IMPACTS OF THE INDONESIAN GOVERNMENT POLICY IN THE FIELD OF DEFENCE INDUSTRY ON THE OPERATIONS AND SUPPLY CHAIN STRATEGIES OF PT PAL AND PT DAYA RADAR UTAMA IN PRODUCING THE INDONESIAN NAVY’S MAIN WEAPON SYSTEMS
IMPACTS OF THE INDONESIAN GOVERNMENT POLICY IN THE FIELD OF DEFENCE INDUSTRY ON THE OPERATIONS AND SUPPLY CHAIN STRATEGIES OF PT PAL AND PT DAYA RADAR UTAMA IN PRODUCING THE INDONESIAN NAVY’S MAIN WEAPON SYSTEMS DAMPAK DARI KEBIJAKAN PEMERINTAH INDONESIA DI BIDANG INDUSTRI PERTAHANAN TERHADAP STRATEGI OPERASI DAN RANTAI PASOK DARI PT PAL DAN PT DAYA RADAR UTAMA DALAM MEMPRODUKSI ALAT UTAMA SISTEM SENJATA TNI ANGKATAN LAUT
Syaiful Anwar 1
Indonesia Defence University (morolawe7760@yahoo.com.au)
Abstract – Two Indonesian companies, namely PT PAL and PT Daya Radar Utama (DRU), have been given the tasks by the Government of Indonesia to produce several warships for the Indonesian Navy. The Government has also issued a policy in the field of defence industry, which among others regulates matters related to the procurement of the TNI’s main weapon systems. This research is intended to examine the impacts of the policy on the operations and supply chain strategies of PT PAL and PT DRU in producing warships. By using descriptive qualitative analysis method, the Researcher analyzed empirical data obtained in the field research supported by several theories, namely theory of strategy, theory of operations and supply chain strategy, theory of public policy, and theory of self-sufficient. From the analysis, there are several findings. The policies have given
a certain level of positive impacts on the industries, such as: the improvement of cooperations among them, the improvement of manufacturing process due to the product’s standardization, the improvement of self-reliance level of the industries, and the capability improvement of the companies due to cooperation with foreign parties. However, the policies still give negative impacts to the companies, such as: the low level application of the supply chain management, low level use of the domestic materials and ship’s components, and the low level of fair competition among domestic defence industries.
Keywords: operation strategy, supply chain, warship, PT PAL, PT DRU, Navy, Government of Indonesia, defence industry policy.
Abstrak – Dua perusahaan Indonesia, yaitu PT PAL dan PT Daya Radar Utama (DRU), telah diberi tugas oleh Pemerintah Indonesia untuk memproduksi beberapa kapal perang untuk Angkatan Laut Indonesia. Pemerintah juga telah mengeluarkan kebijakan di bidang industri pertahanan, yang antara lain mengatur hal-hal yang berkaitan dengan pengadaan sistem senjata utama TNI. Penelitian ini bertujuan untuk mengkaji dampak kebijakan strategi operasi dan rantai pasok dari PT PAL dan PT DRU dalam memproduksi kapal perang. Dengan menggunakan metode analisis deskriptif kualitatif, Penulis menganalisis data empiris yang diperoleh dalam penelitian lapangan yang didukung oleh beberapa teori, yaitu teori strategi, teori strategi operasi dan rantai pasokan, teori kebijakan publik,
1 Major General (Ret), Doctor in Human Resource Management, Lecturer of Indonesia Defence University.
Impacts of The Indonesian Government Policy ... | Syaiful Anwar | 1 Impacts of The Indonesian Government Policy ... | Syaiful Anwar | 1
Kata Kunci: strategi operasi, rantai pasokan, kapal perang, PT PAL, PT DRU, TNI AL, Pemerintah Indonesia, kebijakan industri pertahanan
Introduction 1 the defence industry sector. The GoI has established several principles in the
he Government of Indonesia (GoI) continually develops its capacity
fulfillment of the TNI’s main weapon systems, which are mentioned in the
to defend the state. In the Law
Law No. 16/2012 on the Defence Industry, Number 3/2002 on the State Defence, it
namely: (i) the users must use equipment is mentioned that the State Defence is
all efforts to defend the sovereignty of which can be produced by the domestic industries; and (ii) the procurement of
the state, the territorial integrity of the weapon systems from abroad can be
Unitary State of the Republic of Indonesia, carried out only if the domestic industries
and the safety of the nation from threats
2 and disturbances. have not been able to produce them. In order to realize the development of its defence force, the GoI
Various efforts have been made has determined the policy of building the
by the GoI to meet the needs of the strength of the main component of the
Indonesian Navy. Some of the fulfillment State Defence Force, or TNI. The policy
of weapon systems in the last period is is named the Minimum Essential Force
conducted in various ways, namely: (i) (MEF) of the Defence Main Component.
purchasing products from abroad; (ii) This MEF is defined as a minimum standard
jointly producing with foreign industries; of the TNI’s strength which is prepared as
(iii) producing based on technology the main prerequisite and fundamental
transfer; and (iv)producing by several for the effective implementation of the
domestic shipping industries. 4 Although TNI’s main tasks and functions in handling
the procurement of the navy’s main the actual threats.
weapon systems is from domestic sources, but various parties still observe
In line with the development various problems that arise. The main
of the TNI’s strength, the GoI also
3 develops continuously the capability of Setneg RI, “Undang-Undang Republik
Indonesia Nomor 16 Tahun 2012 tentang Industri
the supporting component, particularly
Pertahanan”, 2012. Downloaded from: http:// 1
www.setneg.go.id, on 23 January 2018. 2 Dephan RI, Buku Himpunan Perundang-undangan
4 TNI AL, Alutsista Kebanggaan TNI Angkatan Laut yang Terkait dengan Penyelenggaraan dan
dari Masa ke Masa, Info Historia, Vol , No 3. 2014. Pengelolaan Pertahanan, (Jakarta: Biro Hukum
Downloaded from http://www.tnial.mil.id/Portals, Sekjen Dephan, 2007), p. 35.
on 23 January 2017.
