Purchasing Operation System of General Merchandise Store Division a Case Study at Pt Hero Supermarket Tbk

PURCHASING OPERATION SYSTEM OF GENERAL MERCHANDISE STORE DIVISION A CASE STUDY AT PT HERO SUPERMARKET TBK

Gerry Jonathan Prasetya

014201100127

A skripsi presented to

Faculty of Business President University

In partial fulfillment of the requirements for

Bachelor Degree in Economics Major in Management

January 2015

PANEL OF EXAMINERS APPROVAL SHEET

The Panel of Examiners declares that the skripsi entitled “PURCHASING OPERATION SYSTEM OF GENERAL MERCHANDISE STORE DIVISION A CASE STUDY AT PT HERO SUPERMARKET TBK” that was submitted by Gerry Jonathan Prasetya majoring in Management from the Faculty of Business was assessed and approved to have passed the Oral Examinations on January 27, 2015.

Ir. Erny E. Hutabarat, MBA

Chair – Panel of Examiners

Ir. Yunita Ismail Masjud, M. Si

Examiner I

Filda Rahmiati MBA

Examiner II

SKRIPSI ADVISER RECOMMENDATION LETTER

This skripsi entitled “PURCHASING OPERATION SYSTEM OF GENERAL MERCHANDISE STORE DIVISION A CASE STUDY AT PT HERO SUPERMARKET TBK” prepared and submitted by Gerry Jonathan Prasetya in partial fulfillment of the requirements for the degree of Bachelor in the Faculty of Business has been reviewed and found to have satisfied the requirements for a skripsi fit to be examined.

I therefore recommend this skripsi for Oral Defense

Cikarang, Indonesia, January 19, 2015

Acknowledged by, Recommended by,

V. Jajat Kristanto SE., MM., MBA Filda Rahmiati MBA

Head, Management Study Program Advisor

iii

DECLARATION OF ORIGINALITY

I declare that this skripsi, entitle “ PURCHASING OPERATION SYSTEM OF GENERAL MERCHANDISE STORE DIVISION A CASE STUDY AT PT HERO SUPERMARKET TBK”, is to the best of my knowledge and belief, an original piece of work that has not been submitted, either in the whole or in part, to another university to obtain degree.

Cikarang, Indonesia, January 19, 2015

GERRY JONATHAN PRASETYA

ABSTRACT

Through a qualitative research, the focus of this research is to describe the purchasing operation system of General Merchandise Store Division a case study at PT. Hero Supermarket Tbk. The researcher uses the theory from Miles and Huberman model as references to get data analysis for the data verification. For the analysis the researcher uses SWOT analysis theory and Key Performance Indicator analysis. In the retail business environment, there are thousands types of goods to be sold to the market, it raises an issue on the efficiency of the purchasing operation system, certainly the retail company need to have a good purchasing system. The researcher got the conclusion that the purchasing operation system of PT Hero Supermarket Tbk work efficiently since they purchasing operation system has flow chart or standard operating procedure to run their purchasing activity. They used System Applications Products retail system for monitoring inventory from all store and distribution center. Keywords: Purchasing, Retail, General Merchandise Store Products, SWOT Analysis, Key Performance Indicator, PT Hero Supermarket Tbk

ACKNOWLEDGMENT

First of all, the greatest gratitude is expressed to my precious God for the blessings, wisdom, and perseverance that He has bestowed upon me to complete and submit this thesis within the short period of time. I would like to thank my beloved family, my inspiration – Papa, Mama, my brother Julius Ryan Karsten and my sisters Agnes Christabella and Kezia Sharon Christabella for their caring, love, and support with care and love throughout my life and the completion of a successful thesis. I believe that without them, I am nothing.

An extension of my deepest gratitude goes to PT Hero Supermarket Tbk, for believing in me and in this research. Special thanks to Ms. Yaya as a General Manager of General Merchandise Store Department and also Ms. Elsiana as a Store General Manager of Giant Bintaro.

Appreciation in particular is imparted to Mr. Orlando Santos, Mr. Irfan Habsjah, and Ms. Filda Rahmiati whom I regard as the most understanding lecturers in the world. I would surely not have been able to persevere without your strong support and confidence of my capabilities. You have sacrificed a great deal of time for an abundant amount of advice during the writing process.

To all the International Business students batch 2011, especially Kartika, Giovanni, Andri, Darren, Jonathan, Nashrullah,ardisa. To all my Viva La Vida entrepreneurship team. To all my first year dorm mate, D5 family. Finally last but not least, to friends whose name cannot be written one by one on this list, I would like to say thank you.

TABLE OF CONTENTS

PANEL OF EXAMINERS ...... ii APPROVAL SHEET ...... ii SKRIPSI ADVISER ...... iii RECOMMENDATION LETTER ...... iii DECLARATION OF ORIGINALITY ...... iv ABSTRACT ...... v ACKNOWLEDGMENT ...... vi TABLE OF CONTENTS ...... vii LIST OF TABLES ...... x LIST OF FIGURE ...... xi LIST OF PICTURES ...... xii CHAPTER I ...... 1 INTRODUCTION ...... 1 1.1 Background of Study ...... 1 1.2 Problem Identification ...... 4 1.3 Statement of the Problem ...... 5 1.4 Research Objectives ...... 5 1.5 Definition of Terms ...... 6 1.6 Scope and Limitation ...... 10 1.7 Research Benefits ...... 10 1.7.1 Researcher ...... 11 1.7.2 President University...... 11 1.7.3 PT. Hero Supermarket Tbk ...... 11 1.7.4 Future Research ...... 11 CHAPTER II ...... 12

vii

LITERATURE REVIEW ...... 12 2.1 Supply Chain Management ...... 12 2.1.1 Competitive Advantage within Supply Chain ...... 16 2.1.2 Purchasing ...... 17 2.1.3 Importing ...... 22 2.2 General Merchandise Store Products ...... 24 2.3 Previous Research ...... 26 CHAPTER III ...... 28 METHODOLOGY ...... 28 3.1 Research Method ...... 28 3.1.1 Case Study ...... 29 3.1.2 Triangulation ...... 30 3.2 Research Framework ...... 31 3.3 Data Analysis ...... 32 3.3.1 Data Reduction ...... 32 3.3.2 Model Data (Data Display) ...... 33 3.3.3 Conclusion Making and Verification ...... 33 3.3.4 SWOT Analysis ...... 35 3.3.5 Key Performance Indicator ...... 35 3.4 Research Instrument ...... 36 3.5 Data Collection Technique ...... 37 3.5.1 Primary Data ...... 37 3.5.2 Field Work ...... 38 CHAPTER IV ...... 39 ANALYSIS OF DATA ...... 39 4.1 Company Profile ...... 39 4.1.1 Vision, Mission, and Objective ...... 41 4.1.2 Organization Structure ...... 43

viii

4.2 Data Analysis ...... 44 4.2.1 Purchasing Operation System ...... 44 4.2.2 Data Result Analysis (General) ...... 57 4.2.3 Data Result Analysis (Purchasing Operation System of General Merchandise Store Division) ...... 64 4.2.4 Key Performance Indicator for Purchasing Operation System for General Merchandise Store Division ...... 74 4.3 Interpretation of Result ...... 80 CHAPTER V ...... 82 CONCLUSION AND RECOMMENDATION ...... 82 5.1 Conclusion ...... 82 5.2 Recommendation ...... 84 5.2.1 PT Hero Supermarket Tbk ...... 84 5.2.2 Future Researcher ...... 84 REFERENCES ...... 85 APPENDIX ...... 88

LIST OF TABLES

Table 3-1 Interview Details...... 38 Table 4-1 Budget and KPI of PT Hero Supermarket Tbk (GMS Division) ...... 75 Table 4-2 Result of Budget and KPI of PT Hero Supermarket Tbk (GMS Division) 79

LIST OF FIGURE

Figure 1-1Sales in Modern Retail (Indonesia) ...... 2 Figure 2-1Basic Distribution Center Operations ...... 21 Figure 2-2Product Category of General Merchandise Store Products at PT Hero Supermarket Tbk ...... 25 Figure 3-1 Research Framework ...... 31 Figure 3-2M& H‟s Component of Analysis Data ...... 34 Figure 4-1 Organization Structure of PT Hero Supermarket Tbk ...... 43 Figure 4-2 Flow of Local Purchase Type A ...... 49 Figure 4-3 Flow of Local Purchase Type B ...... 52 Figure 4-4 Flow of Import Purchase ...... 53

LIST OF PICTURES

Picture 2-1 Supply Chain Management Process ...... 12 Picture 4-1 Hero‟s Group Companies...... 41 Picture 4-2 Barcode Handling Terminal Scanner...... 46 Picture 4-3 Supplier Registration Book ...... 46 Picture 4-4 Delivery Order form ...... 47 Picture 4-5 Supplier Registration Book ...... 50 Picture 4-6 Delivery Order form ...... 50 Picture 4-7 Order Form ...... 54 Picture 4-8 Delivery Order Form ...... 55 Picture 4-9 Proforma Invoice Form ...... 55 Picture 4-10 Picture of Hero Supermarket ...... 59 Picture 4-11 Hero Supermarket ...... 59 Picture 4-12 Total stores of PT Hero Supermarket TBk ...... 60 Picture 4-13 Ace Hardware ...... 70 Picture 4-14PONGS Home Center ...... 701 Picture 4-15 AEON Supermarket ...... 72 Picture 4-16 Save Max Supermarket ...... 72

xii

CHAPTER I INTRODUCTION

1.1 Background of Study

In the face of competition among companies, one of the ways that company can be taken is to improve the quality and service that is supported by the existence of a good procurement system. To produce a good procurement system and integrates well, one of them is to create an effective system of purchasing. Mostly, many people are unaware of what purchasing is all about. Purchasing is the term used in industries, commerce, public corporations to indicate the act of and the financial responsibility for procuring material, supplies and services. It can simply describe as the process of buying. Purchasing is the most important activity in the retail business industry; because without purchasing how the companies can sell their product without buy the product first. According to Monczka (2009) said that the strategic purchasing function of an organization is important to secure and organize the supply of materials. Talking about the procurement system will not be separated with the right system of purchasing. A good system of purchasing can provide competitive prices through quotes from suppliers, good control in the course of the buying process, oversee and guide the implementation and selection of suppliers who really have the competence and reliability in terms of price, time and quality offered.

In the retail industry today requires companies to be able to survive and compete with other companies. To be competitive in the retail industry, company or organization must be able to empower and optimize all available resources to the company's survival. One of the companies that are able to survive in the retail industry is PT. Hero Supermarket Tbk.

PT Hero Supermarket Tbk is one of the largest retail companies in Indonesia which has followed the changes that meet the demands of globalization in meeting the daily needs of the community, to provide comfort, care, and quality goods. It is name has been known in the hearts of the people, especially in Jakarta and surrounding areas. With the coming on of supermarkets, Hero Supermarket should continue to evaluate the development of the retail supermarket business, in order to make Hero Supermarket always be in demand and be visited by the public.

Nowadays, the economic growth in Indonesia is experiencing growth and progress quite rapidly. Especially in retail sector and shopping centers shows significant progress and make a positive contribution in the economic recovery of Indonesia, it can be seen from the sales of modern retail business. The figure 1-1 shows the expansion sales of the modern retail business industry that always growing up in every year.

Figure 1-1 Sales in Modern Retail (Indonesia)

Source: Euro monitor

Retail generally divided into two, that is traditional retail business and modern retail business. The definition of traditional retail is retail simple, the place is not large, the goods to be sold are not many, the management system is simple, does not offer the convenience of shopping and still have bargaining process with the merchant. While modern retail on the contrary, offers a broad, goods to be sold are many, well managed management systems, offering the convenience of shopping, and the price is fixed.

In many big cities in Indonesia like Jakarta, where modern retail business is very growing rapidly, there are so many modern retail companies such as Hero Supermarket, Carrefour, Giant Supermarket, Lotte Mart, Hypermart, Superindo, and many more. Too many retail company said that only his company the one who representative with the low prices, based on that it causing so tight competition among businesses. Moreover, Indonesia has become a profitable market for foreign modern retailers. The potential market is large enough considering the population of Indonesia is the fourth largest in the world. The retail industry also has a very important function for the Indonesian economy, especially the Indonesian people. Retail industry as an industry put them selves as second highest in Indonesia employment after agriculture industry. This indicates that many people are dependent on the retail industry.

According to Heizer and Render (2005) companies need to consider the problem of the supply chain to ensure that the supply chain support corporate strategy. If the operation management function supports the overall corporate strategy, the supply chain is design to support operations management strategy. Facilities and costs necessary to meet the need of consumer, with the aim of achieving the minimum cost and maximum service levels are all considered in supply chain management.

