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Global Journal of Business and Social Science Reviewjournal homepage:www.gjbssr.org

GJBSSR, Vol. 1 (1), January-March 2015: 33-50

ISSN 2289-8506

Supply Chain Performance Measurement: The Case of a StateOwned Pharmaceuticals Company (BFM)

Andarini, D.1*, Adhiutama, A.2

1School of Business and Management, Bandung Institute of Technology, Jl. Ganesha No. 10,

40132, Bandung, Indonesia2School of Business and Management, Bandung Institute of Technology, Jl. Ganesha No. 10,

40132, Bandung, Indonesia

ABSTRACT

Objective The Purpose of this study is to identify Supply Chain Management and performancemeasurement in BFM, benchmarked with other Pharmaceutical companies, and to create solutions inimproving and developing Supply Chain Management using the Supply Chain Operations Referencemodel (SCOR). The Supply Chain Operations Reference Framework for supply chain collaboration(SCOR) model developed a set of performance metrics for collaboration, including reliability,flexibility and responsiveness, expenses, and assets/utilization.

Methodology/TechniqueThe methodology of supply chain research in BFM was surveyed by fieldobservation, interviews and research. Interviews were conducted to examine the main issues and a

hypothesis was tested by applying SCOR model, which also includes green SCOR model asconsideration of environmental management.

Findings This study found that problems arose in the Supply Chain Management of BFM are leadtime issues and low performance compared to the score of Pharmaceuticals industry. Environmentalmanagement could not be measured using SCOR metrics at Plan Source stage due to limited supplierof BFM.

Novelty SCOR model was developed performance measurement integrated the supply chainscorecard for process control and result control.

Type of Paper: Empirical

Keyword: Supply Chain Management; Performance Measurement; Indonesia Pharmaceutical

Industry; SCOR__________________________________________________________________________________

*Paper Info: Revised: December, 2014

Accepted: January, 2015

Corresponding author:

E-mail: [email protected]: School of Business and Management, Bandung Institute of Technology, Indonesia
http://www.gjbssr.org/http://www.gjbssr.org/


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1. Introduction

As the global economy continues to grow, a lot of companies must compete against oneanother in order to survive. A lot of industries adhere to create efficiency and effectiveness inthe global and highly competitive environment through integration of supply chain activities

and processes. Companies are no longer competing independently but to rely on their supplychain systems. Working together enables companies to create and capture mutual benefitsfrom matching demand with supply, which is known as collaboration.

The pharmaceutical industry has an important role of preserving human life. It is ahighly regulated environment. The industry has a long Research and Development periodwith a low probability of success for new product development. The growth of Indonesia's

pharmaceuticals industry in 2013 is projected to be not as strong as in last year due toincreasing production cost. Darojatun Sanusi, Executive Director of the Association ofIndonesian Pharmaceuticals Manufacturers said: "There are about two hundred pharmacyindustries in Indonesia". He predicted the pharmaceuticals industry will grow by 12 - 13 percent, compared with 2012's around 14 - 15 per cent.

This paper is conducted on one of Indonesia's Leading Pharmaceutical Manufacturers,BFM. BFM is the only manufacturer of international quality vaccines and anti sera inIndonesia. BFM has some competitive values, such as BFM is one of twenty-three companiesholding WHO's Pre-Qualification Certificates out of two hundred vaccine companies aroundthe world and also the only company which holds Pre-Qualifications in OIC Membership.BFM produces human vaccines such as DTP, TT, Polio, Measles, Hepatitis B, BCG, Flubio,DT, Td, and DTP-HB-Hib. BFM also produces intermediate product vaccines known as bulk.Some international manufactures produce vaccine using BFMs bulk. The biggest revenue ofBFM's company is from its bulk production, of which is 93 per cent is for Polio. Therefore,Its final product, Polio vaccine should also be managed. The other product that veryimportant is DTP vaccine. DTP is vaccines againts Diphtheria, Tetanus, and Pertussisinfections for children. In this regard BFM is the only producer in the world for DTP vaccine.Sales of BFM consists of domestics sales about 35% and export sales about 65%. The exportsales Division has important roles for BFM with sales increasing every year as illustrated inFigure 1 that showed the export products such as vaccines and its bulk.