2 | Jurnal Pertahanan & Bela Negara | April 2018, Volume 8 Nomor 1 2 | Jurnal Pertahanan & Bela Negara | April 2018, Volume 8 Nomor 1
and the suppliers or vendors; (ii) the from users, the lack of demand-side
standard of production in accordance sustainability, and the type diversity of
with the operational requirements of the main weapon systems ordered. This,
users with the appropriate completion in general, resulted in the low level of
time on request; (iii) the use of domestic capacity of these companies in improving
resources in the form of raw materials, their ability, both in the development of
materials, components, human resources, human resources and in the conduct of
and research and development results; research and development.
and (iv) cooperation with foreign parties in the manufacture of certain types of
The operations and supply chain ship. These four dimensions are important
strategyof a company is a elaboration factors which become the subject of deep
of the business strategy of the company discussion in this research and are made
concerned. The strategy is related to the as the research problem. Because of the
preparation of broad policies and plans important of the problem, the Researcher
to use the resources of the company focused on how and how far the impacts
and must be integrated with corporate
5 strategy. of the government policies on the The strategy is an important operations and supply chain strategies of
element of the company in realizing the PT PAL and PT Daya Radar Utama (DRU).
company’s policy of producing equipment ordered by the users or customers.
From the explanation of the problems mentioned above, the
The policies that will be important Researcher decidesthat the research
variables in the analysis are the Law No. formula is: “What are the Impacts of
16/2012 on Defence Industry and the Minimum Essential Force (MEF) of the Government of Indonesia’s Policies in
the Field of Defence Industry on the Defence Main Component. The policies
are government decisions that must Operations and Supply Chain Strategies of
PT PAL and PT Daya Radar Utama (DRU)
be realized by all stakeholders. The in Producing the Indonesian Navy’s Main
policies will of course have profound effects on the business strategy of the Weapon Systems?”
companies involved, and will further PT PAL is a company with the status affect the operations and the supply
of State Owned Enterprise (SOE) while PT chain strategies of them. Some of the
DRU is a national private company. Both dimensions of the GoI policies to be
companies are selected as the object of implemented by the defence industry are:
this research because the two companies
are mandated as the lead integrator in the
F. R. Jacobs and Richard B. Chase, Manajemen
Operasi dan Rantai Pasokan, (Translated) 14 th series of production of the Navy’s main
Global Edition, (Jakarta: Salemba Empat, 2015), p.
weapon systems. Based on the problem
Impacts of The Indonesian Government Policy ... | Syaiful Anwar | 3 Impacts of The Indonesian Government Policy ... | Syaiful Anwar | 3
means used should be balanced with the values and purposes of the goals. 8
1. What are the impacts of GoI’s policiesfor internal cooperation
US Army War College defines on the companies’operations and
strategy as a relationship between the supply chain strategies?
ends, ways, and means. It has also a
2. What are the impacts of definition that the art of strategy is the GoI’s policiesfor the output
intelligence in formulating, coordinating, standardization on the and applying the objective, the ways, companies’operations and supply
and the means (supporting resources) chain strategies?
to enhance and defend the national interests. 9 Meanwhile Art Lykke states
3. What are the impacts of GoI’s policies that strategy = ends + ways + means,
for the use of domestic resources which if unbalanced is assumed will pose
on the companies’operations and
a big risk. 10
supply chain strategies?
4. What are the impacts of GoI’s policies From some above opinions, it can be for cooperation with foreign parties
concluded that a strategy is a way used in on the companies’operations and
order to achieve the goals that have been supply chain strategies?
defined by utilizing all available resources. All three elements, i.e. goals, means, and resources, must be set in a balanced way
Theoretical Framework
to avoid the substantial risks posed by
Theory of Strategy
these imbalances.
According to Clausewitz, strategy is the use of combat for the purpose of war. He further says that a strategist must set a
Theory of Operations and Supply Chain Strategy
goal for the overall operation of the war that would be in accordance with the aims
According to Jacobs and Chase 11 , an of the war. 6 While Antoine Henri Jomini
operations and supply chain strategy conveys that strategy is the art of making
relates to the preparation of policies war on the map, and further applying it
and broad plan to use the resources of to the whole battlefield. 7 Basil H. Liddle
a company and must be integrated with Hart argues that strategy is the art of
the company’s strategy. Meanwhile, disseminating and applying military units
according to Rusdiana, an operations in order to meet the targets of the policy.
strategy is a derivative of corporate Goals should be balanced with the number
strategy that detailing the overall
J. B. Bartholomees, “Theory of War and 8 Ibid. Strategy”, 9 Volume 1, US Army War College Guide Ibid, p. 15. to National Security Issues. 13, 2012. 10 Ibid, p. 48-50.