Retailing is concerned with product availability and retailers must be concerned with the system of product and through their companies in order to make products available to consumers (Spark, 1998). Inside the retail business environment, there are three types of products that PT Hero Supermarket Tbk has, those are fresh products which means all the goods or products that need refrigerator to keep the goods. Second type is grocery products, grocery products divided into two, first called food, and second called non food, the meaning of grocery products is all the goods or products that no need refrigerator to keep the goods. Third is a general merchandise store product which means any non-food or non-grocery products. There are thousands types of goods to be sold to the market, especially General Merchandise Store Products, certainly the retail company need to have a good purchasing system. Because of that, the researcher would like to do a research about “PURCHASING OPERATION SYSTEM OF GENERAL MERCHANDISE STORE DIVISION A CASE STUDY AT PT HERO SUPERMARKET TBK”.

1.2 Problem Identification

This study is focusing only on retailing industry. Based on the background above, the researcher wants to know how retail company manage and improve their purchasing operation system since PT Hero Supermarket Tbk has thousands types of General Merchandise Store Products, it raises an issue on the efficiency of the purchasing operation. However, to make product available to consumer‟s retailers need a good purchasing system.

1.3 Statement of the Problem

The researcher aimed to see the purchasing operation system of general merchandise store division a case study at PT. Hero Supermarket Tbk, researcher has more focus to answer the following questions.

1. What type of the purchasing operation systems that PT Hero Supermarket Tbk has? 2. Does the purchasing operation system of PT Hero Supermarket Tbk Efficient? 3. Does PT Hero Supermaket Tbk improve their purchasing operation system?

1.4 Research Objectives

This research was prepared as an analysis to discover and explain the following issues:

1. To find out the purchasing operation system of General Merchandise Store division at PT. Hero Supermarket Tbk. 2. To find out the purchasing operation system at PT. Hero Supermarket Tbk efficient or not. 3. To find out what strategy of PT. Hero Supermarket to improve their purchasing operation system.

1.5 Definition of Terms

Barcode Handling Terminal (BHT) : A tools to scan the goods that using barcode.

Dematic Approach :Dematic provides intra-logistics solutions for apparel manufacturers/designers, wholesalers and retailers, ranging from small specialty boutique companies to large global corporations, thereby supporting low, medium, and high volume distribution requirements.

Distribution : The movement of goods and services from the source through a distribution channel, right up to the final customer, consumer, or user, and the movement of payment in the opposite direction, right up to the original producer or supplier.

Distribution Center : a set of products is a warehouse or other specialized building, often with refrigeration or air conditioning, which is stocked with products (goods) to be redistributed to retailers, to wholesalers, or directly to consumers.

General Merchandise Store : Defined as retail stores that sell a number of lines, such as dry goods, apparel and accessories, furniture and

home furnishings, small wares, hardware.

Hs Code : HS Code stands for Harmonized Commodity Description and Coding System. This is the common standard worldwide for describing the type of commodity. Every commodity that enters or crosses most international borders has to be declared to customs by means of this code. This helps in standardizing the codes worldwide.

Import : A good or service brought into one country from another. Along with exports, imports form the backbone of international trade. The higher the value of imports entering a country, compared to the value of exports, the more negative that country's balance of trade becomes.

International Trade : The exchange of goods and services between countries. This type of trade gives rise to a world economy, in which prices, or supply and demand, affect and are affected by global events.

Merchandise : The activity of promoting the sale of goods at retail. Merchandising activities may include display techniques, free

samples, on the spot demonstration, pricing, shelf talkers, special offers, and other point of sale methods.

Purchasing :Theactivity of acquiring goods or services to accomplish the goals of an organization.

Retail :The sale of goods and services from individuals or businesses to the end- user. Retailers are part of an integrated system called the supply chain. A retailer purchases goods or products in large quantities from manufacturers directly or through a wholesale, and then sells smaller quantities to the consumer for a profit

System Applications Products :A German software company whose products allow businesses to track customer and business interactions. SAP is especially well-known for its Enterprise Resource Planning (ERP) and management programs.

Supplier : A party that supplies goods or services. A supplier may be distinguished from a contractor or subcontractor, who commonly adds specialized input to deliverables.

Supply Chain Management : Entire network of entities, directly or indirectly interlinked and interdependent in serving the same consumer or customer. It comprises of vendors that supply raw material, producers who convert the material into products, warehouses that store, distribution centers that deliver to the retailers and retailers who bring the product to the ultimate user. Supply chains underlie value-chains because, without them, no producer has the ability to give customers what they want, when and where they want, at the price they want. Producers compete with each other only through their supply chains, and no degree of improvement at the producer's end can make up for the deficiencies in a supply chain which reduce the producer's ability to compete.

System : A set of detailed methods, procedures and routines created to carry out a specific activity, perform a duty, or solve a problem.

1.6 Scope and Limitation

In every research, the scope and limitation are require to be set in order to create the outcome of the research to be more specific and relevant to the most current situation in the particular field of study. Scope is the extent of the area or subject matter that something deals with or to which it is relevant. Limitation is the act of allowing only a specific quantity of something. And therefore, the researcher has set the scope and limitation of this study in which will be clarified below.

In this study research, the researcher will discover and gather the assessment and also opinion from the employee of Pt. Hero Supermarket Tbk by interview, asking question and request data about the purchasing operation system of PT Hero Supermarket Tbk. The researcher collects all the data from the company which is PT Hero Supermarket Tbk, article, journal, and the other research that has done before. The researcher scopes the observation only on Hero Supermarket and Giant Supermarket because they are in the same line business. The researcher limit the observation only on purchasing operation system of General Merchandise Store Division of PT Hero Supermarket Tbk and other explanation about receiving process at Distribution Center of Pt Hero Supermarket Tbk, However, the researcher should make it and get done this research process completely.

1.7 Research Benefits The main purpose of this study is to give information about what are the purchasing operation systems that PT Hero Supermarket Tbk used and to know whether the purchasing operation system of General Merchandise Store Division at PT Hero Supermarket Tbk is efficient or not. This research is expected to give contribution for several people or organization as listed below:

1.7.1 Researcher

This research is expected to implement the theory studied in the class, especially in Supply Chain, Logistic, and Operation Management. It is expected that researcher gain a significant amount of knowledge in terms of purchasing operations.

1.7.2 President University

The researcher hopes that this research will become a valuable addition to the university library. Thus, hopefully this research can become a helpful reference for the university students to want to study about purchasing operations.

1.7.3 PT. Hero Supermarket Tbk

The benefits for PT. Hero Supermarket Tbk is that PT Hero Supermarket Tbk can compare with their Standard Operating Procedure regarding the purchasing operation system and receiving process at Distribution Center that PT Hero Supermarket Tbk used is it run well or not.

1.7.4 Future Research

Furthermore this research is expected to give the future researcher additional information or references that might be useful in handling similar problems or topic that might occur in the future in terms of purchasing operation system, especially in retail business.

CHAPTER II

LITERATURE REVIEW

2.1 Supply Chain Management

Now days, operation process in supply chain is becoming the most important activity in many company, in here operation process means that the design, improvement, and the management of the transformation processes that create value by converting inputs, such as raw materials, labor, and/or customers into outputs, such as goods or services. According to Douglas M. Lambert (2001) Supply Chain Management is the integration of key business processes from end user through original suppliers that provides products, services, and information that add value for customers and other stakeholders. Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet customers‟ requirements. Below is the picture of Supply Chain Management Process.

Picture 2-1 Supply Chain Management Process Source: careeranna.com

By seeing the picture above, there are several main activities in the supply chain management process (John Snow 2011), those are:

1. Serving Customers.

Everyone who works in supply chain must remember that they select, procure, store, or distribute products to meet customer needs. Storekeepers do not store drugs just for the purpose of storing, they store products to ensure that commodity security exists for every customer to obtain use the health or good commodities when they need them. In addition to serving the needs of the end customer, the customer seeking health or good services, each person in the process is also serving the needs of more immediate customers.

2. Product Selection.

In any retail business industry, they exactly have a division called merchandise division (MD), in here the main job of merchandise division itself is to find a product to be sold, MD should think that which product that good and profitable to be sold, etc. MD should consider about the regulation in that country, for example in Indonesia all goods should have a Indonesian National Standard (SNI). So, the supply chain requirements must be considered during the product selection.

3. Quantification.

After products have been selected, the required quantity and cost of each product must be determined. Quantification is the process of estimating the quantity and cost of the products required for a specific program or service, and to ensure an uninterrupted supply for the program, determining when the products should be procured and distributed.

4. Procurement.

After a supply plan has been developed as part of the quantification process, quantities of products must be procured. The systems or programs can procure from international, regional, or local sources of supply or they can use a procurement agent for this logistics activity.

5. Inventory Management: Storage and Distribution.

After an item has been procured and received by the system or program, it must be transported to the service delivery level where the client will receive the products. During this process, the products must be stored until they are sent to the next lower level, or until the customer needs them. Almost all businesses store a quantity of stock for future customer needs.

According to Bozarth&Warsing (2009) Supply chain management can be divided into two major areas of study, namely upstream supply chain and downstream supply chain. These complexities are closely correlated with the level of the efficiency of managing the supply chain. (Isik 2011) argues that complexity can be reduced by an effective management that provides costs reduction within supply chains.

The meaning of upstream supply chain is the process of supply chain toward the supplier and for downstream supply chain is the process of supply chain toward the customer. In here if the members at the supplier‟s end are called upstream members, while the members at the manufacturers or buyer‟s end are called downstream members. The upstream supply chain refers to the movement of a number of elements, such as material goods, to the supplier that is the source of the product supply chain and for downstream supply chain refers to movement in the direction of

14 the customer, or even the consumer. When supply chain members share information, downstream members can share information with upstream members or upstream members can share information with downstream members.

In this research, the researcher will discuss on purchasing operation system, talk about purchasing it will related to the supplier, because the main activity in purchasing is to buy goods from the supplier, that‟s why the researcher will gathering the theory more on upstream supply chain, because based on the definition upstream supply chain is the process of supply chain toward supplier. According to Swaminathan (1995) said that the impact of suppliers sharing to information with the manufacturer, they showed that although sharing upstream information is beneficial to the supply chain as a whole, it may be detrimental to individual participants.

Since the sharing or coordination between manufacturer and supplier is needed, Chen and Yu (2001) consider the value of sharing the supplier‟s forward capacity information in a model with one retailer and one supplier for a single selling season. It is a twoperiodproblem where the retailer has two opportunities to place orders with the supplier before the season starts. At the first period, the supplier has unlimited capacity whateverthe retailer orders will be ready for the selling season. At the second period, the supplier‟s capacity is uncertain or limited due to the time constraint and orders from other retailers. There is a benefit for the retailer to postpone the ordering decision to the second period, but the cost of doing this is that the retailer may not get what he orders at the second period due to the supplier‟s capacity constraint. In this case, the supplier‟s shared information on its forward capacity before the retailer makes the ordering decision can affect the retailer‟s optimal ordering quantities. Comparing the costs associated with the different ordering quantities gives the value to the retailer of knowing the supplier‟s forward capacity.

Then after we buy the goods from the supplier we need to think as well about the lead time management. According to Chen and Yu (2005) quantify the value of lead time information in a single location inventory where retailer buys a product from an outside supplier and sells it to his customers. In here Customer demand is realized periodically, with demands in different periods being independent, identically distributed random variables.

In retail business industry, there are several categories of product to be sold; those are Fresh product, Grocery Product and General Merchandise Store. Fresh product is the product that generate from agriculture, horticulture, fisheries, animal husbandry. Grocery product is divided into two categories, first is food and second is non food. Grocery food means food and beverages product that generate from production process. Grocery non food means not food and beverages that generate from production process. General merchandise stores are defined as retail stores that sell a number of lines, such as dry goods, apparel and accessories, furniture and home furnishings, small wares, hardware.

2.1.1 Competitive Advantage within Supply Chain

Competitive advantages are the collection of superior competencies that create customer value (Morash, 2001). Firms deliver products and/or services which exceed the customer expectation, have more possibility to sell. According to Holcomb (1994), supply chain management now has emphasis on shaping competitiveness and profitability (cited in Tracy, Lim &Vonderembse, 2005). While some strategies create competitive advantages may be easy to imitate by competitors, the competitive advantages that routed from the chain efforts are harder to copy. Effective supply chain, thus, offer the opportunities to create sustainable competitive advantages (Cooper et al., 1997; Higginson &Alam, 1997 – cited in Tracy et al., 2005).

As firms play along together in the supply chain to achieve competitive advantage and win the orders at the bottom line, all members of the chain need to synchronize their strategies toward the end customers‟ direction. This means supply chain strategy and competitive advantage must fit together and the consistency between customer priorities and supply chain capabilities must exist (Chopra &Meindl, 2007). In order to achieve the strategic fit, firms should be able to understand and wisely exercise their customer needs to match their service requirements. Chopra and Meindl (2007) add that firms are able to design supply chain in delegating tasks as to outperforming competitors from other chains by matching the competitive advantages the supply chain have with what of the customers desire.