Figure 1.Export Sales 2006-2011

Source: BFM Export Sales Internal Data


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Although companies have largely recognized the necessity of the Supply Chain Model andimpact of its performance, it is difficult for them to design a new supply chain with asystematic methodology. Furthermore BFM has unique products. BFM is a pharmaceuticalsfor biological product. The products can change quickly and adjust epidomiology. Integrated

supply chain is critical for BFM to excel against its competition. BFM should get out from itscomfort zone in this global competition as it is changing its company's vision in 2012 from"To become vaccine and anti sera producer of global competitiveness" to "To become aworld class vaccine and anti sera producer of global competitiveness". Likewise, BFM doesnot have performance measurement module to compete with others in the same industry.Supply chain performance is an assessment of overall performance of the supply chain stages(Chopra and Meindl 2001).

To measure, evaluate, and monitor the operation of the entire supply chain, variousperformance metrics have been developed. The appropriate performance metrics can be usedto evaluate the probability of success in achieving the target, to provide advice or correctivesuggestions to the organization, to provide a feedback system to the manager and to evaluatethe internal input and output (Tesoro and Tootson 2000). The appropriate actions based on

the performance evaluation will be difficult to take by managers, if the metrics within asupply chain lack consistency. Pittiglio Rabin Todd & McGrath and AdvancedManufacturing Research jointly formed the supply chain council (SCC) with over sixty fiveother enterprises in 1996. It launched the supply chain operations reference (SCOR) model tohelp companies conduct systematic analysis and promote communication among itsmembers.

SCOR is a hierarchical framework with KPIs in each level. Adoption of KPI helps anorganization to conduct scientific management and enables administration to be moreefficient. In addition, SCOR sets up a hierarchical system and points out the correspondingKPIs in each level of SCOR (Lee et al. 2012).

The SCOR model is a cross-industry, standard supply chain model that forms analyticaltools for the supply chain on the basis of process, performance evaluation and best practice.The SCOR model provides companies with a picture of how the processes improve from startto finish (Kevan 2005) and supports cross-industry diagnostics since its standardized process,definitions and metrics fit all types of business operations and environments (Bolstorff 2002,2003b). The aim was to establish basic business rules for setting up supply chains. The SCORmodel addresses supply chain management by allowing companies to examine and measuretheir supply chain processes, to determine where weak links exist and to identify possibleimprovements (Harelstad et al. 2004). Huan et al. (2004) analysed the strengths andweaknesses of the SCOR model and discussed how it could be used to assist managers forstrategic decision-making. There is also environmental consideration to the SCOR Model.Environmental management is a growing concern in industry, specifically, the green supplychain. By integrating environmental and supply chain management, GreenSCOR provides afoundation for improving operational activities while reducing environmental impacts (SCC

2008).SCOR helped define the supply chain challenge, define strategic requirements, measure

the size of the issues, and identify necessary changes to improve performance. Beyond thetactical focus, SCOR also helped transform organizational thinking from event-drivenreflexes to strategic, integrated team behaviors that balance customer requirements with theinternal need for cost and asset management. In other words, SCOR helped these companiesto achieve a core competency in solving supply chain problems and achieving goals (Bostorffand Rosenbauw 2007; Hwang et. al 2011).

This paper is proposing the use of this Supply Chain Operations Reference (SCOR)model to identify the problems of BFM's supply chain management by analyzing, measuring

performance, and benchmarking with other Pharmaceutical companies, in order to give

solutions in improving and developing BFM's Supply Chain Management and alsointroducing environmental considerations to the SCOR Model.


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The paper is organized as follows. First, literature review is outlined followed by theapplications of the SCOR Model review prior to research on designing supply chaincollaborations. The next setion describes analysis and findings indicated some business and

performance issues followed by discussion section. Last in the paper, the concluding sectiondescribes key results and summarizes the answer of the research goal. The limitations of this

paper and discussions of several concepts requiring future study follow.

2. Literature Review

The supply chain operations reference model (SCOR) is a reference model used as a tool tomap, benchmark, and develop the operations of supply chains (SCOR 2006; SCC 2008).Under SCOR, supply chain management is defined as these integrated processes: PLAN,SOURCE, MAKE, DELIVER, and RETURN from the suppliers' supplier to the customers'customer, and all aligned with a company's operational strategy, material, work, andinformation flows as illustrated in Figure 2.

