23

Chapter IV

Analysis and Discussion

4.1. Company Profile

Telkomsel is the leading operator of cellular telecommunications

services in Indonesia by market share. By the end of 2006, Telkomsel

had 35,6 million customers which based on industry statistics represented a

market share of around 56%. Telkomsel provides GSM cellular services in

Indonesia, through its own nationwide Dual band 900/1800 MHz GSM

network, and internationally, through 268 international roaming partner in

155 countries (end of 2006). In September 2006, Telkomsel became the first

operator in Indonesia to launch 3G services.

From the year of 1995, Telkomsel officially began operations as a

company on 26 May 1995. Shareholders were PT Telkom and PT Indosat.

At the start of 1998, Telkomsel became the number one mobile operator in

Indonesia in terms of size and customer base with 1000 BTS (Base

Transceiver Station installed around Indonesia. Telkomsel Company keeps

growing on its customers starting in 1999 with 1 million customers mark, 3

million in the next couple years until 17.8 million active customers in the

end of first quarter of 2005. In the same year, Telkomsel’s Call Center

received ISO 9001:2000 certification and launched m-ATM services with

Bank Mandiri. Nowadays, with the three main products (Simpati, Kartu

Halo, and Kartu As), Telkomsel keeps in innovations of the tariff schemes to

attract more customers in this growing market of cellular

telecommunication.

Telkomsel's gross revenues have grown from Rp 3.59 trillion in 2000

to Rp 34,89 trillion in 2006. Over the same period, the total number of

Telkomsel's cellular subscribers increased from approximately 1.7 million as

at 31 December 2000 to 35.6 million as at 31 December 2006.

The Company’s vision and mission is:

Vision:

Become the Indonesian wireless telecommunications solutions company.

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Mission:

Be the first choice wireless telecommunications solutions provider in

Indonesia working in partnership with shareholders and other alliances to

create value for investors, employees, and the nation.

Telkomsel Company is the one operator GSM in Indonesia which has

three main products. They are Simpati and Kartu AS which is prepaid card

and Kartu Halo which is postpaid. They are spread in Indonesia based on its

market segment. The prepaid one is usually for the one that is from young

person to middle aged and little the old person one that is used it and

postpaid is usually for professional or executive person. Here the author

wants to conduct research on the Simpati card product because it is

contribute the highest market share comparing with other products in

Indonesia. How does its delivery system be constructed in order to be the

highest in market share and the author want to see the problem what is occur.

In this industry, the competition seems to be very tight and close.

Every players are race to attract the customers with the low tariff both for

phone, SMS, or browsing in the internet. They play mostly on the marketing

way such as advertisement, sponsors, campaign, etc. The players seem to

play in low margin on the competition of cellular telecommunication. So, the

distribution is the one crucial business activities in cellular

telecommunication industry in order to achieve customer satisfaction and

gain more market share.

4.2 Business Process of Distribution

Telkomsel existing distribution process are divided into two channel

that is own distribution and outsourcing distribution. The channel and

process flow of distribution are described below:

1. Distribution Channel:

a. Own Distribution, include:

Grapari

25

b. Outsourcing Distribution, includes:

Authorized Dealer

Branch Office

Sub Dealer

Own Managed Outlet

Gerai Halo

Kios Halo

2. Distribution Process:

a. Own Distribution):

Figure 4.1. Own distribution process of Telkomsel

This is the distribution process of Telkomsel Company with official

channel distribution; Grapari (Graha Pari Sraya) that has the function of

selling the product (Simcard with Starter Kit) and also as the customer

services.

b. Outsourcing Distribution:

Figure 4.2. Outsourcing distribution process of Telkomsel

Head Office /Headquarter

Regional Office Grapari Customer

Head Office Authorized DealerCooperation Contract

Regional Office Branch Office

Gerai Halo Sub Dealer

Kios Halo

Own ManagedOutlet

(Frontline Retailers)

Unofficial Outlet(Re-Sellers)

Ordering

Reporting

Monitoring

Handled with DealerManagement SystemAplication.

Process Flow based bySOP.

26

The process diagram above illustrates the outsourcing distribution

process of Telkomsel Company. The arrow indicates the distribution flow

which has the agreement of distribution quota recommendation at the first

time based on Channel Management Area in Regional Office per Authorized

Dealer. Then it is distributed through Finance Area to Inventory in Regional

Office, come to Authorized Dealer then distribute to Branch Office or to

Own Manage Outlet directly.

They have implemented the integration in distribution process

through an IT system (DMS). The distribution process is integrated by an

application called the Dealer Management System (DMS). The DMS

application enables the company to do monitoring of product distribution

around the Authorized Dealer to their subsidiaries. The monitoring scope

includes the payment system, distribution quota, to monitor the growth of

demand in the market, and to fasten the information of demand and supply

access in the Company to the market. The DMS primarily scope shown on

the figure4.2 as the dash line.

