Green Supply Chain Management in Indonesian Crumb Rubber Factories: Designing Strategies towards Implementation.

GREEN SUPPLY CHAIN MANAGEMENT IN INDONESIAN
CRUMB RUBBER FACTORIES:
DESIGNING STRATEGIES TOWARDS IMPLEMENTATION

TRI SUSANTO

GRADUATE SCHOOL
BOGOR AGRICULTURAL UNIVERSITY
BOGOR
2015

DECLARATION OF THESIS, SOURCES OF INFORMATION
AND DELEGATION OF COPYRIGHT
I hereby truthfully stated that all of statement and data in my thesis which
is entitled “Green Supply Chain Management in Indonesian Crumb Rubber
Factories: Designing Strategies towards Implementation” is my original work that
also the results of the study for my thesis under the supervision and advice by the
respected advisors committee, except for those which are indicated clearly as
literatures cited.This thesis also submitted in Entrepreneurial Commercialization
and Innovation Centre, The University of Adelaide, since The Double Degree
Program between IPB and The University of Adelaide. Despite of that, this thesis

has not been submitted to any tertiaru institution nor published before.
I hereby delegate the copyright of my thesis to the Bogor Agricultural
University.
Bogor, July 2015
Tri Susanto
NRP F351137111

SUMMARY
Tri Susanto, 2015. Green Supply Chain Management in Indonesian Crumb
Rubber Factories: Designing Strategies towards Implementation. ( Marimin,
Supervisor and Suprihation, co-supervisor).
Green supply chain management (GSCM) is a new technical innovation that has
been touted to improve supply chain performance as well as minimize the
environmental impacts. Unfortunately, this concept has not been entirely
implemented in Indonesian rubber industries. The primary objective of this
research were identify current green practices, to explore influencing factors and
formulate green approach as well as select strategies to accelerate GSCM
implementation in Indonesia’s crumb rubber factories (CRFs). The case studies
were conducted in two private CRFs. The data were collected through semistructure interviews with stakeholders, field observation, and examination of
QMS documents. The GSCM model for CRFs was constructed, and the

influencing factors were analyzed through thematic analysis through the lens of
innovation diffusion theory. The Analytical Hierarchy Process was employed to
prioritize the strategies. The findings suggest CRFs have not committed
themselves to integrating the environmental management intentionally into the
current production system; their motive of green efforts may be more to maximize
efficiency and reduce the cost production rather than to be more environmental
friendly. The results reveal that technological, organizational and environmental
factors may influence the decision on GSCM adoption. In addition, green
procurement which emphasizes increasing the quality of raw material from the
rubber block supplier and educate farmers or supplier are the prioritized green
approach to accelerate GSCM implementation. The practical results of this
research provide valuable insights and guidelines for CRFs to integrate the green
concepts into operational business strategy.
Keywords: Green Supply Chain Management, Innovation Adoption, Influencing
factor, Crumb Rubber Factories.

RINGKASAN
Tri Susanto, 2015. Green Supply Chain Management in Indonesian Crumb
Rubber Factories: Designing Strategies towards Implementation. ( Marimin,
Ketua Komisi Pembimbing and Suprihation, Anggota Komisi Pembimbing).

Managemen rantai pasok hijau adalah inovasi teknis baru yang telah dipercaya
untuk meningkatkan kinerja supply chain serta meminimalkan dampak
lingkungan. Sayangnya, konsep ini belum sepenuhnya diterapkan di industri karet
Indonesia. Tujuan utama dari penelitian ini adalah mengidentifikasi praktek hijau
di rantai pasok saat ini, mengeksplorasi faktor yang mempengaruhi dan
merumuskan pendekatan hijau serta memilih strategi untuk mempercepat
implementasi rantai pasok hijau di pabrik-pabrik karet remah di Indonesia. Studi
kasus dilakukan di dua pabrik karet remah swasta. Data dikumpulkan melalui
wawancara semi-struktur dengan para pemangku kepentingan, observasi
lapangan, dan pemeriksaan dokumen Sistem Managemen Mutu (ISO 9001:2008).
Model Rantai Pasok hijau untuk pabrik karet remah di desain dan disesuaikan,
dan faktor-faktor yang mempengaruhi dianalisis melalui analisis tematik melalui
lensa teori innovasi difusi. Analytical Hierarchy Process digunakan untuk
memprioritaskan strategi. Temuan menunjukkan bahwa pabrik karet remah belum
berkomitmen untuk mengintegrasikan pengelolaan lingkungan secara sengaja ke
dalam sistem produksi saat ini; Motif mereka mungkin lebih untuk
memaksimalkan efisiensi dan mengurangi biaya produksi daripada menjadi lebih
ramah lingkungan. Hasil penelitian ini menunjukkan bahwa teknologi, organisasi
dan faktor lingkungan dapat mempengaruhi keputusan adopsi konsep rantai pasok
hijau. Selain itu, pembelian yang lebih ramah lingkungan yang menekankan

peningkatan kualitas bahan baku dari pemasok bokar dan mendidik petani atau
pemasok adalah pendekatan yang diprioritaskan untuk mempercepat implementasi
rantai pasok hijau. Hasil praktis penelitian ini memberikan wawasan berharga dan
pedoman untuk pabrik karet remah untuk mengintegrasikan konsep berwawasan
ramah lingkungan ke dalam strategi operasional bisnis
Keywords: Rantai Pasok Hijau, Innovasi Diffusi, Faktor yang berpengaruh, Pabrik
Karet Remah.