In order to achieve the efficient chain in terms of purchasing, firms need to work on the collaboration over the firm‟s boundaries. According to Frankel (2002), the successful collaboration factors tested on retail industry are (1) willing to innovate and change; (2) understanding the other‟s business; (3) common goals and objectives; (4) appropriate measures and incentives; and (5) information sharing. They explain the understandings of other‟s business can enhance the mutual value- added activities which are often lie in logistics competencies in matching or complementing the capabilities of others‟ so as to jointly improve performance.

2.1.2 Purchasing

Purchasing is the activity of acquiring goods or services to accomplish the goals of an organization. During the 1990s purchasing evolved to be viewed as part of a broader function called procurement or the systematic process of deciding what, when, and how much to purchase; the act of purchasing it; and the process of ensuring that what is required is received on time in the quantity and quality specified (Burt and Pinkerton, 2003).

The main function of purchasing is mainly responsible for evaluating and selecting suppliers, reviewing materials, acting as the primary contact with suppliers and deciding how to make purchases (Monczka, Handfield, Giunipero, Patterson, & Waters, 2010).

The correct management of the supply chain and the effective use of strategic purchasing play vital roles in today‟s organizations. The strategic purchasing function of an organization is important to secure and organize the supply of materials (Monczka, Handfield, Giunipero, Patterson, & Waters 2010) No organization can operate in isolation, but also acts as a customer while buying materials from a supplier for the own manufacturing process (Monczka, 2010).

Talking about purchasing it related to the supply chain management process, in here purchasing and supply management professionals should become increasingly involved, and where possible lead, the development of supply chain management. In purchasing process, the significant things that the purchasing division to have is a good relationship management. The skill of the purchasing professional working in a supply chain management environment lies in getting suppliers interested in working with the buying organization so that the suppliers position and perceive the buying organization as a valuable long-term client relationship which is worth investment. An ability to persuade, influence, communicates, facilitate, coordinate and manage the human implications of change is needed in the purchasing activity. Purchasing and supply management professionals wishing to promote and develop supply chain management must adopt all of the above skills and competencies but most importantly, should be able to think in terms of the whole business.

According to Sam Holtz (2007) there are some functions and objectives of purchasing process. The function of purchasing in a manufacturing firm at first glance, it may seem to be to find and purchase a quantity of material for the best price. But price is not the only concern. Low priced material may not be a bargain if

18 it is of unacceptable quality or if delivery is not reliable. Clearly, the purchasing function involves more than obtaining the best price. It also involves buying the best value, which means buying the right quantity and quality, buying the best price, buying from suppliers who are reliable and provide good service.

For the objective of purchasing is to provide an uninterrupted flaw of materials and services for company operations, to find reliable alternative sources of supply, to buy at the most economic order quantities, to buy the best value a combination of right quality at the best price with the best supplier service, and to maintain good relations with vendors.

2.1.2.1 Supplier Selection

Supplier selection can be defined as the process of finding the right suppliers with the right quality at the right price, at the right time, and in the right quantities (Mustafa Batuhan, 2013). In here selecting the right supplier significantly will reduces purchasing costs, improves competitiveness in the market and enhances end user satisfaction.

In order to make the decision about choosing the best suppliers it is necessary to make a tradeoff between these tangible and intangible factors that sometimes conflicts with each other (Ghodsypour& O‟Brien 1998). Therefore, how purchasing decisions are reached and justified should receive much attention in future research (de Boer 1998). Consequently, it is important to determine which factors influence and affects the process of selecting the most suitable suppliers.

According to Damian Beil (2009) said that there are several major steps involved in supplier selectionFirst,the buyer must identify qualified potential

supplier. Next, buyer must evaluate these suppliers this process is initiated when the buyer formally solicits information from suppliers Depending on the information request, suppliers respond by providing bids for the contract, specifying an offer on the contract terms, such as price, lead time, quality, etc. Various contract terms, which relate to the type of contract up for bid? Then Supplier offers often evolve over the course of negotiation with the buyer, and negotiation processes. Finally the buyer determines which supplier or suppliers will be awarded a contract and subsequently monitors the supplier during the life of the contract to support future supplier selection iterations.

2.1.2.2 Distribution Center

Perreault and McCarthy (2003) state that a distribution center is a special type of warehouse which been designed to fasten the flow of goods and avoid unnecessary storing goods. Today the distribution center concept is widely used by firms at all channel levels and also many products buzz through a distribution center without ever tarrying on a shelf, workers and equipment immediately sort the products as they come in hand subsequently move the products to an outgoing loading dock, and then to the vehicle which will take the products to next stop (Perreault& McCarthy, 2003). Seeing the information latter distribution centre speeds up the distribution process and reduces the complication in storing goods.

According to Higginson and Bookbinder (2005), DCs handle most products in two ways, receiving and shipping rather than storage and also DCs hold minimum inventories and of predominantly, high-demand items.

2.1.2.3 Distribution Center Activities

Perreault and McCarthy (2003) has mentioned that more competitive markets, improved technology, coordination among firms, and efficient new distribution centers, those bring such a huge improvement to physical distribution ,(physical distribution or PD is a common name for logistics which provides time and place utility and make possession utility possible), areas and yet biggest challenges may be more basic.

Figure 2-1 Basic Distribution Center Operations Source: Coyle, 2003

1. Receiving operation - This operation means receiving goods and products from the transport network into the warehouse and at the receiving operation point, the inbound carrier is scheduled to deliver the good at a specific time so as to improve warehouse labor productivity and unloading efficiency.

2. Put-away operation - This process involving indentifying the product, typically scanning the product‟s barcode, identify location for the items and moving the products and goods to the appropriate location.

3. Order-picking process- In order-picking process requires warehouse personnel to select the items ordered by the customer or manufacturing operation from the storage place or area.

4. Shipping process - The process concerns with loading goods for shipping to the customer or to the production line. The final movement process occurs at the shipping operation. After outbound carrier arrives at the loading dock, the goods and products are moved to the loading dock from the staging area and into the carrier‟s vehicle.

2.1.3 Importing

Import is the activity of buying and selling goods or services where the actors involved are the importers and exporters who are in different countries and make a written agreement in a contract of sale is in the conference by entering the goods from the outside into the customs territory of Indonesia. One of the activities carried out are making purchases of imported goods that are not produced domestically.

According to Purwito (2006) Import is a shipment activity of goods produced in other countries to be sold in the domestic market. This relates to the flow

of goods, so the authority held by the custom. These imports resulted in an outflow of foreign exchange from the country.

From the description above it can be concluded that the onset of the import starts from the actors that involved are importers and exporters of goods or services which are both located in different countries and make a written agreement in a contract of sale and purchase of goods in the conference by entering goods from outside into the customs territory of Indonesia and imports resulted in an outflow of foreign exchange from the country for which payment by using a letter of credit.

2.1.3.1 Selecting import supplier

According to Belay Seyoum (2009) the product selected for importation may be manufactured by several firms in different countries or within the same country. The next important step is to assess and select the right supplier based on a number of critical factors, such as quality, delivery time and supplier reliability, transportation cost, import duty implications, protection of intellectual property rights, and ability to meet standard requirements. Purchasing agents suggests timely delivery, product brand name, and style as important factors that determine purchasing decisions (Ghymn, 1983).

To be successful, an importer should select a supplier who can deliver a product that satisfies consumer needs, has minimum defects, and is priced competitively. Also adding to the importance of quality and the local market appeal of the product is the availability of core supplier benefits, such as warranties, timely delivery, favorable transportation terms, and after-sales service and reliability. Low-cost suppliers can also be identified based on their proximity to raw materials, labor costs, current exchange rates, or transportation costs.

A potential importer should be aware of any foreign laws that might affect purchase, such as export restrictions or quotas. The importer also needs to ascertain whether the supplier has already appointed other distributors or sales agents in the territory and whether the distribution channels available are acceptable in terms of overall profitability and risk.

2.2 General Merchandise Store Products

According to Neil Kokemulle (2007) General merchandise refers to a wide array of products commonly sold in stores. The simplest explanation of general merchandise is that it includes any non-food or non-grocery products. A general merchandise retailer is any store that sells mainly non-grocery items. Common categories that make up much of the floor space in a general merchandise retail store are auto parts, toys, apparel, home furnishings, clothing, electronics, cameras and film and telecommunications hardware.

Retailers and wholesalers of General Merchandise implement DematicApproach to support the sell it and fill it from everywhere requirements of the channel world. In here, Dematic provides materials handling solutions for General Merchandise wholesalers and retailers, ranging from small specialty product companies to large global corporations, thereby supporting low, medium, and high volume distribution requirements. These solutions are engineered to accommodate the specific application needs of the warehousing and distribution environment, such as configurations for retail store replenishment, order assembly by store ecommerce order fulfillment, multichannel in one facility, seasonal/promotional peaks, inventory velocity, and returns processing. Typical solutions are designed to optimize the processes involved with receiving, storage, put-away, replenishment, case and piece picking, consolidation, packing, palletizing, truck loading, and cross-docking, along

24 with the ability to handle a variety of load types: cartons, totes, poly bags, and envelopes

The researcher makes a table about the Product Category of General Merchandise Store Division at PT Hero Supermarket Tbk:

Department Name Category Name

AUTO CONCESSION HARDWARE DIY HARDWARE ELECTRICAL ACCESSORIES GARDENING MAJOR APPLIANCES SMALL APPLIANCES FURNITURE HOMEWARE HOME FURNISHINGS HOUSEHOLD BABY GOODS CYCLING LUGGAGE LEISUREWARE OUTDOOR SPORTS STATIONERY TOYS CHILDREN & INFANT WEAR FOOTWEAR SOFTWARE LADIESWEAR MENSWEAR Figure 2-2 Product Category of General Merchandise Store Division at PT Hero Supermarket Tbk Source: Author‟s Development

2.3 Previous Research

1. Nina Kaukoranta, 2012, in her research entitled “Measuring Purchasing Process in Retail Industry”, explained that the purchasing process measurement is discussed from strategic, financial and operational perspectives. It has been found that with accurate measurement companies can improve their purchasing process effectiveness and efficiency. The attitudes against measurement and measures can vary in different management levels and these differences should be identified.

2. Mari Toppari, 2009, in her research entitled “Analysis of the Purchasing Operation”, explained that the result of this thesis was clarification of the processes for the employees and the management and showing the improvement possibilities in processes and giving some ideas for the future in purchasing. Although the purchasing models from literature are not completely adaptable, they might give an inspiration to make something differently. Also realizing that even if some procedures might have been very effective some years ago, when business was smaller, it does not mean they would work in the future as well.

3. Francesca Xiaoying Zhang, 2012, in her research entitled “Procurement Domestically and internationally”, explained that Conducting and managing international procurement is more complex than undertaking domestic procurement. Some key aspects that differentiate international procurement from domestic procurement are that international procurement deals with a wider range of issues: trade between different nationalities, less mobility of factors of production, customer heterogeneity across markets and use of different currencies, governmental economic policy and political issues, culture, distance,

customs and tax systems. These are the factors that make international business much more complex and a difficult activity.

4. Latika Supasansanee, 2009, in her research entitled “Logistic Management in Retail Industry”, explained that in today‟s challenging competition in the consumer goods, the manufacturers strive for their products to reach final customers before they turn their heads to the rival‟s ones. This research attempts to understand and investigate how company manages its logistics activities and distribution to achieve competitive advantages. By applying the synchronized strategies between supply chainsmembers‟to adjust and modify the capabilities of firms, leads to supply chain benefits and competitive advantage for retail firm. The applications of Distribution Centers enhance supply chain capabilities, reliability, and dependability which result in better service and market performance. They are also the keys that facilitate the operations of supply chain and retail store.

CHAPTER III

METHODOLOGY

3.1 Research Method

Qualitative research seeks out the „why‟ and the „how‟ of its topic through the analysis of unstructured information (Yin, 1994) – things like interview transcripts and recordings, emails, notes, feedback forms, photos and videos. The qualitative research does not only rely on statistics or numbers, which are the domain of quantitative researchers. Yin (1994) also depicts that the qualitative method is used to gain insight into attitudes, behavior, motivation culture or lifestyles. Focus groups, in-depth interviews, content analysis and semiotics are among the many formal approaches that are used.

The purpose of qualitative research is to delineate some of the essential qualities of complex social phenomena. Many concepts in organizational theory, such as learning, replicating routines, power, authority, dynamic capabilities, or chaos, involve intricate webs of causes, effects, processes, and dynamics, they are about qualities. Qualitative research is based on the principle that social life is inherently complex, which means that organizational issues are inextricably bound up in ongoing social action among people in the situation (Geertz, 1973). The strength of qualitative research is its ability to provide complex textual descriptions of how people experience a given research issue. It provides information about the “human” side of an issue that is, the often contradictory behaviors, beliefs, opinions, emotions, and relationships of individuals. In Qualitative research there are seven primary ways to gather the qualitative data such as interviewing, focus groups, ethnography, sociometry, unobtrusive measures, historiography, and case studies. Qualitative

28 methods are also effective in identifying intangible factors, such as social norms, socioeconomic status, gender roles, ethnicity, and religion, whose role in the research.