Distribution Process

Headquarters is responsible for monitoring and controlling the

distribution of the products (sim card) at each Regional Area in business

process. The coordination from on each downstream generally by

conducting monitoring meeting, controlling meeting, program meeting, etc.

The indicator crosses divisions generally see from the quality and the

quantity of flow in and flow out of data. From the quality, the data must be

compatible with the actual. From the quantity is from the amount of data

flow in and out. In product distribution and spreading, Headquarters role is

controlling and monitoring with also as the facilitator in coordination formed

crosses regional. Company has implemented the use of IT in integrating the

data and information flow to Headquarters that will guarantee the quality and

quantity with the actual one.

Demand forecasting method is based on market survey result and

historical demand annually with the corporate business strategy. Demand

forecasting usually implemented on the form of production plan and selling

27

plan with procurement plan. Product allocate based on demand forecasting

with the order request from the frontlines of sellers. Fundamentally, demand

forecasting used to evaluate the order request presenting from each area.

Forecast data will be compared with the request order effectively enter with

the market reality, as a standard which are sales and active sim card

(inaugural number). If there is a significant differences, it is proper for the

forecasting to review again tally indicators that more actual. The division

who conduct the demand forecasting will be related with every division of

marketing, selling, and production. The relationship used mostly through

reporting mechanism that is weekly, monthly, and annually. The indicator

from demand forecasting performance is from the result of forecast with the

actual market; the closer of forecast number with the actual market means

the forecast quality is good.

Dealers (Authorized Dealer) act as a partner of distribution process in

Telkomsel Company. This division responsible for selling activities through

distribution channel and sometime it is promotion also. Their relationships

between the upstream are meetings and workshop while to the downstream

is more in training. Said that the good performances are reflected from good

collaborations and team works between Telkomsel and its subsidiaries (more

vertical level).

The performance indicators of sim card distribution in branch office

(BO) are the time velocity of distribution from branch office to Own Manage

Outlet (OMO) and the availability in the market (outlet and OMO).

Sub Dealer usually act as a stand alone and it is a partner from

Telkomsel, so it is not directly involved in Telkomsel distribution business

process. The relationship of Sub Dealer with Telkomsel (Grapari) generally

a pure business or limited on selling and purchasing the products that is from

Sub Dealer will be distributed again to market trough outlets. Sub Dealer

usually eases to perform a discount based on the target selling appointed. So

generally it does not have a relationship at all cross Sub Dealers instead it is

competes each other to dominate the market. The heap of stock is risk to Sub

Dealers because usually it is cash purchased by the Sub Dealers to

Telkomsel. The lost of Telkomsel may happen if the Sub Dealer has a heap

28

on their stocks means the stock can not be allocate to the other area that is

productive. In this case generally the stock will be taking back to the

Telkomsel and distribute again to the other area or it will be abandoned until

expired date of those card has passed over and reproduce again those card

numbers.

Unofficial outlets are also a stand alone and do not has relationship

with the other unofficial outlets. Unofficial outlets usually correspond with

the Telkomsel through Sub Dealers or agents and do not have a direct

relationship to Telkomsel. The relationship with Telkomsel is limited on

selling and purchasing of the products to be selling in the market. The

performance of Unofficial Outlets sees from the sales level, the more

products sold, the more compensation will get in the form of discounts.

From the customer’s side about the product distribution, they usually

buy the products of sim card in the counters or outlets rather than Grapari

which is official outlets of Telkomsel. This because of they are (outlets)

reachable with the fewer prices. Customers generally do not have their

products as expected, expected here means the customers did not get the

chosen number, but generally they do got their products as expected with the

normal feature. It is rather being dangerous if customers did not get the

products as their expectation because they will go to the other products

(other providers).

29

In detail, the business process of distribution will be delivered as follow:

Figure 4.3. Business Process of distribution until Authorized Dealer

30

Figure 4.3. Business Process of distribution until Authorized Dealer (continued)

31

Figure 4.4. Business Process of Distribution until OMO

32

Figure 4.4. Business Process of Distribution until OMO (continued)

33

Explanation of business process of distribution (at number):

1. Div. Dealer & Retail Management

Make Quota Letter Recommendation of product distribution per AD

(Authorized Dealer) based on:

- recommendation from Div. Channel Management

- recommendation from M-Kios

- recommendation from retail (Ritnas & Kios Halo)

- recommendation from B2B (m-ATM)

2. Div. Dealer & Retail Management

Send the quota of distribution recommendation Nodin (Nota Dinas)

to Channel Management Area.