Ibid, p 11 .14. F. R. Jacobs and Richard B. Chase, op.cit, p. 33. 4 | Jurnal Pertahanan & Bela Negara | April 2018, Volume 8 Nomor 1 Ibid, p 11 .14. F. R. Jacobs and Richard B. Chase, op.cit, p. 33. 4 | Jurnal Pertahanan & Bela Negara | April 2018, Volume 8 Nomor 1
states that a company can choose one of operations strategy is a shadow or vision
four production process designs, namely of the operation function, which is the
(i) focus on the process; (ii) repetitive driving force or determinant of direction
process; (iii) continuing process; and (iv) for decision-making. 13 mass customization. 16
From the above various opinions, From the above explanations, it can we can see that the strategy they convey
be concluded that a company may choose consists of several issues, namely: (i)
one option from the following operations
a complete plan of operations and the options: (i) Job-shop manufacturing; supply chain; (ii) the plan is derived
(ii) repetitive manufacturing; (iii) mass from the company’s strategy; (iii) the
manufacturing; and (iv) continuous plan regarding matters relating to the
manufacturing.
use of company’s resources; and (iv) The third element of the strategy
the objectives to be achieved by the that needs to be discussed is the resources
effectiveness of operations and the or means to be used in the production
supply chain. process. Dilworth mentions that there are
The objectives in the operations and several resources to consider in developing the supply chain strategy are intended
strategies, namely: (i) the relationship as what is to be achieved related to the
between the company and its suppliers; product to be produced. There are several
(ii) production facilities; (iii) quality of options that can be taken by a company,
human resources; (iv) technology and namely (i) price leadership; (ii) produce
equipment; and (v) information systems. 17 different products in terms of quality;
Meanwhile Kumar and Sureshmention (iii) produce products in a faster time;
that resources include: (i) men; (ii) and (iv) a mixture of the three previously
materials; (iii) machines; (iv) information; described options (trade-offs). 14
and (v) capital. 18
The second element of a strategy From these explanations, the is the way to be selected to accomplish
resources or means used by a firm in the the defined mission or goal. Dilworth
operations and supply chain strategy states that there are two choices of ways
are as follows: (i) human resources; (ii) or manufacturing processes that can be
technology and machinery; (iii) production selected by a company, namely: (i) job
facilities; (iv) information systems; (v) shop manufacturing; and (ii) repetitive
production costs; and (vi) raw materials.
12 Rusdiana, Manajemen Operasi, (Bandung: 15 J. B. Dilworth, Operations Management. 2 nd Pustaka Setia, 2014), p. 42.
Edition, (New York: McGraw-Hill, 1996), p. 52. 13 L. Sumayang, Dasar-dasar Manajemen Produksi
16 Rusdiana, op.cit, 74-8.
dan Operasi, (Jakarta: Salemba Empat, 2003), p. 17 Dilworth, J. B, op.cit, p. 53. 42.
18 S.A. Kumar and Suresh, Operations Management, 14 F. R. Jacobs and Richard B. Chase, op.cit, p. 34-7.
(New Delhi: New Age International, 2009), p.3.
Impacts of The Indonesian Government Policy ... | Syaiful Anwar | 5
The fourth element of the strategy need by using its own resources. 21 Paul is the risk factor where it can generally
C. Godfrey defines self-reliance as the occur due to a gap or a difference
possession of a person toward a resource between the objective to be achieved
that goes beyond his or her needs, and and the way to accomplish the objective
a person’s ability to acquire and hold as well as the available resources. Jacobs
that resource. Ownership is the external and Chase argue that supply chain risk
output, something that depends on the is the possibility of interference that
person’s internal ability. Self-reliance will affect the ability of a company to
contains two parts inherent in the ability, continue supplying products or services. 19 namely the ability to think, and the ability
Burtonshaw-Gunnstates that the risks
to act. 22
of the company can be: (i) technical From the above explanations, it risk; (ii) employment risk; (iii) political
can be summarized that self-reliance is risks; (iv) social and geographical risks;
ability of a country to produce its own (v) availability of resources, customs
needs, using its own human resources, its procedures, import duties, embargoes;
own economic resources, its own natural and (vi) financial risk. 20 resources, in order to obtain maximum
From the above explanations, in the gain or benefits from the activities, and context of an operations and supply chain
also to obtain maximum level of freedom strategy, the risks involved are all possible
to think and to act according to its own unforeseeable barriers and disturbances
needs and capacity.
that can stop or damage the production process. The risks may include: (i)
Theory of Public Policy
technical risks; (ii) financial risk; (iii) risk of raw material availability; (iv) the risk of
Harold Laswell and Abraham Kaplan human resource availability; and (v) the
provide the definition of public policy as risk of changing government policies.
a program projected with certain goals, certain values, and certain practices as well. 23 Meanwhile Thomas R. Dyestates
Theory of Self-reliance
that public policy is everything the According to Johan Galtung, self-reliance
government does, why they do it, and is a principle applied by a country in the
21 J. Galtung, “Towards A New Economics: On the
economy or in areas that are sub-systems
Theory and Practice of Self-Reliance”, in Paul Ekins
of the economy. The basic rule of self-
(Ed), The Living Economy: A New Economics In The
reliance is to self-produce what is self- Making, (London: Routledge, 1986), p. 100-3.