Copyright ©2015 by Bogor Agricultural University
All rights reserved
1. No part or all of this thesis excerpted without inclusion or mentioning the
sources
a. Excerption only for research and education use, writing for
scientific papers, reporting, critical writing or reviewing of a
problem
b. Excerption does not inflict a financial loss in the proper interest of
Bogor Agricultural University
2. No part or all of this thesis may be transmitted and reproduced in any form
without a written permission from Bogor Agricultural University

GREEN SUPPLY CHAIN MANAGEMENT IN INDONESIAN
CRUMBR RUBBER FACTORIES:
DESIGNING STRATEGIES TOWARDS IMPLEMENTATION

TRI SUSANTO

A thesis submitted to
Graduate School of Bogor Agricultural University,
In partial fulfilment of the requirements for the degree of
Master in Science in Agro industrial Technology

GRADUATE SCHOOL
BOGOR AGRICULTURAL UNIVERSITY
BOGOR
2015

External Examiner: Dr. Ir. Hartrisari Hardjomidjojo

Thesis Tittle : Green Supply Chain Management in Indonesian Crumb Rubber
Factories: Designing Strategies towards Implementation.

Nama
: Tri Susanto
NRP
: F351137111

Approved by
Supervisor Comitee

Prof Dr Ir Marimin, MSc

Prof. Dr. Ir. Suprihatin

Chairman

Member

Acknowledged by

Head of Study Program of
Agro Industrial Technology

Dean of Graduate School

Prof. Dr. Ir. Machfud, MS

Dr Ir Dahrul Syah, MScAgr

Exam Date: 10 June 2015

Submission Date:

ACKNOWLEDGEMENTS
Praise and gratitude to Allah SWT, the almighty, the most beneficent and
the most merciful, Thanks, Finally, the author could complete this thesis as a
partial requirement to get Master Science degree in IPB. In addition, I would also
express my gratitude to many people who give support, knowledge, information
and helps during writing this thesis. The title of this thesis is “Green Supply Chain
Management in Indonesian Crumb Rubber Factories: Designing Strategies
towards Implementation”.
During this study, Prof. Dr. Ir. Marimin, M.Sc, chairman of supervisor

committee has patiently guided and instructed the green supply chain management
concept in this thesis, while Prof. Dr. Ir. Suprihation has supported in terms of
environmental aspect in the rubber industries. In addition, Dr Barry Elsey has
helped in research methodology, particularly on qualitative approach in this
research. I would also say many thanks for the insights, valuable information and
also incredible knowledge for Dr. Ron Grill, Dr. Allan O’connor, and Amina
Omarova during the study in The University of Adelaide.
Unforgettable thanks to all of my respondents including two crumb rubber
factories in South Sumatera, BPTK, Gapkindo, BIPA, Ministry of Industry, BLH
and etc. Working with all of the respondents is such an endless journey, thanks for
sharing the knowledge and information. Hopefully, the thesis would be beneficial
for the development of crumb rubber industries in Indonesia.
During writing this thesis in Adelaide, Ketut’s Kitchen was also helpful in
supporting my daily life; it was very memorable working with the KK teams.
Many thanks also for DD students and Nexus’s community who inspire me in
every aspect of the study and life. It is such a golden opportunity to have an
academic journey for almost 2 years with all of you guys.
Finally, proudly, big thanks for my great mother and father who teach me
everything; this thesis is dedicated for both of you.

Bogor, July 2015
Tri Susanto

i
TABLE OF CONTENTS
i
LIST OF FIGURES
ii
LIST OF TABLES
iiii
LIST OF APPENDICES
iii
1 INTRODUCTION
1
Background
1
Statement of the Problem
2
Research Questions
3

Purpose of The Study
3
Significance and Contribution to the Field
4
2 LITERATURE REVIEW
5
Green Supply Chain Management
5
GSCM definition ............................................................................................. 5
Importance of GSCM ...................................................................................... 5
GSCM Model for CRFs .................................................................................. 6
Innovation Diffusion of GSCM
8
Innovation Decision Process of GSCM .......................................................... 8
Factors influencing the GSCM adoption......................................................... 9
3 METHODOLOGY
11
Introduction
11
Setting

11
Participants
11
Measurement Instruments & Data Collection Procedures
12
Data Analysis
13
Validity
13
4 FINDINGS AND DISCUSSION
14
Crumb Rubber Supply Chain
14
Crumb Rubber Industries in South Sumatera ............................................... 14
Crumb Rubber Specification ......................................................................... 14
Crumb Rubber Processing ............................................................................ 15
Current Green Practices
16
Company A ................................................................................................... 17
Company B ................................................................................................... 18
Factors Influencing GSCM adoption
19
Technological Factors ................................................................................... 20
Organizational factors ................................................................................... 22
External Factors ............................................................................................ 23
Best Practices of GSCM Adoption
24
Strategies based on Analytical Hierarchy Process ........................................ 24
Green Procurement........................................................................................ 25
Green Production .......................................................................................... 27
Waste Management ....................................................................................... 27
Green Distribution......................................................................................... 27
Reverse Logistic ............................................................................................ 28
Limitation
28
Managerial Implications
29
Performance Measurement............................................................................ 29
Management Commitment ............................................................................ 30

