Determination of International Logistics Policy on GCSM Performance and World Class SME Capabilities: The Indonesian Case

Journal of World Trade Studies Volume 8, Number 1, 31 July 2023, 22 pages The Impact of International Logistics Policy on GSCM Performance and World-Class SME Capabilities: A Case Study on Indonesia Research Article The Impact of International Logistics Policy on GSCM Performance and World-Class SME Capabilities: A Case Study on Indonesia Muhammad Alfarizi¹, ¹ Department of Management, BINUS Online, Bina Nusantara University Received 9 October 2023; Revised 3 June 2024; Accepted 27 June 2024; Published Online 31 August 2024 Abstract Globalization has encouraged Indonesian Small and Medium Enterprises (SMEs) to accelerate their business capabilities to be able to enter the global market and enhance Indonesia’s creative economy. Logistics governance becomes crucial, because penetrating the international market requires a standardized logistics system and high environmental policy compliance. This study aims to analyze the sustainable supply chain capabilities of Indonesian SMEs, and how improvements can enhance Indonesia’s SMEs towards a world-class standard. It focuses on four out of 13 dimensions: international logistics, traditional logistics, provision, and inventory. This study uses a survey-based quantitative approach through purposive sampling of SME owners in Indonesia. The data from 113 respondents who participated by filling out an online questionnaire were analyzed using Structural Equation Modelling-Partial Least Square (SEM-PLS). The results showed that traditional logistics significantly affected SME inventories and the internationalization of their logistics. Good inventory management affects the ability of SMEs to supply goods or services. International logistics has an impact on the efficiency of supply chain management, which has the potential to increase global market access. Green Supply Chain Management (GSCM) has been growing in importance, affecting the efficiency of sustainable supply chains and SMEs’ capabilities to compete globally. GSCM efficiency can optimize resources, reduce environmental impact, and increase the competitiveness of SMEs in the global market. By implementing GSCM, SMEs can be innovative and strong in global competition. Keywords: Traditional Logistics; International Logistics; Green Supply Chain Management; World-Class SME Capabilities Introduction Significant changes in the global market, such as the involvement of communications, transportation, and other opportunities in the value chain, has raised awareness on the importance of globalization in supporting corporate growth. In the past, the international market prioritized large companies. However, with more open trade and manufacturing, transportation, as well as the development of communication, opportunities are increasingly opening up to Small and Medium Enterprises (SMEs) at the global level. Involvement in international markets is believed to help SMEs thrive through exports, technology adoption, and international operations. Globalization of the world economy creates opportunities for developed and developing countries to prosper through global trade. SMEs can engage in global business through the globalization of production and marketplace, reducing trade barriers between countries. 1 Journal of World Trade Studies Volume 8, Number 1, 31 July 2023, 22 pages The Impact of International Logistics Policy on GSCM Performance and World-Class SME Capabilities: A Case Study on Indonesia Indonesia has great export potential through its natural resources, including oil and gas. In February 2023, Indonesia's export value had reached US$ 21.40 billion from the oil and gas sector (Harini et al., 2023). However, there is still an opportunity to increase exports to earn a higher income. SMEs in Indonesia play an important role in the economy, contributing 60.5% to the Gross Domestic Product (GDP) and absorbing 96.92% of the workforce. Unfortunately, the globalization of Indonesian SMEs' is still low due to limitations in export capabilities. Indonesian SMEs often face challenges in meeting international export standards due to limited technological incorporation, insufficient infrastructure, lack of access to finance for necessary upgrades, and inadequate understanding of global market demands, quality standards, and compliance requirements. In 2020, SME exports were only 14.37% of total non-oil and gas exports, increasing slightly to 15.69% in 2021. This figure is far below the average of Asia Pacific countries, which is around 35% (Handoyo et al., 2021). The government has supported SMEs in exports through various policies such as export-oriented credit financing, exhibition facilities, design development, services to business actors, market information, technical support, and promotion (Ginting, 2015). Initiatives for Micro, Small, and Medium Enterprises (MSMEs) include the 'Gerakan Nasional Bangga Buatan Indonesia (The National Movement of Proud of Indonesian Products)' , aiming to drive digitalization for offline MSMEs and enhance national branding of flagship MSME products across various marketplaces. Additionally, the Omnibus Law on Job Creation includes policies to support and facilitate MSME product exports by providing customs incentives for export-oriented MSMEs, easing the import of raw materials and auxiliary materials, and ultimately facilitating their export. However, SMEs need further support from the government because of their smaller size, limited capabilities, and higher vulnerability compared to large companies. This is important for SMEs to understand the international market and play a role in it. In addition to export and networking aspects, the internationalization of SMEs involves extensive activities. In this process, supply chain management is the key to influencing the success and competitiveness of international businesses. A good supply chain strategy helps SMEs meet global challenges, increase efficiency, and operate in international markets sustainably (Cagri Gurbuz et al., 2023). However, the negative impact on the environment is very important in SME operations, especially on pollution and plastic waste. Pollution comes from production waste, gas emissions, and hazardous chemicals. If not managed properly, pollution from SMEs can harm the environment and public health. In Indonesia, waste statistics show that plastic waste ranks second in quantity (5.4 million tons per year or 14% of total waste), surpassing paper waste which now ranks third (3.6 million tons per year or 9%) (Karjoko et al., 2022). Indonesian SMEs must reduce waste that adversely affects the environment in their business operations. Several studies have shown that supply chains have an important role in the success of global businesses (Amankwah-Amoah et al., 2022; Wajdi et al., 2020). Although the logistics design process for SMEs is not too complicated, when put in the context of internationalization, the complexity of raw material supply and product distribution be (...truncated)