3.1.1 Case Study

A case study is a research approach that is used to generate an in-depth, multi faceted understanding of a complex issue in its real-life context. It is an established research design that is used extensively in a wide variety of disciplines, particularly in the social sciences (Ann Robertson, 2011).A case study can be defined in a variety of ways, the central tenet being the need to explore an event or phenomenon in depth and in its natural context (Sarah Crowe, 2011)

According to Guro Huby (2011) the case study approach is particularly useful to employ when there is a need to obtain an in-depth appreciation of an issue, event or phenomenon of interest, in its natural real-life context.

According to Yin (1994) and Winston (1997), there are several appropriate designs for case studies: exploratory, explanatory, and descriptive. Exploratory research is defined as the initial research into a hypothetical or theoretical idea. Explanatory research implies that the research in question is intended to explain, rather than simply to describe, the phenomena studied. Descriptive research is used to describe characteristics of a population or phenomenon being studied. In this research, the researcher uses the exploratory case study. This is where a researcher has an idea or has observed something and seeks to understand more about it. Exploratory Case studies are very helpful when conducting a complex and multi sight study. The researcher uses a case study of PT Hero Supermarket Tbk.

3.1.2 Triangulation

Qualitative research use triangulation among the data sources to progress research accuracy. Triangulation is the strengthen process of data from different individuals (such lecturer and student), the type of data (such as field observation, interview) in description and themes in qualitative research. In this research, the researcher experiments every single information, facts, and finding to support a theme. It is guarantee that the conducted study is exact because the information comes from different sources, individual, or process. In this study, the researcher pressed on to develop an accurate and credible report. According to Berg (2009) by combining several lines of sight, the researcher obtain a better, more substantive picture of reality; a richer, more complete array of symbols and theoretical concepts; and a means of verifying many of these elements. The use of multiple lines of sights is called triangulation. In this research, the researcher uses the secondary data, interview, and field work as the data triangulation.

3.2 Research Framework

Data Collection (Primary Data, Secondary Data, Field Work)

Purchasing Operation System (PT Hero Supermarket Tbk)

Strength Weakness Opportunity Threat

Key Performance Indicator

Analyzing Theories

Interpretation of Data Analysis

Research Conclusion and Recommendations

Figure 3-1 Research Framework Source: Author‟s Development

3.3 Data Analysis

In this research the researcher apply the Miles and Huberman model in gather the data analysis, according to Miles and Huberman (1994) there are 3 types of activities in qualitative data analysis; Data Reduction, Data Display/ Data Model, and Conclusion Verification.

3.3.1 Data Reduction

The meaning of data reduction is refers to the process of selecting, focusing, simplifying, and transforming raw data that were collected in data collection process, not only do the data need to be condensed for the sake of manageability, they also have to be transformed so they can be made intelligible in terms of the issues being addressed. By using this types, we have to try and discard all irrelevant information, but do ensure that you have access to it later if required, as unexpected findings may need you to re- examine some data previously considered unnecessary.

There are several way to transform pages of textual data into something that more manageable such as make a summary, coding, classification, grouping, separation, writing memo, etc. Since we know that we have to make the research clear so we need to use data reduction. Qualitative data can be condensed in many ways such as smooth selection, summary, and also paraphrasing. The data reduction process is constantly happen until final report is finished. Another function of data reduction is forms of data analysis aiming in choose, focus, and construct the data so the final conclusion can be described well.

3.3.2 Model Data (Data Display)

After data reduction, the second activity in data analysis called model data or data display. Data display is refers to computer output of data to a user, and assimilation of information from such outputs. Some kind of display output is needed for all information handling tasks. Data display is particularly critical in monitoring and control tasks. Data may be output on electronic displays, or hardcopy printouts, or other auxiliary displays and signaling devices including voice output, which may alert users to unusual conditions. By seeing a display, it really facilitates us to understand what is happening and do a further analysis or perform based on this understanding. Data display goes a step beyond data reduction to provide an organized, compressed assembly of information that permits conclusion drawing. A display can be an extended piece of text or a diagram, chart, or matrix that provides a new way of arranging and thinking about the more textually embedded data.

There are several strategies of data display, it depends on your questions and your preference, the common strategies include Flow charts (mapping out critical processes and decisions) and Data matrix (Examining patterns and relationships). Actually the whole thing is planned to create information in a good arrangement which can be accessed straight, in practical way, so the researcher could see what is happening and can explain the conclusion that has been acceptable or move about to the next stage of analysis.

3.3.3 Conclusion Making and Verification

The third step of analysis data activity called conclusion making and verification. In here the researcher learns that your analysis should allow beginning and developing conclusions regarding the study. These initial conclusions can then be verified, that is their validity examined through reference to your existing field notes or further data collection. The final

33 conclusion may not be found until the data collection finish, it depends on the capacity of coding, field data, researcher experience, but once again conclusion regularly describe at the beginning, when a researcher fixed that he already do the process inductively. So we have to be done step by step to get a conclusion itself.

Conclusion is important because they leave an impression. Since the conclusion is the last thing that audience reads, it may leave the most lasting impression. The kind of conclusion will vary fit with the overall picture and purpose of your research, but all effective conclusions should make readers glad that they read your research. You may have been taught that the purpose of a conclusion is to summarize all the points you have developed. In making conclusion we need to eliminate using the interesting story without any truth and purpose.

After we already served up the 3 stages – data reduction, model data, and conclusion making/ verification conclusion, below the figure of the three stages:

Figure 3-2 M& H’s Component of Analysis Data Source: Qualitative Data Analysis Book (Miles and Huberman, 1994)

In this review, the three analysis activities and data collection activity is outlining an interactive cycle process. The researcher surely move between this 4 model during data collection process, then move shuffled through between data reduction, model, and conclusion making and verification for the rest of its study.

3.3.4 SWOT Analysis

SWOT analysis is an analytical method is used to identify and categories significant internal factors (strength and weakness) and external factors (opportunity and threats) faced either in particular arena such as an organization, or a territory. ). In here once this is completed, SWOT analysis determines what may assist the firm in accomplishing its objectives, and what obstacles must be overcome or minimized to achieve desired results. Strategic logic requires that the pattern of actions to be taken should match with strength and opportunities ward off threats and seek to overcome weakness. This approach is appropriate to improve the competitiveness of a company, or a territory. (Hunger &Wesley, 1998)

3.3.5 Key Performance Indicator From the name, Key Performance Indicators already mentioned, performance indicator or pointer performance. KPI is not just measure a length, a processing time, a more precise age of the tool but the size of a performance or performance. Furthermore, A KPI is a measurement which evaluates how a company executes its strategic vision. The term strategic vision refers to how an interactive1 strategy is integrated into a company‟s strategy as a whole. It is important that everyone involved in the company strategy agrees on what the strategy represents and how its variations are interpreted. KPI is the key size for business or success, not only the

35 size pickup / passing of a business process. Thus, the KPI is closely related to the objective of the process to be measured. (Jacques Warren, 2009)

KPI is an indicator that gives information the extent to which we have succeeded in realizing the target of the work that we have set:

1. Indicators KPIs must be measurable. Must be calculated / measured.

2. The indicator also refers to the work output.

3. Measures of success should show a clear performance indicator, specific and measurable.

3.4 Research Instrument

For the research instrument, article, journal, literature review, newspaper, interview, were used as researcher tools to collect the data. For the literature review such as theories were gathered by review books and literature from the internet, e- book which download from several sources, Adam Kurniawan Library, journal, articles are collected for supporting the description of research problem. And interview is done to gain the better understanding on the related research problem. In here the researcher interviewed several people expert in their position related to the research problem. The researcher used primary data which is interview and field work study by going to the office, store, and distribution center.

3.5 Data Collection Technique

The researcher uses two main data collection. First, the primary data is from the interviews and second, field work study gives supporting information in order to fulfill the gap from the interviews in this research. Both data collection methods are explained below.

3.5.1 Primary Data

The researcher use interviews as a primary source of data. Why interview? This question may seem surprising, however the majority of published qualitative research articles use interviews and moreover compared to other methods, interviews are relatively economical in terms of time and resources (Sliverman, 2007). Saunders, Lewis and Thornhill (2007), present the definitions of three types of interview as;

1. Structured interview: Data collection technique in which an interviewer physically meets the respondent, reads them the same set of questions in a predetermined order, and records his or her response to each. 2. Semi-structured interview: Wide-ranging category of interview in which the interviewer commences with a set of interview themes but is prepared to vary the order in which questions are asked and to ask new questions in the context of the research situation. 3. Unstructured interview: Loosely structured and informally conducted interview that may commence with one or more themes to explore with participants but without a predetermined list of questions to work through.

The authors apply a structured interview. The researcher did interview by meet the respondent at the office of PT Hero Supermarket Tbk, and also in the store of Giant Hypermarket.

Table 3-1 Interview Details Source: Author‟s Development

No Name Position Time 1 Ms. Yaya General Manager of GMS division October 29, 2014 2 Ms. Elsiana Store General Manager November 20, 2014 3 Ms. Yaya General Manager of GMS division November 23, 2014 4 Ms.Yaya General Manager of GMS division December 02, 2014

3.5.2 Field Work

The researcher did the field work on PT Hero Supermarket Tbk office that placed in Bintaro and also in the store of Giant Supermarket Bintaro. The researcher did the field work visit for several times in sequence to contract and observes the purchasing operation system that PT Hero Supermarket Tbk used. By going away to the office and store, it really facilitates the researcher to get the better understanding.

CHAPTER IV

ANALYSIS OF DATA

4.1 Company Profile

4.1.1 History of the Company

Until now Hero Swalayan Market is the biggest supermarket retail industry in Indonesia which was first established on 23 August 1971 in the first at Jl. Faletehan 23, Kebayoran Baru, South Jakarta with an area building of approximately 251 m2 or more appropriately called swalayan store named Hero Mini Market.

PT Hero Supermarket Tbk was born of the idea of Mohammed Saleh Kurnia, He was come from Cibadak, Sukabumi, West Java. He learned how to sell since he was small to follow the footsteps of his parents who are already do trading goods of daily needs in the city of origin.

Approximately in 1948 Kurnia's family moved to Jakarta to start his business in order to advance. Parents of Muhammad Saleh Kurnia started his business by managing business street "Gerobak Dorong" in Gang Ribal. By sell food and drinks. From here Muhammad Saleh Kurnia with his brother began to actively help his parents manage their new business in Jakarta.

Day by day, his business is growing rapidly and in 1951 its business is no longer in the wheelbarrow but has been able to move their operations to the shops on the same street with the name of Hero Store. To expedite its business that has been grown very well in 1954. Hero established CV. Hero who a lot of imported foods and beverages from abroad.

In 1969 the family handed over the leadership of the CV. Hero to Muhammad Saleh Kurnia, in the hands of Muhammad Saleh Kurnia the company greater by imported goods from abroad and be an agent of some imported products.

Seeing the market potential of greater import products and the absence of a modern family shopping place and adequate for foreigners at that time, in 1971, Muhammad Saleh Kurnia apply for a permit through the establishment of supermarkets by using Notary Act named Djoko Mulyadi. and on 23 August 1971 opened the first outlet in Jl. Falatehan I, South Jakarta with the name Hero Mini Supermarket.

To support his efforts, in 2014 Muhammad Ipung Kurnia has developed several other companies such as giant extra, giant express, guardian, Starmart, and IKEA. Until 2014, PT Hero Supermarket Tbk has 684 outlets that consist of:

1. Hero Supermarket 35 Outlets 2. Giant Hypermarket (Extra) 51 Outlets 3. Giant Supermarket (Express) 122 Outlets 4. Guardian 318 Outlets 5. Starmart 157 Outlets 6. Ikea 1 Outlet

Picture 4-1 Hero’s Group Companies. Source: Hero Supermarket Website

4.1.1 Vision, Mission, and Objective

4.1.1.1 Vision

Vision is an aspiration description of what an organization would like to achieve or accomplish in the mid-term or long-term future. It is intended to serves as a clear guide for choosing current and future courses of action.

In here the vision of PT Hero Supermarket Tbk is to be a leading retailer in Indonesia in terms of sales and long term stakeholders value creation.

4.1.1.2 Mission

Mission is a written declaration of an organization's core purpose and focus that normally remains unchanged over time. Properly crafted mission statements first serve as filters to separate what is important from what is not, second clearly state which markets will be served and how, and third communicate a sense of intended direction to the entire organization.

Below is the mission of PT Hero Supermarket Tbk:

1. We have 6 Brands (Hero Supermarket, Guardian, Starmart, Giant Ekstra, Giant Express, and IKEA) that can satisfy all customer segments and we will grow them profitably across Indonesia by strengthening each brands offer.