Figure 2. Supply Chain Operations Reference ModelSource: Supply-Chain Council, 2001

Five Players are involved in the supply chain system : the organization itself, suppliers of theorganization, suppliers of suppliers, customers of the organization, and customers of thecustomers. These five players have their respective SCOR, and each SCOR contains thefollowing five behaviours (Lee 2007) :

Plan : a process that balances request of demand side and supply side and has smoothsub-process for sourcing, making, and delivery activities under the best plan

Source : a process that purchases materials and services in order to fulfill plans orpractical needs

Make : a process that transfers to finished goods in order to fulfill plans or practicalneeds

Deliver : A process that transport finished goods so as to fulfill plans or pratical needs Return : Collection of return products due to various reasons

There are six levels within the SCOR model, (SCC 2006; Xelocity 2005). Level one is the toplevel that deals with process types and defines the six key management processes the supply

chain is based on, which are planning, sourcing, making, delivering, returning and enabling.The objectives of the business organization should be established carefully at this level. Leveltwo is the categorization of core processes. Level three contains process elements that


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describe every activity clearly and provide an insight into the operation of a supply chain.Although levels four, five and six are not defined here, they should be defined and describedaccording to the actual situation. Level four defines specific supply chain management

practice that is aimed to achieve competitive edge, which is also called task. Level fiveinvolves the planning of activities within each task, while level six describes the rules foreach activity.

SCOR provides companies with a basic process modeling tool, an extensive benchmarkdatabase, and guidelines on how to measure the supply chain operations. SCOR could beused in any industry and for any supply chain issue. Huang et al. (2005) described the

benefits of using the SCOR model in AVON, LEGO and Siemens Medicals. An integratedanalytic hierarchy process and pre-emptive goal programming based multi-criteria decision-making methodology for the SCOR model performance metric was developed to take intoaccount both qualitative and quantitative factors in supplier selection (Wang et al. 2004).

Green SCOR is a modification of the original SCOR model. GreenSCOR modifies theexisting SCOR structure to include environmental processes, metrics, and best practices.Green SCM recognizes the disproportionate environmental impact of supply chain processesin an organization. The end result is a more efficient and less expensive operations

environment. Suppliers are asked to provide evidence of their operations meeting relevant toenvironmental requirements and, in some cases (Toyota and Ford for example), evidence ofISO14001 certification (SCC 2008).

Supply chain collaboration is when two or more companies work together to achievecompetitiveness and a higher profit margin than can be achieved by acting alone(Simatupang, and Sridharan 2002). Supply chain collaboration introduces the need to payspecific attention, to the understanding of collaboration in order to prepare the chain membersto create collaborative efforts successfully (Lambert et al. 2004).

3. Research Method

Data collection gathered from field through observation, record study and interview. The

observation was done from October 2012 to January 2013. According to the data of year2011, the largest percentage of sales is export sector that have 62.59 per cent of all sales.Export Sales sector was chosen as a focus for this study.

From Annual reports 2011, net sales grew by 9.79 per cent or equivalent to Rp. 1.33trillion and the largest contribution was viral vaccine and its bulk sales of 70.52 per cent thatammounted to Rp. 936.97 billion. Consequently, the selected product for this research ischemical raw material of product Polio Bulk, Polio Vaccine, and DTP Vaccine. DTPvaccine is also as the choice of product for the research based on explanation on introductionsection. BFM is the only producer of DTP vaccine in the world. From UNICEF forecast,worlds demand in 2013 for DTP is about 1,200,000 vials. As the single producer, BFMshould be able to present the desired product or the appropriate product that achieve thewillingness of end consumers, and able to supply goods to market quickly and timing.

Due to time constraint, this research had several limitations. The scope is limited only tothe operations aspect. Financial aspect is not applicable. BFM has not made the calculation ofall cost related to the operation of supply chain. BFM has not also done the asset managementefficiency that includes fixed and working capital.

In gathering data, firstly, it was begun with collecting problem by study the wholesupply chain in BFM. An in-depth interview is conducted with related key persons such ashead of section, manager and senior manager. This is to investigate the current situation ofthe company. An attempt is made to model the supply chain based on SCOR model. Main

problem was indentified here.

Secondly, data and information were collected. The type and techniques of data collection areas follows:

Primary Data: The data were obtained from interviews and field observation. Dailyoffice activity was observed to find out how the company managed the supply chain. The


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aim of interviews and observation of daily activity in each department were to get aclear explanation and information of work flow process, job description, issues or

problems that were occured, expectation to the other department , and their performance.

Secondary data were obtained from the company's documents and also a literaturereview. The literature can be about theories that are related to research, reports of

scientific research that are relevant to the research, and also some information frominternet. The company documents that were relevant to the research were Business flow,Standard Operation Procedure (SOP), Company annual report, Job description andCompany Profile.

After collecting data, the data was analyzed with SCOR Model by assessing the condition ofthe company and benchmark to other companies. Some possible solutions were proposed.

