays in the
arrival of
sensors from Germany. US
borders closed
2011 Arab
Uprising
Tunisia,
Egypt,
Yemen,
Syria,
Libya
Unknown Rise in oil prices and fear of war
Eco
no
mic
Piracy The Gulf of
Aden
$1billion to $16
billion
Delay in transportation of oil and
essential goods. Shipping
companies
avoid the Gulf of Aden and use
Cape of
Good Hope adding 3500 miles
more per
trip.
2000 Y2K Bug World $300 - $600
billion
Disrupt products delivery,
products would not perform due
to the millennium bug
Foxconn Strikes
in China; Honda
Strikes in India
India, China Unknown
Strikes "Floating population" of
China increasing and they are
reluctant to work for fewer wages
in sweatshop condition
30
2.1.4.1 Supply Chain Risk Management Model
In supply chain risk management, understanding the contingency theory can help
increase the response level to achieve supply chain security/stability. The
contingency theory is essential in mitigating consequences of supply disruption,
preparing for, and minimizing the residual effect of the disruptions to gain
competitive advantages. Under such a premise, the theory is the basis for building
a collaborative communications network to manage efficiently and mitigate the
disruption to minimize the impact on business performance (Ho, et al, 2015).
The managers of the organization need to have effective risk management tools,
which require an assessment of both the focus of control and the range of alternative
control actions to respond to any disruption (Franklin II, C. L., 2011). They need a
systematic approach to managing the supply chain risks with a better visibility of
the supply base and understanding the relationships and dependencies, quantifying
the potential impact, designing appropriate risk mitigation plans and strategies, and
then putting those into action if and when a disruptive event occurs.
As Manuj and Mentzer (2008) believe that managing risk should at least comprise
the processes of identification, evaluation, and mitigation. Furthermore, John, G.
(2014) in his SCM World Report about innovative approaches to supply chain risk
31
explained the systematic risk management model that consist of 4 subsequent stages
which are identified, quantify, mitigate and respond.
Source: John, G., 2014
1. Identify
In order to make an effective supply chain risk management (SCRM)
program, the organization must begin by exploring the relationships and
interdependencies amongst themselves and the other firms with which they
collaborate and identifying the possible risks their supply chain may
encounter. Without good visibility, it is impossible to adequately assess the
Figure II-6: SCRM Model
32
potential consequences of disruptions or target mitigation endeavors to where
they are needed most.
Source: John, G., 2014
Getting a clearer picture of who sub-tier suppliers are the best way to identify
the risk because the further away company look, the more blurry things
become. The figure which is the data from 2014 CSCO survey cited in John,
G. (2014) illustrates this perfectly. Asked where they currently have sufficient
or excellent risk visibility, 9 out of 10 respondents pick internal plants and
operations. Moreover, three-quarters believe the same applies to direct (tier-
1) suppliers and customers. However, in the case of long relationships,
visibility levels drop by more than half. On the supply side, only 35% are
confident about their insights into tier-2 suppliers and just 17% feel the same
about suppliers at tier-3 or beyond.
2. Quantify
Quantifying supply chain risk considers as a complex process. It requires
more comprehensive data collection actions to achieve a high level of detail
for each possible origin of risk. The manager can plot a distinct sort of risks
on a matrix that has a probability of occurrence on one axis and business
impact on the other, as illustrated in Figure. By using this method, the
Figure II-7: Risk Mapping
33
managers could focus their concentration on higher probability or higher
impact risks marked with red color.
Source: John, G., 2014
If manager finds difficulties in gathering such data, Simchi-Levi on John, G.,
(2014) insists that it be possible to arrive at an estimate of financial impact
that is good enough rather than attempting to calculate the likelihood of a
disruption occurring. Hence, the risk managers instead concentrate on the
financial implications that each supplier site along the supply chain would
have if it were taken out of action temporarily (John, G., 2014). This approach
is calculated by estimating the hit to the company's sales revenue during the
time it would take a supplier to return to normal operations, whether two,
four, eight weeks or longer – in other words, the time to recovery (TTR), a
key metric in supply chain risk management. The figure shows an example of
this approach applied to a hi-tech manufacturer.
Figure II-8: Risk Matrix
34
Source: John, G. 2014
3. Mitigation
Mitigating supply chain risk is about building greater resilience into the
supply chain so that potential disruptions are minimized. According to John,
G. (2014), the effective strategies for mitigating the supply chain risk is
divided by the following set of 4 actions which are:
1) Active inventory tracking
As indicated by John, G. (2014), active inventory tracking and dual
sourcing are the most well-known risk mitigation strategies used by
supply chain managers, with 45% rating them as “highly effective”.
Active inventory tracking helps to distinguish the higher-risk
suppliers/products, while allowing for a leaner procurement process.
2) Reducing reliance on sole and single sourced parts
Reliance on single sourced parts is pointed out as a primary source of
risk in all the case studies. For instance, Ericsson and Nokia have the
same supplier which is Philips Electronic located in New Mexico. In
2000, a fire accident happened that caused Ericsson loss of USD 400 M
for its T28 model (Norrman and Jansson, 2004). The company used a
single-sourcing policy. Meanwhile, Nokia which also uses the same
Figure II-9: Financial Impact Quantification
35
supplier, manage to avoid further disruption impact by quickly
switching to the backup supplier. This action eventually resulted in an
improvement in 30% of market share (Sheffi, 2005).
3) Increasing use of standard component design
Standardizing the design of components so that they can be used across
product lines and sourced from multiple suppliers brings the double
benefit of cost reduction and risk mitigation. It also leaves a greater
margin for inventory buffers, since the value of the inventory decreases.
4) Segmenting and regionalizing supply chain strategies
Regionalizing the effect of a disruption helps to contain the impact of
disturbance on the region. While it avoids the risk of global shutdown
from one region’s extreme event, it also reduces overall costs of
transportation. It offers more flexibility to serve different markets better
by locating manufacturing close to the distribution center, reducing
customers’ delivery time. Strategies to regionalize supply chain can be
based on markets’ geographic distribution or level of risk associated
with the different components.
4. Respond
Supply chain disruptions could happen even with the most comprehensive
mitigation strategy to encounter it. Unsurprisingly, the effective response
depends on the level of preparedness of the company. Effective contingency
plans are quick to detect disruptions, quick to implement, adapted to each
product and supplier, and regularly audited and reviewed. Enterprises that
manage to respond to supply chain disruptions quickly often have a
centralized data-gathering unit. This action helps the company to be well
informed, and institute response plans quickly.
For instance, when the tsunami hit Japan in 2011, Mitsubishi Electric
Corporation’s underlying focus was in deciding the effect of the emergency
36
and keeping up clear communications all through their business. Their first
action is gathering the data in one place. It took them just ten days to
completely evaluate the accessibility of supply for all segments at thirteen of
their Japanese production lines, while offices kept up close day by day
communication with factories to give the precise update to customers.
When inspecting one of their factories, they found more than 200 suppliers
were situated in the influenced tsunami zone where it was unsafe to enter, and
they were experiencing power outage periods. In order to adjust for a diminish
production capability, the factories brought down their production capacity
fundamentally to where at the end of May, they were running at 40 percent
capacity, and forecasting to be back up to regular production by September
2011. (de Souza, et al, 2011)
The organization was exceptionally moderate while tolerating buy orders as
of now, and they just accept the orders from the customers who tolerate them
for extended delivery times where there was no penalty. Therefore,
Mitsubishi has done a good respond to the risk event.
Previous Research
Few previous researchers have conducted the related topic of this research, they are:
1. Behnezhad, A., Connett, B.I. and Nair, M. (2013) has conducted research
which is related to supply chain risk management process on
uncontrollable risk factors. The purpose of the research is to analyze how
uncontrollable factor on supply chain risks should be addressed with best
approaches. The result of the research are they found out the
uncontrollable risks divided into environmental, political, and economic.
They also conclude although these three types of risk are totally different
in terms of how they are manifested, they are not interrelated toward each
other. For instance, an environmental risk might easily have political
connotations, while economic risks almost certainly have an element of
37
political risk. As world trade expands, and countries become more
interdependent, these three types of supply chain risks have greater
impact on supply chain management. Furthermore, they found out that
there is no one single best approach that would be effective in all
situations. This emphasizes the fact that cooperation and collaboration
between firms and suppliers is the foundation on which effective supply
chain risk management should be built.
2. Tang, C. S. (2006) has conducted research which is related to supply
chain risk management process on uncontrollable risk factors. The
purpose of the research is to generate robust strategies which facilitate a
supply chain to become more resilient to manage the inherent
fluctuations efficiently despite the occurrence of major disruptions. The
result of the study is that is better if they could reduce the risk. However,
it is hard to reduce the likelihood of the risk. So, they conclude three best
way to make a resilient supply chain toward disruption, which are supply
alliance network, lead time reduction, recovery planning system.
3. Ouabouch L. & Paché G. (2014) has conducted research which is related
to supply chain risk management process on uncontrollable risk factors.
The purpose of the research is to measure the impacts of the risks toward
the logistical performance of 158 companies in Morocco. The disruption
that impact the upstream of supply chain has adversely affect the
logistical performance of the company. The researchers conclude that it
is capital to integrate the stakes of risk management in the strategic
thinking to reduce the potential vulnerability of the company. Also, the
company have to clarify the failures on short, mid and long term since
the conscience is sensitive into the company reputation.
4. Wolfs, D. A., et al, 2015 has also conducted research which is related to
supply chain risk management process on uncontrollable risk factors in
the automotive industry. The purpose of the research is to analyze the
risks in a product distribution process in the Brazilian automotive sector,
38
considering the operations performed by a logistics operator of the
automaker which triggers more potential hazards happening that may
have adverse impacts on the customer service level, and consequently,
loss of effectiveness of their logistics processes. The result of the study
is the identification and treatment of the inherent risks in the distribution
process collaborate decisively to achieving the greater speed and
reliability so that the better level of service, and lower costs could be
obtained through more reliable and safe distribution processes. The
researchers also added that through a process of governance and
integrated risk management, the performance has been better with lower
costs, optimization generation, increasing of delivery reliability, better
product quality and service, and lower logistics costs.
2.3 Research Gap
According to Behnezhad A., Connett B.I. and Nair M. (2013), there is no one single
best approach that would be effective to use in all the uncontrollable risks which
are natural disaster, economy and government regulation toward the supply chain
of the company. They emphasized on the collaboration between firms and supplier
as the effective supply chain management approach.
However, the researcher think that there is an intersection of approaches as the
foundation to mitigate the uncontrollable risk. The reason why the researcher think
that way is because the result by another researcher such as Tang (2006) that stated
the company could make a resilient supply chain risk management by doing the
supply alliance network, lead time reduction, recovery planning system. In other
way, the research that has done by other researchers such as Ouabouch L. & Paché
G. (2014) stated that the company have to identify the risk of disruption on short,
mid and long term as the best way to mitigate the risk.
Based on different result of study above, the researcher of this study is motivated
to examine the mitigation strategies and how effective the mitigation strategies to
minimize the risk on uncontrollable risks towards the automotive industry as the
39
case study. The result is the best mitigation strategy that could be applied by all
automotive industry or replicated by the other industry to minimize all the
disruptions that is caused by the uncontrollable risks which are natural disaster,
economic, and government regulation.
40
CHAPTER III
METHODOLOGY
3.1 Research Method
The research method that the researcher selected for this study in achieving the goal
of the research question was a qualitative approach. Qualitative research has been
essential in research for a long time. The qualitative research involved data
collection, analysis, and interpretation.
The type of information needed requires the participants’ experiences surrounding
the phenomenon and the nature of the sampling (Yin, R., 2012) used a qualitative
method to explore the different risk issues associating to the supply chain process
(Frels & Onwuegbuzie, 2013).