3. Channel Management Area

a. Receive the quota of distribution recommendation Nodin from

Div. Dealer & Retail Management and make a quota letter of

product per AD based on the recommendation letter and make a

sales order refer to the supply chain management SOP (Standard

Operation Procedure) about the making of sales order dealer.

b. Send the quota letter of product to each AD with copy (cq)

Finance Area Manager and HR & Adum Area Manager.

4. Finance Area

a. Receive the copy of product quota letter from Channel

Management Area.

b. Do approval of each AD payment in Paradise Application based

on DOA effectively entry to the Telkomsel bank account.

5. HR & Adum Area / Inventory Area

a. HR & Adum Area receives the copy of product quota letter AD

from Channel Management Area.

b. Inventory area conducts distribution to each AD after the AD

payment approved by Finance Area (administration recorded in

Paradise Application).

6. Authorized Dealer

Receive the quota letter from Channel Management Area and receive

the product from Inventory Area.

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7. Authorized Dealer

Send the quota letter and distribute the product to Branch Office or to

Own Manage Outlet (OMO).

8. Branch Office (BO)

a. Receive the quota letter, BA distribution, and product from AD.

b. Do receiving of the product through SMS / email / web / PDA

which will record to the DMS (Dealer Management System)

Application.

9. Branch Office (BO)

Send the quota letter and distribute the product to OMO.

10. Own Manage Outlet (OMO)

a. Receive the quota letter, BA distribution, and product from AD

or BO.

b. Do receiving of the product through SMS / email / web / PDA

which will record to the DMS (Dealer Management System)

Application.

11. Own Manage Outlet (OMO)

Do selling the products to customers (end users) and make a product

selling report.

Dependencies

There was dependency constructed in the distribution process. This is

because from the interview result each division on distribution process and

distribution channel has its own role and responsibilities also performing

good teamwork and collaboration among the member of distribution process

is the main attitude to perform. Based on Malone et al. (1999: 8), there was

three generic types of dependencies; flow, sharing, and fit. In Telkomsel

Company, the dependency mostly on flow dependency which are from the

upstream (Headquarter – Regional Area – Dealer) to downstream or vertical

relationship in the downstream that are mostly flatted with sharing

dependency. Distinguish between the own manage distribution and

outsourcing distribution, dependency especially flow dependency mostly

occur in own manage distribution which are end at Grapari. The outsourcing

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distribution are more varieties include flow, sharing, and fit dependencies

but more stressed on flow and sharing distribution. Flow dependency in

outsourcing distribution mostly occur in product distribution arrive from the

dealers to its subsidiaries or downstream which are sub dealers and OMO.

They are waiting for the product arrives based on the lead time from which

the order has made (one week). During that time, they do selling for certain

period scheduled (sharing) and make order to become recommendation on

distribution process later (fit).

Since coordination is the process of managing dependencies among

activities (Malone and Crowston, 1999: 7), the author defined the each

process in distribution process, activities is performed by actors and with

consuming resources. So, the dependencies identified are listed in Table4.1.

Table 4.1. Dependencies in distribution process

GenericDependency Specific Dependency

Activity-Actor Activity-Activity Actor-Actor

Sharing

Task assignment, e.g.selling activity, productdistribution to eachdealer, card production

Some activity happensimultaneously, e.g. sellingand product distribution

Share a commonresource, e.g. usingsame budget, DMSApplication

Flow

Delegation of agents toperform particularactivities, e.g. cardproduction

Some activities are theprerequisite of otheractivities, e.g. cardproduction to distribute theproduct

Agencies getinvolved in aparticular sequence, ,e.g. regional(production,inventory), dealers,retailers

Fit

Agents must be capableto perform the task.Making a distributionquota for the nextperiod, card production

Some activities mayinteract or have countereffects. Making adistribution quota mayeffects the other activities

Agents must havecompatible goals

There is the general illustration of dependencies in distribution

activities. Come into coordination mechanism for the existing process of

distribution (based on Shen and Shaw, 2004: 7). Below it will deliver more

specific on dependencies in each player and divisions in distribution process.

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Table 4.2. Dependencies on specific divisions

Relationship Dependency Coordination Structure Coordination Process

Headquarter –

Regional

Fit Centralized Decision,

More vertical

communication

Team Meeting

Regional – Grapari Flow, Fit Modularization Standardization,

Routine

Regional – Dealer

(AD)

Flow,

Sharing, Fit

Use boundary spanners Planning / Routine,

Dynamic Planning

Dealer (AD) –

Branch Office. /

OMO

Flow, Sharing Real Time, Use boundary

spanners

Planning

Branch Office –

OMO

Flow, Fit Real Time Planning

Branch Office –

Sub Dealer

Flow, Sharing Real Time, Use boundary

spanners

Planning

Sub Dealer –

Unofficial Outlet.

Flow, Fit Real Time Planning

In Regional Area, there are two divisions involved in distribution

process, there is Card Production and Headquarters, the dependencies are

delivered below.