The performance system approach strives for designing and implementing co-performance metrics as the main concern of collaboration. The Supply Chain OperationsReference Framework for supply chain collaboration (SCOR) model also developed a set of

performance metrics for collaboration including reliability, flexibility and responsiveness,expenses, and assets/utilization

To gather data of supply chain in BFM, Supply Chain Operations Reference (SCOR) wasused. Steps in collecting data based on three levels of SCOR Metric.

SCORMetrics Level One : Process Type LevelLevel One defines the number of supply chains and how their performance is measured.Supply chain management is defined as these integrated processes: PLAN, SOURCE,MAKE, DELIVER, and RETURN.

SCOR Metrics Level TwoThis level is derived from level one. Level two is the categorization of core processes.This level settles on more concrete strategies for each player in supply chain. The secondstep, level two of the SCOR model, is to configure the supply chain. This step maps thehigh-level material flow in both as-is and to-be states. The material flow may rationalizeforecasted items and organize the supply chain stocking strategy

SCOR Metrics Level 3This level is derived from level two, which elaborately describes steps in level two. Levelthree contains process elements that describe every activity clearly and provide an insightinto the operation of a supply chain.

4. Analysis & Findings

The analysis and findings based on collecting data for three levels of SCOR Metric:

SCORMetrics Level One

Findings:

From SCOR Metrics level One some business issues were discovered. Most of the issuesare about lead time and quality, shown in table 1.

Table 1. Main Issue of SCOR Metrics Level one

Main Issue Measurement

PLAN Stock Out and Wrong Planning Lead Time

SOURCEPunctuality of product arrival & requested deliverytime too short

Lead time


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MAKEQuality of product, production planning, lateness ofraw material, needs of workers

Lead Time and Quality

DELIVERLow response to customers, shifting of the shipmentplan and shipping quality

Service level, lead time and quality

RETURN Quality of product Quality

Level one of the SCOR model is used as the basis to analyze competitive situations, whichincludes competitive performance requirements, performance metrics, and scorecard and gapanalysis. The research began by studies the whole chain in BFM. Interviews were conducted

based on SCOR Model. Several issues were gathered from interviews. Supply Chain in BFMincludes five stages which is the role of planning in the PPIC (Production Planning andInventory Control) Department.

Main issues faced by the Planning stageare stock issues and wrong planning. One ofstock issues is shortages that might be caused by the governments new regulations,unpredictable problems in customs clearances, and the request of specific tailor made

products. The wrong planning often happens when sales forecasts do not match with the finaloutcome. Therefore, Planning plays an important role.

Main issues faced by the Sourcing stage aredelay of arrival product and short lead timein delivering material. Sourcing stage are running by Procurement Department which doingthe job based on its requested order from PPIC. The main issues found are Punctuality ofdeliveries leads to the same issues as shortages stock. Lead time issues makes no supplierable to provide the requested delivery time.

Main issues faced by Make stageare quality of product, lateness of raw material, andproduction planning. The issues of product quality such as packaging, label, titre, releasecertificate, and lateness of raw material are caused by Planning or Sourcing stage, while atthe end, it could alter production from its planning.

Then, there are some issues regarding to delivery. The Delivery stageis run by the Salesand Distribution Department. The main issues are low response to customers, shifting ofshipment plans, and product shipping quality. The low response to customers caused by someinternal problems of product readiness that depend on raw materials, scheduled productionand QC time is measured by service levels. Shifting of shipment plans might be caused by thelateness of issuing the Letter of Credit. Some issues that occured for product shipping qualityare damage packaging, temperature indicator errors, and the alarming of the temperatureindicator. Lastly, BFM does not have a returns policy but only a replacement policy throughinvestigation of the complaint.

From the several issues above, the focus of the study was selected. Planning Source wasselected in order to improve the supply chain especially on availability of raw material toensure production as scheduled, which in turn, improves responses to customers. The quality

of raw material is a primary influence on the effectiveness and efficiency of the productionprocess (Monezka et.al 2002).

Considering the integration between SCOR model and environmental management, there aresome environmental practises that have been done in BFM in each stage that is driven from

potential impact in environment. Unfortunately, green supply chain in BFM is initiated fromoutside the supply chain divisions, usually by the Environmental, Health, and Safety (EHS)Division.Table 2 showed BFM Environmental Management System.