The qualitative method is beneficial when the researcher does not identify key
variables (Yin, R., 2012). Since the researcher is not curious in investigating the
correlation or examining and comparing two or more variables, the quantitative
research is not the proper method for this study. Furthermore, in the quantitative
research process, the researcher tests a theory by refusing or accepting hypotheses
(Neuman, 2011). Meanwhile, in this study, the researcher is not testing the
hypothesis.
Moreover, the mixed method was also not relevant for this study. The reason is
that the particular method is suitable when a researcher wants to explore and
examine both the qualitative and quantitative aspect if a single quantitative or an
original qualitative research solely cannot answer the research question (Cameron
& Molina Azorin, 2011). Consequently, a mixed-methods approach was not
suitable for this research because the research question may be answered using a
single research method. Furthermore, the lack of quantitative data impedes a mixed-
methods methodology from consideration for this study (Yin, 2012).
41
In investigating the research question, a qualitative research approach is compatible
because the researcher used the method to understand the strategies for mitigating
supply chain risk on business performance. The qualitative research method was
beneficial for the analysis of participants' views because it involves uncovering the
emotional and symbolic dimensions of the members (Rowley, J., 2012).
3.1.1 Case Study
The primary goal of this research is to discover and explore the mitigation strategy
that should be used by the automotive company for managing the uncontrollable
risk in supply chains and how effective it is by using a case study.
By using the case study, the researcher explored the phenomenon under study to
understand this complex issue (Yin, 2012). The use of case study research was
relevant for managers to determine the risk issues in the supply chain, and also to
illustrate discrepancies and system failures and to draw attention to strategies used
by managers in organizations (Yin, 2012)
A distinguishing characteristic of a case study methodology is the use of more than
one source of evidence. Yin (2012) identified six sources of evidence: (a)
documentation, (b) archival records, (c) interviews, (d) direct observations, (e)
participant observations, and (f) physical artifacts. A review of the professional and
academic literature and the nature of the study led to the decision to use a qualitative
method. The participants' open-ended responses on risk mitigation strategies were
necessary to understand the impact on business performance. The researcher
collected data through the views of the participants via interviews and archival
records to ascertain the facts (Yin, 2012). The selection of a case study research
design, over all other qualitative research designs, was necessary to explore the
strategies managers use to mitigate the impact of supply chain risk on business
performance.
42
3.1.2 Triangulation
There are numerous techniques used to progress research accuracy and ensure the
validity of the research result and qualitative research use triangulation in which
identified as a strategy for increasing the validity of a study (Golafshani, N. 2003).
Triangulation is a process of verification that increases validity by incorporating
several viewpoints and methods. (Yeasmin, S. and Rahman, K.F., 2012)
For completeness purposes, researchers use triangulation to increase the in-depth
and understanding of the phenomenon under investigation by combining multiple
methods and theories. Triangulation used in researching the few explored or
unexplored research problems. One of the advantages of qualitative research
paradigm is generating the rich amount of data that further can help researchers in
developing hypotheses for quantitative investigations
Therefore, the researcher uses triangulation as a technique to ensure the validity of
the results and using interview, internal document review, and field work as the
triangulation data.
43
3.2 Research Framework
Source: Author’s Development
Strengths
Data Collection (Primary Data, Secondary Data, and Field
Work)
Honda Sales Operation
Supply Chain Risk Management
Weaknesses Opportunity Threat
Industry Rivalry
Analyzing Theories
Data Analysis Interpretation
Research Conclusion and Recommendation
Figure III-1: Research Framework
44
3.3 Data Analysis
The researcher uses the Miles and Huberman Model in this research to gather
the data analysis. As Miles, M. B., Huberman, A. M. and Saldana, J. (2014)
indicated, there are three types of activities in qualitative data analysis, namely
data reduction, data display/ data model, and conclusion verification.
3.3.1 Data Reduction
The first component of analysis in qualitative research is the reduction of data
through coding and categorizing (Sekaran & Bougie, 2013). Data reduction also
refers to the process of selecting, focusing, simplifying, abstracting and
transforming the data that appear in written up fields or transcription (Miles, M.
B., Huberman, A. M. and Saldana, J., 2014). Coding is the analytic process of
reducing the data and integrates it to form a theory. The goal of coding in
qualitative methods is to “fracture” the data and rearrange it into categories to
facilitate analysis which supports to draw a conclusion later on. Moreover, the
researcher uses this process to discard the irrelevant information, but keep the
access for the future research.
3.3.2 Model Data (Data Display)
The second component of data analysis in qualitative research is data display. It
provides the ways of arranging and thinking about textually embedded data. It also
refers to charts, matrices, diagrams, graphs and frequently mentioned phrases.
This is critical to help the researcher organize the data, discover the patterns and
relationship in the data in order to draw a perfect conclusion. It depends on the question and preferences to choose which strategies of data
display is the best to use by the researcher. The researcher is using the chart and
data matrices to mapping out the critical process and examining the
interdependencies. To create information in a proper arrangement is the plan of
45
the whole strategies in order the researcher could easily looking at what is
happening and explain the best conclusion.
3.3.3 Conclusion Drawing and Verification
The conclusion drawing is the last element in the analysis process of the
qualitative research. This element is the moment of truth of the research because
the researcher answers all the research question and link it into the supported
theories. Moreover, the conclusion is crucial since it impresses the audience at the
part of the study. Therefore, a distinctive conclusion make the readers feel
satisfied after they read the research.
3.3.4 SWOT Analysis
The researcher uses SWOT analysis to determine what the internal factors to
accomplishing the business goals and identify the obstacle must be overcome and
minimized to achieve the desired result. Also, it is used to identify and categorize
significant what the external factors that could be opportunity and threat that faced
by the organization or territory. The researcher uses the TOWS Matrix tool to
emphasize the external environment that linked into the internal environment.
3.4 Research Instrument
The researcher uses the research instrument namely article, journal, literature
review, and interview as the data collection tool. Theories in the literature review
were gathered by examining books, e-books internet articles, previous research,
journals, reports and literature from internet websites. Moreover, the interview is
done by the researcher have a purpose to gain a deeper understanding of the
research problem. In this research, the researcher interviewed several people who
have sufficient experiences and expert on their position related to the research
problem. Furthermore, the secondary data is gathered to have the full insight of
46
supply chain risk management on uncontrollable factors at PT. Astra International
– Honda Sales Operation (HSO) related to the research problem.
3.5 Data Collection Technique
In this research, the researcher uses two main data collection which are the
primary data and the secondary data. The main data is the data collection from the
interview. Meanwhile, the secondary data consist of the company website, journal,
and article to fill the gap that exists in the interview.
3.5.1 Primary Data
The researcher uses the structured face-to-face interview data collection method.
According to Saunders (2007), the structured interview is a data collection
technique that involves the researcher as an interviewer physically meets the
respondent, reads them the same set of questions in a predetermined order, and
record each of the response. Therefore, the researcher conducts the interview by
meet the respondents at the Head Office of PT. Astra International – Honda Sales
Operation (HSO).
No. Name Position Time
1. Jentya Logistic Sub-Department
Manager at Head Office
HSO
November,
10th 2016
2. Toto Transportation Supervisor
at Head Office HSO
November,
21st 2016
3. Teddy Supply Demand and
Warehouse Supervisor at
Head Office HSO
November,
21st 2016
4. Rani Support Sub-Department
Manager at Head Office
HSO
November,
10th 2016
5. Hasto Retail Marketing
Department Manager at
Head Office HSO
November,
10th 2016
Table III-1: Participants Detail
Source: Author’s Development
47
3.5.2 Secondary Data
Data resources for the secondary data is taken from the company’s website, journal,
and article of PT. Astra International – Honda Sales Operation (HSO) that related
with the data processing. The period of this research is four months, from
September 2016 – December 2016. Hence, the secondary data is used to help the
researcher interpret the primary data.
48
CHAPTER IV
ANALYSIS OF DATA
Data Analysis
4.1.1 Supply Chain Management Design
The researcher collected the data of risk management and supply chain from
Marketing, Pricing, Logistic & Support Department, especially in Logistic
Department of PT Astra International – Honda Sales Operation.
Based on Participant 1, it is better if the company’s supply chain design is well
understood by the researcher as well as the readers to be able to know the possible
risk that will be impacted on the particular that is chain caused by the uncontrollable
risks.
Honda Sales Operation has three pillars in doing their supply chain management
activities which are:
1. Supply and Demand,
2. Transportation, and
3. Warehouse
The supplier is not included into the supply chain pillars because the business scope
of HSO is to distribute and retail the motorcycle of Honda in Indonesia which is
downstream of the supply chain. All of those pillars are playing an important part
of each chain of supply in the business process. Hence, the interconnection of each
pillar could be described on the complete HSO supply chain cycle diagram below:
49
Figure IV-4: HSO Supply Chain Cycle
Source: PT. Astra International - Honda Sales Operation, 2016
4.1.1.1 Supply and Demand (Ordering)
The first step of all the supply chain process in Honda Sales Operation is ordering
the units by analyzing the market. The main dealer and dealer working
collaboratively analyzing the particular region or district on how big potential
market, the expected retail sales and expected market share.
The dealer has to define the ordered units in the next three months which analyzed
by two factors, which are Retail Sales Target and Stock Days. Retail sales target is
the expected sales based on the customer demand which segregated into different
segmentation. The market segmentation could determine which type of motorcycle
that will be ordered to AHM.
Meanwhile, the definition of stock days is the average number of day's motorcycle
remain in inventory before being sold. For instance, the total motorcycle's stock in
Semarang dealer is 100 units. They could sell 20 units each day which mean the
stock days is five days. In other words, if within the next day there are no
motorcycle units delivered to the dealer, then they still could sell the units for
Transportation
PO PO
Astra Honda
Motor (AHM)
Main
Dealer
(HSO)
Dealer
(HSO)
End User
PC
PC
Warehouse Warehouse
Transportation Transportation
Demand
Supply
50
maximum next five days. Therefore, before five days they have to get the units from
the main dealer so they could sell the units to the end user.
After the dealer has defined the ordered units, the main dealer’s supply demand
supervisor analyzes the proposal before the main dealer’s supervisor transfer it to
the supply-demand supervisor in head office. The amount and type of units ordered
could be increasing or decreasing which is not precisely accurate with the units
order from the dealer. For example, if a dealer ordered 5,000 units, then final units
ordered could be 4,900 or 5,200 depend on the supervisor analysis at Main Dealer
and Head Office.
The next step after it has received by the supervisor at head office is the submission
of purchasing order (PO) to Astra Honda Motor. Then, the last step is the
manufacturer (AHM) will issue a purchasing contract (PC) to HSO. The purchasing
contract is the fixed amount of motorcycle that is being manufactured which later
will be distributed to the main dealer, dealer and eventually the end user.
This diagram described only the supply-demand process of the complete HSO
supply chain process:
Figure IV-5: Ordering Process
Source: PT. Astra International - Honda Sales Operation, 2016
4.1.1.2 Transportation
Once the purchasing contract has been issued by AHM, the motorcycle is going to
be manufactured by them. The next pillars that significantly contribute to supply
chain management cycle are transportation. To move the units from the
AHM
(Production, Purchasing Contract)
Main Dealer
(Purchasing Order)
Dealer
(Purchasing Order)
Consumer
(Demand)
51
manufacturer to the main dealer warehouse and dealer warehouse before arrived at
the end user home, it requires an efficient transportation process.
Figure IV-6: Transportation Process
Source: PT. Astra International - Honda Sales Operation, 2016
In Honda Sales Operation, three significant aspects of transportation that have to be
concerned which are lead time, unfilled, and defect. Lead time is the amount of time
that needed between when the process of moving goods started from the
manufacturer to the dealer's warehouse. The total lead time is different from each
dealer or main dealers because it depends on the distance and the transportation
mode whether it is land, land, and sea, or sea. However, it has to be as efficient as
possible.