Table 4.3. Dependencies on internal regional office

Relationship Dependency Coordination Structure Coordination

Process

Card Production –

Headquarters

Fit, Flow Use boundary spanners, Real time

communication, Centralized

decision

Planning,

Routine,

Schedule

The dependencies will perform based on the actor, activity, and with

their resources. Here in distribution process of cellular product, generally

concentrate on their selling activity with their proper product sell. Below, the

author also determines the dependencies and the coordination mechanism

and it is all is the current condition (as is).

37

Table 4.4. Coordination Mechanism for distribution process

Dependency Coordination MechanismCoordinationStructure Coordination Process

Sharing

Activity-Actor

Taskassignment

Real time /synchronouscommunication Planning (Thompson)

Dependency Coordination MechanismCoordinationStructure Coordination Process

Activity-Activity

Simultaneousactivities

Use boundaryspanners (Gittell)Centralizeddecision (Malone)Synchronous

Routine (Gittell), Synchronization(Malone and Crowston), DynamicPlanning

Actor-Actor

Publicresourcesharing byparticularagents

Use boundaryspanners (Gittell),Synchronous

Prioritizing (Malone et al.),Synchronization, Routine

Flow

Activity-Actor

Delegation ofparticularagents

Modularization,Use boundaryspanners, directcommand Dynamic planning, Planning, Routines

Activity-Activity Prerequisite

Direct command,CentralizedDecision

Notification, tracking (Malone andCrowston ) Planning / Scheduling /Routines (Thompson, Malone andCrowston, Gittell)Dynamic planning, Synchronization

Actor-Actor Sequencing

Synchronouscommunication,Real timecommunication,Direct command,Centralizeddecision Dynamic planning, Direct Supervision

Fit

Activity-Actor

Agents mustbe capable ofperforming thetask

Modularization(Schiling)Centralizeddecision, Directcommand

Agent identification,Fix resource allocation, Planning

Activity-Activity

Responseeffects

Centralizeddecision

Team meetings (Gittell), DynamicPlanning

Actor-Actor

Goalcompatibility

Centralizeddecision, DirectCommand

Standardization (Thompson)Team meeting (Gittell)

38

Above is the existing coordination mechanism of distribution process

in Telkomsel Company. Starting from Card Production to their frontlines

sellers which have directs contact with customers.

4.3 Key Performance Indicator (KPI)

Actually, each division has its own success factor of measurement,

for example in card production, the good performance indicate beside from

the good team work as well, they have to fulfill the market needs as proper

as the production capability could perform. Then in inventory also has to

maintain the amount of products in inventory in the level which are

presented in the SOP. Reaching the end of distribution process in regional

division which are divided in two management; own manage distribution

and outsourcing distribution management. Leaving the regional division to

Grapari which are classified in own manage distribution, has to serve the

customer as the frontline retailers (official). Come into outsourcing

distribution management, dealer (AD) has to deliver the products to its

downstream of distributor and frontline retailers on time and no defect of

goods, and so does for the downstream (Sub Dealers and Branch Offices)

until it frontline retailers (Own Manage Outlet and Unofficial outlet) has to

sell their product and serve the customers. The existing Key Performance

Indicator in the Telkomsel Company in distribution process as deliver below.

Table 4.5. Existing Key Performance Indicators in distribution from Regional to Unofficial

Outlets

Definition Target

Product Distribution

KPI

Quality No defect products delivered after

Regional Area.

100%

Quantity /

Availability

Products delivered are suited with

the ordered.

100%

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Table 4.5. Existing Key Performance Indicators in distribution from Regional to Unofficial

Outlets (continued)

Time The amount of time which after order to deliver (Dealer).

The amount of time which after order to deliver (Branch Office to

Unofficial Outlets).

2 days

0 – 2 days

Table 4.6. Key Performance Indicators from each division

Divisions KPI

Card

Production

Receiving the material from suppliers based specifications ordered with

100% completion.

Produce the card (inaugural number) based on specifications.

Have quality control with 100% completion of physical checking.

Delivering the card based specifications to Telkomsel Headquarter with

90 - 100% completion.

Headquarter Receiving the sim card (inaugural number) from Card Production with

95 - 100% completion.

Have quality control with 100% completion of physical inspection and

network checking.

Have 100% completion on activation the card after product inspection.

Distributing through Regional Area office based on order and demand

forecasting with 100% completion.

Monitoring distribution activities from each Regional Area office

around Indonesia.

Regional Receiving the sim card from Headquarters based on order and demand

forecasting with 100% completion.

Allocate the card to distribute on each Grapari and Dealer based on

order, demand forecasting, and cooperation agreement with 100%

completion.