Table 2. BFM Environmental Management System

Potential impact Environmental Practise

PLAN Plan to minimize energyconsumption and hazardous

-

Each department should have program to minimizeenergy consumption


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Potential impact Environmental Practise

material usage -Check the hazardous material

-Preparing the personal protective equipment

Plan the handling and storageIncoming Department identify and sort the material

when receive the goods and to be put in warehouse

Plan for the disposal

-There is Standard Operation Procedure (SOP) tomanage waste

-Each department responsible to manage waste inthe first stage (pre-treatment)

SOURCE

Select supplier withenvironmental records

-There is an SOP for assesing and selecting supplierincluded questionaire of environmentalmanagement system as a data base for suplliersprofile

Select materials, packagingand delivery requirement

considering environment

BFM has not done this requirement to the supplier

MAKE

Schedule production tominimize energy consumption

-There is timer control in the cooling system

-Production process optimalization in minimizingproduct defect such as personal qualification,machine, tools, process and room validation.

Manage waste during process

-There is technology to reuse water from production

-Each Department should do disinfection whilemanage waste

Manage emisions-Monitoring and measurement of environmental,

Health and Safety

DELIVER Manage emisions -

Transportation should pass the emission test

As mention above, Planning Source was selected as the focus of the study. To be consideredsome of raw materials are tailor made which means supplier makes the product based onBFMs request andnot for mass production. Therefore, there are only few suppliers or singlesupplier that could provide the material. Although, the supplier is more than one, the rawmaterial usually has different results. In this matter, Production Department should dorevalidate, means BFM cannot directly move from one to the other supplier. Choosingsupplier is not a simple thing; it is through some stages, such as clinical trial and validation. Itcould take years to get qualified supplier. Re-validation process is also needed when suppliersdo change on their specification.

In this case, environment records of the supplier is only for selected term. Not allsuplliers should have Environmental Management System (EMS). BFM only use EMS as arules to select supplier which is related to a project or hazardous material. Furthermore,

percentage of suppliers with an EMS or ISO 14001 certification as metrics could not be usedin Plan Source Stage at this moment. Below study, BFMs KPI do not include EMS.

BFM's KPI of Procurement Department can be seen on table 3. There are threeindicators. The first indicator is Lead time to issue PO not more than fifty days since the notereceipt received in Procurement. Second, Lead time to issue L/C is a hundred days and thethird is incoming material should be twenty days from the received of import document. Asshown on table 3, all targets were reached for company's Key Performance Indicator (KPI).


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Table 3. BFMs KPI

KPI BFM StatusActual

PerformanceTarget

Lead Time to issue PO 50 Days 100% 95%

Lead Time to issue L/C 100 Days 100% 95%

Incoming material20 Days from receiving Import

document100% 95%

Internal KPI is very important to measure the work performance internally in Procurement. Itcan be seen that the set value of the target is under its capability. The target of the KPI looksgood. There is no challenge to achieve a better target, or the KPI might not matched with the

problem.

Besides internal KPI, to measure the performance, scorecard analysis is used. Then,BFM's performance score is compared to the score of Pharmaceuticals and general industry

performance for each metrics. Top level SCOR metric focus on five performance attributes,as follows (Bolstorff and Rosenbaum,2007):

Reliability: the performance related to the delivery,i.e.,whether the correct product(according to specifications) is delivered to the correct place, in the correct quantity,at the correct time, with the correct documentation and to the right customer.

Responsiveness: the speed at which a supply chain provides the products tocustomers.

Flexibility: the agility of a supply chain to respond to market changes in demand inorder to gain or maintain its competitive advantage.

Cost: involves all the costs related to the operation of a supply chain. Asset management efficiency: the efficiency of an organization in managing its

resources to meet demand. This includes the management of all the resources of fixed

and workingcapital.In this research, the data is applicable only for external metrics. As mentioned before,

the scope is limited only to the operations aspect. Financial aspect is not applicable. BFM hasnot made the calculation of all cost related to the operation of supply chain. BFM has not alsodone the asset management efficiency that includes fixed and working capital.

In this scorecard analysis, process control scorecard (Table 4) is compared to the resultcontrol scorecard (Table 5). Process control scorecard is the scorecard between ProcurementDepartment and suppliers. Result control process is the scorecard between ProcurementDepartment and PPIC Department. The result control process scorecard is used to identifywhether Procurement Department can fulfill orders for its customers, PPIC Department. TheScorecard is breakdown for each product and can be seen in table 4 and 5. As information,

the value of performance metrics such as parity, advantage, superior are taken from PMGliterature for several metrics of pharmaceuticals and chemicals industry. Other metrics aretaken from PQM Consultant literature as the value for all industry.