Unfilled is the motorcycle unit that is not delivered yet. The units are still on the
plant because of several conditions, such as the fault of the transportation vendor
since the allocation of the truck is not appropriately accurate or the fault of the plant
because of the lateness of the production.
Meanwhile, the defect is the unit that is harm during the transportation process. It
could be affected by the condition on the road, accident, and other events that occur
during the transportation process.
There is three transportation method used by HSO in delivering the motorcycle to
the end user, namely:
End userDealer
Warehouse
Main Dealer
Warehouse
Astra Honda Motor (AHM)
52
1. Land
Figure IV-7: Land Transportation Chain
Source: PT. Astra International - Honda Sales Operation, 2016
This transportation mode implemented on transporting the units from AHM Jakarta
and West Java Plants to the HSO main dealers and dealers located in Semarang and
Yogyakarta. HSO use transportation vendor to deliver the unit dealers warehouse.
Furthermore, the dealers have their own pick up’s to deliver the motorcycle to the
end user home.
2. Land – Sea
Figure IV-8: Land-Sea Transportation Chain
Source: PT. Astra International - Honda Sales Operation, 2016
Plant C
Plant A
Plant B Main Dealer
Warehouse
Dealer
Warehouse End User
Home
Plant C
Plant A
Plant B Ferry
Boat Main Dealer
Warehouse Dealer
Warehouse
End User
Home
53
Meanwhile, this transportation mode implemented on transporting the units from
AHM Jakarta and West Java Plants to the HSO main dealers and dealers located in
Palembang, Bengkulu, Denpasar, and Mataram. It is the same with the land
transportation, but it has to cross over Java Island and Bali Island. Therefore, before
it goes on the ferry boat, the units will be wrapped. So, there will be no defect on
the units.
3. Sea
Figure IV-9: Sea Transportation Chain
Source: PT. Astra International - Honda Sales Operation, 2016
The last transportation mode that is implemented by HSO is the sea. The
transportation vendors take the units from the Jakarta and West Java's Plant before
put them into the freight pool. Next, the units inside the container will be wrapped
and loaded into the ship in Tanjung Priok Port. After the container is arrived in the
destination port, which are Pontianak, Balikpapan, Makassar, and Papua port, the
transportation vendor will deliver it into the main dealer warehouse. Then, the main
dealer will transport it into the dealers' warehouse before it arrived at the home of
end users.
The amount of the transported motorcycle each day is the result of the total
motorcycle ordered divided to 25 days and seven freight forwarder. For example,
Semarang main dealer has ordered 5,000 units. There will be 2,000 units that are
delivered every day consist of 7 freight forwarders. Therefore, each freight
forwarder or transportation vendor will deliver around 280 units per day to fulfill
Plant C
Plant A
Plant B Freight
Pool Jakarta
Port Destination
Port MD
Warehouse Dealer
Warehouse
54
the ordered by Semarang main dealer. They have the door-to-door system which
are the units that are taken from the plant will be delivered to the HSO warehouse.
Hence, the HSO Supply Chain or Logistic team have to ensure the lead time is as
short as possible, there is no defect during the journey, and all the unfilled units are
delivered to the warehouse.
4.1.1.3 Warehouse
Warehouse also plays significant role in the supply chain at Honda Sales Operation
since all the motorcycle unit has to be stored before it goes to the customer's hand.
When the motorcycle has arrived at the warehouse, the employee will scan the units
to fill in the warehouse management system (WMS). As a result, the shortest lead
time occurs when they need to deliver the units into dealer warehouse since the
employee does not have to search the particular specific type unit in which floor.
Also, it could help on the data of the engine, type, color of the units that is being
sold.
Moreover, HSO used the First In First Out (FIFO) approach in term of the inventory
method. FIFO is the inventory method that refers to the timing at which the
inventory that is purchased first is the sold before the inventory that is bought in the
later day. They use the approach because they do not want obsolete inventory or
not suitable for sale and to reduce the impact of inflation as the oldest inventory
items are used.
After all the units are delivered to the customer home, the cycle will continue
iterating. The dealer will issue the purchasing order based on the demand forecast
to request the supply, the manufacturer as the supplier issue the purchasing contract,
the transportation provider will deliver the units until the last chain of supply, and
the warehouse will store the units before they arrived at the customer home. The
supply chain cycle will keep iterating as the team of each network work
collaboratively.
55
The body of literature is in alignment with the HSO supply chain design. The
Council of Supply Chain Management Professional (CSMP) claimed that the
supply chain refers to planning and management of all activities comprehensively
involved in sourcing and procurement, conversion, and logistic activities with
coordination and collaboration with the channel partners, which are suppliers,
intermediaries, third-party service provider, and customer.
4.1.2 The Supply Chain Uncontrollable Risk Cases
Some examples of uncontrollable supply chain disruptions are presented in this
section, and the disruptions are occurring over the last three years. The purpose of
the cases aims to show the risk events that should be concerned in the supply chain
activities. The cases affected only on the downstream of production Honda
Motorcycle but in the whole supply chain operation for the respective company
since the organization has a role as the distributor and retailer.
4.1.2.1 Natural Disaster
In the literature review, Charles, et al, (2015) identified that the impact of natural
hazards is the most impacting and the most uncontrollable factors among the
various factors contributing to supply chain risk.
In the case of natural disaster, all the participants revealed that there is one event
occurred in last two years which disrupt most of the company's supply chain
activities. It is the partial bridge collapse of Comal Bridge that is located on the vital
Java's Northern Coast Road connecting central Java and eastern Java. The accident
happens just two weeks before the homecoming travel before the religious holiday
Eid al-Fitr in Indonesia. The homecoming is causing a mass exodus from the city,
clogging the Java’s Northern Coast Road by vehicles.
Participant 1 and 2 stated that the demand for motorcycle one month before the
religious holiday, the Eid-el-Fitr, is higher than the ordinary months of each year.
However, the transportation ministry of Indonesia stated that all the logistic vehicle
56
must not use the road during five days before the religious holiday and three days
after the religious holiday.
Furthermore, it usually takes five days to distribute the units to Semarang. However,
with the collapse, it may take more than five days to distribute only to Semarang.
As a result, the company has to do the extra work to distribute the mass motorcycle
from the plants in Jakarta and West Java to all main dealers and dealers including
3 main dealers and 48 dealers located in Central Java (Semarang), Bali (Denpasar)
and West Nusa Tenggara (Mataram).
Figure IV-10: Disrupted HSO Main Dealers & Dealers Region
Source: PT. Astra International - Honda Sales Operation, 2016
To distribute the units in that area, the transportation provider has to use the Java
Northern Coast Road which is the connecting road from Jakarta to the Eastern Java.
In that particular situation, the connecting bridge in Pemalang is collapsing. The
Comal Bridge
57
collapse is caused by the erosion of the land of the flash flood of the rain that was
hit the bridge. Furthermore, a much heavy loaded truck that crossed the bridge
contribute to the bridge west part decreasing 3 cm per hour.
As a result, all the vehicle that went to the central and eastern Java including the
transportation providers that bring the motorcycle to the main dealer warehouses
are deadly stuck. The logistic providers that went back to take another motorcycle
on Jakarta and West Java are also deadly stuck.
Based on the interview of Participant 2, the lead time increases to one until two
weeks. The Main dealers do not have the motorcycle to distribute to the dealers and
the number unfilled unit which is the undistributed motorcycle stacked in AHM are
incredibly high. The total of defect units is also growing since the driver have to
use the unusual road. The event also provoke the increasing of the cost of
transportation provider since they have to detour on the southern road coast.
In all the sudden, the supply chain cycle is idle. The disruption not only hits the
main dealer transportation network but also affect the rest of the supply chain.
Therefore, the total loss is quite high which reach 15% for the dealers located in
Semarang, Denpasar, and Mataram. John, G. (2014) supported the researcher
conclusion that if there is a disruption in one part of the network, the whole part of
the network will get the magnified effect.
Another case occurred on the early of 2016, the Negara Bridge in Bali is having the
same accident just like Comal Bridge in Semarang. The bridge is collapsed because
of the flood. The significant impact felt by the company, since the bridge is the main
road to deliver the units to 1 main dealer that consist of 15 dealers in Bali and 1
main dealer that consist of 8 dealers in West Nusa Tenggara. Therefore, the lead
time, the transportation cost, the unfilled and the defect units are all significantly
increasing.
58
4.1.2.2 Economic
The increasing of fuel price trigger the inflation in Indonesia. The price of the goods
and services become more expensive as the cost of production is also the growing.
The cost of production consist of several elements, including the transportation or
logistic cost, direct material cost and direct labor cost.
Based on the interview, the cost pushes inflation happens in Indonesia several times
in the last decade. However, in the previous three years, the company experienced
the cost push inflation in November 2014. The new elected Indonesia President,
Joko Widodo decided to increase the fuel price considering the increasing of global
fuel price and the high amount of state budget to subsidize the fuel.
The fuel price is vital in the distribution of the goods. The participant 2 revealed
that fuel contributes to 60 – 70% of the transportation provider cost in each unit. If
the transportation price is still the same while the fuel price is increasing and the
risk of transporting the mass motorcycle unit are high, then the transportation
providers refuse to distribute the units. It diminishes the profit margin of the
transportation provider. Another significant impact of the increasing fuel price is
the growing price for rent or buy of a land. He also added that the inflation
eventually impact the motorcycle price for the end users.
4.1.1.3 Government Regulation
Based on Participant 2, there was a changing regulation on the specification of the
truck that could travel issue by the transportation ministry. The size of the truck,
length, width and capacity have to reach the standard of the regulation. As the result,
many unstandardized trucks reluctant dealing with the police because they have to
pay the fee to the police to pass the inspection.
Another case is on March 2016, the Pontianak Government set a new regulation for
the freight forwarder. The government issue a regulation that allow the
transportation to open the container start from 8 pm in which before they can open
the container for motorcycle loading started at 6 pm. The regulation is issued to
59
achieve the efficiency of the port since the type of the harbor is a bulk port which
is different with the common port located in most of the Indonesia port such as
Jakarta, Surabaya, and Makassar.
In this new regulation, the freight forwarder still can distribute the motorcycle units
to the Main Dealer warehouse. The unit will be arriving at the warehouse at the
latest at 12 pm. Even though there is an additional fee for the workforce, the main
dealer is capable of distributing to the dealer in the next day.
Later in October 2016, the Pontianak government update the new regulation which
stated the freight forwarder are allowed to open the container for motorcycle
loading starting from 11 pm. The result was paramount as the lead time of
distribution is decreasing. The freight forwarder will deliver the unit to the
warehouse on the next day as they will not reduce the profit margin because of the
addition payment for the driver. As a consequence, the dealer will receive the late
and longer time of the unit delivery that eventually will impact to the customer
satisfaction. Another important impact is that the company have to pay another
addition fee because the container has to be storage in the port.
4.1.3 The Respond toward the Case
4.1.3.1 Comal Bridge Collapse
Based on the conversation with all the participants, the first step for them to respond
the disruption is by detecting and knowing if there are any disruptions. It is
important to know the disruption as soon as the disruption occur. In the case of
Comal Bridge, one of transportation providers gave them the information of the
collapse. Furthermore, they ensure it by watched the news on the TV even though
it was journalized several hours later.
Participant 2 revealed that his job is covering the people relationship management
which maintains the regular open dialogue with the transportation provider. Even
though the communication lead time could be optimized, the strategy of regular
open dialogue with the provider is effective since the risk exposure is getting
60
identified by HSO as quick as the Person In Charge (PIC) of the transportation
provider communicate it to participant 2.