Distributing the sim card with the correct quantity, location, and on time

to Dealers and Graparies with 100% completion.

Grapari Receiving the sim card from Regional based on demand forecasting

with 80 - 100% completion.

Selling the card (inaugural number) based on planning of demand

forecasting approximately above 80% sold.

40

Table 4.6. Key Performance Indicators from each division (continued)

Divisions KPI

Dealer (AD) Receiving the sim card from Regional based on order and

cooperation agreement with 100% completion.

Distributing the sim card to BO and OMO with the correct

quantity, location, and on time delivery with 100% completion.

Branch Office

(BO)

Receiving the sim card from Dealer based on order and

cooperation agreement with 100% completion.

Selling the card (inaugural number) based on planning of demand

forecasting approximately 80 – 100% sold.

Own Manage

Outlet (OMO)

Receiving the sim card from Dealer or BO based on order and

cooperation agreement with 100% completion.

Selling the card (inaugural number) based on planning of demand

forecasting approximately 90 – 100% sold.

Sub Dealer Receiving the sim card from Branch Office based on order with

100% completion.

Distributing the sim card to unofficial outlet with the correct

quantity, location, and on time delivery with 100% completion.

Unofficial Outlet. Receiving the sim card from Regional based on order with 100%

completion.

Selling the card (inaugural number) based on planning of demand

forecasting approximately 70 – 100%.

Both the own and outsourcing distribution management are has

similar performance indicator. The performance indicator are mostly in

product quality distributed, on time delivery to its subsidiaries or

downstream which is mostly in outsourcing distribution management, and

quantity ordered are suited and proper with they (dealer’s downstream)

expected.

4.4 Root Cause Analysis

This part will identify the problem occurred in the distribution

process, thus it will determine and analyze the root cause from the problem.

SCOR model will be used to interpret the problem and find the root cause as

the SCOR model deliver in four levels. Also the root cause finding is the part

41

of Five Stage of Problem Solving Process (IBM, 1984: 7). From the existing

business process and Key Performance Indicator sub-chapter before, come a

problem occurred in distribution process as deliver below.

1. Return Products

Return products occurred in the distribution business process.

Returns here means several products ordered from dealers are getting back to

Company which has been paid before. From interview result, the returns are

mostly occurred in dealers division (Authorized Dealer). The symptoms

indicate from the customer who has purchased the sim card from several

outlets found that the product is unable to execute several feature as the

ordinary cellular phone did. Also, sometimes it is not applicable in High End

(many features) cellular phones or in Low End (less features) cellular

phones. It summarizes for those products (sim cards) are in incompletely

usable. Now, the calculation of product returns because of products defect

both non-function and incompletely usable is:

Products return in a month / = 425 / 5,600 = 7.6%

Total number of products distributed

Then, those numbers of return are cause by defect product, so the

calculation of good quality will deliver below.

Total number of good quality products / = 5,175 / 5,600 = 92.4%

Total number of products distributed

That number seems to be significant because on monthly order will

have a quick replenishment that if happens products return will have an

impact on customers when they receive defect product, they will abandone

they willingness to purchase from certain provider to else. Also this result

will influence the cost that occurs in handling the return products.

Incompletely usable category of product defects is the main defect category

because it has the majority on the product defect problem.

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Table 4.7. SCOR model level 1

Performance Attribute Level 1 Metric Actual Parity Advantage Superior

Supply Chain Delivery

Reliability

Delivery

Performance

88% 75% 85% 90%

Fill Rates 80% 77% 85% 90%

Perfect Order

Fulfillment

87% 85% 90% 95%

Supply Chain

Responsiveness

Order Fulfillment

Lead Times

2 days 7 days 5 days 2 days

Supply Chain Flexibility Supply Chain

Response Times

7 days 11

days

8 days 6 days

Production

Flexibility

3 days 7 days 5 days 2 days

That table above is the SCOR model level 1 to indicate the gap

between the actual condition of each metrics of supply chain and in the

industry. Actually, Telkomsel has it own KPI in distribution process and not

based on SCOR model, so this table has been adapt and modified to suit the

realistic in Telkomsel Company.

Table 4.8. The existing distribution process KPI and the gap within

Definition Actual Target

Product

Distribution KPI

Quality No defect products delivered

after Regional Area.

97% 100%

Quantity /

Availability

Products delivered are suited

with the ordered.

100% 100%

Time The amount of time which after

order to deliver.

2 days 2 days

Above is the existing KPI in Telkomsel distribution process with the

gap on product quality between actual percentage of average accumulations

from the last three months (see Appendix II) and the target that said no

products defected delivered.

On level two of SCOR model, there will be mapping of distribution

process in Jakarta with the return products. Level two illustrate the supply

chain configuration on material flow which are includes the geographic map

43

of as is condition with the thread outline and design specification. The

position of this return will be delivering in the mapping of level two of

SCOR model below.

