The Influence of Internal Drivers and Environmental Drivers towards Supply Chain Management (SCM) Strategy, SCM Practices, Responsiveness and Implication on the Operational Performance of Organic Fertilizer Manufacturers in East Java, Indonesia

Abstract

The aim of this research is to formulate a theoretical model that explains causal links among supply chain drivers and operational performance by adding several SCM variables, namely strategy, practices and responsiveness into the links and empirically tests the model on organic fertilizer manufacturers in East Java, Indonesia. Provincial sample data that consist of 85 companies are analyzed using SEM by component-based approach, which is Generalized Structured Component Analysis (GSCA).

The result shows that internal drivers only have weak influence to the operational performance and environmental drivers do not influence it. Furthermore, SCM practice do not influence the operational performance. Nevertheless, the relationships between other variables hypothesized are found positively and significantly influence the operational performance. In order to compete in supply chain level, companies have to adopt the right SCM strategy and also build supply chain responsiveness. Both have important role as intervening variables to strengthen the weak or insignificant relationships. This research implication might limited for the types of industry in which the Government plays big role as one of the environmental drivers.

The organic fertilizer industry has to compete with chemical fertilizer products which have won the customer’s loyalty; and therefore the organic fertilizer manufacturers have to change their SCM strategy to become more responsive to the customers’ needs and requirements, also internally improving innovation aspect, particularly product innovation. The integration drivers are not directly related to performance, but rather have to be through SCM practices. Likewise, the SCM practices are not directly related to performance, but rather have to be through responsiveness. These research findings strengthen the strategic supply chain theory and the supply chain responsiveness theory.

Keywords: supply chain drivers, SCM strategy, SCM practices, responsiveness, operational performance, organic fertilizer manufacturers.