Participant 1, 2 and 3 also revealed that they always made and updated the risk
mapping that consists of the flow of the goods from the manufacturer to the dealer
warehouse. It consist of the list of each transportation provider, the particular
amount of unit that the transportation provider has to deliver every day, the
particular plant that each transportation provider have to take and also the route that
the transportation will use to deliver unit to the warehouse. However, the data are
updated in the Microsoft Excel. Then, the participant 2 will contact manually to tell
the transportation provider in which they have to deliver how many units in how
many days and where to pick them.
Participant 3 stated that the pic at the warehouse also could identify the disruptions
if there is a lateness of expected time of delivery. However, the pic warehouse will
communicate it into the pic warehouse at head office. Then, the pic warehouse at
head office will clarify to the pic transportation at head office before the pic
transportation at head office ask the transportation provider. Next, the
transportation provider has to ask the driver before he clarifies to the pic
transportation at the head office. Therefore, the communication flow is still
complex.
Furthermore, according to the participants, the logistic team analyzes the impact on
cost and revenue of each chain until the end user in the case of the Comal Bridge's
collapse. Participant 1 mentioned that soon after the event have been identified by
the team, the logistic team made a meeting to scrutinize any options and make a
prioritize decision to speeding the recovery based on the worthiness of the option
on company cost and revenue.
After they get the cost and revenue analysis on each option along the chains, they
set three best combined solutions to recover and minimize the impact of the
disruption which are:
61
1. Transportation Cost Adjustment
The trucks have to detour to the southern road before arrive on Semarang.
The detour affect to the longer distance of travel which influences the
consumption of fuel. Therefore, HSO have to increase the cost of
transporting. Moreover, the company also increase the incentive for the
driver if they want to deliver the mass product since the condition at the
event is two weeks before the religious holiday. They needed to set the
incentive because the transportation provider is not only transporting
Honda Motorcycle but also transporting the competitor motorcycle units.
As Participant 2 stated that it would be a win-win solution since HSO will
get all of the motorcycle units delivered and the transportation provider
will get more incentive based on how much the motorcycle is delivered.
The action is also implemented because of HSO have to maintain the
trustworthiness to the transportation provider.
2. Sea Transportation
Since the transportation provider cannot handle the mass distribution in
two weeks, HSO also distributes the units through another mode of
transportation which is the sea. Therefore, the transportation provider is
handling the units from the manufacturing plants in Jakarta and West Java
(Cibitung) to Tanjung Priok Jakarta Port. When the units are arrived in
Tanjung Emas Semarang Port, the transportation provider will distribute it
into the main dealer warehouse in Semarang, Bali, and Mataram.
The company also considered to used the train to transport, but the cost is
high because no provider could manage the transportation from the plants,
to train stations, and to the main dealer. HSO have to use one provider to
transport the unit to the train, then pay the train logistic fee. The company
also have to pay the transportation provider from the Semarang station to
the warehouse. It is different with sea modes transportation.
62
3. Temporary Warehouse
The significant impact of the disruption event beside the lead time and
defect is the unfilled unit which is the undistributed units stacked on the
manufacturer plant. The units have to be distributed as soon as possible
because there was no space left for the remaining finished product. It
creates un-balance inventory control and distribution to three regions
which are Semarang, Bali and West Nusa Tenggara.
Furthermore, there was limited available transportation provider to
distribute the units to all the main dealers in three regions. After the logistic
team has quantified the impact, it comes with the solution for a temporary
warehouse. The team was looking the possible warehouse location with
the particular capacity that is affordable to rent or buy at the situation.
Therefore, they contacted the possible warehouses from the internet.
Finally, they decided to rent a warehouse for four months in Semarang
after price negotiation. They also hire the extra workforce for managing
the temporary warehouse and pay the overtime payment to the labor at the
warehouse. Then, the unit could be stacked into the temporary warehouse
in Semarang. The next step is the company have to contact another
transportation provider to distribute the units to the warehouse in Bali and
Mataram.
Those three solutions are worthy which mean the profit margin is still in the
company target if the mass motorcycle during the months is sold out. Instead, there
will be a loss for them if the motorcycle is not delivered to the warehouse. Hence,
they have to deliver the motorcycle to the dealers to avoid the loss, but the solution
of the distribution have to be the most effecient solution.
4.1.3.2 Fuel Price Increasing
Similarly, the company has made a predictive analysis of the impact the fuel price
toward the supply chain. Participant 2 described that he has made such of risk
63
mapping to predict the chain that will be affected by the increasing of fuel price.
According to him, the most impacted chain is the transportation network whether
from the plant to the main dealers or from main dealers to the dealers. Also, the fuel
price fluctuation has occurred since 1990's which make them could analyze the
effectiveness of the action from the historical data. HSO is one of the companies
that survive on the economic crises on 1998 in Indonesia. They have learned from
the crisis to cope with the economic disruption. Based on the experience, they have
strategically quantified which chain will get the impact and how much money it
impacts if the inflation and fuel price increasing occurs.
Participant 1 claimed that based on historical data, the transportation and the
warehouse would get impacted a lot. According to Participant 2, 37-40% of the
company cost depend on the fuel price. Since the role of the enterprise is to
distribute and retail, the transportation will have a major part of the business. Then,
most of the operational expense is from the transportation cost. If the transportation
cost is growing, the retail team had to have a good strategy not to increase the price
to the end user. So does the warehouse as the storage of the units before sold to the
end user. The price of the rented land is another highest operational expense of the
company.
Moreover, he way they identified the increasing of fuel price by monitoring the
world fuel price and Indonesia economy. They monitored it by several ways, such
as the international and local news, economic research, and the economic forum.
Moreover, HSO has the morning break once a month. Morning break is a meeting
of all the employee at Head Office leading by the CEO to discuss the previous
month performance, current month target and the international and Indonesia
economic trends or prediction. Therefore, logistic team could predict the economic
situation based on the presentation by the CEO, the news, journal, and forum.
HSO respond the fuel price increasing disruption by doing the upper and lower limit
deal to the transportation provider and the contract for the warehouse rent.
However, the inflation will make a harder for the team to decide how long to rent
the warehouse. It also depends on the strategic objectives of the organization.
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In addition, participant 4 indicated that if the economic disruption occurs the
marketing team will implement the promotional events or discount strategy for
selling the motorcycle to the customer. She added it is better to sell all the inventory
although the profit is slightly increasing compared to the loss of the unsold
inventory.
4.1.3.3 Government Regulation
Based on the interview, the way company identified the risk is by creating a risk
mapping for the visibility of the potential regulation risk disrupt the supply chain
process. According to Participant 2, they identified the dynamic changing
regulation is based on the guideline that is being socialized by the government’s
spokesperson to the industry player, including HSO.
Based on the risk mapping, the logistic team knows the potential huge risk could
hit the transportation chain since the Indonesia implement the regional autonomy.
The regional autonomy is the decentralization of governance which each
government possibly change the regulation. HSO distribute to 11 regions which
means the company has to analyze 11 different regulations. For instance, the
dynamic-changing regulation of loading and unloading at Pontianak Port and Papua
Port.
They quantified the significant impact on cost and revenue by the possible
regulation disruptions. However, the company quantified the risk based only on the
historical dynamic regulation. Participant 2 gave an example, they have quantified
the impact of cost and revenue of the regulation disruption to the port of Makassar.
The quantification is based on the previous case on Pontianak which is the changing
loading/unloading time.
In order to respond to the government regulation on the specs of the trucks, the
logistic team regularly evaluate the trucks. They ask the photo of the truck, engine,
and age of the engine regularly. The company also know if there is an added vehicle
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since the transportation provider could access and update it on the Transportation
Management System (TMS).
Participant 1 stated to response the disruption, the team has to analyze the reason
why the regulation issued by the government. For example, the loading/unloading
regulation in particular port is changing which makes the company pay extra money
to store at the port, but the fuel price is decreasing or in other port, there are no cost
of port storage any longer. Therefore, they could allocate the money that previously
allocated to the high fuel price to the storage port.
4.1.4 Mitigation Strategy on Uncontrollable Risks
4.1.4.1 Comal Bridge Collapse
Participant 2 revealed that the company has not experienced with such
uncontrollable natural disruption event that significantly impacts the whole supply
chain. Before the event, they have mitigated the impact of the risk by insuring each
of the units transported by the transportation provider. Therefore, if there are
uncontrollable accident when transporting the units, then the insurance company
which is Asuransi Astra Buana (AAB) will pay the other events. In other words, the
broken and defect units have sold to AAB.
After the event, they realized that they have to create a more resilient strategy to
minimize the impact. Participant 2 revealed that the Transportation Management
System (TMS) has developed rapidly after the event in Comal Bridge occurs.
According to him, the system will be suitable to handle the uncontrollable risk like
Comal bridge because of the inventory could be tracking real-time and it cuts the
complexity and inefficiency of communication flow.
He also added that the TMS was initially built because there is no specific inventory
data when the units are transported to the temporary warehouse. The main dealer
warehouse will inform each of specific units to the logistic team in Head Office on
the usual process. However, the information will be lost if there is any disruption
occur which make the head office did not know how many units, the particular type,
66
the engine number, the specific color, which unit have to be delivered first to the
dealer and who deliver the units.
Nowadays, the TMS could track the inventory that is transported to main dealers'
warehouse. The transportation provider could access the system so that they could
make the profile of the identity of the drivers, the vehicle number of the truck and
the amount and specific units they carried. It is integrated with the labor at the main
dealer warehouse and manufacturer plant. They could also fill the data on the
system. The system also helps the main dealer to know which unit will be delivered
on what day. It could help them to prioritize and manage the unit distribution to the
dealer. Therefore, the unit data is manageable.
Most importantly, the company knows where their specific unit is. Furthermore,
when there is another similar case occur like the collapse of Comal Bridge, the
transportation driver could access the system to report that there is a disruption. It
makes HSO realized the risk as soon as possible in order for them to decide how
the ongoing transportation vendor should go and also the action for the
transportation and warehouse to recover from the events. The company also can
ensure whether the specific unit has arrived at a decision's destination since every
inventory are tracked real-time.
4.1.4.2 Fuel Price Increasing
According to Participant 1, the company cannot simply lay off the employee to keep
the profit margin. They also cannot degrade the standard quality of service and
goods because of the company’s value. However, if the company set higher pricing
strategy than the competitor, then the customer may purchase the motorcycle from
the competitors.
In the case of mitigation for the economic disruption, the company has set the upper
and lower limits for the fuel price to set the transportation cost. For instance, when
the fuel price is on 5,000 – 7,000 the company will pay 50,000 per unit the
transportation provider to distribute to Semarang but if the fuel price is on the 7,000
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– 10,000 the company will pay 70,000 for the transportation provider. The company
also made the deal of the transportation price limit with the transportation provider.
Therefore they maintain the trustworthiness of partnership. As participant 2
revealed that the logistic team has set the transporting cost strategy in order for the
other division to set their strategy to ensure the end user worthy to purchase with
the particular price.
In the case of the warehouse price, Participant 3 stated that they mitigate the impact
of the inflation is by analyzing the potential market in the region in the next 20 year
with the economic prediction in 3-5 years. The result of the analysis will be the
decision whether to rent or buy and rent for how many years. Hence, the prediction
of the economy trends is paramount in mitigating economic disruption as the
uncontrollable risk.
4.1.4.3 Government Regulation
In order to mitigate such cases, the company decides to deliver a higher amount of
unit to the main dealers so that the profit of motorcycle could cover the fee of the
port storage. Therefore the increasing of the unit distributed have to be analyzed by
the team. Participant 2 also revealed that the logistic team has always evaluated and
audited the performance of the transportation provider, including the specification
of the truck. Therefore, if the vehicle does not meet the government standard and
the HSO standard, then the company will give warning two letters before cut the
contract and looking for other dedicated transportation providers.