ii
Organizational Learning ................................................................................ 30
Team Project .................................................................................................. 32
5 CONCLUSION AND RECOMMENDATION
33
Conclusion
33
Recommendations
34
Strategic ......................................................................................................... 34
Policy-making................................................................................................ 34
Theory-building ............................................................................................. 34
Future Research Direction ............................................................................. 34
REFERENCE
35
APPENDICES
39
BIOGRAPHY
66
LIST OF FIGURES
Figure 1. Generalized Supply Chain of Crumb Rubber in Indonesia (Adapted from
the studies by (Arifin, 2005; M Arif Darmawan, Wiguna, & Marimin, 2012; M.
A. D. Marimin, Muhammad Panji ; Machfud, Bangkit ; Islam Fajar Putra, Bangkit
; Wiguna, Bangkit, 2014; Wibawa, Hendratno, & van Noordwijk, 2005))
3
Figure 2 Model of GSCM Implementation in CRFs (Adopted from (Elting, 2009;
Hervani et al., 2005; Ho, Shalishali, Tseng, & Ang, 2009; M. A. D. Marimin,
Muhammad Panji ; Machfud, Bangkit ; Islam Fajar Putra, Bangkit ; Wiguna,
Bangkit, 2014; Srivastava, 2007; Zhu, Sarkis, & Lai, 2008) )
7
Figure 3 Innovation decision process (IDP) towards adoption of green in the
supply chain management (adapted from (Rogers, 2003)
9
Figure 4 Data Collection and Analysis
11
Figure 5 The Production process of Crumb Rubber
16
Figure 6 Influencing factors on GSCM adoption process in CRFs
21
Figure 7 the Hierarchy of GSCM Implementation in CRFs
24
Figure 8 The AHP Stages
42
Figure 9 The influencing factors and IDP Process of GSCM adoption in CRFs 48
Figure 10 Result of Pairwise Comparison from 1st Expert Judgment (Senior
Researcher in Indonesian Rubber Research Centre-BPTK Bogor)
58
Figure 11 Result of Pairwise Comparison from 2nd Expert Judgment (Senior
Researcher in Indonesian Rubber Research Centre-BPTK Bogor)
59
Figure 12 Result of Pairwise Comparison from 3rd Expert Judgment (Secretary of
Indonesian Rubber Entreprise Association in Palembang)
60
th
Figure 13 Result of Pairwise Comparison from 4 Expert Judgment (Senior
Researcher in Institute for Rubber Research in Sembawa, Palembang)
61
Figure 14 Result of Pairwise Comparison from 5th Expert Judgment (Head of
Factory A)
62
Figure 15 Result of Pairwise Comparison from 6th Expert Judgment (Head of
Factory B)
63
Figure 16 The Result of Aggregation from 6 experts judgment
65

iii
LIST OF TABLES
Table 1 List of Respondents
Table 2 Crumb Rubber Specification of Indonesia, Malaysia and Thailand
Table 3 Current Green Practices in Each Company
Table 4 Ranking of Green Strategies based on AHP
Table 5 Data Analysis- Current Green Practices in Company A
Table 6 Data Analysis- Current Green Practices in Company B
Table 8 Thematic Analysis - Factor Influencing GSCM Adoption

12
15
17
25
44
46
49

LIST OF APPENDICES
Appendix 1- Interview Questions and Framework for Field Observation
39
A. Framework for Field Observation ........................................................... 39
B. GSCM Practices (Checking List) ............................................................. 39
C. List of Questions During Field Observation............................................ 40
D. List of Questions (Interview) .................................................................. 40
Appendix 2- AHP
41
Analytical Hierarchy Process - Definition .................................................... 41
Appendix 4 – Data Analysis
43
Research Question 1 ...................................................................................... 43
Research Question 2 ...................................................................................... 48
Research Question 3 ...................................................................................... 54
The result of AHP (Using Expert Choice 2000)
58

1

1 INTRODUCTION
Background
Indonesia is the second largest natural rubber producer in the world,
producing about 28% of total production (IRSG, 2014). Approximately 85% of
the natural rubber from the plantation is processed as a crumb rubber and exported
to other countries like Japan, USA, China, and Australia (Barlow, Jayasuriya, &
Tan, 2014). Crumb rubber (CR)1 is a featured export rubber product of Indonesia
which has a significant role to play in the national economic development and
poverty alleviation. Based on Trade Ministry data, the value of crumb rubber
exports was about $9.39 billion USD in 2013, amounting to approximately 7% of
country’s overall exports. Compared to concentrated latex and Ribbed Smoked
Sheet (RSS)2, the market demand of CR has increased significantly. The downstream rubber manufacturers prefer use the CR as their raw material because the
easy storability and the physio-chemical and mechanical properties of crumb
rubber. Because of this increase, consequently, CRFs have had adverse effects on
the environment, particularly due to their waste disposal management.
Based on the last annual assessment result by the Ministry of Environment,
about 28 of 150 CRFs are categorized as “red label performers” and 45 of 150
CRFs are in “blue level performers” (Ministry_of_Environment, 2014). Red label
means that the management of hazardous and toxic material, wastewater, solid
waste, and gas emission in CRFs is well below the green level of government
regulation standards and are being threatened with closure as a result. Meanwhile,
the blue is a level between red and green levels. This under-performed
environmental performance has caused serious ecological problems such as water
contamination, air pollution, and bad odours surrounding the CRFs. It seems that
the environmental performance in mostly Indonesian CRFs is still underperformed. An empirical study by Arifin (2005) reports that the low efficiency of
the supply chain mechanism, and low product quality of the CR is caused by the
complexity of the marketing channel from plantation to CR processing. This low
economic performance also leads to deteriorate the environmental condition along
the supply chain.
Many researchers have made recommendations to overcome the
environmental issues in CRFs. For instance, Utomo, Hasanuddin, and Suroso
(2010) suggest re-designing the production process in order to minimize the
amount of wastewater. Another research by (Muhammad Arif Darmawan et al.,
2014) mentions that the best strategy for green productivity improvement in
natural rubber processing is production optimization. This optimization primarily
focuses on adopting new technology to reuse water that leads to improve the
1