22 P. C. Godfrey, More Than Money: Five Forms of Capital to Create Wealth and Eliminate Poverty,
(Standford: Standford University Press 2014), p. 19 F. R. Jacobs and Richard B. Chase, op.cit, p. 40-1.
23-9.
20 S. A. Burtonshaw-Gunn, Alat dan Teknik Analisis 23 H. Laswell, and Abraham Kaplan, Power and Manajemen, (Translated by Peni Rachmawati),
Society, (New Heaven: Yale University Press. (Jakarta: PT Indeks, 2011), p. 234.
1970), p. 71.
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component’s strengths to the operations Nugroho concludes that public policy is a
and supply chain strategies of the defence decision made by the state as a strategy
industries, in particular the companies to realize the objectives of the country
involved in the manufacture of the navy’s concerned. 25 main weapon systems (NMWSs).
From the opinions we can see that The assessment of a policyimpact public policy contains several elements,
stated by Rossi and Freemanis intended namely:(i) public policy is a formal
to estimate whether the intervention document or practice of the state; (ii)
produces the expected effect or not. Such public policy is intended to respond the
estimates do not yield definite answers will of the public or the state; (iii) public
but only a few possible answers that policy is made or done in order to lead to
make sense. The basic purpose of impact better conditions of society or country;
assessment is to estimate the “net effect” and (iv) public policy contains the rights
of an intervention. 27
and obligations of the parties stated in By examining from the micro aspect,
the policy. in this case the operations and supply
The second issue of public policy chain strategy aspect, the Researcher will is policy analysis. According to Dunn,
obtain an answer or can conclude about policy analysis is an intellectual and
the actual impacts of the policy. The practical activity aimed at creating,
findings in this micro scope will ultimately critically appraising, and communicating
provide input to the macro aspect which knowledge about the policy process.
is the government policy in building the The procedures used in analyzing the
capability of the defence industries. With policy are: (i) definition; (ii) prediction;
reference to the above explanation, the (iii) prescriptions; (iv) description; and (v)
efforts to be taken by the Researcher Evaluation. 26 are to compare the dimensions of the
If we look at the above explanations, components (strategy, objectives, types the assessment of the consequences
of operations, resources, risks, and cost) or effects of a policy on something falls before and after the companies obtain
within the scope of the policy analysis. jobs in manufacturing the NMWSs. The object of this research to be carried
out by the Researcher is to examine the
Defence Industry Models or Practices
impacts of the Indonesian government
in Some Countries
policies on the defence industries and Brazil develops its defence industry
24 T. R. Dye, Understanding Public Policy, (New
in order to relinquish its dependence
Jersey: Prentice Hall, 1995), p. 2. 25 R. Nugroho, Public Policy, (Jakarta: Elex Media
27 P.H. Rossi and H. Freeman, Evaluation: A Komputindo, 2008), p. 55.
Systematic Approach, 2 nd Edition, (California: Sage, 26 Ibid, p. 131-2.
1993), p. 215.
Impacts of The Indonesian Government Policy ... | Syaiful Anwar | 7 Impacts of The Indonesian Government Policy ... | Syaiful Anwar | 7
missile. 30
its defence industry products. It choses to manufacture its marketable defence
The relations between the Govern-
equipment at its regional level, namely:
ment Policies on Defence Industries
Super Tucano A-29 fighter, ASTROS II
and the MEF with the Operations and
rocket launcher, EE-11 troop carrier, and
Supply Chain Strategy
light weapons. Its export products can The GoI’s objectives in developing or thrive as there is effective support from building the defence industries are:
its government. 28 (i) realizing a professional, effective,
China develops its defence industry efficient, integrated, and innovative in order to meet its military needs, and
defence industries; (ii) realizing self- at the same time maintains the status of
reliancein fulfilling the defence and its defence industry which has a certain
security equipment; and (iii) improving degree of autonomy. It still maintains
the capability to producethe defence its independence in producing military
and security equipment. The defence equipment. However, it also develops
industry is also an integral part of the cooperation with other countries, such as
state defence system that embraces the with Pakistan in designing and producing
people’s defence system. Therefore in jet combat aircraft JF-17. 29
the law is re-emphasized the function India develops its defence industry
of the defence industry, namely: (i) in order to meet its military needs. It
strengthening the defence industry; (ii) has succeeded in reducing dependence
developing technology; (iii) promoting on overseas suppliers by designing,
economic growth; (iv) establishing self- developing, installing and producing
reliance of the state defence and security its own equipment. India cooperates
systems; and (v) building and improving with the United States in the missile
human resources capability. programs, and ToT of F-16 as well as F/A-
While the GoI’s policy on the
18 fighter aircraft. It also collaborates MEF Main Component concerning the with Russiain producing BrahMos missile,
development of the sea power includes the development of remote missiles, and
the provisions on the procurement of the Glonas satellite navigation system.
warships for the Navy. Prior to entering India also cooperates with Israelin the
into a weapon system purchase contract,
28 P. Yusgiantoro, Ekonomi Pertahanan: Teori dan
the organization specifies the standard,
Praktik, (Jakarta: Gramedia Pustaka Utama, 2014), p. 202-5.
amount, and time of completion of
29 J. D. K. Boutin, “Arms and Autonomy: The Limits
each ship ordered. The number of ships
of China’s Defence-Industrial Transformation”, in Bitzinger, R. A. (Ed), The Modern Defence Industry,
30 T. D. Hoyt, Military Industry and Regional Defence (California: Praeger Security International, 2009),
Policy: India, Iraq, and Israel, (New York: Routledge, p. 218-21.
