a framework for the development of sustainable supply chain management for business sustainability...

Proceeding of Industrial Engineering and Service Science , 2011, September, 20-21

Copyright © 2011 IESS.

A Framework for The Development of Sustainable

Supply Chain Management for Business

Sustainability of Export-Oriented Furniture

Industry in Indonesia

(A Case Study of Teak Wooden Furniture in

Central Java Province)

Muh. Hisjam1; Adi Djoko Guritno

2; Hasanu Simon

3; Shalihuddin Djalal Tandjung

4

1,2,3,4Graduate School, Gadjah Mada University, Yogyakarta, Indonesia 1Department of Industrial Engineering, Faculty of Engineering, Sebelas Maret University, Surakarta, Indonesia [email protected]; [email protected]; [email protected]; [email protected]; [email protected]

ABSTRACT

Wooden furnitures are the biggest part of export furnitures from Indonesia and many people rely on this industry sec-

tor. There are many industries that produce wooden furnitures in Central Java Province. Many wooden furniture in-

dustries in Central Java Province are less competitive than the ones in other countries because of raw material scarci-

ty, inefficiency in operations management, and marketing problems. This paper proposes a framework for investigation

of problems regarding to: (1) sustainability aspects mapping of teak wooden furniture production and (2) promoting

some alternate solutions of research objective problems. This paper proposes an approach using Sustainable Supply

Chain Management (s-SCM) due to the characteristics of the problems that related to economic, social, and environ-

mental problems.

Keywords: wooden furniture industries, teak wood material, sustainability, sustainable SCM

1. Introduction

Wooden furnitures are the biggest part of export of furniture from Indonesia. About 30% of the exporting furniture s

from Indonesia are produced from Central Java Province [1]. The number of industries that related to producing

wooden furniture in Central Java Province are about 3568 industries [2]. In Central Java –one of the provinces that

have most furniture industries can be found- the industries face the same problems as other furniture industries in

Indonesia that their products are less competitive than furniture products from other countries because of raw ma-

terial scarcity, inefficiency in operations management and marketing problems.

After export log ban by Indonesian government in 1985, export furniture industry in Indonesia was growing

rapidly, and after ten years raises many problems, e.g. shortage of raw materials, the issue of deforestation and

ecological imbalance [3]. Lack of raw material logs continue to do so [4-5]. One of the causes of the problem of

shortage of wood raw material is due to the policy of Perum Perhutani that apply the rules of forest conservation

and preservation efforts [6]. Perum Perhutani as a state-owned forestry enterprise that managing teak forests in Java

cannot provide adequate amount of wood because of illegal logging. The peak occurred in the early reform in

1998-1999. Consequently Perum Perhutani ability to supply raw materials furniture continues to decrease. Standing

stock is also on the wane. The standing stock is 36.2 million m3 1998, 27.5 million m

3 in 2003 and 18.9 million m

3

in 2007. While the composition of the stands of teak in 2007 (18.9 million m3) dominated the young plants, namely

Class Age (KU) I and II, about 76% [7].

Raw material of furniture industry –wood-, is custodied from forest. Forest has economic, sosial, and

environmental values. Teak forest in Java island has long story in its role for prosperity of the comunity [8]. The

wood demand for the Central Java wooden furniture industry is estimated at 1.8 million m3/year and of which

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A Framework for The Development of Sustainable Supply Chain Management for Business Sustainability Of Export-Oriented

Furniture Industry In Indonesia (A Case Study of Teak Wooden Furniture in Central Java Province)

286

roughly 80% is teak [9]. In 2008, the supplies from Perum Perhutani were 228,059 m3, and from

Community/Private Forests were 1,248,140 m3 [2]. The remaining came from a few different sources such as illegal

logging from the Perhutani plantations, Indonesian outer islands and imports from other countries, namely Burma

and Thailand [9].

The lack of main raw material will lead to economic, social and environmental issues. It will increase the price of

the raw material. While the cost of raw material for furniture products is about 60% of total production cost [10].

Then it will reduce margin that received by furniture industry or it will increase the price of the products that will

reduce the competitiveness of the product. The lack will also threaten the social aspects. When price of the raw

material increasing, there will be a trend to minimize the labor cost or firing employees for efficiency reason. In

other case, when furniture industries go bankrupt due to inability to compete, there will be many unemployment.

The lack will also threaten the environmental aspects. The increasing price of the raw material will also motivate

for illegal logging and it will threaten efforts of Perum Perhutani to manage sustainable forest.

Preliminary studies in forestry and furniture industry have been conducted to support this paper. Hisjam and

Wahyudi [11] mapped the problems in wooden furniture related to sustainability and proposed a framework for

sustainable supply chain for furniture production. The scarcity of raw material becomes more serious when

considering forest and forest product certification. In reference [12], it is stated that Perum Perhutani faces many

problems to achieve forest product certification, because of economic and social aspects. Due to the difficulties

faced by Perum Perhutani, only a few of Forest Management Units of Perum Perhutani that hold forest certification.

Inefficiency in business operations is another important problem in the furniture industry [9]. In reference [6]

proposed that furniture industry should improve their work methods, streamline the production line and introducing

more efficient resource management, which would contribute not only to increased productivity and reduced costs,

but also toward great occupational safety and health in the workplace. Considering that cost related to raw material

is biggest part in furniture industry. A preliminary study has conducted by [13] and proposed a model for

minimizing costs in furniture industry related to the raw material.

The next important problem in the furniture industry is marketing problem [1],[9-10],[14]. Reference [10]

suggested that to compete in global market on the basis of quality, design and image. Using wood from a certified

source is an important part of changing the image of Indonesian wooden furniture products.

