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Agriculture and Agricultural Science Procedia 3 (2015) 189 - 194
The 2014 International Conference on Agro-industry (ICoA): Competitive and sustainable Agro-
industry for Human Welfare
Productivity Improvement of Small Scale Medium Enterprises (SMEs) on Food Products: Case at Yogyakarta Province, Indonesia
Dewi Kurniawati*, Henry Yuliando
Department of Agro-Industrial Technology, University of Gadjah Mada, Jl Flora 1, Bulaksumur, Yogyakarta, 55281
Indonesia
Abstract
Small and Medium Enterprises have a central role for national economic. Unfortunately, it still has a domain of low productivity, as well as for SMEs on food products. This study is aimed to identify the factors that influence performance in correspond to increase the productivity of SME on food products. The analysis is based on a fuzzy DEMATEL and ANP as a hybrid MCDM. The objects are SMEs on food products located at Yogyakarta province, Indonesia. The result shows that the most critical factor of the SME performance is human resource. This finding also supports argument that non-monetary reasons play more important role than financial reasons.
© 2015 The Authors. PublishedbyElsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of Jurusan Teknologi Industri Pertanian, Fakultas Teknologi Pertanian, Universitas Gadjah Mada
Keyword: SMEs; performance; productivity; hybrid MCDM; fuzzy
1. Introduction
Small Scale Medium Enterprises (SMEs) have an important role Indonesian economic (Bhasin, 2010; Gunawan 2012; Hamdani, 2012; Indrawati, 2012; Pawitan, 2012; Setyaningsih, 2012). Sharman and Wadhawan (2009) stated that the importance of the SMEs sector is even recognized around the world because it can significantly improve the
* Corresponding author. Tel.: +6285780789695 E-mail address: dewikurniawati.didi@gmail.com
2210-7843 © 2015 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.Org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of Jurusan Teknologi Industri Pertanian, Fakultas Teknologi Pertanian, Universitas Gadjah Mada doi:10.1016/j.aaspro.2015.01.037
social and economic systems in a variety purposes. The increasing number of SMEs can support the economic to be stronger.
In Indonesia, SMEs have contributed over 75% of national income and occupied 97% national employment (National Cooperative Department, 2011). This number reflects that SMEs prosecute to be carefully developed due to wide variances of labor skill and technology adopted in contrast to the customer requirements over the products of food (Setyaningsih, 2012).
The question is what about Indonesia SME situation and how the performance work out. Taking into account this problem, it needs multi criteria to be considered. Hence, a multi-criteria decision making (MCDM) approach proper to be applied. A MCDM model has been widely applied to solve many multi criteria problems (Tsai et al 2011). Yang et al (2008) said if a MCDM is more suitable for evaluating and improving problems in the world than previously available methods.
According to Pribadi and Kanai (2011) the government of Indonesia needs to reformulate their policy in strengthening and regulating the small firms in Indonesia. The government should dedicate more effort to eliminate SMEs boundaries and decide the effective way for helping SMEs to develop their strengths and potentials (Irjayanti and Aziz, 2012). This statement briefly shows that there are several criteria that should be incorporated to delegate more productive SME in Indonesia. Therefore, this study is aimed to identify factors that significantly influence the performance of SME which responsible to increase the productivity. This research mainly focused on SME on food products located at Yogyakarta Province, Indonesia.
2. Methods
The analysis in this study combines Decision Making Trial and Laboratory (DEMATEL), and Analytic Network (ANP) as a hybrid MCDM model for evaluating and improving problems related to SMEs performance. A hybrid MCDM is not only dealing with problems of interdependence factors and feedback but also improves the normalized supermatrix to suit the real world (Tsai and Kuo, 2011; Yang et al, 2008; Huang and Tzeng, 2012; Liao et al, 2014).
DEMATEL was used to identify complex relationships and build a network structure among the factors, whereas ANP was used to determine criteria weights with dependence factors and feedback. On the other hand, fuzzy model can helps decision makers to reduce uncertain factors in the assessment, especially for qualitative factors. The correspondences employed for answering the questionnaire are experts in a related field.