Table 4. Supply Chain Scorecard and Gap Analysis (Process Control)

Performance VersusCompetitive Population

External

Overview

Metrics

SCOR Level 1

Metrics

Actual

Polio Bulk

Actual

PolioVaccine

Actual

DTPVaccine Parity Advantage Superior


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DeliveryPerformance/

Quality

DeliveryPerformance toCommit Date

33.33% 84.38% 67.65% N/A 79% 99%

Fill Rates 0% 15.28% 5.23% 94% 96% 98%

Perfect OrderFulfillment 50.00% 57.64% 52.61% 80% 85% 90%

OrderFulfillment Lead

Time65 days 94 days 100 days 7 Days 5 Days 3 Days

Flexibility &Responsivene

ss

Supply ChainResponse Time

104 days 136 days 144 days82

Days55 Days 13 Days

ProductionFlexibility

N/A N/A N/A N/A 30 Days 6 Days

Table 5. Supply Chain Scorecard and Gap Analysis (Result Control)

Performance VersusCompetitive Population

External

Overview MetricsSCOR Level 1

Metrics

ActualPolioBulk

ActualPolio

Vaccine

ActualDTP

VaccineParity Advantage Superior

DeliveryPerformance/

Quality

DeliveryPerformance toCommit Date

33.33% 33.33% 29.41% N/A 79% 99%

Fill Rates 0% 15.28% 5.23% 94% 96% 98%

Perfect OrderFulfillment

50.00% 57.64% 52.61% 80% 85% 90%

OrderFulfillmentLead Time

65 days 94 days 100 days 7 Days 5 Days 3 Days

Flexibility &Responsiveness

Supply ChainResponse Time

104 days 136 days 144 days 82 Days 55 Days 13 Days

ProductionFlexibility

N/A N/A N/A N/A 30 Days 6 Days

As shown in table 4 and 5, it could be analyzed that the Incoming Planning, scheduled by the

PPIC Department should be discussed further. This is due to the fact that the ProcurementDepartment of Polio Bulk can only achieve 33.33 per cent to the commited date as shown in


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table 5. As well as, the delivery performance to the committed date from the supplier is alsolow, only 33.33 per cent as shown in table 4. From Table 4, it could also be analyzed that thesuppliers delivery performance of polio vaccine is high, at about 84.38 per cent. But thedelivery performance for the controlled result is still low as shown in table 5 due to the duedate of supplier stated on PO is the maximum amount of days to complete their delivery, notthe delivery schedule required from the PPIC department. It could also be analyzed that the

suppliers delivery performance of DTP vaccine is on average about 67.65 per cent and thedelivery performance for the controlled result is only 29.41 per cent as shown in table 5.

In this score card, fill rates is measured by comparing quantity and time of deliverymaterial with quantity and time of schedule planning. Fill rates between ProcurementDepartment with supplier and Procurement Department with PPIC Department has the samemeasurement. The planning of delivery should have known by supplier once they receiverequest for quotation, but BFM could not complaint due to it is not stated details on PO. It isonly stated the due date of supplier to deliver the product. The fill rates of all product are alsolow.

Perfect Order Fulfilment is measured from the number of orders fulfilled with theappropriate quantity, documentation, quality and punctuality. The quality and documentation

of incoming material for the three products in years 2009-2012 have 100 per centperformance rate, but the quantity and punctuality is calculated same as fill rates as above.Therefore, the result of Perfect Order Fulfilment is still low.

Order Fulfilment Lead Time is measured from PO date until goods received, which havesame calculation for both process control and result control. The earliness or lateness ofincoming material is defined as a failure because the earlier delivery could cause problemsfor inventory and late delivery could cause problems for production. When compared withthe Pharmaceuticals industry, the difference of Order Fulfilment Lead Time is severe. Mostof suppliers of the source products are overseas manufacturers. They also do not do source tostock but they do source to order.

Supply Chain Response Time is the time needed to procure material since receipt notefrom PPIC Department received until the incoming material which has same calculation for

both process control and result control.

As a result of Scorecard analysis, BFM has low performance compared to the otherPharmaceuticals and Chemicals companies. The performance is also under the par score. Inthe first stage, BFMs target is to achieve the advantage score, where BFM has theopportunity to improve about 46 per cent.