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4.1.5 Data Result Analysis (SWOT Analysis in General)
TOWS Matrix
Strengths Weaknesses
Largest network dealers in
Indonesia
Strong database of
motorcycle sale
Engage “Astra” as the strong
brand image
Standardize layout and
facilities toward the
workshops and dealers that
make a better business image
Aggressive safety riding
campaign, in line with
Astra’s focus
The uneven people competencies
& infrastructure, especially in
Sales Force sourcing problem in
rural area
Lack of awareness of efficient
Customer Relation Management in
most of the dealer's network which
makes small number of after sales
income including the workshop
and spare part's service and
quality, and eventually the
iteration of sales
Lack of the implementation of
HSO Unique Value Proposition's
in business activities which are
Friendly and Reliable (FIRE)
Op
po
rtu
nit
ies
Indonesia Economic Growth
which creates the increasing of
middle-class segment
Technology advancement
followed by various
telecommunication
Synergy among value chain
parties (Astra Group) regarding
program, product, network,
system, join operation and
database utilization
The new potential market
which are women, netizen, and
youth
Non-core business product
which is spare part and
workshop that give additional
income and recurring income
High spare part demand after
customer purchase the
motorcycle.
Pursue the efficiency of
spare-part and workshop
service selling beside the
motorcycle to the middle-
class segment, woman,
youth, and netizen market
The technology advancement
integration of motorcycle,
spare part, and workshop
database to increase
prospects of the added value
for the customer and enhance
additional and recurring
income
The promotion of motorcycle
sale collaborates with the
financial company. For
instance, collaboration with
Federal International Finance
(FIF) as the member of Astra
group.
The combination of technology
advancement, netizen, and youth
to enhance the sales of spare part
and workshops. For example,
content writing in social media to
give people awareness of network
effect (youth and netizen sharing)
to purchasing the service or spare
part.
The usage of technology
advancement to improve the
competencies of workforce in rural
area
Th
reats
The increasing motorcycle
density in most of the city in
Indonesia, for example, the
density in Denpasar is 1.5 which
mean each person in Denpasar
has minimal one or two
motorcycles.
Fierce motorcycle competition
particularly in Pareto
Segmentation which is the area
of 80% of sales
Cost leadership, quality
maintenance and after sales
service strategy by
optimizing the strong brand
image and the motorcycle
database
After sales service strategy
which focus on the selling of
spare parts, workshop
service, and other customer
relation management
The incentive strategy for salesman
to increase the increasing of spare
part and workshop selling in the
high-density regions. Hence, the
more after-sales the salesman sell,
the more incentives money they
will be received.
Conducting workforce recruitment
in the city with the requirement of
relocation to a rural area to
compete with the fierce
competition.
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Table IV-1: TOWS Matrix on General HSO
Source: Author’s Development
To analyze the company in general, the researcher used TOWS matrix above to
identify four strategies based on:
1. The internal strengths to take advantage of opportunities (Strengths –
Opportunities)
2. The internal strengths to avoid potential threats (Strengths – Threats)
3. The opportunities to overcome the internal weaknesses (Weaknesses –
Opportunities)
4. The minimization of weaknesses and avoidance of threats (Weaknesses
– Threats)
4.1.6 Data Result Analysis (SWOT analysis on SCRM in Automotive
Industry)
Similarly, the researcher used the same tool to analyze the effectiveness of the
Supply Chain Risk Management on the uncontrollable risk cases that was happened
on the previous three years which resulted to have the strategies that mentioned in
the table below.
Cost increasing in operational
dealers affect the operational
expense of the company caused
by the inflation, increasing labor
wage, fuel price and increasing
logistic & transportation
challenge
Price sensitive consumer
behavior
Natural hazard and dynamic
autonomy government policy
activities in high motorcycle
density region
The combination of
aggressive safety riding and
promotional strategy to cope
with the price-sensitive
consumer behavior
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TOWS Matrix
Strengths Weaknesses
Data Driven Supply Chain
Management: TMS, SLS, WMS
Integrated risk mapping with
financial impact and time to
recovery quantification
Risk sharing: Insurance, Multi-
modal, and Multi-carrier
Revenue management: dynamic
pricing and promotion
Regular Open dialogue with supplier
Regular audits of keys suppliers
Regular long-term market analysis
Innovation-driven company
The risk identification
and quantification based
only on the company
history, while the
potential risk could
occur in any forms
Lack of business
continuity plans or
business simulation if
the disruption occurs
Lack of SCRM
Handbook
Documentation as the
communication tool to
the current stakeholder
or next stakeholder
Lack of risk intelligence
by social media
monitoring and third-
party intelligence
Op
po
rtu
nit
ies
Sea toll (ports) improvement by
government
Global SCM disruption cases on
the Internet as part of learning
The advancement of technology
Increasing of logistic company
Increasing number of Risk
Management Software:
Maplecroft, LLamasoft, or Screen
Extend the supply chain network:
Dealers network, Main Dealers
network
Risk reduction for profit margin
enhancement
The advancement strategy of TMS,
SLS, and WMS to become well-
systemized like UPS, Cisco, or Ford
system by using the advancement of
technology.
The purchasing of risk management
software to identify, quantify, and
mitigate the risk
The increasing number of multi-carrier
and multi-modal strategy to share the
risk
The integration of regular provider
communication and evaluation, risk
quantification, risk sharing with the
data-driven could reduce the impact of
the risk which increase the profit
margin
The internal innovation competition to
enhance the efficiency of SCRM
adapting the cases on Internet
The purchasing of
business simulation
software to simulate the
business operation when
the disruption happens
The social media
strategy to monitor and
identified the risk
The using of global
SCRM cases as the
strategy to enrich the
possible disruption that
could happen toward the
company. Also, the
advancement of the risk
management toward the
new potential cases
Th
reats
Natural Disaster
Fuel Price Fluctuation
Global Financial Instability
Dynamic Government Regulation
Terrorist Attack
Disruption on Transportation
Provider
The usability of real-time inventory
tracking and transportation
performance to quickly respond to the
disruption
The advancement of SCRM process
which is the identification
quantification, mitigation and response
on each chain toward the disruption
that similarly affect the company in
previous years
The use of technology
advancement to quickly
identify, quantify,
mitigate, and respond to
the threats. The
advancement allow the
company to access the
risk management
software to simulate the
business if the
disruption occur, to
identifying risk by
social media
intelligence, and SCRM
documentation to
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Table IV-2: TOWS Matrix on HSO’s SCRM
Source: Author’s Development
Interpretation of Result
4.2.1 Supply Chain Risk Management Process
Based on the comprehensive interview, each of participant claimed that they did
not use any standardized tools or theory in doing the supply chain risk management
process. However, the researcher interpreted that the company manage the supply
chain risk by identifying the possible risk, quantifying the cost and revenue impact
caused by the risk, minimize the same possible of the risk, and act to recover from
the disruption. The response was in alignment with the theory from John, G. (2014)
about the four subsequent stages of supply chain risk management model.
Figure IV-11: SCRM Model
Source: John, G., 2014
communicate to the
current or next
stakeholder
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In the literature review, John, G. (2014) stated that the innovative approach to
supply chain risk consist of the systematic risk management model divided into 4
subsequent stages which are identified, quantify, mitigate, and respond. The
diagram below is the researcher interpretation on the way the company manage the
uncontrollable risks cases:
Figure IV-15: HSO SCRM Process
Source: Author’s Development
4.2.4.1 Identify
Based on the interview, the researcher examines that the company has done the
same action on each cases before constructing the mitigation strategies. They
identifies the risk by mapping the risk. The risk mapping is a powerful tool to get
an overview of supply chain structure. It shows the part breakdown, the actors in
the chains, address, historical record, and potential risks each part has. By doing a
•Time To Recover (TTR)
•Financial Impact (FI)
•Risk mapping
•Historical data
•Regular open dialogue with provider
•Media monitoring
•Socialization
•Tracking on Transportation Management System (TMS)
•Multi-Modal Transportation
•Temporary Warehouse
•Revenue Management via Dynamic Picing and Promotion Respond Identify
QuantifyMitigate
• Transfer of risk via Insurance
• Active track inventory data via Transportation Management System (TMS)
• Multi-Carrier transportation • Regular audit of key providers • Long-term market analysis • Long-term contract • Dynamic volume distribution via
Sales Logistic System (SLS) • Dynamic transportation cost
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risk mapping the logistic team will knows the potential huge risk that could hit the
chain whether it is on natural disaster risk, economic risks, or the regulation risks.
In the case of uncontrollable risks on HSO, Participant 1, 2 and 3 also that they
always made and updated the risk mapping that consists of the flow of the goods
from the manufacturer to the dealer warehouse. It consist of the list of each
transportation provider, the particular amount of unit that the transportation
provider has to deliver every day, the particular plant that each transportation
provider have to take and also the route that the transportation will use to deliver
unit to the warehouse.
The example describe the important role of risk mapping which is the visualization
of the risk. The team also could discover a new potential risk by visualizing the
supply chain process. In a subsequent and similar study, Wolfs, D. A., et al, (2015).
revealed that in achieving reliable and safe distribution processes, it is decide by
the collaboration between identification and treatment of the inherent risks in the
distribution process. So does John, G. (2014) who stated without good visibility,
it’s impossible to adequately assess the likely consequences of disruptions or target
mitigation efforts to where they are needed most.
Furthermore, Participant 2 who work as the Transportation Supervisor revealed that
his job is more on people and relation management. He maintains the
communication with the transportation provider. It is imperative for the company
to have a dialogue regularly in order for them to identify the risk or disruption. The
case of Comal Bridge collapse has proven the importance of regular dialogue. The
information obtained by participant 2 supported by the conclusions made by Ali
Behnezhad, A., Connett, B. I., & Nair, M. (2013). The authors claimed cooperation
and collaboration between firms and suppliers is the foundation on which effective
supply chain risk management should be built.
Another way for the company to identify the risk is by analyzing the historical data
of disruption. The company could handle the same possible disruption by making
the same risk management approach on the previous year. However, if the risk
management approach is not working properly or it could be optimized in the
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previous case, then the company could learn from the data. According to SCM
World CSCO survey on John, G. (2014), 60% of 944 respondents on effective
SCRM analyze historical data on issues such as the performance and financial
stability of their suppliers. The historical data could also help the quantification
stage.
Lastly, the company also identify the risk the socialization of regulation from the
government spokesperson. Unsurprisingly, the regulation changing could affect the
supply chain activities positively or negatively. Then, if there are any disruption or
possible risk happened, then the company confirmed it by looking the news on TV
or magazines.
4.2.4.2 Quantify
Participant 1 claimed that all the decision to respond a disruption is based on the
cost and revenue analysis. In another word, when the disruption occurs, the
company will make the financial impact of the disruption on each network in the
risk map so that the company could make a decision on how to recover as soon as
possible from the disruption. The decision will affect the time to recovery from the
disruption.
For instance, In the case of Comal Bridge, after they get the cost and revenue
analysis on each option along the chains, they could set three best combined
solutions to recover and minimize the impact of the disruption since they have
known the most impacted part of the network.
The financial impact analysis is paramount since the company could understand the
dependencies within their supply chains, and estimate the money impacts and
prioritize the risk mitigation strategies to reduce the impact of the risk when it
occurs. The information obtained from the participant align with the theory made
by Simchi-Levi on John, G., (2014) in the literature review. The MIT Professor
stated that the approach is calculated by estimating the hit to the company’s sales
revenue during the time it would take a supplier to return to normal operations,
75
whether two, four, eight weeks or longer – in other words, the time to recovery
(TTR). By using the cost and revenue or Time To Recovery (TTR) model they
could prioritize the action to reduce the unfilled unit and lead time, then they could
consider alternatives to respond to it.
