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Int. J. Business and Systems Research, Vol. 5, No. 1, 2011
Application of knowledge management systems in Malaysian oil palm plantations’ supply chain Nitty Hirawaty Kamarulzaman Faculty of Agriculture, Department of Agribusiness and Information Systems, Universiti Putra Malaysia, Serdang 43400 UPM, Selangor, Malaysia Fax: +60 3 8946 4142 E-mail:
[email protected]
Mohd Ghazali Mohayidin* Faculty of Business and Management, Open University Malaysia, Jalan Tun Ismail, Kuala Lumpur 50480, Malaysia Fax: +60 3 2697 8850 E-mail:
[email protected] *Corresponding author Abstract: Vertically integrated firms are streamlining activities in their supply chain by using knowledge management systems (KMS). Effective KMS need suitable combination of organisational and managerial initiatives and the use of suitable information technologies. Malaysian oil palm plantations have been recognised as leaders in technology development and adoption. KMS in the plantations started with the use of computerised inventory management systems. Subsequently, the plantation companies applied KMS to integrate various functions, including sourcing raw materials, production and support activities. This paper explores to what extent oil palm plantations have used KMS in managing their supply chain primary and support activities and how effective it is in increasing performance. Results of the study showed the plantation managers agreed that KMS have contributed significantly in improving the plantations’ performance. However, greater use of existing KMS and adopting a more advanced IT will further improve performance at all stages of the supply chain. Keywords: supply chain; knowledge management systems; information technology; primary activities; support activities; oil palm plantations. Reference to this paper should be made as follows: Kamarulzaman, N.H. and Mohayidin, M.G. (2011) ‘Application of knowledge management systems in Malaysian oil palm plantations’ supply chain’, Int. J. Business and Systems Research, Vol. 5, No. 1, pp.104–121. Biographical notes: Nitty Hirawaty Kamarulzaman is a Senior Lecturer in the Faculty of Agriculture of the Department of Agribusiness and Information Systems at the Universiti Putra Malaysia. She received a PhD in Management Science from Lancaster University, UK. Her research interests include logistics
Copyright © 2011 Inderscience Enterprises Ltd.
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management, supply chain management, e-supply chain, supply management, e-procurement and knowledge management. Mohd Ghazali Mohayidin is a Professor in the Faculty of Business and Management at Open University Malaysia (OUM). Before joining OUM, he was a Professor at Universiti Putra Malaysia (UPM). He obtained his PhD (Agric Econ) at the University of Hawaii. While in-service, he received several academic grants and attended several training programmes such as the Agribusiness Short Course in Singapore and Sustainable Agricultural Development Course at Newcastle, UK. He is deeply involved in conducting research and consultancy as well as writing papers, books and reports in the areas of agribusiness, sustainable agricultural development and knowledge management.
1
Introduction
A rapid development of information technology (IT) in Malaysia has enabled firms in manufacturing, agro-based and food-based industries improved their knowledge management systems (KMS) initiatives to produce more value-added products. KMS are applications of the organisation’s computer-based communication and information processing systems to support specific knowledge management (KM) processes (King, 2007). KM processes consist of the generation, acquisition, storage and dissemination of knowledge (Mohayidin et al., 2007). According to Marwick (2001), efficient and effective KM typically requires a suitable combination of organisational, social and managerial initiatives and the use of suitable technologies using IT as an enabler. KM and IT have been recognised as a strategic tool to increase competitiveness and productivity of a firm. Even though KM is a relatively young topic in Malaysia, it has attracted many researchers. Most of these researchers (Hoon et al., 2004; Tehraninasr and Raman, 2009; Wong, 2008) focused their works, either on information technologies or management information systems in public organisations or industries. Studies on the application of KM in the agricultural sector especially in the area of supply chain management (SCM) have been very scarce. Malaysian firms are also transacting using their capabilities of KMS and IT aggressively along their supply chain to enhance their competitiveness. The Malaysian palm oil industry (MPOI) is considered as one of the pioneers in this endeavour. Since its beginning, the success of the MPOI has been the result of the ideal climate, efficient milling and refining technologies, research and development (R&D), effective use of management tools and marketing strategies. The Malaysian Government has been fully committed to expand the palm oil industry and encouraged global expansion of palm oil production. Being competitive and profitable, the oil palm industry has continued to seek ways to improve performance by using better production and marketing strategies. This has contributed significantly to the growth of the agricultural sector, which has recorded a growth rate of 3.0–4.0% per year. Effective and reliable management tools and strategies, however, are needed to manage challenges and to preserve stability and competitiveness of the MPOI in the global market. To preserve the dominant position in the regional and international markets, the MPOI is striving to improve its productivity and competitiveness through continual technology innovation. The MPOI is finding effective
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ways in handling its supply chain activities, thus increasing performance of oil palm production and reducing costs related to production and manufacturing of palm oil products along its supply chain activities. With the availability of appropriate and affordable technologies, the question is whether the MPOI is able to manage its supply chain activities effectively using KMS and IT. The use of advanced databases, computer software and communication systems is important for developing a cost-effective supply chain. The purpose of this study is to explore to what extent the Malaysian oil palm plantations supply chain have used KMS and IT to manage their supply chain activities, particularly those related to sourcing of raw material, production and support activities. The study also aims to determine whether the use of KMS and IT in supply chain activities has contributed to improving performance. Following this introduction, we will discuss in separate sections the concept of SCM followed by a short reviewed of KM, research methodology and discussion of the results. In the last section, we will conclude this paper with possible recommendations.