2. We nurture and motivate the best local talents within the company.

3. We strive to be the best for customers, simpler for employees and cheaper for the company.

4. We, the retail Pioneer in Indonesia, will continue to work together to grow along with the development of our country, to advance our company and improve the welfare of our stakeholders.

4.1.2.3 Objectives

1. We always put the best service to customers.

2. We always provide a high quality product according to the customer‟s want.

3. We are together built a good management.

4.1.2 Organization Structure

` Organizational structure is a place that consists of a number of people to achieve a goal, therefore organizing in a company is important, by putting the right people in the right position in order to achieve company goals.

Figure 4-1 Organization Structure of PT Hero Supermarket Tbk

Source: Magazine of PT Hero Supermarket Tbk

4.2 Data Analysis

4.2.1 Purchasing Operation System In this research, the researcher got the data about the purchasing operation system of General Merchandise Store Products at PT Hero Supermarket Tbk.

In PT Hero Supermarket Tbk the one who handle this activity called MD (Merchandise) division. Merchandising is any practice which contributes to the sale of products to a retail consumer. At retail in store level, merchandising refers to the variety of products available for sale and the display of those products in such a way that it stimulates interest and entices customers to make a purchase.

The researcher chooses General Merchandise Store products it is because in PT Hero Supermarket, GMS products have a lot of order number, and mostly all the products was import from China.

Based on the conversation with the General Manager of General Merchandise Store division named Ms. Yaya at PT Hero Supermarket Tbk, there are two system purchasing of General Merchandise Store Division, first called local purchase and second called import purchase.

4.2.1.1 Local Purchase

Local purchase means that MD Division of Pt. Hero Supermarket Tbk will order and buy the goods that come from local (Indonesia) seller. A preference to buy locally produced goods and services over those produced farther away. It is very often abbreviated as a positive goal, "buy local", that parallels the phrase "think globally, act locally”. There are 2 types local purchase of

General Merchandise Store Division in Pt. Hero Supermarket Tbk, those are called Type A (Distribution Center) and type B (Direct), here the more explanation about local purchase type A and B of PT. Hero Supermarket Tbk.

a. Type A (Distribution Center) The first local purchasing operation system called type A (Distribution Center), in here Merchandise Department of PT Hero Supermarket Tbk they order the goods to the Distribution Center, after that Distribution Center of PT Hero Supermarket Tbk will order to local supplier in Indonesia, then after all transaction done, the local supplier will deliver all the goods to the Distribution Center of PT Hero Supermarket Tbk. After the goods arrived in Store, the next step is store should do the receiving process first.

There are several important things in receiving process in store; store should register local supplier Log Book, after that store receiving and checking the goods by using BTH (Scanner), then store need to upload BHT data to receiving system, then store need to input the data such as invoice and delivery order and the last is Reconcile Data Labeling with Delivery Order. After all the receiving process done, the goods are ready to display or put in their storage.

Picture 4-2 Barcode Handling Terminal Scanner. Source: Store of Giant Hypermarket

Picture 1-3 Supplier Registration Book

Source: Storage of Giant Hypermarket

Picture 4-4 Delivery Order form

Source: Storage of Giant Hypermarket

Below the flow of local purchase type A of General Merchandise Store Division at PT Hero Supermarket Tbk:

Type A (Direct Order Direct Supply) of Local Purchasing Operation System

Merchandise Department (MD)

Distribution Center (DC)

Order to Local Supplier

Local Supplier Deliver to Distribution Center

Distribution Center Deliver to Store

Receiving Process at Store:

1 .DC Register Local Supplier Log Book.

2. Receive and Checking Goods with BTH (Scanner).

3. Upload data BHT to receiving system.

3. Input Document

4. Reconcile Data Labeling with DO

( Data has to be 100% accurate )

Figure 4-2 Flow of Local Purchase Type A Source: Author‟s Development b. Type B (Direct) The second local purchasing operation called type B (Direct), in here the meaning of direct itself is Merchandise Department of PT Hero Supermarket Tbk or Store they be able to order the goods direct to the local supplier, in type B Merchandise Department and store can directly order to store but store cant order all the goods directly to supplier, in here MD the one who give rules to the store about what are goods that store can directly order to supplier such as dairy products (Tahu, tempe, Milk), the products that has a limitation for expired date. in this case they no need to go to DC to order the goods, but in this type MD department or Store can direct order to local supplier and after they order, all the good will deliver directly to the store. In here after the goods arrive at the store, the store should do the receiving process also.

The receiving process in store (Type B), store should register local supplier Log Book, after that store receiving and checking the goods without using BTH (Scanner) it is different with type A, because since the goods deliver from the local supplier directly, we do manually checking, then DC need to input to the receiving system., and the last is Reconcile Data Labeling with Delivery Order. After all the receiving process done, the goods is ready to display. In here all the goods in type B for devoted to particular goods, which will be directly displayed.

Picture 4-5 Supplier Registration Book Source: Storage of Giant Hypermarket

Picture 4-6Delivery Order form Source: Storage of Giant Hypermarket

Below the flow of local purchase type B of General Merchandise Store

Division at PT Hero Supermarket Tbk:

Type B (Direct Order Indirect Supply) of Local Purchasing Operation

System

Merchandise Department (MD)/ Store

Order to Local Supplier

Local Supplier Deliver to Stores

Receiving Process:

1 .DC Register Local Supplier Log Book.

2. Receive and Checking Goods without BTH (Scanner). (Manually checking)

3. Input Receiving.

4. Reconcile Data Labeling with DO

( Data has to be 100% accurate )

Figure 4-3 Flow of Local Purchase Type B Source: Author‟s Development

4.2.1.2 Import Purchase Import means a good or service brought into one country from another. Along with exports, imports form the backbone of international trade. The higher the value of imports entering a country, compared to the value of exports, the more negative that country's balance of trade becomes.

Based on the interview with Ms. Yaya as a General Manager of GMS, PT Hero Supermarket Tbk used import activity for their purchasing. In here PT Hero Supermarket they don‟t perform import activity directly, but they used third party which is Importer Company. Why PT Hero Supermarket Tbk used third party for their Import Activity, Ms. Yaya said that since our company run on retail business, we don‟t want to focus on import activity, we just focus on how to sell the goods to the consumer. Ms. Yaya said to me also about if we do directly import activity, it will be difficult for my company, why it is because if we do import activity, one day we will get sudden inspection. That‟s why PT Hero Supermarket Tbk makes collaboration with Importer Company that called PT. Mitra Sarana Purnama.

PT. Mitra Sarana Purnama established in 1985 as Trading Company in field of distribution and importing company. Main line of business is to import Fruits, Meat Products, and Home ware products, required by PT. HERO SUPERMARKET Tbk and also distributing grocery products such as Marjan Syrup, Sauces, Condiments and Drink Products, for domestic market.

The vision of Pt. Mitra Sarana Purnama is becoming a Professional Importer and Distribution company in Indonesia.

The mission of Pt. Mitra Sarana Purnama is a company that able to import various range of product categories and a distribution company managing national wide coverage to all part of Indonesia.

The researcher did the flow about the import process of General Merchandise Store Division at PT Hero Supermarket Tbk:

MD Ordering MD Send Overseas Supplier Determined Ordering Quantity Will Raise

Quantity for to Overseas Proforma Invoice Import Product Supplier (PI).

MD Approved PI MD Submit MD Discussed and Included Order Approved PI to MD Review the PI. Number to Admin Import. PI approved by Merchandise Supplier Overseas. Admin Import Staff Will Create Order Director. Number.

MD Make sure the After Goods Import Admin Staf Article Details Arrived at The sends SuratJalan to such as Article Port, Forwarder DC Rebuyer that Number, Price, Will Raise will issue PO to Packaging, and “SuratJalan” to Supplier. barcode. MD. MD will send SuratJalan to ImportAdmin Staff.

The goods arrived at DC & DC wills delivery to the Figure 4-4 Flow of Import Purchase store. Source: Author‟s Development

The import purchasing system in PT Hero Supermarket Tbk is comes from MD determined ordering quantity for import product that based on the market trend, after that MD send the ordering quantity for import product to the overseas supplier. After MD sends the ordering quantity, MD will get Proforma Invoice that given by overseas supplier. Then after got the PI, MD will discussed and review the PI itself. After that MD should get approval from Merchandise Director. Next, MD will submit approved PI to the admin import in PT Hero Supermarket Tbk, and then admin import will create order number. After all completed, MD send approved PI included order number to supplier overseas. MD makes sure the article details such as Article Number, Price, Packaging, and Barcode. After all the goods arrived at the port, forwarder will raise “SuratJalan” to MD, and MD will send suratjalan to import admin. Lastly, import admin staf sends suratjalan to DC rebuyer that will issue PO to supplier.

The receiving process in store in Import Purchase is the same with the receiving process in Local Purchase type A.

Picture 4-7 Order Form Source: Merchandise Department

Picture 4-8 Delivery Order Form Source: Merchandise Department

Picture 4-9Proforma Invoice Form

Source: Merchandise Department

After we know the local and import purchasing operation system, next we have to know exactly what the main function of Merchandise Department is. The researcher got the information from Ms. Yaya that the main function of Merchandise Department can be divided into 4 points: a. For Procurement for Request/ Order from Store (Regular). As regular goods, stores do the order activity based on minimum stock. In here if the store got the information from the system about report Minimum and Maximum goods, the store will review and order the goods based on the purchasing type, means that if type A MD will order the goods to the Distribution Center and for type B the MD/store will order directly to supplier, in type B MD and store can directly order to store but store cant order all the goods directly to supplier, in here MD the one who give rules to the store about what are goods that store can directly order to supplier such as dairy products (Tahu, tempe, Milk), the products that has a limitation for expired date. b. Promotion. Promotions refer to the entire set of activities, which communicate the product, brand or service to the user. The idea is to make people aware, attract and induce to buy the product, in preference over others. In here in PT Hero Supermarket Tbk, they will give promotions, such as weekly promotions. We can see the weekly promotions from the newspaper, mailer and radio. Based on the promotion goods, MD will make allocation goods to store based on historical data sales of every store, then MD will make purchase order to supplier. c. New Store. If PT Hero Supermarket Tbk wants to open new store, in here MD is the one who will order all the goods needed in the store first. Because in here

it is impossible if for example store a want to open in Cikarang, in here the store manager want to order by himself, it cannot, the policy said that if there is a new store, the one who order or purchase all the goods first is Merchandise Department division.

d. Finalize Purchasing with Trading Terms. Finalize Purchasing means that in trading terms we will got the number of target purchase, based on that MD has a duty to make sure that the target month by month till the end of the year to be achieved. In here if the target achieved, MD of PT Hero Supermarket Tbk will get buying income for volume purchase.

4.2.2 Data Result Analysis (General)

SWOT analysis is a strategic balance sheet of an organization; that is the strengths of the organization, the weaknesses of the organization, the opportunities facing the organization, and the threats facing the organization. It is one of the cornerstone analytical tools to help an organization develop a preferred future. It is one of the time tested tools that has the capacity to enable an organization to understand itself. To respond effectively to changes in the environment, we must understand our external and internal contexts so we can develop a vision and a strategy that link the two. We need to weave together our understanding of our organization and our actions to develop a future. The purpose of the SWOT analysis is to provide information on our strengths and weaknesses in relation to the opportunities and threats we face. 4.3.1 Strength

4.2.2.1 Strength

Strength is about the advantages that the company or organization has, what are the things that create you better than other company, exceptional resources that you can draw upon others can‟t. The strength is the thing that an organization has that makes it confidence enough to compete in the competitive market.

Here the strength of PT Hero Supermarket Tbk:

A. The name of the company that has been known to the public.

Since we know based on the history, PT Hero Supermarket Tbk was established on 23 August 1971, it already 43 years that PT Hero Supermarket Tbk stand on retail business industry. Can‟t be denying that the name of PT Hero Supermarket Tbk was very strong in the public.

B. Has a convenient shopping place.

A convenient shopping place is very necessary thing to the buyers when they want to buy the goods. That‟s why PT Hero Supermarket Tbk really thinks about how to make a convenient shopping place. So that, many people force to buy the goods at PT Hero Supermarket Tbk.

Picture 4-10 Picture of Hero Supermarket

Source: Author‟s Development

C. Arrangement of items organized.

Arrangement of items it is really important, why? Because if we didn‟t classify the goods well, it will make the consumer hard to find the goods that they want. That is why in here PT Hero Supermarket Tbk really focused on arrangement the items in the store.

Picture 4-11 Hero Supermarket Source: Author‟s Development

D. Have so many stores in Indonesia, from Sabang to Merauke.

Based on the interview that the researcher did, the total store of Hero Supermarket over Indonesia is 35 outlets, and for Giant Supermarket consist of 51 outlets Giant Extra, and 122 Outlets Giant Express, a total is 220 outlets. In here the researcher added Giant Supermarket it because both are in the same group and at the same business line which is retail industry.