2007), p. 61-6.
8 | Jurnal Pertahanan & Bela Negara | April 2018, Volume 8 Nomor 1
Figure 1. Relation between Variables and Sub variables
ordered is aligned to the program plan chain strategy, and specifically on the and budget that has been made. While
impact of sub variables from the first the delivery time of the ship is adjusted to
variable to the sub variables of the second the plan.
variable. The relationship of these factors In this study, the main variable
is illustrated in Figure 1.
is the government policy, and the sub variables are the factors mentioned in the
Previous Relevant Researches
policy, namely: (i) inward cooperation; (ii) There are three different relevant standardization;(iii) self-reliance; and (v) researches that will be mentioned in outward cooperation. While the second this section. The first study is a study variable is the operations and supply of Ivan Yulivan in 2016 under the title chain strategy of the studied companies “Improving Corporate Performance which contains four sub variables, namely: Through Development of Competitive objective, way, resources, and risk. Strategies Driven by Corporate Resources
Analysis of impact of a policy is and Market Attractiveness: A Study in conducted by comparing the variables
Indonesia’s Defence Industries Post Law and sub variables of the research object,
No. 16 Year 2012 about Defence Industry.” with a focus on searching conditions
This study analyzes the phenomenon before and after the implementation of
of defence-based strategic industries policy. Thus, the analysis of this study will
that currently have not been able to focus on the impact of policy variables
thoroughly anticipate the existing in general on the operations and supply
business opportunities, not ready to
Impacts of The Indonesian Government Policy ... | Syaiful Anwar | 9
10 | Jurnal Pertahanan & Bela Negara | April 2018, Volume 8 Nomor 1
compete intently because of limited resources, and still difficult to access the market due to limited human resource capabilities and supporting facilities. The second research is the study of Radhana Dwi Wibowo in 2016 with the title “The Problems in Realizing Defence Industry Self-Reliance.” This study analyzes three issues that arise in realizing the self-reliance of the defence industry, namely: the defence industry actors, the continuity of ordering equipment for defence and security equipment, and the ability of the defence industry to meet the specifications desired by the TNI. The third study is the research of Andyawan Martono Putra in 2014 with the title of “Civil Military Integration in the Field of Technology and Industry in Defence Industry of Indonesia.”This research analyzes the civilians and military integration ontechnology and industry sector in the Indonesian defenceindustry.
Framework
Framework of hypotheses of this research is illustrated in Figure 2, where the Researcher explaines the sequence of effort in addressing the research problem to the expected output of this study. In order to build a strong, resilient and high deterrence power, the GoI has made efforts to strengthen the state’s sea defence component, among others by increasing the capabilities and strengths of the navy, in particular the addition of the number of the navy’s warships. At the same time, the GoI also concerns to build the capability of the defence industry in order to have better capabilities, with increasing production capacity, as well as self-reliance and independence from foreign parties. To realize these two objectives, the GoI issued a policy in the form of Law No. 16/2012 on Defence Industry and the MEF Development Plan of the Defence Main Component.
Figure 2. Framework of Hypotheses
Impacts of The Indonesian Government Policy ... | Syaiful Anwar | 11
In responding to these policies, the defence industry prepares a plan or business strategy that can accommodate what the government requests. There are several companies appointed by the GoI as the main integrator of the manufacture of the navy’s main weapon systems (NMWSs), two of them are PT PAL and PT DRU. Both companies are made by the Researcher as the research objects. Both companies in implementing the production process of the NMWSs have developed operations and supply chain strategies in accordance with the type of products made. Policy impact analysis is carried out on the variables of the operations and the supply chain strategy in general. However, in order to obtain a more detailed picture, then the strategy variables need to be spelled out into several sub variables.
Based on the determination of the relationsamong variables and among sub-variables, then the Researcher can determine the information and data needed for the analysis of this research. Based on the results of the collection of information and data, then the Researcher will conduct the analysis supported by several theories related to the policy’s impact and also the operations and supply chain strategy. The output of this analysis is the impact of GoI’s policies on the operations and supply chain strategies of PT PAL and PT DRU.
Research Method
Researcher uses qualitative research methodology with case study method. According to Robert K. Yin, case study is an empirical inquiry that investigates phenomena in the real-life context; when the boundaries between phenomena and context are not visibly apparent; and where multi-source evidence is
utilized. 31 The Researcher considers that the characteristics of this research are very suitable with the characteristics of the method of case studies stated by Robert K. Yin.Based on the explanation of the method used, the approach of this research will consist of several steps, namely: (i) conducting analysis to find and establish subvariabel of the government policy variable; (ii) analyzing the second variable of the operations and supply chainstrategy; (iii) illustrating the relations between the variables and between sub variables; (iv) collectingprimary and secondary data; (v) conducting a qualitative analysis using the case study analysis method; (vi) performing validity tests; and (vii) making a conclusion.