Crumb rubber (CR) is a typical rubber product from coagulated latex that is processed by washing, drying,
heating and pressing without additional chemicals. Crumb rubber is an intermediate rubber product for other
rubber industries like tires, balls, engine mountings, gaskets, etc. Every rubber producer has their quality
standard such as SIR (Standard Indonesian Rubber) and STR (Standard Thailand Rubber). The CR
specification of each country is different in some parameters, but the standards are accepted as export
requirements(Muhammad Arif Darmawan, Putra, Wiguna, & Marimin, 2014).
2

RSS is Ribbed Smoke Sheet, a latex product that produced by use wood smoke to dry the solid latex. The
production technology of RSS is relatively simple compared with CR.

2
production efficiency as well as obtain higher environmental performance.
However, the studies only focused on the upstream practices in RSS and natural
rubber factories rather than the CRFs. In addition, previous studies only
emphasized the processing plant and the production technology, while the
researchers have not yet considered the entire supply chain activities of natural
rubber because the concept of greening the supply chain is relatively new in
Indonesian rubber industries.
The issue of environmental pollution accompanying industrial development
ought to be addressed by the supply chain management that considers the material
and information flows as well as the networking of certain industries to be
environmentally friendly. Green Supply Chain Management (GSCM) is the
merging of environmental and supply chain management concepts. This concept
could be useful to improve the effectiveness of the supply chain (economic profit)
and also reduce negative environmental impacts (Srivastava, 2007). The other
purpose of GSCM is environmental consciousness in each step of the supply chain
through efficiently using materials and energy and minimizing waste. Many
industrial sectors like manufacturing, logistics, electronic and assembling in some
countries have initiated to adopt the GSCM in their business strategy. For
instance, Taiwan (Chien & Shih, 2007), India (Diabat & Govindan, 2011), China
(Chien & Shih, 2007) and Brazil (McCormack, Bronzo Ladeira, & Paulo
Valadares de Oliveira, 2008). Nevertheless, the GSCM implementation in
agricultural based industries has not been explored widely owing to the supply
chain mechanism of agricultural products being complex and highly uncertain
compared to manufacturing products. This complexity is because the agro-product
characteristics are perishable, seasonal and bulky and also the chain has many
tiers (as shown in Figure 1).
Bearing in mind the importance of CRFs for the Indonesian economy and the
environmental deterioration, there is a growing need to determine a more effective
way of solving the environmental problems as well as to improve the CR
competitiveness in the global market. However, the GSCM adoption in CRFs has
not been widely explored, and the practices have not yet developed in Indonesian
rubber industries. Therefore, there is an urgent need to design a strategy that will
accelerate innovation diffusion of GSCM in CRFs to address the ecological
issues, while at the same time improving the CR competitiveness in the global
market.
Statement of the Problem
The GSCM is a new innovative concept for CRFs in Indonesia, and the
evidence of its implementation is scarce. The unstructured information and the
perceived attributes / advantages of GSCM constrain the integration of green
concepts with the current production system in CRFs. As noted, insufficient
knowledge and resources on GSCM practices negatively impact the decision to
implement GSCM. Moreover, the lack of ecological mindset in operational
business strategies among CRFs exacerbates this condition.

3
Research Questions
The problem areas lead to main research questions:
RQ1: What are the current practices of GSCM in CRFs? How effective are they in
minimizing the environmental impact on CRF activities?
RQ2: What are the factors that may influence the adoption of innovative green
concepts into the existing crumb rubber supply chain?
RQ3: What kind of green supply chain activities may enhance the implementation
of GSCM? What best practices may be useful (simply implemented in CRFs)?

Figure 1. Generalized Supply Chain of Crumb Rubber in Indonesia (Adapted from
the studies by (Arifin, 2005; M Arif Darmawan, Wiguna, & Marimin, 2012; M. A.
D. Marimin, Muhammad Panji ; Machfud, Bangkit ; Islam Fajar Putra, Bangkit ;
Wiguna, Bangkit, 2014; Wibawa, Hendratno, & van Noordwijk, 2005))
Purpose of The Study
The purpose of this research is to identify the current GSCM practices and to
explore factors influencing GSCM adoption as well as formulate strategies to
improve the GSCM implementation among CRFs in Indonesia.
This research aims to recommend the best practices for accelerating GSCM
adoption and integrating the green concept as part of their business strategy.