Picture 4-12 Total stores of PT Hero Supermarket TBk Source: Author‟s Development

4.2.2.2 Weakness

Weakness is the things that could create you lose in the sales, and it is also something that you could get better. The company or organization needs to recognize their weakness and if it is possible to pass up it. Don‟t let the competitor solve that your company or organization has so many weakness points.

Here the weakness of Pt Hero Supermarket Tbk:

a. In order to maintain the quality, the price offered to be relatively higher. PT Hero Supermarket Tbk has a mission to over the best product or good with the best quality itself, but then since we offer the goods with the best quality, the price that we offer is a bit higher than others.

b. Less rapidly to adapt with the competitors. Day by day the competitors in retail business industry is getting high, in here PT Hero Supermarket have to consider about this situation, if PT Hero Supermarket less rapidly to adapt with the competitors it will be bring a bad impact, such many customer will buy in other store.

4.2.2.3 Opportunity

Opportunity is talking about what kind of exciting trend that currently happening, what good opportunity that your company or organization can spot. Opportunity is the external positive thing that could support the development of one‟s business.

Here the opportunity of Pt Hero Supermarket Tbk:

a. Market share of retail business is still many. Since we know that Indonesia has a lot of population it will be a good impact for the market share in retail business industry, why it because if the population is getting up, of course they will buy the goods in the supermarket.

b. Changes in people's lifestyles, which began to love shopping at the supermarket. Nowadays, many people change their lifestyle from shopping in the traditional market to the modern market. In here it is a good opportunity for PT Hero Supermarket Tbk.

c. Products offered are products which will continue to be needed by the human.PT Hero Supermarket Tbk offers the products which is the product that needed by the consumer. This is good for the company so that the consumer will buy the goods in our company.

d. Increasing the growth of the community, accompanied the needs will continue to increase. In every year, the growth of the community is increasing. It will be impact on the needs itself. So this situation will bring a good opportunity as well to PT Hero Supermarket Tbk.

4.2.2.4 Threat

Threat means all the things coming from outside that could tackle the expansion of your business. The threat could come as the tight competitiveness is happening.

Here is the threat of PT Hero Supermarket Tbk:

a. High Level of Competition. There are so many competitors of PT Hero Supermarket Tbk such as Carrefour, Lotte Mart, Superindo, etc. In here PT Hero Supermarket Tbk should be more serious in order to compete with the competitors.

b. Suppliers Do Wrong Delivery or Delay in Delivery. The purchasing operation system at PT Hero Supermarket Tbk they have two terms; first local and import. In here PT Hero Supermarket Tbk have to make sure that the delivery is right and on time, because if the delivery is wrong and not on time, it will be affected on the sales.

c. The Country's Economy and Currency Values are Unstable, Which Had an Impact on Purchasing Activity in The Company. In recent years, the Country‟s Economy and the Currency Values in Indonesia are unstable; in here it will be impact while PT Hero Supermarket Tbk makes purchasing activity.

After we discussed about the SWOT of PT Hero Supermarket Tbk in general, better if we know as well the strategy based on the SWOT of PT Hero Supermarket Tbk:

1. Strength - Opportunity

Based on the strength and opportunity, PT Hero Supermarket Tbk should expand the location, by expand the location it will give impact to increase the market share.

2. Strength - Threat

Based on the strength and threat, PT Hero Supermarket Tbk should improve the purchasing and receiving system and can keep finances in order to remain stable, despite the aggressive expansion of the current competitors or new comers.

3. Weakness - Opportunity Based on the weakness and opportunity, PT Hero Supermarket Tbkshould expand the diversity of products, improve employee productivity, and improve the supply chain system, so that the consumer needs are fulfilled.

4. Weakness – Threat Based on the weakness and threat, PT Hero Supermarket Tbk Should performs adjustment against competitors and evaluates the performance of the company and reduces operating costs, so that the price can compete.

4.2.3 Data Result Analysis (Purchasing Operation System of General Merchandise Store Division)

In here after the researcher did the analysis in general about PT Hero Supermarket Tbk, next the researcher will make an analysis for a second time about the purchasing operation system of General Merchandise Store Division itself, so that after the researcher make this analysis, it will be answered from the statement of problem that mentioned in chapter 1.

4.2.3.1 Strength

A. Using SAP (System Application Products) system.

Purchasing Operation System and General Merchandise Store Division of PT Hero Supermarket Tbk they used SAP (System Application Products) system for their daily activity. According to Miftah&Didi (2012) said that SAP entered into the big 5 of ERP system.

SAP is a German software company whose products allow businesses to track customer and business interactions. SAP is especially well known for its Enterprise Resource Planning (ERP) and data management programs. SAP software is being implemented as part of re engineering and provides end to end solution for financial, logistic, distribution, inventories.

By using this SAP, PT Hero Supermarket will get more benefit such as Flexibility, customized solutions to suit your business, highly integrated with other modules, Industry specific modules with a deep insight, Continuous support. The major advantages of SAP, is the HIGHLY INTEGRATION WITH OTHER MODULES OF BUSINESS, which is not there in other SOFT WARES. In other software, you need to have different software's for different module.

B. General Merchandise Store Division PT Hero Supermarket Tbk has group import procurement for joint buying.

In here, this point can be the important strength why? Because General Merchandise Store division in PT Hero Supermarket Tbk is the only one retail company who has group import procurement for joint buying that located in Guangzhou, China. In here group import procurement for joint buying means that a company who has the duty to help our import activity.

In here GMS division of PT Hero Supermarket Tbk has group import procurement in Guangzhou, China. The function is to make easier process of import. By doing cooperation with group import procurement it will be benefit for our company. Again this process applied only in GMS division

of PT Hero Supermarket Tbk, other retail company in Indonesia they don‟t use this process.

C. General Merchandise Store division of PT Hero Supermarket Tbk used Importer for they import activity.

Again the type of purchasing operation system of GMS products at PT Hero Supermarket Tbk divided into 2; first called local purchase, and second called import purchase. Since there is import purchase at purchasing operation system of GMS products at PT Hero Supermarket, the researcher ask Ms. Yaya for the GMS products import activity. Surprisingly, Ms. Yaya said that in import activity, PT Hero Supermarket Tbk didn‟t import all the goods directly to the supplier, but then PT Hero Supermarket Tbk used Importer Company for their imports activity. In here the Importer Company named is PT. MitraSaranaPurnama. And the researcher curious why PT Hero Supermarket Tbk didn‟t import the goods directly, why they used Importer Company? And she said that since our core activity is to sell our product not for doing import activity, and if we do import activity as well, we need to think about the sudden inspection from custom, we need to manage for government regulation and also nowadays, the government provides policy that mentioned about all the GMS products should have a Indonesian National Standard (SNI), we need to think about how to get the Indonesian National Standard label as well, it is really complicated, that‟s why GMS division of PT Hero Supermarket Tbk decided to using third party which is Importer Company for their Import Activity.

The advantages of this point that GMS division of PT Hero Supermarket Tbk has already in relationship with this Importer Company which is PT. Mitra Sarana Purnama for 20 years. Based on that PT Hero Supermarket Tbk has advantages from payment terms. In here GMS division of PT

Hero Supermarket Tbk only pay 3 % per order, while in other Importer Company we need to pay 15% per order.

D. Already know with the local supplier before the store is open yet.

GMS division of PT Hero Supermarket Tbk is already knows and make a relationship with the local supplier since the store is open yet. Then as time goes by, now PT Hero Supermarket Tbk has a lot of store, it can be benefit for two sides which are PT Hero Supermarket Tbk and for supplier.

In here the benefit for PT Hero Supermarket Tbk is that we already have a local supplier to supply our goods with the affordable price. And for the supplier is that once we supply for PT Hero Supermarket Tbk it will be continuously from store one till other store. By making a good relationship with the local supplier it will be bring strengthens of PT Hero Supermarket Tbk. The examples strengthens by making a good relationship is that we can push the local supplier if we need urgent goods, we will get the goods with best quality and also with affordable price.

E. Terms of Payment with the both local and import supplier well recognized.

Terms of Payment in every transaction is needed. PT Hero Supermarket Tbk work for purchasing activity which is related to the payment, PT Hero Supermarket Tbk has to be more concern in terms of payment with the supplier. In here Ms. Yaya said that PT Hero Supermarket Tbk always pays on timely with supplier so that the supplier feel trusted and enjoyed working with PT Hero Supermarket Tbk.

4.2.3.2 Weakness

A. Performances of data system.

As a big company PT Hero Supermarket Tbk of course they will have a lot of data, in here day by day the data in PT Hero Supermarket Tbk is getting higher, it will be affected to the performances of the system. The system works so slow it because the data is too big.

The example is like Ms. Yaya said in GMS division of PT Hero Supermarket Tbk we have 2 data system, it is not effective, but Ms. Yaya did this to make it easier. It should be only has 1 data system which is SAP system that PT Hero Supermarket Tbk used, but since hard to access or get the data from the SAP system, Ms. Yaya decided to make another data system just for GMS division only.

B. Paperwork.

In PT Hero Supermarket Tbk, all the document still using paper, whereas there are several documents in import activity that we need to scan the data from the paper itself, it would be affective if we using email. The researcher agrees that better if PT Hero Supermarket Tbk tries to using email as their document compared by using paper.

4.2.3.3 Opportunity

A. SAP system will apply for long terms.

It is a good opportunity that GMS division of PT Hero Supermarket Tbk has, because they already using a good database system which is SAP system. Ms. Yaya said that this SAP system can be apply for long terms in PT Hero Supermarket Tbk.

B. Has a strong people power.

Means that the General Merchandise Store division at PT Hero Supermarket Tbk needs to have a people with a good knowledge, and PT Hero Supermarket Tbk has it. A good people power strong will bring a good impact to the company. By having a good people who handle GMS division, it such an opportunity to have a good people power for the future.

C. Private Label.

Still many item products that PT Hero Supermarket Tbk can build with private label. The more goods that we adopt as our private label, it will give a chance to PT Hero Supermarket Tbk to sell the product with lower price and will get the profit higher.

4.2.3.4 Threat

A. System Server.

In here, since the data is big, it will be impacted to the server, the server will down automatically, so PT Hero Supermarket Tbk has to make sure that the server is strong enough even we have a lot of data.

B. Specialty Store

In here General Merchandise Store products is any goods that sells mainly non-grocery items. Common categories that make up much of the floor space in a general merchandise retail store are auto parts, toys, apparel, home furnishings, clothing, electronics, cameras and film and telecommunications hardware.

The threat is comes from the specialty store such as:

1. ACE HARDWARE who focus on selling the furnishings goods.

Picture 4-13 Ace Hardware Source: Author‟s Development

2. PONG‟s who focusing on sell the furnishings goods.

Picture 4-14: PONGS Home Center Source: Author‟s Development

C. New Comers.

Talking about business, it will relate to the rival or opponent. Same here in retail business industry PT Hero Supermarket Tbk has a lot of common rival such as Carrefour, Lotte Mart, Superindo, etc, besides that PT Hero Supermarket Tbk also has a new comers that want to enter Indonesian Market such as:

1. AEON

Picture 4-15 AEON Supermarket

Source: Open Rice Website

2. SAVEMAX.

Picture 4-16Save Max Supermarket

Source: Savemaxwholesale.com

D. Piracy Labor.

Based on the opportunity of PT Hero Supermarket Tbk has, which has a lot of good people power, it will bring a bad impact to our company, why? It because many competitors will try to piracy our labor, that‟s why in here PT Hero Supermarket Tbk should save their employee.

Next, discuss about the strategy of PT Hero Supermarket Tbk for purchasing operation system of General Merchandise Store Products:

1. Strength - Opportunity

Based on the strength and opportunity, PT Hero Supermarket Tbk should update the system that they used according to market demand. For example in terms of capacity, since the capacity of data year by year increased, the performance of SAP system should be updated. Second in terms of promotion, now we make a discount like buy 1 get 1, or pay 2 get 1, in here we need to change the system in order to get consumer.

2. Strength - Threat

Based on the strength and threat, PT Hero Supermarket Tbk should maintain and increase in market share, since we know that we are in a good condition which means our strength is growing up, but then we have to think about our competitors it is because they will improve their strength as well.

3. Weakness - Opportunity Based on the weakness and opportunity, with high costs for labor, the SAP system of PT Hero Supermarket Tbk should be maximized, means that all document should approved by using email, not using approved by manual again. By using email, we can minimize the employee. Next in

terms of private label, PT Hero Supermarket Tbk should maintain and increase private label performance.

4. Weakness – Threat Based on the weakness and threat, PT Hero Supermarket Tbk Should increase server capacity now, should not be delayed, we prepare for long term. Next in terms of competitors, store who near or besides the store competitors, should be well maintain. Well maintain here for example such as every day we offer low price for daily needed, or we make morning market at the morning and we offer vegetables with 50% discount.