The primary data source in this study is the competent informants (subjects), who relate to the settings of the problems
studied. 32 Therefore, the Researcher will collect data from statements and words from officials of PT PAL and PT DRU related to the production process of the NMWSs, the MoD officials and the Indonesian Navy
31 R. K. Yin, Studi Kasus: Desain dan Metode, (Translated by M. Djauzi Mudzakir), (Jakarta: Raja
Grafindo Persada, 2009), p. 18. 32 Iskandar, Metodologi Penelitian Kualitatif,
(Jakarta: Gaung Persada, 2009), p.113.
officials. validity of data, where in this study the The field studywas conducted by the Researcher used triangulation technique. According to Moleong, triangulation is a
Researcher by visiting PT PAL and PT DRU, technique of checking the validity of data
the MoD, and the Navy Headquarters. This field study was conducted in order to carry that utilizes something else outside the
data for the purposes of checking or as a out direct interviews with informants
comparison of that data. 36 and observe the production process of
the NMWSs being undertaken by both The research was conducted in companies. The Researcher conducts
two companies, namely PT PAL and PT structured interviews by applying the
DRU located respectively in Surabaya techniques defined by Moeleong, in
and Jakarta, and the MoD and the Navy which the Researcher will establish his
Headquarters both in Jakarta. In those own problems and questions to be asked,
places, interviews were conducted by in order to find answers to the hypotheses
the Researcher to the informants. While
the survey that directly observes the questions have been strictly conceived by
that have been established. 33 The
production process of the NMWSs that making an interview protocol.
being produced was done in locations where both companies have shipyards,
The qualitative data analysis according to Bogdan and Biklen is an effort namely in Jakarta, Surabaya, and Lampung.
The time of the research and the writing done by working with data, organizing
of research report were conducted in the data, sorting it into manageable units,
synthesizing it, searching and finding period of July until October 2017. patterns, finding what is important and
what is learned, and deciding what can be
Research Result and Discussion
delivered to others. 34 Data processing as
Research Result
described above, according to Prastowo PT PAL is a State-Owned Enterprise
is similar to Miles and Huberman’s model (SOE), located in the northern area of
which divides the activities into three Surabaya, East Java, Indonesia. The
processes: (i) data reduction process (ii) main business activities of this company
data display process; and (iii) conclusion
35 and verification process. include: (i) producing warships and commercial vessels; (ii) providing ship
The validation of data was repair and maintenance services; and
conducted with the intention to test the (iii) providing general engineering
33 L. Moleong, Metode Penelitian Kualitatif. Revision
with certain specifications based on
Edition, (Bandung: Remaja Rosdakarya, 2007), p.
client needs. Currently the company is
138. 34 Ibid, p. 248.
developing products that will be marketed
35 A. Prastowo, Metode Penelitian Kualitatif dalam
domestically and abroad, especially
Perspektif Rancangan Penelitian, (Yogyakarta: Ar- Ruzz Media, 2012), p. 241-50.
36 L. Moleong, op.cit, p. 178.
12 | Jurnal Pertahanan & Bela Negara | April 2018, Volume 8 Nomor 1 12 | Jurnal Pertahanan & Bela Negara | April 2018, Volume 8 Nomor 1
materials, as stated by the PT PAL’s Head the Indonesian Police, the Ministry of
of Procurement Division: Ocean and Fishery, the Ministry of Energy
“Our strategy in procurement is and Mineral Resources, the Ministry
that we have 3 philosophies, namely on quality, on budget and on schedule. First
of Finance, and overseas institutions. on quality, we fit the design and adjust
Products that have been mastered by the new specifications followed on this company include: 125 meter Landing
budget and on schedule.” Platform Dock (LPD), 60 meter Missile
Fast Ship, 57 meter Fast Patrol Boat (FPB In terms of the employment of 57), 1200 GT Survey Ship, Fast Patrol Ship
human resources, PT PAL and PT DRU up to 38 meters, Tugboat and Anchor
also cooperate with partners who Handling Tug, Fishing Vessels up to 60
are used to working with them. Some GRT, and Ferry and Passenger Ships up to
technical workers are taken from outside 500 pax.
the companies, and also some works are PT DRU is a private company
carried out by the sub-contractors who are already partners of these companies. established in 1972 at Tanjung Priok Port, 37 The
Jakarta. The company started business as company’s strategy in dealing with the
a general trading and services company, subvariabel of risk is conducted in its own including shipbuilding business. Until
way according to the type of risk faced now at the age of nearly 50 years, the
by the companies. In relation to financial company has completed the construction
risk, PT PAL has a strategy of cooperating of hundreds of ships in various types
with third parties who can assist with funding. 38 and sizes such as Roll on Roll off (RORO) However, PT DRU in this
vessel type, cargo ship, tanker, navy’s context, does not cooperate with other patrol boat, fast patrol boat, tug boat,
parties, they manage the company’s cash and speed boat.Landing Ship Tank (LST)
flow as best as possible so that it can run is a product built in order to strengthen 39 the production smoothly. Another risk
the strength of the fleet of the Navy. The that may be faced is the risk of availability company has accomplished one unit of
of raw materials for production. PT PAL this type of vessel by mid 2015, and is now
and PT DRU have cooperated with raw producing several more for the same type
material suppliers. PT PAL uses long- subsequently ordered by the GoI.
term contracts in cooperation with the domestic industries, while PT DRU uses
PT PAL and PT DRU in producing vendors’ database in an effort to address warships orders, cooperate with the
37 Interview with PT PAL’s Head of Production
domestic defence industries. This
Division, 2017.