4.2.4.3 Mitigate
The way the company reduces the impact of the risk is shown by the company
decision to insure each unit while the transportation provider is distributing the units
until it arrives at the end user hand. As a result, if the disruption occur and it
damages the motorcycle, then the insurance company will pay the units. The
company has shared the risk by transferring it to the insurance company. The
information obtained from the interview questions gained support from conclusions
made by Berg (2010). The authors claimed that the way the company could treat
the risk is by using the strategy where another party accepts the responsibility or
sharing the risk through contract, insurance, or partnership/joint venture.
Christopher S. Tang (2006) supported the findings that to generate robust strategies
which facilitate a supply chain to become more resilient to manage the inherent
fluctuations efficiently despite the occurrence of major disruptions is by reducing
the risk. Insurance is one of the methods to reduce the risk.
Similarly, the transportation management system (TMS) could reduce the impact
of uncontrollable risk. The role of TMS makes the company track the real inventory
time actively. In a subsequent and similar study, John, G. (2014) revealed that one
of the best ways to mitigate the supply chain risk is by using the active real-time
inventory tracking. Therefore, the company knows how many the units is currently
transported by the specific truck of transportation provider, the specification of
units, the estimated arriving time at the warehouse and the transportation route.
By using the TMS, if the accident occurs just like Comal Bridge, the driver could
access the system, then the system will suggest what the driver will do next whether
to detour or using other routes. The TMS also tell the company real time that the
disruption just occur. It cuts the complexity and inefficiency of communication
76
flow. The responses were consistent Wolfs, D. A., et al, (2015), who claimed that
if there is integration of the involved partners in distribution process, the better
performance is present.
The company also know if there is an added vehicle since the transportation
provider could access and update it on the Transportation Management System
(TMS). The transportation provider could update the photo of the truck, engine, and
age of the engine regularly. Therefore, it could reduce the risk of transporting the
units by using the non-standardize trucks since the company could evaluate the
truck regularly.
The multi-carrier of the unit distribution are also effective to reduce the impact of
the risk. If there is a disruption impact one of the transportation providers, then HSO
still could distribute the units by using another provider. The statement from Berg
(2011) confirmed the findings that the company could treat the risk by reducing the
risk itself. He stated reduction of risk means the likelihood controlling actions that
lower the probability of risk and seriousness of the impact which related to multi-
carrier transportation.
Furthermore, the regular audit of supplier performance could mitigate the risk.
Taking the case of the government trucks standardization, if HSO know the
transportation provider transport the units by using the non-standardize trucks, then
the company will send them the letters twice. When the transportation still
transports the units with the same truck, the company will terminate the contract.
The regular evaluation of the supplier performance also reducing the level of the
impact because of the provider is not performing well, it could increasing the lead
time, defect units and the unfilled which are the key metrics performance in
transportation.
To reduce the impact of economic disruption, the company analyzing the long-term
market in order to them to make a long-term contract. The impact of economic risk,
namely inflation could significantly reduce by the long-term contract since the
company pays the fee, for example, the warehouse rent fee or dealers office rent fee
based on the current currency valuation, not the next, increasing currency valuation.
77
However, the company has to analyze the long-term market to make the purchase,
or the rent is worthy. Hence, the company will avoid the inflation impact on the
value of the money.
The last approach for reducing the impact of the risk is by utilizing the Sales
Logistic System (SLS) to make a dynamic volume distribution and dynamic
transportation cost. The SLS makes the main dealers and the dealers transparently
know how many units that will arrive within the next 30 days. They also know the
why they get the different particular amount of units and how much they cost in
each main dealers or dealers. The reason is namely that of different stock days or
the uncontrollable disruption that impact the chain to the area distribution.
4.2.4.4 Respond
Based on the case from the interview, if uncontrollable event disrupts the
transportation network, then the transportation provider will input the disruption
condition into the Transportation Management System (TMS). Since HSO could
track real-time the specific inventory that the truck brings, the transportation route
and the specification of the truck, the team could suggest the action that has to be
taken by all driver of the trucks. If the truck has to detour or stop, the estimated time
arriving will be adjusted by the coordination of the transportation provider and the
HSO logistic team. The time arrival adjustment is integrated into Sales Logistic
System (SLS) which make the dealers or main dealers know that the occurrence of
the uncontrollable disruption makes the lateness of distribution. The integration
systems of TMS and SLS also informed them the new estimated time arrival.
Therefore, they could prioritize which units have to be sold first.
HSO also could encourage the transportation provider to take a higher amount of
unit by implement the incentives policy, yet it still based on the quantification of
the risk. Furthermore, when the impact of the disruption cut the whole road
transportation, the company will use other modes than trucks to distribute the units.
For instance, they could use sea route, train route or air route. However, the decision
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of the using of other mode is based on the quantification stage of the risk which are
the financial impact and time to recovery analysis.
The quantification phase of the risk also being a foundation of making a decision
to reduce the unfilled unit. As Participant 1 mentioned that soon after the event have
been identified by the team, the logistic team made a meeting to scrutinize any
options and make a prioritize decision to speeding the recovery based on the
worthiness of the option on company cost and revenue. If the financial impact of
the unfilled unit is high, then the company may rent a temporary warehouse in a
certain position to become the storage of the unfilled unit. The company also have
to contact the transportation provider to transport the units from the temporary
warehouse to the destination warehouse.
Lastly, when the uncontrollable disruption affects the retail network, the company
implement the mechanism of dynamic pricing and dynamic promotion. Since the
cost of the product is increasing by the disruption, the demand for particular
disrupted units could be managed by this kind of strategy. Specifically, the dealer
can use pricing mechanism to entice customers to choose products that are widely
available.
4.2.2 Best Mitigation Strategy
Based on this research, the researcher find out that each of business organization
needs an effective mitigation strategy to manage the supply chain uncontrollable
risk in the future. In order to answer the research objectives no 1 that questioning
the kind of mitigation strategy that should be used by the company for managing
uncontrollable risk in supply chain, the question cannot be solved before the
company has identified and quantified the risks. The best effective way to create a
mitigation strategy is by visualizing the details of supply chain process using a risk
mapping. The risk mapping will revealed the dependencies of each chain and
potential sources of risk across the value chain. When a risk map has constructed,
the company could quantify the financial impact prediction toward each chain and
time required to recover if the uncontrollable disruption occurs. The best mitigation
79
strategy is the action that will minimize the network that suffer the most financial
impact. Then, without good visualization, it is nearly impossible to adequately
assess the likely consequences of disruptions or prioritize the target mitigation
efforts (John, G., 2014).
The conclusion drawn by Wolfs, D. A., et al, (2015) supported the information
given by the participants in this study that to make a better company’s performance,
the company need to apply a process of integrated risk management which is the
risk identification and risk treatment.
Furthermore, when the identification and quantification of the risk has been created,
these four mitigation strategies should be consider to minimize the uncontrollable
disruption impact, which are:
1. Sharing of the risk
The strategy where another party accepts the consequence cost of the risk.
For instance, insurance toward the transportation of goods. As indicated
by Berg (2011) that one best way to treat the risk is by using the strategy
where another party accepts the responsibility or sharing the risk through
contract, insurance, or partnership/joint venture. So does Christopher S.
Tang (2006) that stated to generate robust strategies which facilitate a
supply chain to become more resilient to manage the inherent fluctuations
efficiently despite the occurrence of major disruptions is by reducing the
risk.
2. System Integration
The integration of TMS, SLS, and WMS makes a data-driven decision-
making culture. The system makes the decision toward disruption faster,
the accessible of the historical data, transparency of the past, current or
future transported and distributed amount of goods, simple regular
communication with suppliers, and real-time tracking data. In a subsequent
and similar study, John, G. (2014) revealed that the best effective methods
to identify the risk exposure is by the regular dialogue with supplier the
80
usage of historical data. Also, the study also revealed that best effective
way to mitigate the supply chain risk is by actively track inventory levels.
3. Flexible Transportation & Sourcing
The strategy to reduce the probability of risk and seriousness of the impact.
The flexible transportation and sourcing allow company to divide the risks.
It consists of Multi-Modal Transportation, Multi-carrier Transportation,
multiple routes, and multiple suppliers. This point also supported by the
research by John, G. (2014) that claimed 45% of 938 companies declare
that multi-sourcing is very effective. It also proven by the Nokia’s strategy
on the fire incidents in 2000. Not like Ericsson who uses one sourcing for
the component, Nokia uses multiple sourcing so that they can quickly
switching into the backup sources when the fire incidents occurred.
4. Revenue Management
The strategy of dynamic pricing and promotion as revenue management
create an effective way to maintain demand when the supply of a distinct
product is disrupted. Also, a retailer could use pricing mechanism to entice
customers to choose products that are widely available.
Those kinds of mitigation strategies could be replicated by other company in all
sector of the industry. The researcher hopes with the effective mitigation strategies,
the business, could contribute to empowering all the stakeholder who is essential to
community development.
Lastly, based on the Participant 1, the implementation of risk management by HSO
has made the company accumulation profit still on track. On the 2015 global
economic crisis, HSO could increase their profit by 0.5% while the other
competitors mostly decreasing. However, based on TOWS matrix, the researcher
feel that it is the time for the business organization, especially automotive industry
to seize the advancement of technology and big data opportunity to enhance the
integration of company’s system with the SCRM software tool to manage the
81
uncontrollable risk toward supply chain. As John, G. (2014) revealed that there are
no comprehensive, all-in-one solutions for supply chain risk management available
to buy off the shelf. There are a bunch of software that could map and monitor
supply chain risk, optimize inventory, manage demand, integrate the historical data,
maintain the risk mapping, maintain financial impact, TMS, SLS, WMS, manage
risk governance and managing product and trade flow. The company could make
their system like HSO build their TMS or collaborate with the software company.
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CHAPTER V
CONCLUSION AND RECOMMENDATION
Conclusion
From the analysis of data, the researcher concludes that the effective mitigation
strategy in managing the future uncontrollable supply chain risk characterized by a
good visualization to identifying potential risk and the financial impact prediction
of disruptions to prioritize the target mitigation efforts.
The researcher has found that there are four best mitigation strategies to minimize
the uncontrollable disruption impact, which are:
1. Sharing of the risk,
2. System Integration,
3. Flexible Transportation & Sourcing,
4. Revenue Management
The researcher also concluded that the mitigation strategy for the uncontrollable
risks at PT. Astra International – Honda Sales Operation (HSO) is effective enough
since the potential huge financial impact caused from the disruption has avoided
and the profit has maintained.
83
Recommendation
By having the conclusion that supply chain risk management of PT. Astra
International – Honda Sales Operation is performed very well, the researcher
suggest to:
5.2.1 PT Astra International – Honda Sales Operation
To help HSO improve its supply chain risk management, the researcher suggest that
the company needs to enhance their system’s advancement and integration of the
systems, among Transportation Management System (TMS), Sales Logistic System
(SLS), and Warehouse Management System (WMS). The researcher found out that
the company is on the phase of transforming the manual data to digital data.
However, it does not simplify the work process yet. The potential of the digital,
technology and open data era have to seize by the company to simplify the chain
which eventually simplifies the risk of disruption. For instance, the advancement of
the system allows all stakeholder including consumer identify where is their product
located now, when will it arrives or the company could construct one click payment
among the chains.
5.2.2 Other Companies
The researcher also would like to suggest that it is important for other business
organizations, especially automotive industry to seize the advancement of
technology and big data opportunity to enhance the integration of company’s
system with the SCRM software tool to manage the uncontrollable risk toward
supply chain. The company could make their system like HSO build their TMS or
collaborate with the software company.
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5.2.3 Future Researcher
There are several areas that would be interesting for the future researcher. First of
all, it would be relevant to study how the advancement of technology reduces the
impact of uncontrollable risks in the automotive industry. It would be nice to
discover the effective internal system that could significantly contribute to
mitigating the potential risk faced by the automotive company since the system
could integrate the database, minimize the lead time, and simplify the process.