4.2.4 Key Performance Indicator for Purchasing Operation System for General Merchandise Store Division

Key performance indicators (KPIs) in purchasing are an important instrument for representing internal development trends. For the interpretation of KPIs it is very important to understand the connections between some particular indicators.

Table 4-1 Budget and KPI of PT Hero Supermarket Tbk (GMS Division) Source: Author‟s Development

BUDGET Key Performance Indicator (KPI)

Sales Stock On Hand

Profit (%/Value) Assortment Clustering

Buying Income Pricing Policy

In General Merchandise Store Division of PT Hero Supermarket Tbk, to see the performances of merchandising was determined by 3 point criteria those are sales, profit, and buying income. To make sure the performances of merchandising itself, General Merchandise Store Division of PT Hero Supermarket Tbk make a Key Performances Indicator, those are stock on hand, Assortment Clustering, and also pricing policy.

Below the explanation of Key Performance Indicator that General Merchandise Store Division of PT Hero Supermarket Tbk has.

A. Stock On Hand

Stock On Hand is measured differently by department; it is depend on the characteristic of particular products under the department. For example: For Software Department, there are several things to consider such as consider about the minimum quantity for production, consider about the size, and also for the colour. For Home ware Department, the things to consider such as minimum quantity for production, consider about the import terms to differentiate, and also for additional cost due to new

75 government regulation (Indonesian National Standard). Another example for Leisure ware, the things to consider such as minimum quantity for production, consider import items to differentiate. And consider for additional cost due to new government regulation (Indonesian National Standard).

Generally, the common consideration for all division such as: a. Minimum delivery quantity for small format business (Convenience Store). b. Additional cost due to new government regulation (Indonesian National Standard). c. Assortment Completeness. d. Term of payment to suppliers.

In key performance indicator, of course we need to have an indicator for criteria, in here the indicator for stock in hand:

a. In line with term of payment supplier or one month more than term of payment for more complicated department such as Software department and high margin department such as Household, Leisure department.

For monitoring stock on hand, General Merchandise Store Division used SAP retail system; in here SAP retail system has an aging stock report by store and by format. By using SAP retail system, General Merchandise Store Division can monitor all the goods in every store throughout Indonesia per item.

B. Assortment Clustering

Assortment Clustering is measured by store capability to sell products and space capacity. In here there are several point regarding to assortment clustering: a. Organize stores by business format: 1. Hypermarket 2. Supermarket 3. Starmart 4. Guardian 5. Additional cost due to new government regulation (Indonesian National Standard)

b. Organize each business format by store capability to sell products: 1. Good Sales Stores 2. Medium Sales Stores 3. Low Sales Stores

c. Identify the products for each group of stores as one Cluster.

The indicator for assortment clustering such as:

1. Balance between sales driven and GP Generator. 2. There should be quick replacement for non moving items. 3. Mark down policy should be one of the core regulations to maintain.

C. Pricing Policy

Pricing policy is measured by the ability of a retailer to sell products less than competitor prices for all sensitive price items. In here there are several point regarding to Pricing Policy:

a. Regular price check policy for sensitive items. 1. Hypermarket 2. Supermarket 3. Starmart 4. Guardian 5. Additional cost due to new government regulation (Indonesian National Standard) b. There should always be specific products (not available in the market) that should balance the small GP% of sensitive items. c. Gross Profit % target benchmark for mixed margin to enable products of sensitive price is still competitive.

The indicator for pricing policy such as: a. For any sensitive items (goods that notified by customers), daily prices should be cheaper than competitors of the same format business. b. For entry price private labels, price should be cheaper than best selling products in the market c. For media promotion (Newspaper) should always be cheaper than competitors.

In pricing policy, General Merchandise Store Division has a specialty team that assigned to checking the price in the competitors; we called it “ComCheck Price”.

4.2.4.1 Performances Result of General Merchandise Store Division until October 2014

Table 4-2 Result of Budget and KPI of PT Hero Supermarket Tbk (GMS Division) Source: Author‟s Development

Budget and Actual Budget Actual YTD Fore cast YTD October 2014 December 2014

Sales IDR x 86,5 % 102,45 %

Profit IDR x 77,3 % 100,49 %

Buying Income IDR x 80 % 104%

4.3 Interpretation of Result

After doing the research, the researcher got the information about what are the purchasing operation systems that PT Hero Supermarket Tbk has. There are two type of purchasing operation system, first called Local Purchase and second called Import Purchase. There are 2 types local purchase of General Merchandise Store Products in PT Hero Supermarket Tbk, those are called Type A (Distribution Center) and type B (Direct). And for import purchase, PT Hero Supermarket Tbk only has one type of import purchase, they don‟t perform import goods directly, but they used third party which is Importer Company to run their import goods.

According to Latika Supasansanee, 2009, in her research entitled “Logistic Management in Retail Industry”; Frankel (2002) said thatin order to achieve the efficient chain in terms of purchasing, firms need to work on the collaboration over the firm‟s boundaries. the successful collaboration factors tested on retail industry are (1) willing to innovate and change; (2) understanding the other‟s business; (3) common goals and objectives; (4) appropriate measures and incentives; and (5) information sharing. By doing the data analysis related to the theory of SWOT analysis and Key Performance Indicator, the researcher concludes that the purchasing operation system of PT Hero Supermarket Tbk is efficient, it was proven by: a. They have flow chart or standard operating procedure for run their purchasing activity both local and import purchase. b. They have SAP retail system for monitoring inventory from all store and distribution center. c. For Import Purchase, General Merchandise Store Division PT Hero Supermarket Tbk has group import procurement for joint buying.

d. For Local Purchase, General Merchandise Store Division PT Hero Supermarket Tbk already knows with the local supplier before the store is open yet. e. At store level, they already used ordering system by using Barcode Handling Terminal scanner. f. By having “ComCheck” team, for checking the price through other competitors. g. Every purchasing department they have their own target, those target such as: sales, gross profit, and buying income. h. They have Key Performance Indicator to achieve the target. i. They have a performances result as daily, weekly, and monthly.

Lastly, the researcher got the information about how PT Hero Supermarket Tbk improve the purchasing operation system, in here for improve their purchasing operation system, first, they using an ordering Min-Max (Minimum and Maximum) system in every store. For instance, the stock of one item was in minimum number or in maximum number, the Mix-Max system will automatically create the ordering. Second, PT Hero Supermarket Tbk used SAP retail system that used to maintain or control inventory through all store centrally at head office.

CHAPTER V

CONCLUSION AND RECOMMENDATION

5.1 Conclusion

After all the research process been through by the researcher, the researcher is in the conclusion that purchasing operation system of PT Hero Supermarket Tbk has 2 types, first called local purchase and second called import process.

The researcher concludes that the purchasing operation system of PT Hero Supermarket Tbk both local purchase and import purchase are effective. According to Latika Supasansanee, 2009, in her research entitled “Logistic Management in Retail Industry”; Frankel (2002) said that in order to achieve the efficient chain in terms of purchasing, firms need to work on the collaboration over the firm‟s boundaries. the successful collaboration factors tested on retail industry are (1) willing to innovate and change; (2) understanding the other‟s business; (3) common goals and objectives; (4) appropriate measures and incentives; and (5) information sharing. It was proven by purchasing operation system of PT Hero Supermarket Tbk has flow chart or standard operating procedure for run their purchasing activity both local and import purchase, they using System Applications Products retail system for monitoring inventory from all store and distribution center. For Import Purchase, General Merchandise Store Division PT Hero Supermarket Tbk has group import procurement for joint buying. For Local Purchase, General Merchandise Store Division PT Hero Supermarket Tbk already knows with the local supplier before the store is open yet. Next factor that bring a good impact for purchasing operation system are at store level, they already used ordering system by using Barcode

Handling Terminal scanner, and General Merchandise Store division of PT Hero Supermarket Tbk has a “ComCheck” team, the main duty of ComCheck team is for checking the price through other competitors.

The researcher found out as well about how PT Hero Supermarket Tbk improve their purchasing operation system, in here to improve their purchasing operation system they using an ordering Min-Max (Minimum and Maximum) system, and they using SAP retail system which is used to maintain or control inventory throughout all store centrally at head office.

All procedure in purchasing division already poured into standard operating procedure. Every person involved on Merchandise Department got the budget for sales, gross profit, and buying income. To support the achievement of the target, every person on Merchandise Department makes a key performance indicator.

5.2 Recommendation

By having the conclusion that purchasing operation system of PT Hero Supermarket Tbk is work well, the researcher suggest to:

5.2.1 PT Hero Supermarket Tbk

PT Hero Supermarket Tbk should pay attention on the performance of system that they used. In here PT Hero Supermarket Tbk they used System Applications Products (SAP) for run their business. The researcher suggest that better if PT Hero Supermarket Tbk more develop the performance system which is System Applications Products itself, because all the data that they have will directly save to this system, PT Hero Supermarket Tbk is a large company, it means that they have a lot of important data to be save in the SAP system, once again the researcher suggest to PT Hero Supermarket Tbk to increase the performance of their SAP system.

5.2.2 Future Researcher

Purchasing operation in many companies usually have several terms such as PO, PI, DO, SAP, etc. The researcher suggests it is necessary for future researcher to understand those terms prior to conducting a research about or related to purchasing operation. Understanding those terms will help the future researcher to gather and analyze the data from interviewee, because from the researcher experiences they often refer to those terms while answering some questions.

REFERENCES

Arren, J. W. (2011). Key Performance Indicators. Integrating KPIs into your company’s strategy, 2-12. Berg, B. L. (2009). Case studies. Qualitative Research Methods for the Social Sciences. Boston: Allyn & Bacon. Bozarth, C. (2009). The impact of supply chain complexity on manufacturing plant performance. Journal of Operations Management(27), 78–93. Burt, D. (2003). A Purchasing Manager’s Guide to Strategic Proactive Procurement. New York: AMACOM Books. Croxton, K.L.-D. (2001). The Supply Chain Management Processes. The International Journal of Logistics Management Vol. 12, No.2 , pp. 13-36. Family Planning Logistics Management. (2004). Pest Management for Warehouses Storing Contraceptive Products in Developing Countrie. Arlington: FPLM/John Snow, Inc. Frankel, R. G. (2002 ). Grocery industry collaboration in the wake of ECR. International Journal of Logistics Management, 57-72. Ghodsypour, S. a. (1998). A Decision Support System for Supplier Selection Using an Integrated Analytic Hierarchy Process and Linear Programming. International Journal of Production Economics, 199-212. Handfield, R. M. (2009 ). Sourcing and supply chain management, fourth edition. Canada: Cengage Learning. Heizer, J. H. (1999). Operations Management. Upper Saddle River, N.J: Prentice Hall. Hyun-cheol Paul Choi California State University. (2014). Operations Management. Journal of Operations Management, Volume 8, Number 1.

Isik, F. (2011). A New Approach to Quantitative Measurement of the Supply-Chain- Complexity. Complexity in Supply Chains, 72-80. J. G. Kariuki, K. J. (2012). Report. Kent, R. (2007). Marketing Research: Approaches, Methods and Application in Europe. UK: Thomson Learning. Knobel, C. L. (2004). A Handbook for Teacher Research From Design to Implementation. Glasgow: Bell & Bain Ltd. Langevin, A. &. (2005 ). Logistics system: Design and optimization. New York: Springer. Miles, M. B. (1994). Qualitative data analysis: An expanded sourcebook (2nd ed.). Thousand Oaks, CA: Sage. Monczka, R. M. (2010). Purchasing & SupplyChain Management. South-Western: CengageLearning. Morash, E. (2001). Supply Chain Strategies, Capabilities, and Performance. Transportation Journa, p. 37-54. Morrison Z, R. A. (2011). Understanding contrasting approaches to nationwide implementations of electronic health record systems. J Healthc Engin, 25-42. Perreault, W. &. (2013). Essential of marketing: A golbal-management approach. In W. &. Perreault, Logistics and distribution customer service (pp. 72-90). Boston: McGraw-Hill/Irwin. Saunders, M. L. (2007). Research methods for business students, (4th ed.). Harlow : Financial Times/Prentice Hall. Serlin, C. F. (2011). The SAGE Handbook for Research in Education: Pursuing Ideas as the Keystone Exemplary Inquiry . California: SAGE Publications, Inc. Silverman, D. (2007). A very short, fairly interesting and reasonably cheap book about qualitative research. London: SAGE.