SCOR Metrics Level Two

Findings:

Figure 3 shows BFM's SCOR Metric Level two which is the categorization of core

processes was conducted. Level 2 processes are described as planning, execution and enable.Each execution process has different capability to respond to the customers orders. In BFM,the execution process includes Source to Stock (S1), Source to Order (S2), Make to Stock(M1), Make to Order (M2), and Deliver to Order (D2).


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Figure 3. BFM's SCOR Metric Level 2

The as-is supply chain flow is configured in Figure 4. This level settles strategies foreach player in supply chain. In BFM, Source should be managed. Source Department in BFMdoes procurement based on PPIC requested orders in the form of receipt notes. In this matter,the first thing that should be considered is Planning. From findings in SCOR Metrics levelone, Plan Source (P2) was selected as the focus of study. Then, the core process wascategorized in level two. Plan Source is categorized as Source to Stock (S1) and Source toOrder (S2). The red circle in Figure 4 of BFM's Supply Chain shows the root of the problemin the Supply Chain of BFM.


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Figure 5 explains the process of procurement from the Local Supplier in BFM. The processincludes the role of the Senior Manager and Manager of Procurement, Board of Directors,Corporate Secretary, Incoming Material Section (under PPIC Department), Auction Team &Procurement Committee (for procuring above one billion), and two sections (sub department)in the Procurement Division such as Administration and Local Procurement.

There were several issues both in administration and procurement section. Some issuesfaced by the Administration Section are overloaded purchase receipts which depend on thesenior manager as final decision, time consumption in quotations that could be caused byappointing new suppliers or lack of information in note receipts or no lead time for thecorporate secretary to number and date the quotation from the supplier, several thresholds indrafting PO, and no lead time for the supplier in issuing a bank guarantee. Issues in theProcurement section are incomplete information, no guidelines in making Owner Estimatesfor new orders, bid evaluation, and winner determination. All these issues are timeconsuming.

Issues for the manager and senior manager are some provisions in appointing suppliers,unpredictable amount of time in price negotiation, and time consumption of PO approval,especially PO that needs the signatures of the Board of Directors.

Several issues faced by the Incoming material section when receiving goods arecompleteness of documents, the timeliness, and product quality and quantity.

Main issues in level three can be concluded as high workload, not clear defined duties,and lead time. These occurred due to the fact that there was no supply chain performancemeasurement to analyze the effectiveness and reduce problems in the procurement process.

5. Discussion

The main purpose of this research is to examine the problems of BFM's supply chainmanagement. From Analysis and Findings of the preceding section, it was identified thatSource in BFM should be managed. The first thing that should be considered is Planning.Plan source should be managed to improve the supply chain especially on availability of rawmaterials to ensure the production schedule, which in turn , improve the response tocustomers .

BFM should focus to analyze the suppliers of raw materials since the due date onPurchase Order (PO) is often exceeded. Some suppliers cannot commit to their promises. Inthis case, the Procurement Department have difficulty to control its processes.

Procurement Department should also review the delivery terms on Purchase Order thatshould be stated in detail in the delivery schedule. The Procurement Department shouldnegotiate with the supplier for the incoming planning from the PPIC Department and also the

possibility to commit to the date of incoming planning.

The major findings are discussed as follows. Firstly, lead time issues that could be aguideline for managers to make strategic decisions in solving lead time problems, such asorganizing the persons in charge, maintaining Service Level Agreement (SLA) betweendepartments, and developing collaborations with suppliers.

Managers should define duties clearly with specialized personnel in order to solve leadtime issues because it is not efficient or practical to have all purchasing personnel responsiblefor every task within each group (Monezka et.al 2002). Then, the process betweendepartments should align with the business Service Level Agreement in order to solve leadtime, (PQM Consultant 2012). At the end, collaboration with suppliers should be developeddue to variants of a supply chain process driven by a seamless information system includequick responses, vendor-managed inventory (VMI), efficient-consumer-response, and CPFR(Barratt and Oliveira 2001).

Secondly, low performance issues could be a basic action for managers to build specific

performance measurements, and create cross-functional collaborations. Specific performancemeasurement that contains metrics will also drive performance (PQM Consultant 2012). It


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could be employed by managers to control and monitor the plan of action from the businesssolution implementation plan. Metrics can be used as a language to create cross-functionalcollaboration that should be considered into Service Level Agreement in delivering highquality services (Tjosvold 2013) and metrics can be functioned as a bridge in negotiation

processes and resource deployment in cross company collaboration and integration as acooperative strategy to create mutual benefits by matching demand with supply order and

prepare the chain members to create collaborative efforts successfully (Spekman et al. 1998;Fisher 1997; Lambert et al. 2004). Collaboration with supplier can be developed bydeveloping EDI and VMI, creating real time visibilityand monitor suppliers performance and

build e-procurement.