85
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APPENDICES
Transcript Interview
Interview I: Logistic Sub-Department Manager at Head Office of PT Astra
International - Honda Sales Operation
Researcher: Good Afternoon Ms. Jentya. My name is Ghilmansyah Amri from
President University majoring in Management-International Business.
I would like to ask several questions in the fulfillment of my skripsi
research.
Participant: Yes, Indeed.
Participant: Could you please describe your job?
Researcher: I am responsible to managing and balancing demand-supply, stock,
ordering, and distribution until the unit arrive to customer home. I
handle the supply from the manufacturer which is AHM and the order
from the dealers throughout Indonesia. It includes the logistic strategy
from upstream to the downstream. I also handle 11 logistic region
supervisor and 11 warehouse region supervisor.
Researcher: Talking about supply chain risks management. I wonder if the
company have experience a significant natural disaster disruption
toward supply chain process in the last 3 years?
Participant: In the last 3 years, the most significant disruption is the collapsing
bridge of Comal at Pemalang that connecting the Western java to
Eastern Java, Bali and Lombok.
Researcher: How significant is the impact toward the company’s supply chain?
Participant: Since it was happened around a week before the Islamic religious
holiday, we got mass units that the other months to deliver to the
dealers. It is because the demand at that particular month is the highest
91
than other months. Therefore, the transportation provider transported
the unit to the all main dealers and dealers, including to the region of
Central Java, Bali, and Lombok. We have 3 main dealers and 48
dealers located on those area. The government also stated the trucks
are forbidden to pass the road around 5 days before the holiday.
Because of the disruption of the connecting bridge on the main
Northern Coast route, the transportation process was messed up. So
does the units storage.
Researcher: What about the economic disruption toward the company’s supply
chain process in the last 3 years? How significant the impact?
Participant: Yes, there was inflation that cause all the land price rocketed. It affect
the warehouse rent fee or dealers rent fee also rocketing.
Researcher: What about the regulation disruption toward the company’s supply
chain process in the last 3 years? How significant the impact?
Participant: Actually the economic and regulation are interrelated. Let me take
example of the fuel price. The economic situation will affect the
government to issue the new regulation about the fuel price. The
impact of the changing of fuel price is very paramount since the
transportation cost is one of the biggest operational expense. It will
create a domino effect to warehouse, cost, and so eventually the price
of the units.
Researcher: How the company respond to the natural disruption on the Comal
Bridge case?
Participant: We are looking and consider for another modes besides truck. It could
be train, but the cost was very high. Also, we have to give extra
incentives for the transportation provider since they were not only
transporting Honda motorcycle, but also another brand of motorcycle
in Indonesia. The bridge was collapse in the peak time of the SCM
92
operation. So, it is a win-win solution for the transportation provider
and HSO
Researcher: What about the respond toward the economic disruption on the
inflation case?
Participant: The way we respond it is by matching the strategy of the organization.
It means we have calculate the financial impact of the warehouse then
it could be decided whether it is best to rent or buy for the next 5 year
or none at all. It depend on the financial impact strategy. We also have
the calculation of demand prediction on the regions until the next 20
years. However, the inflation will make the decision making process
harder.
Researcher: How about the company respond toward the regulation on the case
Fuel Price Increasing?
Participant: We have to maintain the trustworthiness with the transportation
provider and also the warehouse. That is why it is important to create
a sustainability partnership and relationship toward them. Hence, in
the case of fuel price, we have adjusted the price for transporting the
unit and also we have given the incentives for them. In HSO, we have
an upper and lower limit for the price of the transportation goods. It
depend on the fuel price. Moreover, it is not because the fuel price is
increasing, then the price of unit that will being sold to the end user
will also increasing. We have allocation on other network in order to
prevent the increasing of the unit price. Lastly, we also analyze the
reason why the government increase the fuel price. There was a case
of the fuel price is increasing but the port price is decreasing.
Therefore, we could allocate it to cover the fuel price increasing.
Researcher: Alright, but how effective the respond toward the disruptions?
Participant: I think it was effective enough since we are still have a partnership
with the transportation provider and the profit at that time is not really
93
bad. Even though it was not reached the target, but it was a slight
increase on the profit.
Researcher: What kind of mitigation strategy you have used for managing the
uncontrollable risk in supply chain?
Participant: The discount and promotional event is effective enough until today to
cope with the fluctuation of the cost. We could not just increase the
price of the unit because the end user will purchase the competitor
brand whether it is a Rp. 50,000 difference. Another way is we have
learn all the modes besides the truck, for instance the train as the
alternative. We always updated the price of the train transportation
with door-to-door service. Therefore, if a disruption event occur, we
could analyze which mode strategy is the best. However, it is still on
the cost and revenue impact or financial impact toward the company.
We do not have any tools to manage the risk. It just an excel format to
mapping the supply chain process. Inside the map, we have the
detailed of the transportation provider and the units they have to
deliver to which warehouse.
Researcher: How to monitor if there is an accident on the road occur?
Participant: The transportation provider should provide the letter from the police
that stated there was a accident. That letter will be given to the
warehouse destination. After the PIC analyze the letter, HSO will
make decision whether it is the fault of the provider or it is an
uncontrollable disruption. If the uncontrollable disruption makes the
unit become defect. The unit will be sold to the insurance company
which in this case is AAB. Therefore, they will pay the units.
Researcher: What is the possible improvement of the SCRM mitigation strategy
that you have implemented?
Participant: The improvement will not influence directly, but it is more like domino
effect. For example, the TMS. The system will inform and visualize
94
how many units is taken from AHM by which provider to which
warehouse destination. The provider will get the notification on the
system for the order. Moreover, the unfilled distribution will
optimized since the provider could knows where they should take the
units from. Usually, the provider allocate the truck to take the units on
the wrong AHM plant. That action affect the lead time and pounding
stop to the cycle since they have to ask to HSO which plant is the right
one or they just wait for the units on the wrong plant. Moreover, the
SLS also could be optimized since it creates bonding with the dealer.
The dealer will transparently know the allocation of unit based on
national stock days and stock days. The dealers head will know how
much units they will get today and tomorrow so that they could
prioritize the sales or inform the arrival of specific unit to the
customer.
Researcher: I believe that was my last question. Thank you for your time and
cooperation. Have a good day
Participant: You are welcome. Good luck to you.
95
Interview II: Transportation Supervisor at Head Office of PT Astra
International - Honda Sales Operation
Researcher: Good Afternoon Mr. Toto. Let me introduce myself, I am
Ghilmansyah Amri from President University majoring in
Management-International Business. I would like to ask several
questions in the fulfillment of my skripsi research. I want to evaluate
the supply chain risk management system on uncontrollable risk in
HSO and its impact towards supply chain operation. Let us begin with
your job description. Could you please describe it?
Participant: I mostly handle the transportation logistic. I have to allocate the units
per provider, evaluation control provider performance, ensuring the
units safely arrived from the AHM plant to the destination warehouse
which eventually to the end user. I am actually responsible for PRM
or People Relation Management because I always communicate with
the provider regularly.
Researcher: Talking about supply chain risks management. I wonder if the
company have experience a significant natural disaster disruption
toward supply chain process in the last 3 years?
Participant: Yes, the collapsing of Comal Bridge at Northern Coast Road and
Negara Bridge on Bali main road. Both of the event made the
increasing of the lead time, increasing of defect since the trucks have
to detour to use the unusual road. As a result, the units was scratched
by tree branches. However, the most damaging disruption was Comal
Bridge collapse since it is the connecting road to the transportation to
the eastern of java as well as Bali and Lombok. The transportation was
stucked. It was happen nerlay at the religious holiday when the
demand are the highest in the year. The lead time is increasing until
1-2 weeks. There was truck who depart from the plant and stopped at
Comal, then they have to find the alternative route which make the
increasing of the defect. Therefore, the warehouse cannot distribute
96
the units, the dealer sales activity also jammed, and also the total loss
was quite high until 15% to Semarang, Denpasar, and Mataram. 1.
Another significant impact of the increasing fuel price is the growing
price for rent or buy of a land. The inflation eventually impact the
motorcycle price for the end users.
Researcher: What about the economic disruption toward the company’s supply
chain process in the last 3 years? How significant is the impact?
Participant: The transportation provider did not want to deliver the units because
of the fuel price increasing. The cost and risk of transporting mass
units was increased while their service fee still the same. So, the profit
margin is very low.
Researcher: What about the regulation disruption toward the company’s supply
chain process in the last 3 years? How significant the impact?
Participant: The most disruption impact caused by the regulation is the changing
of ministry of transportation and the impact of autonomic government
regulation. The transportation minister was set the standard for the
truck, size, capacity, wide, and so on. In other side, the provider
usually increased their quantity of delivery to create more profit
margin. Then, they modified the width and size which is not precisely
same with the standard. Therefore, the police would caught them and
they have to pay some amount of fee to take the truck back. Another
case occured on the sea transportation. Another case is on March
2016, the Pontianak Government set a new regulation for the freight
forwarder. The government issue a regulation that allow the
transportation to open the container start from 8 pm in which before
they can open the container for motorcycle loading started at 6 pm.
The regulation is issued to achieve the efficiency of the port since the
type of the port is a bulk port which is different with the common port
located in most of the Indonesia port such as Jakarta, Surabaya, and
Makassar.
97
In this new regulation, the freight forwarder still can distribute the
motorcycle units to the Main Dealer warehouse. The unit would be
arrived at the warehouse by the latest at 12 pm. Even though, there is
additional fee for the man power, the main dealer is capable to
distribute to the dealer in the next day.
Later in October 2016, the Pontianak government update the new
regulation which stated the freight forwarder are allow to open the
container for motorcycle loading starting from 11 pm. The result was
paramount as the lead time of distribution is decreasing. The freight
forwarder will deliver the unit to the warehouse on the next day as
they will not reduce the profit margin because of the addition payment
for the driver. As a consequence, the dealer will receive the late and
longer time of the unit delivery that eventually will impact to the
customer satisfaction. Another imperative impact is that the company
have to pay another addition fee because the container have to be
storage in the port.
Researcher: How the company respond to the natural disruption on the Comal
Bridge case?
Participant: The trucks have to detour to the southern road before arrive on
Semarang. The detour affect to the longer distance of travel which
influence the consumption of fuel. Therefore, we have to increase the
cost of transporting. Moreover, the company also increase the
incentive for the driver if they want to deliver the mass product since
the condition at the event is 2 weeks before the religious holiday. They
needed to set the incentive because the transportation provider is not
only transporting Honda Motorcycle but also transporting the
competitor motorcycle. it will be a win-win solution since we will get
the all the motorcycle units delivered and the transportation provider
will get more incentive based on how much the motorcycle is
delivered. We have to maintain the trustworthiness to the
98
transportation provider. Since the transportation provider cannot
handle the mass distribution in two weeks, we also distribute the units
through another mode of transportation which is sea. Therefore, the
transportation provider is handling the units from the manufacturing
plants in Jakarta and West Java (Cibitung) to Tanjung Priok Jakarta
Port. When the units are arrived in Tanjung Emas Semarang Port, the
transportation provider will distribute it into the main dealer
warehouse in Semarang, Bali, and Mataram.
We also considered to used train to transport but the cost is high
because there are no one provider that manage the transportation from
the plants, train stations, to the main dealer. HSO have to use one
provider transport to the train, then pay the train logistic fee. The
company also have to pay the transportation provider from the
Semarang station to the warehouse. It is different with sea modes.
Researcher: How did you identified the risk?
Participant: In many ways, it could be from the regulation guideline from the
government spokesperson or by simply on the news. We also identify
the potential natural disaster for our several dealers or warehouse
location. Furthermore, we have calculate the financial impact of the
event on the certain network in the supply chain. So, if it happens we
could prioritize which is the best strategy to respond it.