4
Significance and Contribution to the Field
Previous studies only focused on the upstream area of the supply chain,
comprising the plantation, RSS, and rubber block3 (M. A. D. Marimin,
Muhammad Panji ; Machfud, Bangkit ; Islam Fajar Putra, Bangkit ; Wiguna,
Bangkit, 2014; Wibawa et al., 2005). The studies in innovation adoption of
GSCM in a context of the Indonesian CRFs have not been broadly developed yet,
and the implications regarding the diffusion of the various GSCM practices are
not well understood by stakeholders. Unfortunately, the evidence of GSCM
implementation and the operational best practices for CRFs is very limited. Thus,
the specific research that focuses on how innovation adoption of GSCM in CRFs
is critical.
This current study contributes to green practitioners and stakeholders by
providing evidence of GSCM implementation in Indonesia CRFs. The research
would not contribute new knowledge to the GSCM theory rather it would offer a
relevant and suitable model of GSCM implementation for CRFs. The other
research findings include the factors influencing GSCM adoption which would be
useful for the stakeholders in designing the greening action and strategies towards
the implementation. In addition, the outcome of this research may provide new
and practical guidance for applying the constructed model of GSCM in the real
world. The contribution of this research probably would give a definite advantage
to the process of GSCM innovation diffusion among agro-based industries in
Indonesia.

3

Coagulated fresh liquid latex from the plantation by adding chemicals (acid solution), this
process needs about 7-10 days until it can be sold to collectors. Usually, farmers have a small
pond nearby the plantation area.

5

2 LITERATURE REVIEW
Previous researchers have approached GSCM from many different
disciplines such as management, EMS, logistics, network analysis, human
resources, and GSCM performance measurement. Meanwhile, there has been little
research focus on the GSCM innovation diffusion. In order to implement GSCM
entirely, the adopters who implement the concept should know what GSCM is.
Therefore, the literature review starts with a GSCM definition and its importance
for factories, and then follows by the justification of GSCM model that is relevant
to CRFs condition in Indonesia. Furthermore, the literature review also addresses
the innovation-decision process of GSCM adoption.
Green Supply Chain Management
GSCM definition
Green issues have been popular due to the pressures from regulation,
market, NGO, and suppliers. Therefore, adoption of ecological mindset into the
business activities has become a crucial part of corporate strategies in sustaining
the competitiveness in the global market (Zhu, Sarkis, & Geng, 2005). GSCM is
an incredible concept to instil environmental thinking in traditional supply chain
(Beamon, 1999). Compared to the traditional supply chain, the GSCM allows
collaboration among the members non-linearly to share information and materials
(Srivastava, 2007). This collaboration leads supply chain members to work
effectively to achieve higher level of greenness (Beamon, 1999; Bhetja, Babbar,
Singh, & Sachdeva, 2011; Walton, Handfield, & Melnyk, 1998). In the context of
CRFs, the green adoption primarily stresses in using materials and energy
efficiently while minimizing waste in each step of CR production.
Importance of GSCM
GSCM is necessary because it supports the saving of resources and energy,
cutting down costs as well as providing profitable pollution prevention (Diabat &
Govindan, 2011; Rao, 2007; Srivastava, 2007). The external drivers such as
customer demand, NGO, business partners, neighbors, government regulation and
investors have a significant impact on how companies see how critical GSCM
adoption is in their operational and strategic business management. For instance,
green image and eco-label have influenced the customers’ decision to buy
products. Furthermore, NGOs, WWF and Green Peace have campaigned greening
industries to society by exposing companies that are potentially harming the
environment. These phenomena could affect the customer’s behavior. A strong
internal driver is the willingness to improve risk management due to potential
interruptions in the supply chain. Another internal driver is the collaboration with
suppliers or other stakeholders to find alternative materials, technology, and
equipment in order to minimize environmental impacts more efficiently
(Johansson & Winroth, 2009).
The urgency of GSCM implementation has many considerations. To
illustrate, Diabat and Govindan (2011) reports that the decisive reason is the
ambition of gaining a sustainable competitive advantage. Based on previous
works of literature, the advantages of implementing GSCM are summarized as

6
follows (Eltayeb, Zailani, & Ramayah, 2011; Johansson & Winroth, 2009;
Srivastava, 2007):
a) reducing the production cost,
b) enhancing the product value to customer,
c) increasing the sales,
d) obtaining positive media attention,
e) improving operational efficiencies,
f) Increasing the ratings from investment firms.
GSCM Model for CRFs
Various models of GSCM are typically fitted with certain industries or
products (Andiç, Yurt, & Baltacıoğlu, 2012; Henriques & Sadorsky, 2007;
Srivastava, 2007). For instance, Hervani, Helms, and Sarkis (2005) define GSCM
in manufacturing companies as a sequence of activities from green purchasing,
green manufacturing / material management, green distribution / marketing, and
reverse logistic. In addition, Srivastava (2007) suggests the green product design
should be in the model. Meanwhile, Zhu et al. (2005) emphasize the concept of
“closing the loop” in the GSCM implementation, which means the green should
be integrated integration from suppliers until the end-customers or buyers.
In this research, the GSCM model is tailored based on the CRFs production
system. The suggested GSCM model for CRFs is a series of procurement,
production, distribution, reverse logistics, and waste management (as shown in
Figure 2); the model excludes product design. The government and buyers
establish the specification of crumb rubber so that the companies do not need
develop the product specifications. Moreover, based on the CR supply chain
mechanism, the marketing and relationship with the end customer is not included
in CRFs scope. Thus, the concepts of “closing the loop” and green marketing are
excluded in the GSCM model in CRFs.
a. Green Procurement
The concept green indicates that purchasing should involve reuse,
reduction, and recycling activities in the business while the purchasing materials
need to have less impact over the whole life cycle (Salam, 2008). Moreover,
substituting hazardous materials, establishing environmental standards for
suppliers, and improving the quality of raw material are essential practices for
green adoption (Min & Galle, 2001; Walton et al., 1998). Traditional companies
consider the procurement of raw material or services as supporting activities in
achieving profits. Indeed, in CRF, the purchasing of rubber block from suppliers
either farmers or middlemen is the vital activity because the quality of raw
material influences the production process, and the amount of supply relates
closely to lead time for order fulfillment.
b. Green Production
This green production concept is designed to improve the production
system in order to reduce or prevent emissions, water contamination and land
pollution as well as minimize risks to humans and the environment (Johansson &
Winroth, 2009). Moreover, Atlas and Florida (1998) highlight that using small
impacts input in a production process with highly efficient technology leads
companies to generate little or no waste, or pollution while optimizing supply