Thirdly, wide gap issue could be used by managers to identify the position of their owncompany in the similar industry. The gap could be reduced by improving the performancediscussed above. Supply chain performance is evaluated within the context of the competitiveenvironment (PMG 1999). Organizations are seeking to improve their supply chain's

performance faster, cheaper, and more reliable. On the other hand, the strategic decision isbeing used by the managers to select suppliers. A trend that is affecting purchasing right toselect suppliers is the use of teams to make buying decisions (Monezka et.al 2002). Suchteams would still feature the involvement of personnel with purchasing expertise. For

instance, Croxton et al. (2001) propose eight key supply chain processes including customerrelationship management, supplier relationship management, manufacturing flowmanagement, demand management, order fulfillment, new product development andcommercialization, and returns management.

The implementation plan should be divided into two processes. Those are initiation planand business solution implementation. Initiation plan is started from planning and organizing.The next step is to start the project and identify problems with the SCOR Model. The businesssolution implementation plan is also divided into two processes, collaboration with suppliersand collaboration within departments. Collaboration with suppliers has advantages anddisadvantages. The advantages are developing mutual trust, developing responsibility between

parties, etc. The disadvantages are difficult to have complete information sharing betweensupply chain partners due to lack of trust, limited interest by supplier, etc. Collaboration withindepartments also has advantages and disadvantages. These advantages are developingunderstanding within departments and achieve service level agreements. The disadvantagesare meetings could be running over time and the possibility of departments not beingconsistent with the SLA.

The Business solution implementation plan is divided into three planning horizons, suchas short-term which is one until six months, medium-term which is about one year, and long-term which is about two years.

6. Conclusion

In conclusion, Supply Chain Operations Reference (SCOR) model helped measure the size ofthe issues, identify necessary changes to improve performance, define the supply chainchallenge by benchmarking with other Pharmaceuticals companies, and define strategicrequirements.

First, supply chain management in BFM has main issues in lead time, which isindentified as a constraint in building the supply chain in BFM. Second, performancemeasurement integrated from the SCOR metrics are very low for both the supply chainscorecard for process control and result control. The process control score card compared tothe result control scorecard shows that the result control process was not achieved, due to thelow result in the process control scorecard. Supplier's performance on committing todeadlines, fill rate, order fulfillment, and flexibility and responsiveness were still low. Thisfinding could guide managers to do an analysis of situations faced by suppliers. Most ofsuppliers in BFM procure from overseas suppliers. Strategic decisions can be made by going

directly to local suppliers. Third, benchmarked with other Pharmaceuticals companies, theperformance gap was moderately wide. BFMs performance was compared to the best in itsclass in the Pharmaceuticals and Chemicals industry. Fourth, it is important to create


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solutions in improving and developing Supply Chain Management in BFM by developingcollaborations with suppliers, and also within departments, and controlling and monitoring

plans of action through integration scorecard reviews and gap analysis for process and resultscontrol. Considering the integration between SCOR model and environmental management,there are some environmental practises that have been done in BFM. Although, supplierswith an EMS or ISO 14001 certification could not be used as metrics in Plan Source Stage at

this moment due to only few suppliers or single supplier could provide the material that BFMneed.

Based on the conclusion of this research, some recommendations could be made in orderto improve BFM's Human Resource capability on sourcing and negotiating, purchaseresearch that assesses suppliers and developes material forecasts, and regulates sections toupdate new regulations in procurement to reduce lead time.

Practical implications are divided into three planning horizons such as short, mediumand long term and two collaborations such as the collaboration with suppliers and thecollaboration within departments. Information sharing which often improves performanceamong chain members (Lee et al. 1997; Lee 2000; Lee and Whang 2000) is done bycollaborating with suppliers such as communicate production issues to suppliers for the short

term, while the medium term done by sharing forecasts and historical data and understandingabout the effect of lateness of raw material to communicate production issues, andcollaborating within departments such as create SLA to identify critical points and buildSales & Operations meetings for the short term, while SLA is assessed in the medium term,and Sales & Operations meetings could be continued in the medium and long terms.

Aligning with the limitations of the research, there are some opportunities for the furtherresearch that could be recommended in order to develop the measurement of supply chainmanagement such as developing the measurement of the internal metrics by providingfinancial aspects, analyzing the bullwhip effect, and building the CPFR in collaborations withcustomers.

7. References

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