Researcher: What about the respond toward the economic disruption on the fuel
price case?
Participant: We have the upper and lower limit deal to the transportation provider
and the contract for the warehouse rent. When the limit are passed
through, we have to adjust the transportation cost and communicate it
to the other division especially marketing and retail in order for them
to know the strategy that have to be implemented. The transportation
cost depend on the fuel. It contributes around 37-40 % to the cost
calculation. The distance and man power or labor also contribute to
99
the cost. Lastly, we evaluate the age of the truck as well as the
specification of the truck. If they are not meet the standard that have
been set, we will give them 2 warning letter and 1 letter to cut the
contract in which they have done it three times a row.
Researcher: How about the company response toward the regulation disruption?
Participant: We need to allocate the cost on order to remain the price still the same
to the end user. We usually analyze why one regulation was issued,
because it should be something that makes the port regulation is
changing for example. For the standard of the truck, we did not deal
very much with it. It is on the transportation provider since it is their
risks. In fact, the implementation of the regulation is not really well
implemented. However, my job is to communicate with them about
their problem to transport the units.
Researcher: Based on the response toward uncontrollable risks, I wonder how
effective the respond toward the disruptions?
Participant: The profit was slightly increased on those cases. It proven that is
effective enough.
Researcher: What kind of mitigation strategy you have used for managing the
uncontrollable risk in supply chain?
Participant: I think the best mitigation strategy is to analyze the potential
occurrence of the risks. So we could scrutinize it based on the impact
on the revenue of the company. We also do the analysis of the market
and we use many transportation providers in order if there is
disruption impacted on a provider, not all units will impacted by it.
Researcher: What is the possible improvement of the SCRM mitigation strategy
that you have implemented?
Participant: After we experienced the disruption caused by Comal Bridge, we
realized that TMS must be optimized. There is no communication of
information when the disruption occurs. We did not know where our
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units and what happened to them. The communication flow is
complex when it was happened.
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Interview III: Supply Demand and Warehouse Supervisor at Head Office of
PT Astra International – Honda Sales Operation
Researcher: Good afternoon, Mr. Teddy. First of all I would like to introduce
myself, my name is Ghilmansyah Amri from President University
majoring in Management-International Business and I would like to
conduct an interview with you regarding my skripsi writing. Could
you please describe your job as my first question?
Participant: I handle the daily activity warehouse which is the report of every main
dealer consist of the amount of unit on hand, defect, capacity, level
stock. The level of stuck will be fluctuated every day. Investment of
warehouse or new warehouse, based on the location, coverage sales,
and territory of dealer. It will be interrelated to the transportation cost.
So does the man power. I also manage the demand from the dealers to
the AHM supply.
Researcher: Have the company experience the natural disaster disruption toward
supply chain process in the last 3 years? How significant the impact?
Participant: In the warehouse itself, the warehouse experienced the leaked caused
by heavy rain. Fire on transportation pool which makes a short stock
on several types of motorcycle. And the impact of Comal Bridge
Collapse. The most significant impact is on the collapse because there
is no specific units that should be there in the warehouse until 1-2
weeks.
Researcher: Have the company experience the economic disruption toward supply
chain process in the last 3 years? How significant the impact?
Participant: The inflation affect the warehouse extension contract since the price is
increasing. Also, the strategy of HSO in the next 3 years is to open
several new dealers which need new warehouse. Because of the
inflation, the rent or purchasing price is higher than before. It also
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impact the labor on the warehouse. It impacts the increasing of
Operation Expense (OPEX)
Researcher: Have the company experience the government regulation disruption
toward supply chain process in the last 3 years? How significant the
impact?
Participant: I think there is no significant political or regulation disruption on the
warehouse network. However, there was an extension of road which
makes us to re arrange the scheme of the warehouse.
Researcher: How do you respond to the natural disaster disruption toward the
company supply chain process?
Participant: Since the warehouse have a role as the storage of the units which is
interrelated to the transportation network. In order to solve the
disruption event, we make a temporary warehouse near Semarang
after we scrutinized the financial impact if the units are not delivered
to Central Java, Bali, and Mataram.
Researcher: How do you respond to the economic disruption toward the company
supply chain process?
Participant: We handle that by prioritizing a longer deal contract in renting the
warehouse. It is a must because we will never know how much the
price in the next future. However, it based on the analysis of the
economic by logistic team, morning break, or in the economic forum
held at Indonesia. The period of the contract is also basically on the
impact of the revenue and cost when the cost of rent or buy is high.
Researcher: How do you respond to the regulation disruption toward the company
supply chain process?
Participant: For that case, I think it could be managed by the re scheme the
transportation schedule.
Researcher: How effective the respond toward the disruptions?
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Participant: There is no negative profit during the last three year. It should be
affective enough.
Researcher: What kind of mitigation strategy/tool you have used for managing the
uncontrollable risk in supply chain?
Participant: We do not use any tool to mitigate the risks. The most important part
to mitigate it is by knowing the disruption as soon as possible and
measure the financial impact toward the supply chain network. Hence,
when the event is occur, we could have meeting and scrutinize it to
make a proper response since the chain is affected one another. We
also have the WMS to implement the FIFO that will cut the good
issues lead time. The inventory level will be well monitored
Researcher: What is the main weaknesses of the mitigation strategy that you have
implemented?
Participant: I think the WMS could be optimized. Currently, there is no one single
place to gather all the report of the defect, report of stock on region,
warehouse queue and so on. The report is on the excel format. It will
take a long time to handle those report from 11 main dealers which
could be consist more than 30,000 units a month. Therefore, we could
know as soon as possible and anticipate when the level of stock is high
because of the disruption including the uncontrollable disruption.
Researcher: That was my last question. I thank you very much for the time.
Participant: You are welcome. Have a good day
Researcher: Have a good day.
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Interview IV: Support Sub-Department Manager at Head Office of PT Astra
International - Honda Sales Operation
Researcher: Good afternoon, Ms. Rani. I am Ghilmansyah Amri from President
University majoring in Management-International Business. I would
like to ask a couples of questions in the fulfillment of my skripsi
writing. May we proceed to the first question?
Participant: Good afternoon, Ghilmansyah. Yes, sure.
Researcher: Could you please describe your job description.
Participant: I handle the performance of sales of each month. It could be on key
unit volume which related to distribution and sales structure. The bad
performance of sales could be caused by the unavailable supply from
the manufacturer. I also handle the performance of the workforce and
dealers head. Another responsibility is to simplify the business
process on the field. So, it is interrelated to the upstream of the chain.
Researcher: Have the company experience the natural disaster disruption toward
supply chain process in the last 3 years? How significant the impact?
Participant: No significant impact that hit the sales directly. But it could be caused
from the previous chain. For instance, the collapsing of Comal Bridge
makes the end user have to wait for a longer time than before until the
unit arrived. However, there is no significant problem because the end
user is willing to wait for the delivery.
Researcher: Have the company experience the economic disruption toward supply
chain process in the last 3 years? How significant the impact?
Participant: There is no significant on sales directly. However, it will affect the
storage of the goods which relates to rent of warehouse or extend a
warehouse. It is related because I have to analyze and forecast the
sales and market until the next 1-5 year. The economic volatility will
affect the OPEX since the warehouse is one of the biggest contributor
to the OPEX.
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Researcher: Have the company experience the government regulation disruption
toward supply chain process in the last 3 years? How significant the
impact?
Participant: There is no significant impact on us. However, the domino effect will
be occurs if the regulation is issued on the logistic network.
Researcher: How do you respond to the natural disaster disruption toward the
company supply chain process?
Participant: I think we have done a similar response to all uncontrollable risks
including the regulation and economic disruption which is by make
the promotional event program to ensure the sales and price of unit.
We also ensure the brand of Astra motor by sending a volunteer to the
disaster’ place. In addition, we could make an event of motorcycle
trade in promotion if the disaster affect the end user.
Researcher: How effective the respond toward the disruptions?
Participant: The increasing of NPBT (Net Profit Before Tax) and increasing of
volume unit shown it is effective enough. Even though the target profit
is not accomplish, but it still increasing
Researcher: What kind of mitigation strategy you have used for managing the
uncontrollable risk in supply chain?
Participant: We identified the risk by mapping it and received the socialization
from the government. We also make feasibility study for it based on
the financial impact of the disruption. It is all based on the cost and
revenue to maintain the customer purchasing power to buy HSO unit.
Researcher: What is the main weaknesses of the mitigation strategy that you have
implemented?
Participant: Change management which is the socialization of technology to all the
workforce. Nowadays, we use the advancement of the technology to
ensure the smoothness of business process which including the supply
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chain operation. I think the human capital behavior is important to
support the business operation.
Researcher: Thank you for your time. I appreciate your kindness. Have a good day
Participant: No problem. Have a good day and goodluck!
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Interview V: Retail Marketing Department Manager at Head Office of PT
Astra International - Honda Sales Operation
Researcher: Good afternoon, Mr. Hasto. Allow me to introduce myself first, my
name is Ghilmansyah Amri, a student of President University
majoring in Management-International Business who want to conduct
an interview in partial fulfillment of my skripsi. Let we move into the
first question. Could you please describe your job?
Participant: Yes, sure. I am responsible to handle the sales strategy operation to the
end user on the 149 dealers in Indonesia. I have one of dealers head
on each dealer to ensure the end user will get the best service and
experience from Astra Motor.
Researcher: Have the company experience the natural disaster disruption toward
supply chain process in the last 3 years? How significant the impact?
Participant: There is no significant impact on retail itself, but we experienced it
because of the problem with logistic chain. If they have a disruptive
event, it usually affect us. On the Case of Comal Bridge, the units ware
late, and the cost is high.
Researcher: Have the company experience the economic disruption toward supply
chain process in the last 3 years? How significant the impact?
Participant: I think on the cost that affect the price to end user. The inflation cause
the increasing of operational expense which eventually affect the
price.
Researcher: Have the company experience the government regulation disruption
toward supply chain process in the last 3 years? How significant the
impact?
Participant: I think not directly affect the retail but we get the impact of it on the
logistic chain.
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Researcher: How do you respond to the natural disaster disruption toward the
company supply chain process?
Participant: Since there is no significant direct hit, we could collaborate with the
financial company to make a program in order to encourage the
purchasing intention. I think that is the response to face all the risk
since our indicator is to sell the unit. Therefore, it will be very
sensitive with the price. Our responsibility is to ensure the price is
worthy for the end user.
Researcher: How effective the respond toward the disruptions?
Participant: It is effective enough since the sales are on track with the target each
month for the last 3 years
Researcher: What kind of mitigation strategy you have used for managing the
uncontrollable risk in supply chain?
Participant: For retail, the dynamic of sales promotion is essential. Like what I
mentioned earlier, through the promotional program we could boost
the sales event on the economic crisis. Even though, the profit is not
really high but at least we sold the unit and we still got the profit
Researcher: What is the main weaknesses of the mitigation strategy that you have
implemented?
Participant: Since we are the last chain before the unit goes to the end user, there
should be an improvement of the recurring income sales which are the
workshop and spare part. We could boost the sales of the workshop
and spare part if the disruption affect the motorcycle sales. Therefore,
we could still get expected the profit margin.
Researcher: That was my last question. I really appreciate your time and kindness
to be my interviewee. Thank you and have a nice day
Participant: Glad to help. Have a good day and goodluck!
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Interview with Ms. Jentya at Head Office of PT Astra International – Honda Sales
Operation Indonesia in Sunter
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Interview with Mr. Toto at Head Office of PT Astra International – Honda Sales
Operation Indonesia in Sunter
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Interview with Mr. Teddy at Head Office of PT Astra International – Honda Sales
Operation Indonesia in Sunter
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Interview with Ms. Rani at Head Office of PT Astra International – Honda Sales
Operation Indonesia in Sunter