7
chain costs. In the production process of crumb rubber, the primary processes are
down-sizing and cleaning the rubber block. Consequently, CRFs consume large
quantities of energy and water as well as generate amount of wastewater. In this
context, green production in CRFs should be concerned about the amount of
energy and water utilization, the quantity of hazardous waste, type of energy
sources, and typical technology for the production system.

Figure 2 Model of GSCM Implementation in CRFs (Adopted from (Elting, 2009;
Hervani et al., 2005; Ho, Shalishali, Tseng, & Ang, 2009; M. A. D. Marimin,
Muhammad Panji ; Machfud, Bangkit ; Islam Fajar Putra, Bangkit ; Wiguna,
Bangkit, 2014; Srivastava, 2007; Zhu, Sarkis, & Lai, 2008) )
c. Green Distribution
According to Ho et al. (2009), green distribution could be defined as green
packaging and green logistics. Recently, the issue of increasing amounts of solid
waste due to the dumping of packaging material has led to the emergence the
green packaging concept in the supply chain. The greening packaging can be
approached by using green materials, recycling and reusing packaging and
coordination with vendors or customers to standardize the packaging to be more
environmentally friendly (Dekker, Bloemhof, & Mallidis, 2012; Ninlawan,
Seksan, Tossapol, & Pilada, 2010). While the green logistics for raw material and
finished goods includes the reduction in energy usage for logistic activities and
waste during the process. The current condition of rubber logistics is less
organized between stakeholders. In order to implement an interconnected system
between government, public and corporate sectors which integrates material and
information management of transportation, storage, and delivery, it is necessary to
consider an efficient distribution route (Sheu, Chou, & Hu, 2005). In CRF, the
distribution activities like warehousing and transporting cause air pollution and
odors4 from manufacturing. Therefore, the inventory system in the factory needs
4

Rubber block has a bad odour because of the protein decomposition of the rubber block by
bacteria. This environmental issue becomes a significant impact for the public around the factory
location.

8
to be managed deliberately because these activities are primarily odor sources that
could cause a serious environmental problem for humans near the location.
d. Reverse Logistics
The reverse logistics concept includes the process of planning,
implementing and controlling the using of raw materials so that the value or
disposal from the products could be recaptured (Wang, Lai, & Shi, 2011). The
other definition of reverse logistic is the systematic process of taking their
distributed products for possible recycling, remanufacturing, or disposal. In this
research, the reverse logistics focus is on the internal area of the CRFs because
crumb rubber is an intermediate product. In addition, collecting product returns
from the customers is unlikely as buyers generally accept the product (possibly
reducing the price if the quality is poor).
e. Waste Management
The primary goals of waste management are minimizing the amount of
disposed material, source reduction, pollution prevention and disposal. Thus,
controlling the solid waste, wastewater, and gas emissions as well as handling raw
material, products, and defect products are essential to succeed in this goal (Andiç
et al., 2012; Rothenberg & Zyglidopoulos, 2007). The waste should be maintained
according to the process: reduction, reuse, recycling, energy recovery and finally
disposal of the unusable part of the materials (Andiç et al., 2012). In CRFs, the
waste management concept would be included in each step of CR processing.
Studies of GSCM practices have been developed for particular industries such
as electronic industries in Taiwan (Chen, Shih, Shyur, & Wu, 2012); textile
industries in India (Baskaran, Nachiappan, & Rahman, 2012); Chemical and
cosmetic sectors in Brazil(de Sousa Jabbour, 2015). Their studies result in
different approaches in order to implement the GSCM so that the best practices
have been developed based on the nature of the industries and the final product.
To illustrate, Andiç et al. (2012) identify waste management as the starting point
to adopt green concepts in electrical, electronic equipment industries. Meanwhile,
waste minimization plays a crucial role in GSCM implementation in Indian
Pharmaceutical Industries (Gangele & Verma, 2011). On the other hand, the result
of GSCM adoption observation in 341 Chinese manufacturers implied that
internal environmental management and green purchasing should have
multifaceted application in GSCM implementation (Zhu et al., 2008). Therefore,
the prioritization of GSCM activities and formulating strategies for each activity
along the crumb rubber supply chain are necessary to accelerate GSCM adoption
in CRFs.
Innovation Diffusion of GSCM
Innovation Decision Process of GSCM
Innovation is defined as “an idea, practice, or object that is perceived as
new by an individual or other unit adoption” (Rogers, 2003, p. 11). The
innovation includes practices that are new to organizations, such as equipment,
products, services, processes, policies, and projects. Therefore, understanding the
types of innovation helps explain the organization’s adoption behaviour and
describes the determinants of innovation in them. Damanpour (1991) categorizes
innovations into two concepts: administrative and technical innovation.
Administrative focuses on the organizational structure and administrative process;