Figure 4.5. Mapping of distribution process and the return product illustration within

That is the mapping of sim card products (Simpati) delivery from the

the supplier of card production to the frontlines retailers and to the end

customers. The return products illustrate as the dash line with white color

mostly occur in the area of south and east Jakarta. So, the ‘to be’ of mapping

process deliver below.

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Figure 4.6. ‘to be’ process mapping of distribution

The ‘to be’ process mapping of distribution above deliver there is M

(Make) on Regional Area means here there is a quality control activities

after products receive from Headquarters. Also there are no products return

means there will be zero defects in products of Telkomsel Company. Still in

the level two of SCOR model, below is the mapping of execution process in

product and material flow from supplier to consumer and also the return

products from the customers to the Regional Area office which is the

incompletely usable defect products or non-function products defect.

45

Figure 4.7. Supply chain activity plan

The figure above illustrate returns of products happen in distribution

process from the customers to retailers, and then it is gathered to the

Authorized Dealers to be back at Regional Area to be re-processes. During

the moment they experience return, the defect products are bringing to

Grapari as the treatment for personal use. If it is from BO or OMO, it will be

brings back to the Authorized Dealer where they are purchased it and from

the AD will bring back to the Regional Area especially in Channel

Management division as the temporary storage. Classification of the root

cause in this problem is at the Headquarters at S1 and S2 as delivered in the

symbol of DR1 in yellow color arrow. Since the S1 and S2 has the same

resources and come to D1 and D2, the process on the level three is same.

Then, the ‘to be’ of activity plan will deliver below.

46

Figure 4.8. ‘to be’ activity plan of distribution

Figure above illustrate the adding of M1 and M2 in Regional Area to

conduct quality control after Headquarters.

The often happening of the appearance of incompletely usable sim

cards has make caution of the company in card production. There were

reports from dealers (Authorized Dealer) said several sim cards were unable

to execute certain features of cellular phone as its ordinary. It classified them

into occurrence in product defects in frontlines retailers and customers. This

is the current state of the problem the author may write and concentrated. So,

the desired future statement (IBM, 1984) of improvement will be a reduction

of product defect especially in frontline retailers.

The figure above also illustrate the supply chain plan in SCOR model

delivered that was divided into plan of source, make, and deliver also the

return. The P1 indicate the general plan of supply chain in Telkomsel

Company Indonesia which is integration by the information technology

based especially in P2 which is on the plan of source that enable the using of

system computer to inject the number based the Home Location Register

(HLR) and D4 which is plan deliver also integrated with Dealer

47

Management System to monitor and tracking the product distribution across

nation.

Before go to the level three in SCOR model, the process flow in

business process will be deliver and the problem within below.

Figure 4.9. Business process on card production to Regional Area

Business process on the figure above shows the root cause location in

general process illustration. The root causes are classified in execution phase

between the planning on production order and controlling on delivering the

products. The execution phase includes the production activities with quality

control after come the output.

48

On level three in SCOR model to determine the root cause of the

problem (return) more deeply. Level three is the level of performance

practice and system also based on the Standard Operation Procedure (SOP)

of Telkomsel Company. This will include the information and work flow

(process element level). Below is the illustration of SCOR level 3 on

‘source’ part in Headquarters.

Figure 4.10. SCOR model level 3 on Source at Headquarters

The location of having quality control indicates on the receiving

products at the Headquarters as delivering in the illustration above in the

‘source’ part on SCOR model at Headquarters above. Then, for the

activation is included in the ‘make’ part of SCOR model as illustrate below.

Figure 4.11. SCOR model level 3 on Make at Headquarters

49

There were activities in the receiving product (S1.3) and activation

file (M1.3) that indicate under performance, so the author will deliver those

illustrations on the SCOR model level 4 below.

Figure 4.12. SCOR model level 4 on receiving products (S1.3) at product quality inspection

Headquarters

On the inspection on product quality activities above illustrate there

were some under performance of their activities. Then, in the activation

process (M1.3), the level 4 will be address below.

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Figure 4.13. SCOR model level 4 on activation (M1.3) at file transfer Headquarters

The network problems appear when the employees miss several file

to be transfer for activation to system network. So, the root cause category as

the activation handling by employees.

Come to activity flow in the product inspection to identify in detail

the activities which under performance. Below is the mechanism of product

inspection activities.

Figure 4.14. Detail activities on product inspection with the under performance activities on

employee

From the figure above, the author deliver the cause of the problem is

in the lack of number of employees who are handling the inspection of the

51

sim card products. Sometimes they missed several products to be inspected

both on the physical or checking the network signaling.

Summary of the root cause will deliver below.