cooperation is conducted for the 38 Interview with PT PAL’s Head of Finance Division,
fulfillment of the main components,
39 Interview with DRU’s Head of Business Development, 2017.
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strategies of PT PAL, namely Priority, Frame Agreement, Contract Priority undertakes shipbuilding in accordance
System, Stock Level, and the Ministry with the requests from the ship users. For
example, for the navy’s ships, because of Meanwhile, PT DRU
Project Standard. 41
the functions concerned, some parts of overcomes the availability of raw materials
the ship’s body need to be thickened. 42 by fostering good trade relations with its
suppliers. This was conveyed by the DRU’s For the production of combat ships, Head of Business Development that they
there is a constraint for PT PAL, which is maintain relationships with suppliers, who
caused by the ship production method are members of the marine community,
itself. In the construction of LPD vessels so they know the names of the vendors
in cooperation with Daewoo Company and the types of goods they have.
of South Korea, it used a block system From the above description, it where the ship construction was divided into small parts, therefore it took a longer
can be concluded that the operations time for the completion. In contrast to
and supply chain strategies of PT PAL PT DRU, the navy’s ship building process
and PT DRU toward subvariabel ‘inward is in accordance with the delivery time
cooperation’ have been implemented, required by the Navy, therefore PT DRU
seen from the sub-variable ‘objective’ that use ‘mix strategy’ or trade-offs; the obtains someother ship orders.
sub-variable ‘way’ that use the Job-shop In their production activities, the manufacturing strategy; the sub-variable
defence industries shall prioritize the use of ‘resource’that use contract strategies
of domestic raw materials, materials, and for HR and raw materials; and use contract
components, including human resources strategies to deal with sub-variable ‘risks’.
and the national R & D results. In this As a company that produces combat
case PT PAL and PT DRU have used raw ships, PT PAL always prioritizes the
materials and components from inside fulfillment of operational requirements of the country. The steel for ship platform
the main weapon system. The company is supplied by PT Krakatau Steel. While is committed to use raw materials in line
other components, such as engines, and with the standards of warship safety.
cranes, are supplied by PT Pindad, and It is also stated by the PT PAL’s Head
casting is supplied by PT Barata Indonesia. of Procurement Division that in every
Other supporting products such as doors, procurement, it always adjusts the quality
pipes, steel furniture, anti-fire curtains on boats are supplied by various domestic
40 Interview with PT PAL’s Head of Procurement
companies that have become partners of
Division, 2017. 41 Interview with PT PAL’s Head of Procurement
42 Interview with PT DRU’s Head of Business Division, 2017.
Development, 2017.
14 | Jurnal Pertahanan & Bela Negara | April 2018, Volume 8 Nomor 1
PT PAL. 43 with the supervision from the MoD as the regulator in procurement of TNI’s
The DRU’s Head of Business main weapon systems. The essence
Development also states the same matters that they have used several state-
of the policy is that the fulfillment of main weapon systems can be carried
owned companies in terms of material out by implementing two strategies.
compliance. PT DRU orders cranes and anchors to PT Pindad, and orders steel
For main weapon systems that can
be manufactured in the country, it is plates to PT Krakatau Steel. In PT DRU, all
mandatory for the Indonesian users to ship production processes are conducted
procure and purchase them, while foreign in certain level of self-reliance using
procurement through import can only the Indonesian employees. However,
be conducted if the domestic industries for certain specialists, they use foreign
have not been able to produce such main workers with a short-term contract. The
weapon systems.
use of human resources from within the country is also required by the Indonesian
The Director of Domestic Industry Navy during the production of LSTs,
Technology of MoD, First Marshal where it is not allowed to use foreign
Gita Amperiawan conveyed that the employees.
supervision of the implementation of defence industry policy in general can be
In the context of foreign seen from how the progress of government
procurement, there will be cooperation priority programs.As long as the priority
between the domestic defence industries programs are well underway, it means
with foreign companies in the form that the defence industry is developed
of joint production. Opportunities for within the policy corridor. While the next
cooperation with foreign parties have supervision is how the implementation of
been taken by PT PAL and PT DRU by purchasing certain components that can
off-set rule. In terms of supply chain and production management, the success of
not be produced by domestic industries. government policy implementation can
PT PAL has cooperated several times with
be seen from how SOEs are able to act as partners from abroad such as Damen, a
lead integrators, and are capable to foster company from Netherlands and Daewoo,
the second and third tiers of the defence
a company from South Korea. This
industries. 44
cooperation opportunity is utilized to improve the ability of PT PAL in producing
Other forms of oversight of the warships.
defence industry policy were stated by The GoI’s policies, especially the Law
Major General (Ret) Jan Pieter Ate. For No. 16/2012 on Defence Industry and the
the military equipment procurement MEF Main Component are implemented programs, the oversight is conducted by
43 Interview with PT PAL’s Head of Procurement Interview with First Marshal Gita Amperiawan,
Division, 2017. Impacts of The Indonesian Government Policy ... | Syaiful Anwar | 15 Division, 2017. Impacts of The Indonesian Government Policy ... | Syaiful Anwar | 15
thing is after-sales service, which should be Oversight Agency. Meanwhile, the
paid attention by the manufacturers. An oversight for the implementation of the
example of delay in delivery experienced defence industry policies is conducted by
by the Navy is the production of LPDs that the MoD. The supervision to PT PAL and
are two years behind schedule. 47 PT DRU is carried out by the Directorate
Another issue that the Navy of Domestic Defence Industry of MoD,
complains about is that the products either directly or through a verification
of domestic industries are still in the and monitoring program, or inviting the
development phase. It is mentioned by industries to attend various meetings
the Navy’s Head of Material Division conducted by the MoD. 45
that if the navy procure ships from the As the regulator, the GoI’s role is
domestics industries, the status of the to encourage the defence industries to
products is still in the engineering phase, become lead integrators. The industries
which means they still need to be tested must be able to determine strategies
first in various operational fields. Another to achieve profit for the companies.