The ANP method was used to determine the factors relative weights. The ANP includes all relevant factors and decision-making alternatives to form a network that incorporates feedback and interdependent relationships. Because of the interdependency, the factors that are less important individually might turn out to be more important when evaluated collectively.
This study used fuzzy technique to acquire the structure of MCDM problems. The fuzzy judgment was used to assess by the experts (decision makers). The fuzzy linguistic scale is described on table 1 and 2.
Table 1.Linguistic Scale and Triangular Fuzzy Number in Fuzzy DEMATEL
Linguistic term Influence score Triangular fuzzy number
No influence (No) 0 (0, 0, 0,25)
Very low influence (VL) 1 (0, 0,25, 0,5)
Low influence (L) 2 (0,25, 0,5, 0,75)
High influence (H) 3 (0,05, 0,75, 1)
Very high influence (VH) 4 (0,75, 1, 1)
Table 2.Linguistic Scale and Triangular Fuzzy Number in Fuzzy ANP
Linguistic Scale Triangular fuzzy numbers (l, m, u) Reciprocal
Extremely important (9) (8, 9, 9) (1/9, 1/9, 1/8)
Very important (7) (6, 7, 8) (1/8, 1/7, 1/6)
Important (5) (4, 5, 6) (1/6, 1/5, 1/4)
Slightly important (3) (2, 3, 4) (1/4, 1/3, 1/2)
Equally important (1) (1, 1, 2) (1/2, 1, 1)
3. Result and discussion
SMEs need to measure their performance to maintain their existence and development over the business. Mostly SMEs in Indonesia have a traditional way in terms of their production process, technology and marketing (Indarti dan Langenber, 2004 in Hamdani 2012). They face problems in quality of human resource, technology, knowledge, facility, capital access, imbalance competition, market access and information (Bhasin, 2010; Hamdani, 2012, Adiningsih, 2004, Indrawati, 2012, Tambunan, 2011).
In addition, mostly SMEs in developing country such as in Indonesia have a low penetration to develop their business. However, they need to increase the performance and to develop their business so that they will be ready to face globalization such as Asean Economic Communnity (AEC) 2015 (Hamdani, 2012).
Based on several literature reviewed it can be constructed that criteria which assumed to significantly influence the performance of SMEs on food products are listed on following Table 3.
Table 3. Factors that used to assess the SMEs performance
Clusters Factors
Production Resource A. Raw Material
B. C. Marketing and Distribution (Irjayanti, 2012; Bhasin 2010) Technology (Production Process)(Hamdani, 2012).
Human D. Motivation
Resource E. Education/experience (Hamdani, 2012; Chowdhury et al, 2013 )
Business Environment F. G. H. I. J. Partnership (Hamdani, 2012). Business Regulation and Restriction (Karpak and Topcu, 2010). Financial support (Hani et al 2012; Adiningsih, 2004; Karpak and Topcu 2010) Government Policy (Tambunan, 2011). Business Competition
(Karpak and Topcu, 2010; Hamdani, 2012)
3.1 Fuzzy DEMATEL
The assessment of interdependence relationship among the factors by decision makers (respondents) is the input of Fuzzy Model. The research framework is depicted on Fig. 1. The DEMATEL method gives a result of interrelationship among analysed factors.
References -Factors -FDEMATEL -FANP
Fffl l=h^r3B | I fflffl 3P
Fig 1. Research Framework
The threshold value is 0.27, which means not all factors could be converted at the impact-diagraph map. It can be said that any factor that equal or more that this threshold have a relation to others. The result of DEMATEL analysis is considered to build a networking model for fuzzy ANP as shown in Fig. 2.