For solving the problems mentioned earlier, we propose sustainable supply chain management (s-SCM)

approach. Actually s-SCM is the development of Supply Chain Management (SCM) by adding social and

environmental objectives simultaneously [15-16]. Using this approach, the three goals are achieved simultaneously.

Because of the problems related to economic, social and environmental aspects, so S-SCM is the appropriate

approach to solve the problem. Besides there are many case studies that demonstrate the successful application of

s-SCM for solving the problem of material flow of a product that should consider the value of economic, social, and

environment simultaneously [15].

2. Wooden Furniture Industry Supply Chain

Wooden furniture industry supply chain begins with sourcing especially main raw material -wood- from forest in form

of logs. Then they will be transported to the warehouse or storage of logs and then transported to sawmill plant or man-

ufacturing plant. Sawmill plant produces boards or Rough Sawn Timber (RST) and will be sold to manufacturing plants

or wood stores. Manufacturing plants produce furniture and will be sold to local markets or for exports. It needs trans-

portation from manufacturing plant to local market or to destination country for exporting products. Every step of the

supply chain will affect to economic, social and environmental value. The flow of material, the involved, the main ac-

tivities and the main objective of furniture industry supply chain can be shown in Figure 1.

In the case study, the supply chain of teak wooden furniture industry supply chain, consist of:

Suppliers are community/private forests and Kesatuan Pemangkuan Hutan (KPH) of Perum Perhutani Unit I

Manufaturers are manufacturing plants (owned by Perum Perhutani or by private) that export their furniture

products

Customers are buyers, distributors, end users from country export destination, or their representatives in Indonesia



Copyright © 2011 IESS 287

Figure 1 Generic Wooden Furniture Industry Supply Chain

3. Sustainable Supply Chain Management

S-SCM is an approach that developed from SCM concept and added by social and environmental objectives simulta-

neously [15-16]. In reference [17] SCM is defined as a set of approaches used to integrate suppliers, manufacturers,

warehouses and stores so that goods are produced and distributed on the exact number, at exact location, and at the right

time to minimize overall system costs by meeting the requirements level service. S-SCM itself can be defined as the

management of material flow, information and capital and cooperation between companies along the supply chain while

achieving the objectives of the three dimensions of sustainable development, namely economic, environmental and so-

cial development based on needs arising from customers and stakeholders [16]. Many papers has discuss about this ap-

proach and successful implementation of this approach as shown in Table 1. In Table 1, there is a research gap. There

is no s-SCM models that can be used to help decision maker in teak wooden furniture industry for the need of business

sustainability and get the benefit in economic, social and environmental value simultaneously.

Table 1 State of The Art Related to This Paper

Publications Model Types Supply Chain Cycle Objectives

Conceptual Descriptive Prescriptive Procurement Manufacturing Distribution Economic Social Environmental

[18] V V V V

[19] V V V V

[16] V V V V

[20] V V V V

[21] V V V V

[22] V V V V

[23] V V V V

[24] V V V V V

[25] V V V V

[26] V V V

[27] V V V V

[28] V V V V V

[29] V V V V V V

Hisjam et

al. (2011) V V V V V V V



288

4. A Framework for Developing Sustainable Supply Chain Model in Teak Wooden Furniture Industri at Central Java Province

In this paper, we propose a framework of developing sustainable supply chain model that suitable to the problems in the

industries as shown in Figure 2. The objectives that we consider simultaneously are:

a. business sustainability,

b. maximize economic value,

c. maximize social value,

d. maximize environmental value.

So, we have to consider those objectives in relationships between main actors in the s-SCM. Generally there are two

relationships:

a. relationship between supplier and manufacturer,

b. relationship between manufacturer and buyer/customer.

In relationship between supplier and manufacturer, the objectives we proposed are:

a. ensuring the availability of raw material that needed by the industry to accomplish the objective of business

sustainability,

b. minimize procurements cost and related cost to accomplish the objective of maximizing economic value,

c. maximize social benefit of community around forest to accomplish the objective of maximizing social value,

d. maximize standing stock in forest to accomplish the objective of maximizing environmental value.

In relationship between manufacturer and buyer, we propose the objectives which are:

a. ensuring the availability of products suitable with the order of buyer to accomplish the objective of business

sustainability,

b. minimize total cost to accomplish the objective of maximizing economic value,

c. maximize safety of employees to accomplish the objective of maximizing social value,

d. minimize environmental impacts of the entire business processes to accomplish the objective of maximizing

environmental value.

5. Conclusions

The problems faced by wooden furniture industry, i.e. main raw material scarcity, inefficiency in business operations

and marketing problems are tried to be solved using s-SCM that try to increase economic, social and environmental

value simultaneously. This paper shows state of the art of research related to this paper and the approach that will be

used to solve the problems. At the end of this paper, we propose a framework as a research plan for solving the prob-

lems.

The approach we propose are:

a. Development of two models that covers the relationship between suppliers and manufacturers and between

manufacturers and buyers/customers that considers not only economic value but also social value and

environmental value. Considering the approach of s-SCM, it is necessary to create new agreement that meet the

expectations of the both stakeholders that considers all those values.

b. Integration of the two models will improve the manufacturers because the business processes in manufacturers

have to consider s-SCM approach due to the requirement of the both models.

6. Acknowledgements

The authors are grateful to Central Java Provincial Forestry Office and Perum Perhutani Unit I Cental Java for

supporting this research.



Copyright © 2011 IESS 289

Figure 2 Framework for The Development of Sustainable Supply Chain Model of Teak Wooden Furniture in

Central Java Province

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