9
it is indirectly related to the basic work activities, but more closely to
management. While technical innovation pertains to products, services, and
production process technology. Adopting green practices involves implementing
new or modified processes, techniques and systems to be more environmentally
friendly, this adoption behaviour can be said to be a technical innovation process
(Henriques & Sadorsky, 2007).
Diffusion is the “process by which innovation is communicated through
certain channels over time among the members of a social system” (Rogers, 2003,
p. 5). According to Rogers (2010) the four major elements in the diffusion of new
ideas are innovation, communication channels, time and context (the social
system). GSCM should show five perceived innovation characteristics that
determine its rate of adoption; these factors will be explained as the influencing
factors in the next section. The third element, time, is involved in the innovationdecision process (IDP). IDP is defined as “the mental process through which an
individual (or other decision-making unit) passes from first knowledge of an
innovation to forming an attitude toward the innovation, to a decision to adopt or
reject, to implementation of the new idea, and to confirmation of this decision”
(Rogers, 2010, p. 163). Figure 3 illustrates the process of how innovations are
implemented in an organization. As the GSCM concept is fairly new for
Indonesian industries, the IDP would be beneficial as framework in diffuse the
GSCM among stakeholders. The essential stages in IDP are the knowledge and
decision, mainly in which organization considers to adopt or reject the innovation.
The last element of innovation diffusion is the social system. This element varies
from individuals, informal groups, organizations, and or subsystems. The pattern
of the connection and information networking influence how quickly an
innovation is diffused and the time of adoption (Valente, 1995).

Figure 3 Innovation decision process (IDP) towards adoption of green in the
supply chain management (adapted from (Rogers, 2003)
Factors influencing the GSCM adoption
Many studies have been conducted to analyse the factors affecting green
practice adoption in the supply chain. For instance, Chau and Tam (1997)
highlighted understanding the factors is valuable for practitioners to implement
green practices quickly. Therefore, in this study, influencing factors are explored
and analysed to formulate appropriate best practice for implementing GSCM.
Research by Lin and Ho (2011) through a survey of 322 logistic
companies reports that the characteristics of a green approach and organization
size positively influence the adoption of GSCM. Other researchers also reveal that
the customer demand and regulation pressures affect the decision of implementing

10
green manufacturing practices in Taiwan electronic industries. However, the
studies are limited to logistic and electronics industries, which is different from
processing factories.
Henriques and Sadorsky (2007) Clarifies the changes in organization due
to the technical innovation process of adopting the green concepts would not be
flow smoothly. GSCM, a new technical innovation, should show the perceived
characteristics. This becomes important consideration in the decision stage
whether to adopt or to reject the GSCM adoption. However, other possible factors
that may affect the decision were also explored in this study. The explanations of
GSCM characteristics are described as follows:
1) Relative advantage. Companies are more likely to adopt a new technology
that can provide better performance and higher profit than the old
technologies (Lin & Ho, 2011).
2) Compatibility. How the whole of GSCM concept fits with the capability
that a company already possesses. GSCM should be synchronized with the
current production system in CRFs in order for its adoption to succeed.
3) Complexity. Many studies reveal that the complexity of green practices
has negative influences on green adoption for many industries.
4) Trialability. The easier it is to trial, the less uncertainty for companies in
adopting the green concept.
5) Observability. The more clearly benefits resulting from GSCM can be
observed, the more likely companies are to adopt the ideas.

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3 METHODOLOGY
Introduction
It is noteworthy that most previous studies conducted on GSCM
implementation in various industries has been carried out through the case study
methodology. Yin (2011) mentions that a case study methodology enables the use
of multifaceted sources of evidence such as document, reports, and especially
interviews. Even though the researcher could not control the case, the case would
result in deep exploration in a particular case. This study adopted a similar
research method with the qualitative approach, using two cases from CRFs in
South Sumatera, Indonesia. The study was purposively conducted in two cases
studies in two different companies that are the oldest companies (have been
operating for about 60 years), but still need improvement in environmental
performance. Companies A and B have slight differences in production capacity,
processing technology and the number of employees while based on the
environmental assessment those companies are in the same level of perceived
environmental friendliness. Figure 4 shows how the data were collected and
analyzed.
Setting
The research was in South Sumatera province, the highest crumb rubber
producer in Indonesia. The data collected from December 2013 until March 2015.