(1) Impact Diagram Map among Clusters
(2) Impact Diagram Map for Productive Resource Cluster
(3) Impact Diagram Map for Human Resource Cluster
D. Motivation
E. Education/experience
A. Raw material
B. Marketing and distribution
C. Technology (production process)
(4) Impact Diagram Map for Business Environment Cluster
F. Partnership
G. Business regulation and restriction
H. Financial support
I. Government policy
J.. Business Competition
Fig 2. Impact Diagram Map among Clusters and in the Various Clusters
3.2 Fuzzy ANP
The input of Fuzzy ANP is the paired-ratio between considered factors. The development of paired-ratio matrix is based on fuzzy DEMATEL output. The weight is used to examine the crisis factors to improve SMEs performance. The recapitulation of local and global weights as can seen on Table 4. The global weights should be considered as interdependent relationship between factors, which are defined by crossing the interdependence matrix with weight local matrix of factors.
Table 4. Recapitulation of Local and Global Weight
Clusters Factors Local Weight Global Weight Priority
Raw material 0.263 0.070 9
Productive R pennrr.p Marketing and distribution 0.355 0.094 7
Technology (production process) 0.381 0.101 5
Human Motivation 0.518 0.166 1
Resource Education/experience 0.482 0.154 2
partnership 0.238 0.099 6
Business Business regulation and 0.016 0.007 10
restriction
Environment Financial support 0.193 0.080 8
Government policy 0.283 0.118 3
Business Competition 0.270 0.112 4
Global weight describes the priority or factors influence to improve SMEs performance. Table 4 also reflects the critical factors to improve SMEs performance which are motivation, education/experience, government policy, business competition, and technology. Meanwhile, factors that have weight 0.1 are assumed have a weak influence. It can be said that motivation is highly appreciated as a trigger to SMEs on food products to move forward by creating innovation. This is correspond to the motivation to have higher income, expense flexibility, flexibility in time spending, and to provide family security (Rachmania, 2012). Moreover, Wager and Ziltener (2008) argued that entrepreneurs or SMEs are motivated and self-realization and independency. They eager to enhance status income, economic contribution and its impact, upholding tradition and securing income. This motive influences the Indonesian SMEs performance as well. Their interest to have their own business through SMEs platform is because of income and self-independency.
Previous studies showed the relationship of education or experience and entrepreneurship. Educated personal have a strong passion to have high earning and choose self-employment to be independent in their human capital (Bhattacharjee et al, 2008).
Government, research centers, and universities should give a contribution in applying knowledge and know-how for SMEs. This could help SMEs to increase productivity, shorten time production, raise the quality, and able to compete. This finding gives argument that non-monetary reasons play a more important role than financial reasons. Based on Karpak and Topcu, (2010) The entrepreneur characteristics in SME as well as motivation, managerial
skills and technical know-how are influential factors related to performance. Similar with Anggadwita and Mustafid (2014), entrepreneurial aspect is one of critical success factors in running a business. Competence of human resource is important to face new challenges in market competition.
In fact, SMEs role for Indonesian economic is very tremendous, but government's policies and regulations are still need to be improved. Government should think seriously type of development programs and promotions as a strategic plan. However, Indonesia still face problem related to transportation system that influences the shipping cost (Irjayanti, 2012).
Indonesia has been involving free trade zone, so that SMEs are not only competing with local product but also with abroad product that to some extent have higher quality and cheaper. Products of SMEs are losing their competitiveness, especially in term of price and quality (Pawitan, 2012). Many SMEs have no ability to apply technology that can help them to have be efficient. This is mainly due to the lack provision and financial access for SMEs to adopt newer technology.
4. Conclusion
This study attempted to prioritize critical factors that influence SMEs performance. Motivation in entrepreneurship to work out in SMEs platform is believed to be the most influencing factor to the success of SMEs on food products in sustaining their businesses. Factors such as education, government policy, business competition, and technology are supporting factor that enable SMEs to enhance their competitiveness as well. The most critical factor of the SME performance is human resource. This finding argues that non-monetary reasons play more important role than financial reasons. The government needs to eliminate the boundaries and encourage the development of SMEs through supporting policies in financial access, facilities and infrastructure.
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