Figure 4.15. Root cause of products return

For the evidence of the lack of employee number in product

inspection in Headquarters can be seeing from the workload point of view

which is from the capacity person and the working time (working hours).

Based on the observations conducted, there were 3 persons who in charge of

product inspections in Headquarters, the working time available for them are

7 hours a day on average. In this case the capacity will be see from the

capacity of persons inspected the quality of the products (card).

Now taking from the number of 5175 cards are ready to deliver and it

is 100% as the current demand of certain period. Based on Cachon and

Terwiesch (2006: 64) about increasing capacity by selectively adding

workers, for the product inspection current capacity will be delivering

below.

Requested capacity = number of cards produce /

total working hours all employees

= 5175 / ( 7 x 3 )

= 246 cards to be inspected per person per hours

= 0.068 unit to be inspected per second

Activity time = number of workers / requested capacity

= 3 / 0.068

= 44 seconds

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Process capacity = 246 units / hour

Flow rate = Demand = 5600 units / month

= 267 units / hour

Utilization = 267 / 246 = 101.4%

From the calculations above, the person capacity come a result 246

cards to be inspected per person per hours. Based on this number means

every minute the person will have to inspect 4 card numbers on quality

check only (physical). Then from the flow rate the persons are have an

excessive workload that by inspecting 267 cards in an hours.

Utilization 101.4% means they have a little excess workload

compared to the target of utilization of 100%. The excessive utilization will

had the employee to somehow in a rush condition or fatigue that lead to miss

inspection of the card products from Card Production. The miss inspection

means that the employee or workers (QC staff) are missing several products

to be inspected, they are not put a full caution or attention at the products

they should inspect. The miss inspection also happens although there is one

person from inventory division occasionally inspecting the card products.

Based on the observation for the second root cause which is the

employee that misses for activation has 20 - 30% that employee possible to

experience the miss activation. This number seems significant because based

on KPI above the receiving product in Headquarters should be 95 – 100%.

For the second root cause is possibly have more several reasons that causes

the problem but because the limited observation it is just ended up in man

problem. Several possible causes will be delivering in fish bone diagram or

Ishikawa diagram below.

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Employee missesfor activation

(man problem)

Man Method

Machine Material

Lack of training

Human error

Too old machine

Incompatiblemachine

Incompatiblemethod

Incompatiblematerial

Figure 4.16. Possible reasons causes employee misses for activation

That is the illustration of root causes analysis on products return

which causes from products defect (incomplete usable) that is occurs first

time on the customers. The flow of causes is from right (products return) to

left (lack of employee number in product inspection). The location of root

cause is on Headquarters at ‘source’ (product inspection) and ‘make’

(activation) part. The road map of the return will stop in the Regional Area

in channel management division to conduct treatment. But the root cause

positions of these problems are at the Headquarters especially in ‘sourcing’

and ‘make’ part of SCOR model. For the ‘make’ (activation) part, there is no

more further causes to become root cause because based on interview, the

actual condition only shows the causes, no more lack of employee number in

this position is needed. The percentage of return products root causes are

mostly from the lack of employee number in products inspection.

There was also reason for the appearance of lack of employee

number in product inspection, it is seeing from the capacity point of view.

From the capacity planning this is the analysis of capacity from the working

hours per capacity person. The observations resulted that the capacity person

is not suited with the working hours given. The 4 persons to handle the

product inspection coming from the card production seem incapable to

handle the inspection of card quality.

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4.5 Solution

In the solution sub-chapter, it will deliver several solutions from the

author due to problem solving. Set target will be established here in the

solution sub-chapter in order to indicate the successful of the solution.

Set Target

After give the solution, the author will deliver set targets to measure

the successful implementation in solution (IBM, 1984). Also the purpose of

set target is to take the significant cause defined in stage two and describe

the conditions that will exist when that significant cause has been eliminated.

That final condition is defined as the “objective” and the intermediate levels

on the way toward meeting the objective are called “targets”. The solution

target of this research will deliver below:

1. The defect products (sim card) will be reduced 80 – 100%.

Here will have a calculation to increase the employee number in

order to lower the defect rate from the miss inspection from the employees.

In this case to prevent the defect products occur, set the current number of

card produce is 5600 and it has no defect, so the calculation for adding

workers will delivering below.

Requested capacity = number of cards produce /

total working hours all employees

= 5600 / ( 7 x 3 )

= 267 cards to be inspected per person per hours

= 0.0742 unit to be inspected per second

Adding number of worker = activity time x requested capacity

= 44 x 0.0742

= 3.263

Process capacity = 5600 / (7 x 4 ) = 200 units / hour

Flow rate = Demand = 5600 units / month

= 200 units / hour

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Utilization = 200 / 200 = 100%

So, the calculation come a result to adding one worker in product

inspection Headquarters in order to minimize the product defect occurrence

because of miss inspection. There are several reasons for adding one worker

will reduce the miss inspection and will lead to reducing the defect. The

reasons for adding worker will reduce the miss inspection will be:

1. To fulfill the resource that will comply with the number of products

produce.