Sparks, L. (1998). The Retail Logistics Transformation: insights onto current practice and trends from leading experts. In J. Fernie & L. Sparks (Eds. Logistics and Retail Management , (p. 1-22). Wheelan, T. a. (1998). Strategic Management and Business Policy (5th ed.). Addison-Wesley: Reading, MA. Y. H. Hui, L. B.-K. (2003). Food Plant Sanitation. 270 Madison Avenue, New York, NY 10016: Marcel Dekker, Inc. Yin, R. K. (1984). Case study research: Design and methods (1st ed.). Beverly Hills, CA: Sage Publications. Yin, R. K. (1993). Applications of case study research. Newbury Park, CA: Sage Publications. Yin, R. K. (1994). Case study research: Design and methods . Newbury Park, CA: Sage Publications.

APPENDIX

Transcript Interview

Interview 1: General Manager of General Merchandise Store Division at PT Hero Supermarket Tbk, Bintaro Researcher: Good morning, Mam. My name is Gerry Jonathan Prasetya, I am a student of President University, majoring on International Business. I would like to interview you regarding my thesis research. Can I have your time? Participant: Morning, sure Gerry. Researcher: Could you introduce yourself Ms? Participant: Okay, my name is Yaya, I am work for General Manager of GMS division at PT Hero Supermarket Tbk. Researcher: Well Ms. Yaya I have several question regarding my thesis research entitled Purchasing Operation System of General Merchandise Store products a case study at PT Hero Supermarket Tbk, could we start now? Participant: Yes, you can, what‟s your question? Researcher: Can you explain in general about purchasing operation of GMS products at PT Hero Supermarket Tbk? Participant: Well, let me explain about that, generally the purchasing operation in GMS division divided into 2 types, first called local purchase which means we order the goods from local suppliers. The second one is import purchase, import means we buy the goods from outside country. In local purchase we can divided into two types again, first we called type A and second we called type B, type a means that we order the goods to DC of PT Hero Supermarket Tbk, and for type B we order the goods directly to the local suppliers.

And for import purchase, mostly the goods we order comes from China, and PT Hero Supermarket Tbk used intermediary to import our goods. Researcher: The other things that I want to ask is why PT Hero Supermarket Tbk doesn‟t import directly to the foreign supplier? Participant: The reason why PT Hero Supermarket Tbk doesn‟t import directly to the foreign supplier isthe company‟s vision and mission is to sell the goods neither imports the goods. Therefore, the company focuses to sell the goods rather than do the import one.Moreover, if the company import the goods by them self, it such a complicated things since importing some goods need special requirements. In addition, sudden inspections from the customs office commonly become to be an issue. The company needs to deal with Indonesian National Standard (SNI) as well. Because of those things, PT Hero Supermarket Tbk decided to use Importer Company for run their import activity. Researcher: What are the differences between type A and type B on local purchase? Could you explain more about the flow? Participant: Yes of course, The type A flow starting from Merchandise Departmentorder the goods to Distribution Center, Distribution Center will re-purchase to the local supplier, after DC order to supplier, supplier will send the goods to DC, and DC will directly send the goods to the store, have you got what I meant? Researcher: Oh got it Ms, how about type B? Participant: Type B is simpler, because in this flow Merchandise Department or Store order directly to the local supplier, then the supplier will directly send the goods to the store. Hence, some rules are implied,the store can‟t buy or order all the goods from the local

supplier, the store will only buy some product like dairy products, such as tofu, tempeh, milk, etc. Researcher: Next, how about the purchasing in import Ms.? Participant: The procedure in import purchase started whenMD order the goods and determined the quantity order, after that, MD will send itto the foreign. Next, the foreign supplier will issuedProforma Invoice (PI).MD will discuss and review the ProformaInvoice that is going to be approved by Merchandise Director. After PI approved by Merchandise Director, MD will submit approved PI to MD Admin Import, and Admin Import staff will Create Order Number.Then MD approved PI included with order number to Foreign Supplier.MD makes sure the article details such as Article Number, Price, Packaging, and barcode. Next steps, after the goods arrived at The Port, Forwarder will raise “SuratJalan” to MD. MD will send SuratJalan to ImportAdminStaff.Next, Import Admin staff sends SuratJalan to DC re-purchase that will issue PO to Supplier. Lastly, the goods arrived at DC & DC wills deliver the goods to the store. Researcher: The next question, what is the main function of MD itself in terms of purchasing operation system? Participant: The main function of MD itself divided into 4 points. First is for procurement for request/ order from store (Regular), as regular goods, stores do the order activity based on minimum stock. In here if the store got the information from the system about report Minimum and Maximum goods, the store will review and order the goods based on the purchasing type. Second is for Promotion. In here PT Hero Supermarket Tbkwill give promotions, such as weekly promotions. We can see the weekly promotions from the newspaper, mailer and radio. Based on the promotion goods, MD

will make allocation goods to store based on historical data sales of every store, then MD will make purchase order to supplier. Third is for new store, If PT Hero Supermarket Tbk wants to open new store, in here MD is the one who will order all the goods needed in the store first. The one who order or purchase all the goods is Merchandise Department division. Last is for finalize purchasing with Trading Terms, Finalize Purchasing means that in trading terms we will got the number of target purchase, if target completed MD of PT Hero Supermarket Tbk will get buying income for volume purchase. Researcher: Sounds great, Okay Ms. Thank you so much for your time, I think is enough for today; I do appreciate your kindness for allow me to interview you. Have a good day Ms. Yaya. Participant: Yes, my pleasure.

Interview II:Store General Manager for General Merchandise Store Division at PT Hero Supermarket Tbk, Bintaro (2) Researcher: Good afternoon Ms.My name is Gerry Jonathan Prasetya, I am a student of President University, majoring on International Business. I would like to interview you regarding my thesis research. Can I have your time? Participant: Afternoon. Sure Gerry. Researcher: Could you introduce yourself Ms? Participant: Sure, My name is Elsiana, I work for Store General Manager of GMS division of PT Hero Supermarket Tbk. Researcher: Ms. Elsiana, regarding my title research about purchasing operation system, last week I already know about the purchasing operation system that explained by Ms. Yaya, and now I would like to know about receiving process of GMS products at PT Hero Supermarket Tbk, could you explain the receiving process? Participant: Alright, I will explain one by one. First receiving process in Local Purchase type A, the first step is while the goods arrived in store, the DC should register local supplier log book or we called it “BukuTamuRegistrasiFaktur”, later we go to storage to see BTRF itself. Next Steps is store receiving and checking goods with BTH scanner, after that, we upload data BHT to the receiving system, after we upload the BHT data, we have to input the document as well such as suratjalan, invoice,etc. Lastly, store should reconcile data labeling with delivery order (SuratJalan). Next for Local Purchase type B, all the processes is same, the differences only on receiving and checking the goods, in type B since the goods come directly from the supplier, store will not using BHT scanner for receiving and checking the goods, yet checkingmanually.

Researcher: How about the receiving process for Import Purchase, is it same with Local Purchase? Participant: For Import Process, since the goods come from supplier as well, so the receiving process is same with Local Purchase type B, which means the store is not using BHT scanner for receiving and checking the goods, but they use manual checking. Researcher: I would like to know what are the documents needed in receiving process? And is there any problem in receiving process for both Local and Import Purchase? Participant: The document needed is usually like Invoice, Delivery Order, and also PO (Purchase Order), I will show it to you later. So far, the problem we got such as for Local Purchase the goods we order and the goods arrived is somehow different, or the quantity is not same, for example we order 10, the goods arrived just 5. For Import Process, we have a problem in time, in here we can‟t force the supplier, since in the delivery process also influenced by so many external factors, such as weather, traffic, etc. Researcher: What is your solution to solve their problem? Participant: For Local Purchasein PT Hero Supermarket Tbk, wehandle this problem by using DCA. DCA is Damage Claim Assortment. In here if the goods that we order are not same, we can claim the goods by using DCA itself. Unfortunately, we still have no solution in import process since the common problem is come from the external factors such as weather. Researcher: I think is enough for today Ms, I got lots of valuable knowledge from you. Thank you for your kindness of answering my question. Have a good day Ms. Participant: No need to be that formal. You‟re welcome,Gerry.

Interview III:General Manager of General Merchandise Store Division at PT Hero Supermarket Tbk, Bintaro (3) Researcher: Good afternoon Ms. Yaya, I would like to discuss about SWOT analysis from purchasing operation process and General Merchandise Store division itself. Participant: Good afternoon Mr. Gerry. Yes we can discuss right now. Researcher:. Could you explain the strength of purchasing operation system and General Merchandise Store? Participant: Well, our strength is we use SAP formerchandising system, in here SAP is one of the best systems for retail business. By using this software, PT Hero Supermarket Tbk will get more benefit such as Flexibility, customized solutions to suit the business, highly integrated with other modules, Industry specific modules with a deep insight, Continuous support. Next, General Merchandise Store Division PT Hero Supermarket Tbk has group import procurement for joint buying.General Merchandise Store division in PT Hero Supermarket Tbk is the only one retail company who has group import procurement for joint buying that located in Guangzhou, China. In here group import procurement for joint buying means that a company who has the duty to help our import activity. Next, General Merchandise Store division of PT Hero Supermarket Tbk used Importer for they import activity. Lastly, General Merchandise Store Division PT Hero Supermarket Tbk already knows with the local supplier before the store is open yet and Terms of Payment with the both local and import supplier well recognized.

Researcher: How about the weakness? Participant: For the weakness, first is performances of data system,a big company such as PT Hero Supermarket Tbk of course have a lot of data, in here day by day the data in PT Hero Supermarket Tbk is getting higher, and it will be affected to the performances of the system. The system works so slow it because the data is too big. Second is about Paperwork of PT Hero Supermarket Tbk, all of document still using paper, whereas there are several documents in import activity that we need to scan the data from the paper itself, it would be affective if we using email. Researcher: Talking about opportunity and threat, what are the opportunity and threat of purchasing operation system and General Merchandise Store division? Participant: For the opportunity, SAP system will apply for long terms, Hero also has a strong people power, and Private Label. Oeover, PT. Hero still have so many item products that can build with private label. And for the threat, PT. Hero has to make sure the system serveris work properly since PT Hero Supermarket Tbk has a lot of data. The second threat is specialty store. Researcher: After we discussed about SWOT analysis, could you give several recommendation? Participant: Sure Gerry, I recommend that PT.Hero should concern in the system server, it must work well. Then for the paperwork, we need to change into email, because it‟s really helpful for us. Researcher: Okay, thank you so much for your time and kindness Ms. Yaya. Wish you all the best in your work. Good day. Participant: Okay then. You are very welcome Mr. Gerry.

Interview IV:General Manager of General Merchandise Store Division at PT Hero Supermarket Tbk, Bintaro (4)

Researcher: Good afternoon Ms. Yaya, In this meeting, I would like to discuss about key performance indicator for purchasing operation system, could you give explanation about that? Participant: Sure Gerry, every department have their own KPI, for purchasing department, actually in PT Hero Supermarket our division will have the target every year, and we have to achieve that target, so that MD should make sure the performances of merchandising work well. To see the performances, it can be seen by sales, profit and also buying income. To makes sure and achieve the target, MD make a key performance indicator, those are stock on hand, assortment clustering, and also pricing strategy. Researcher: So based on 3 points of Key Performances Indicator for purchasing, could you explain one by one?

Participant: Stock On Hand is measured differently by department; it is depend on the characteristic of particular products under the department.For example: For Software Department, there are several things to consider such as the consideration about the minimum quantity for production, consideratonof the size, and also for the color. The indicator for stock on hand is should be in line with term of payment supplier or one month more than term of payment for more complicated department such as Software department and high margin department such as Household, Leisure department.

Researcher: How about Assortment Clustering?

Participant: Assortment Clustering is measured by store capability to sell products and space capacity. In here there are several point regarding to assortment clustering, and the indicator for assortment clustering are balance between sales driven and GP Generator, there should be quick replacement for non-moving items, mark down policy should be one of the core regulations to maintain.

Researcher: For Pricing strategy?

Participant: Pricing policy is measured by the ability of a retailer to sell products less than competitor prices for all sensitive price items. The indicators for pricing strategy are for any sensitive items, daily prices should be cheaper than competitors of the same format business, for entry price private labels, price should be cheaper than best-selling products in the market, for media promotion (Newspaper) should always be cheaper than competitors.

Researcher: So, if I want to know until December so far, by using this KPI, is the target is already achieved?

Participant: Actually this is confidential, but I will show it to you but you can‟t show it real, you can make it into percentage for example. Based on the budget list (The researcher saw the table list of the budgeting), I hope that our target will achieve Gerry by the end of this month.

Researcher: Thank you Ms for your kindness, I already know about the Key Performances Indicator of purchasing operation system. Have a good day.

Participant: Sure Gerry, good luck for your research.

Field Work Pictures

Interview with Ms. Yaya at PT Hero Supermarket Tbk @ Bintaro

Interview with Ms.Elsiana at Giant Supermarket Bintaro.

Picture of the total store of PT Hero Supermarket Tbk Group

100

BHT Scanner for receiving process

101

Loading dock of PT Hero Supermarket Tbk @ Bintaro

102

Storage of Giant Supermarket Tbk @ Bintaro

103