obstacle perceived by the Navy against the However, the government also supports
ability of the domestic defence industry is fairly all industrial development works,
the lack of maintenance capability. Not where almost all their activities are paid by
all types of maintenance can be carried the government. Therefore with the man-
out domestically, for example for gas hours are already paid the government, it
turbines. In addition, the combat vessels is expected that SOEs can make profit. 46
that are not in accordance with the The advantage possessed by the
technical specification of the Navy has also been experienced by the Navy, which
domestic defence industries is that they are geographically close to the users.
is at the time of construction of KCR 40. The company could not install the Combat
For example the Navy’s Eastern Fleet is close to PT PAL and the private shipyards
Management System (CMS) desired by the navy on the ship, because between
in Lamongan, while the Navy Western them cannot be fittedtechnically.
Fleet is close to Tanjung Priok Port. This is an advantage over imported producers
Furthermore, the ship did not meet the navy’s operational requirements, because
when there are technical problems, it will there were stiil several weaknesses,
take a long time to bring in technicians such as: ship speed that still lower than
to deal with disruptions. Regarding the product completion, stated by MG Ate
expected, CMS that did not fit with the ship space, and spare space in the engine
that the weakness of domestic industries, room that was not sufficient for the
45 Interview with MG (Ret) Jan Pieter Ate, 2017. 46 Interview with First Marshal Gita Amperiawan,
2017. 47 Interview with MG (Ret) Pieter Ate, 2017.
16 | Jurnal Pertahanan & Bela Negara | April 2018, Volume 8 Nomor 1 16 | Jurnal Pertahanan & Bela Negara | April 2018, Volume 8 Nomor 1
MG (Ret) Jan Pieter Ate also states that the reluctance of TNI in using
The government’s policy mandates domestic products causes the domestic
that both SOEs and private companies defence industries to have difficulty in
which awarded contracts or mandates as mastering technology, because their
lead integrators are required to conduct products are not used optimally by the
supply chain management. The supply TNI. Therefore, TNI is expected to be
chain is defined as a group of mutually ready to use domestic products in order
participating and interconnected to build the Indonesia’s domestic defence
companies seeking the added value of a industries. In the event of a war, all
modified input stream from their sources logistics and overseas procurement lines
to become the finished product or will be inhibited by the opposing party,
services demanded by the end customers while the domestic defence industry is
to which they are destined. 49 From the not developing, so that Indonesia will find
understanding of the supply chain, difficulties to survive.
there are several companies involved as suppliers, suppliers of suppliers, OEMs (Original Equipment Manufacturer),
Discussion
distributors, and customers. Therefore, in The Law Number 16/2012 on Defence
the context of this research, PT. PAL and Industry arranges several issues, one
PT. DRU as OEMs or lead integrators, need of them is regarding the actors of
to implement supply chain management. the production process of defence
The practice and activities of supply chain equipment. The policy regulates coverage
management consist of three major parts, of actors from the defence industries,
namely: (i) supply chain configuration; including: (i) major equipment industries;
(ii) supply chain relationships; and (iii) (ii) main component and/or supporting
supply chain coordination. 50 Companies industries; (iii) component and/or
that act as lead integrators or OEMs can supporting industries (supplies); and (iv)
build relationships among companies the raw material industries. The policy
engaged in the supply chain with the goal mandates that the conduct of defence
of achieving long-term stability, which industry in producing defence and security
is called stable network. They can also equipment is implemented through inter-
choose the way that the aim is to build defence industry cooperation in the
dynamic networks. Most of them are country. Generally, those who obtain a
short-term relationships with distributors contract from the GoI in the procurement
and suppliers to achieve operational of the NMWSs are SOEs or domestic
49 D. Lu, Fundamentals of Supply Chain Management, 48 Interview with Navy’s Head of Material Division,
2011. Downloaded from bookboon.com, p. 9-10. 2017.
50 Ibid, p. 13-4.
Impacts of The Indonesian Government Policy ... | Syaiful Anwar | 17 Impacts of The Indonesian Government Policy ... | Syaiful Anwar | 17
companies in order to produce warships have given positive impacts to the
is realized by PT. DRU. However, the companies as the lead integrators. The
supply chains of such raw materials and cooperation among themhas produced
components should be ensured not to certain level of benefit to them in terms
affect their production strategies that prioritize the quality and delivery time
of finance, capacity building, and also self- reliance. The domestic resources, human,
appropriate to the contracts they receive. material, and also expertise, are optimally
This is evidenced by the completion of utilised by the industries the government order for the first LST, , in order to
develop the national defence industries. hereinafter named KRI Teluk Bintuni
520, which is now operationalized by the However, because of the condition Navy. 52
of the domestic industries in general and the level of order from the government