2
Supply chain management
Understanding SCM has become important to companies in an increasingly competitive global market. It is an enormous topic covering multiple disciplines deploying many quantitative and qualitative tools (Johnson and David, 1999). Supply chain refers to a set of three or more entities (organisations or individuals) directly involved in the upstream and downstream flow of products, services and information from suppliers to customers. On the other hand, SCM is defined as “the planning and control activities of physical movement of materials, resources and information used in the supply chain process from raw materials to finished products”. Specifically, Simchi-Levi et al. (2003) defined SCM as “a set of approaches utilized to efficiently integrate supplies, manufacturers, warehouses and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize system-wide costs while satisfying service level requirements.”
A more recent SCM definition was by Handfield and Bozarth (2006). They defined SCM as “the active management of supply chain activities and relationships to maximize customer value and achieve a sustainable competitive advantage”. Nowadays, SCM has received greater attention from companies and has become a successful strategy to link effectively all trading partners and to ensure cost-effective and timely movement of materials from suppliers to producers and finally to customers (Premkumar, 2000). According to Dreyer (2000) and Kumaraswamy et al. (2000), many companies are implementing SCM to remain competitive because they are able to reduce time to market, improve product quality, slash production costs and lead times. They constantly adjust their supply chains to increase efficiency, control costs and improve customer satisfaction. Sunil and Peter (2001) agreed and said this would enable firms to achieve maximum profit. As customers are the major consideration in implementing SCM, creating value based on customers’ needs has become an important source of competitive advantage, creating a shift from ‘push’ to ‘pull’ strategies for bringing products to the customers.
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Coordination of activities and management of relationships in the supply chain can be a significant source of competitive advantage and bring added value to customers. Companies that challenge and improve the entire supply chain will eventually improve customer satisfaction. This is done by sharing information with their suppliers, which will lead to reduction in costs of inventory, higher inventory turnover, increased sales, reduce product defects and improve relationships, and more importantly, happier customers (Beamon, 1999; Borade and Bansod, 2008; Brelin, 1998; Sahay et al., 2006; Soni and Kodali, 2008). Since companies are looking for competitiveness in the global market, the primary objective of SCM is to improve internal efficiency (Poirier, 1999). Similarly, Ricks et al. (1999) supported that the objective of SCM is to improve the coordination and performance of production and marketing systems. Besides, to preserve the effectiveness of the supply chain, communication at all levels and all entities and between trading partners involved in the supply chain must be effective and timely. Development in SCM is consistent with recent changes in the MPOI. With increasing competition from other players in other countries, we believe that it is critical for the MPOI to continue improving its SCM to sustain the competitive edge which it currently enjoys in the global market. Adding values through supply chain activities will increase the chances of higher customers’ satisfaction.
2.1 Value-added strategy along the supply chain A value can be determined by the utility combination of benefits delivered to the customer less the total costs of receiving the delivered benefits (Walters and Lancaster, 1999). The value of any product or service is the result of its ability to meet customers’ priorities. According to Slywotzky and Morrison (1997), value opportunities can be distinguished by understanding customers’ priorities and monitoring the priorities for change. Value comprises all those activities involved in delivering the product and service attributes that are considered to be necessary to create customers’ satisfaction and to preserve a current, long-term relationship with customers, thus increasing competitive advantages. It includes the value-adding activities undertaken to bring a product or service from raw material to provide final customer service and support. Keeping end customers’ loyalty are likely the interests of companies. However, many companies struggle to add value to their products and services. As explained by Kanji and Wong (1999), various processes can be improved and thus adding value to the products and finally, pass on the added value to the customers. As a company focuses on its core competency, its operations can start with the highest value-added activities. Similarly, Webb and Gile (2001) suggested that companies’ management should add values in all activities to improve the companies’ competency. Lin et al. (2008) also found that collaborative procurement systems and supply chain maturity had a significant influence on business performance by adding values along the supply chain. By adding values in the activities and processes, companies could efficiently push products and services to market and offer more value to customers. Adding value along supply chain activities would ensure a close and long-term relationship among supply chain players. This would encourage them to work together towards a common goal of meeting customers’ needs. These ideas were also highlighted by Prahalad and Ramaswamy (2004). However, they stressed the information infrastructure must be centred on the customers. The customers are encouraged to participate actively in information search,
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products and services configuration, fulfilment of business processes and feedback from customers’ consumption of products and services.