2. Minimizing the fatigue factor of the workers that by adding the

worker will have the resource of inspection to be shared.

3. Less number of products to inspect will be had from each worker so

the worker will not feel a rush while having the product inspection.

As described above about the miss inspection explanation that the

employees are missing several products to be inspected because of over

utilization lead to fatigue or in a rush condition, the adding worker is to have

an early detection of the possible occurrence of products defect. This is a

prevention action for the products defect problem so it will not occur in the

distribution process especially at the customers.

Then the mechanisms of adding worker that reduces the miss

inspection will reduce the defect occur in distribution process because of

early detection, these are:

1. The accuracy of product inspection will increase because they do not

feel in a rush condition so the occurrence of product defect will have

a caution and anticipated immediately.

2. The detected of defect products will not come into distribution

process especially in the customers because of the early detection in

product inspection.

3. The worker capacity to inspect will be less than before the additional

worker exist so there will have much time to inspect on the products.

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4. With the additional worker exist to lower each worker capacity to

inspect; this will lower the fatigue level of each worker so they will

fully focus to the inspection.

Also there is alternative solution see from the system point of view in

case of the Company did not want to adding worker for some reasons. The

method of quality control especially product inspection in physical checking.

For the existing method of quality control or product inspection is delivered

in the SCOR model level 4 above and the detail activities of product

inspection. Then for the new method (system improvement) to prevent the

problem of miss product inspection will be delivering below.

Figure 4.17. New system in product inspection

That is the new system of quality control improving from the

previous method quality control. The different is there is allocation of

product inspection to several workers available.

Figure 4.18. Possible reasons causes employee misses for activation

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For the possible cause of employee misses on activation above will

be delivering the possible solutions into the table below.

Table 4.9. Solution on each problem causes product defects

No. Root Cause (in ranking ofmust possible cause)

Solution

1. Incompatible method Renew the method or SOP of activation suited withemployees characteristics and capacity.

2. Human error Motivational advise, award, and punishment.3. Lack of training Give more training of accuracy.4. Incompatible machine Renew the machine compatible with employee

characteristics.5. Too old machine Renew the machine compatible with employee

characteristics.6. Incompatible material Find other compatible material suppliers.

Several solutions to solve the root causes of the problem are deliver

below (in ranking). The solutions are more likely to curative one than the

preventive. The preventive solutions should discuss the incoming material in

Card Production divisions. This observations has limited on Telkomsel

Company only and don’t have further observations to the supplier of card

production.

Table 4.10. Solution on each problem causes product defects

No. Problem Category Solutions KPI1. Lack of

number ofemployeesin productinspection.

Incompleteusable

Increase the number of employee (1person) in the product qualityinspection at Headquarters. Increaseworking hour of product inspection.Routine meetings with supervisortwice a week.

Productsinspection moreaccurate.

Have low defectrate (reduce to 80 -100%).

2. Lessaccuracy inhandling theactivation.

Incompleteusable

More training to do the handling. Havea supervisor to monitor the activation.Increase working hour. Routinemeetings with supervisor twice aweek.

Activation moreaccurate (increaseaccuracy 80 -100%).

Have low defectrate (reduce to 80 -100%).

4.6 Discussion

In discussion, solution explanation in solving the problem will be

addressed. After the analysis about root cause before, it will deliver the

solution that more stressed in quality control process orientation.

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1. Quality Control

Now in the quality control side, according to the return problem, the

author will deliver a quality control in the Regional Area office only the

network checking not for the physical checking and after the products

receiving. The specific will be delivering in business process below.

Figure 4.18. Business Process Improvement the process of card production

Solutions on the business process are from the information and

distribution process per regional to be put at the first time they conduct

production process. Although the existing is still classified in the planning

for production, it is located on the edge of the production begin. This will

impact on less accurate product order specific from Telkomsel Company to

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card production. So, the solution of the information and distribution process

per regional will be place on the beginning they conduct production

activities to increase product order accuracy. Also in Regional Area will be

add a quality control activities for network checking after products receiving

in order to avoid defect products on customers. The general steps in

conducting quality control are delivering below.

1. Have a method that is quick and reliably adaptable to current and

future technologies for controlling the quality of the products.

2. Training for the employees who involved in quality control

especially in regional area office with data synchronization of

performance measurement.

3. Make the quality control a ‘mature’ process by accustom it regularly

so that it could be holistically implemented around subsidiaries.

4. If possible establish software to automate the quality control of mass

production.

5. Simply build a monitoring method based information technology to

easy monitor and control the quality control activity and report.

6. Make a quality control policy.

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