Figure 4 Data Collection and Analysis
Participants
Company A has been established since 1940; the production capacity is
about 400ton crumb rubber per month with 400 employees that work 16 hours a
day. Whereas, the company B is relative younger than A, it has been operating
since fifty years ago, the capacity is about 300ton per month with only 300

12
employees in the factory. Both companies have implemented the Quality
Management System (QMS) based on ISO 9001:2008 since 2004. They are
classed in the blue level performance of environmental assessment5. The
document of ISO 9001:2008 is not related to environmental management system,
but the reports in controlling the quality of product is documented based on this
standard.
Table 1 List of Respondents
No
Institution and Respondents
Data Collection
1
Company A (heads of the factory, head Field observation for 4days
division of procurement, production, (Observation list is in Appendix
inventory, logistic, environment and 1).
Interview @ 60-90 minutes with
quality assurance)
head of each division.
2
Company B
ditto
3
Research Centre for Rubber in Bogor
( 2 researchers)
4
Research Centre for Rubber in South
Sumatera
(Head office and 1 researcher )
5
Ministry of Industry (MoI)
(Head Section in Assessment Centre for
Green Industry and Environment &
Head of Sub-directorate for Agro Semi-structured interview with
open ended questions, each
Industry)
6
Rubber Association South Sumatera, respondent is about 60 minutes
Gabungan Pengusaha Karet Indonesia,
GAPKINDO (Secretary). 1 secretary
7
Product Certification Body (BIPA)
(Head office, 2 auditors and 1
researcher)
8
Environmental Agency in South
Sumatera
(1 Inspector for CRFs)
9
2 Farmers Musi Banyuasin
Measurement Instruments & Data Collection Procedures
The questionnaire and list of interview questions were formulated based
on some literature reviews of GSCM implementation and the condition of CRFs
in Indonesia. Academics and experts discussed the content of interview question
to improve the precision of some questions. An interview script that had openended questions was used; the guideline is in Appendix 1. The semi-structured

Ministry of Environment assess the CRFs’ environmental performance annually, the
classification of blue means the factories report the environmental monitoring and control the
waste properly, but their waste treatment need to be improved. In order to get advantage from
government banking, the company must be at the green level.

5

13
interviews were personally conducted and recorded, mostly about 30-60 minutes
for each respondent; a series of notes was made during the interviews. The
interviews were in Indonesian, being the mother language of researchers and
respondents; it gives more benefits to the sharing of ideas. In addition, field
observation is also helpful in overcoming discrepancies between the interview and
the actual condition; this might help uncover behavior of which the participants
themselves may not be aware.
Data Analysis
All interviews were audio recorded on tape, and interviews are listened to
repeatedly and continually coded as proposed by Creswell (2013). The collected
data were organized and coded based on the research questions, and then analysed
through thematic analysis. After the coding of the material, some nodes were
created and categorized following the already established framework from the
literature review. The generated nodes were again refined, and subcategories
formed. Data from the field observations and document of ISO 9001:2008 were
also used to compare with the results of the interviews. After that, the result was
translated into English. The process of data analysis is in Appendix 4.
Selection strategies for GSCM implementation is a complex decision for
the organizations. Therefore, Analytical Hierarchy Process (AHP) would be used
to prioritize the beneficial strategy that result in a significant impact for CRFs.
The AHP was employed by using Expert Choice Software. The hierarchy
structure was constructed through the study of the most cited journals, analysing
the current system of CRFs, and discussion with experts. The experts are two
doctors who are the senior researchers in rubber technology, the head of rubber
Research Centre, the secretary of the rubber association in Palembang, and two
directors CRF. The pair-wise comparison matrix was judged by six experts. A
Consistency Index (CI) which is generated through the calculation in the software
was used to control the consistency of experts’ opinion. The description of AHP is
in Appendix 2.
Validity
The units of analysis used in this study were two large companies, their
current use of GSCM practices and the implementation phase of GSCM practices
in the past. Due to the openness and interactivity, interview outcomes might suffer
from low reliability, as every interview is different (Creswell, 2013). This
research adopts an inductive process that only observed small numbers of
samples. The context-bound theory that emerges after or during the research is
most likely just valid in these particular circumstances (Creswell, 2013).
In terms of construct validity, this research collected data from multiple
sources like qualitative interviews, scientific literature, field observation, and
check-up the document of QMS (ISO 9001:2008). This helped in establishing a
chain of evidence of the research. In addition, the data collected were also shared
in the appendix. In the data analysis, in order to understand the extent of GSCM
implementation in those CRFs, patterns in each case sufficiently matched with the
theoretical framework of GSCM. Moreover, the reasons for the patterns are being
explored in the within and cross analysis of the research.

14

4 FINDINGS AND DISCUSSION
The participants were asked through semi-structured interviews, and
additional data were also collected during field observation. Their responses,
which depend on knowledge, experience and insights, were valuable to present
the GSCM implementation in CRFs. The result of field observation and check-up
ISO 9001:2008 document were useful to find the consistency of the data
collected; this was also helpful to get the validity of the research. This chapter
presents the findings along with the interpretation and discussion.
Crumb Rubber Supply Chain
Crumb Rubber Industries in South Sumatera
Natural rubber industry in Indonesia can be divided into two different type
based on owner namely state owned and private owned factories. All state owned
industry have their own rubber tree plantation for latex supply, but private owned
industry usually buy rubber block from farmers as raw material in crumb rubber
production. Hence, the crumb rubber supply chain is like a mutual symbiosis
between CRFs and farmers. The detail explanation is shown in Figure 1.
South Sumatera is the highest producer of natural rubber in Indonesia. The
plantation area is about 658.812 ha and it produces approximately 470.000 ton
rubber annually. The production tends to grow every year (IRSG, 2014). It is
about 30 private crumb rubber factories are operated. Most of the CRFs produce
technical specification of crumb rubber namely Standard Indonesian Rubber (SIR)
20 and SIR 10. In addition, respondents also stated that CRFs also produce crumb
rubber based on customer requirements which has a different quality from SIR 10
or SIR 20.
Crumb Rubber Specification
Government has established the quality standard of crumb rubber product
specification in order to assure the quality. The standard