2.2 Adoption of internet technologies for supply chain improvement Many companies may introduce product and service innovations to the market by strengthening supply chain activities and meet customers’ needs for value-added products. Johnson and Wood (1996) found an essential step to achieve efficiency of the supply chain is to provide a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products and distributing these finished products to customers. Bowersox et al. (2000) argued that to increase effectiveness and to be competitive, supply chain players must work together and increased coordination in carrying out various operations. Supply chain integration will create profit, increase market share, strengthen competitive position and increase value of the company. The integral part of SC integration is information sharing (Lee, 2000). While many strategies and approaches could be used to improve performance of the supply chain, rapid growth in the internet has increased its importance as a tool to improve supply chain activities. The availability of the latest internet technologies in the market helps companies to achieve the efficiency of their supply chain activities and remain competitive in the industry where they operate. Lankford (2004) described that to explore the effect of internet technologies on the supply chain is to examine the impact the technologies have on the efficiency, responsiveness, effectiveness and overall performance of the supply chain. Increasing the speed of supply chain activities promoted by internet technologies may be the best opportunity to reduce costs, improve productivity, decrease order cycle time and increase profits. Internet technologies can offer several benefits in supply chain activities, namely creating fast and accurate information, adjusting inventory, production and transport systems and reacting quickly to market changes (Lancioni et al., 2000). Therefore, using internet technologies would lead to increased customers’ satisfaction and better companies’ performance. When firms are conducting business supply chain activities electronically, managing relationships will become an important factor in ensuring the success of the business. According to Alshawi (2001), supply chain players must be transparent in providing relevant and accurate information along supply chain activities. They must also be flexible in offering business partners to make changes in their operations or products when necessary. Bradley (2000) also supported the notion that if internet technology is applied correctly, it should be able to link all business partners in a supply chain and they can benefit from information sharing, promoting speed, efficiency and collaborative planning. So, advanced information technologies are becoming important management tools in SCM, where organisations are changing the way they do business to gain competitive advantages (Chan and Chan, 2008).
2.3 KMS in SCM Knowledge has long been recognised as a valuable resource for organisational growth and sustaining competitive advantage (Gottschalk and Karlsen, 2008). And, KM has been widely practiced by many organisations as one of the most promising ways of achieving success in the information age (Malone, 2002; Pillania, 2007). KM provides new
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opportunities to create and retain greater value from supply chains based on core business competencies (Tiwana, 1999). According to Hult et al. (2004), capitalising on knowledge can create superior performance in supply chains but only if the relative emphasis on various knowledge elements such as tacitness, accessibility and responsiveness matches strategy. KMS can be used in decision making that will lead to improved SCM competence. Wadhwa and Saxena (2005) believed that KM has great potential to offer opportunities to create and retain greater value within the supply chain players. This, however, required that the implementation of KMS in the supply chain be enriched by the judicious use of IT which will result in improved flow of information. Lau and Lee (2000) explained that almost all companies would need to have a better information flow for easier and quicker access to required information across organisational and geographical boundaries. Rapid flow of information on products particularly on the status of orders and deliveries are important for a smooth transaction between customers and companies. Hill (1999) showed that customers prefer to do business with companies who can provide quicker order turnaround, more frequent shipment, special packaging, labelling, pallet builds and other value-added services. Therefore, companies must quickly implement KMS which focus on technologies and systems that support all activities and the flow of information along the supply chain. Good KMS help companies to maintain their competitiveness by building strong relations with employees, customers and upstream and downstream suppliers and partners (Thomas et al., 2004). Wu (2001) described that the principles of applying KM in the supply chain are for coordination, information and knowledge sharing among the supply chain players. Besides, these principles allow companies to develop good strategies, methods, policies, cooperation mechanism and technologies on KM in SCM (Dwivedi and Butcher, 2008). Most supply chain systems such as vendor managed inventory (VMI), collaborative planning, forecasting and replenishment (CPFR), enterprise resource planning (ERP) and e-procurement can easily implement timely and effective knowledge sharing among the supply chain players. KMS can also provide tools to manage vast amount of data that exists across the supply chain, conduct sophisticated analysis on these data and develop a better understanding of supply chain performance and opportunities. In a complex supply chain networks, it is important that organisations understand how knowledge is created and shared around their core business processes and thus it will improve their performance significantly (McLaughlin, 2009). Flexibility in the KMS is also important. Fantazy et al. (2009) found that strategic decision making and information systems flexibility had positive impact on supply chain performance.
3
Theoretical framework
Prahalad and Ramaswamy (2004) discussed the importance of providing new infrastructure capabilities and new functional and governance capabilities to create values for customers. The performance enhancement in Figure 1 measures value-added supply chain activities, measured using several indicators such as cost-effectiveness, better transportation decisions and better communication with suppliers and others. Tables 1 and 2 (as shown in Section 5) show the list of items used to measure performance enhancement for sourcing of raw materials and production activities, respectively. The main independent variable of this study focuses on the effectiveness of KMS application.
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Referring to previous studies (Borade and Bansod, 2008; Michael et al., 2002; SimchiLevi et al., 2003), this variable includes items such as the effects of providing IT infrastructure capabilities (see Table 3 for details). The other independent variables which are deemed to be relevant in this study include number of field and administrative workers, and qualification of the managers. Figure 1
4
Factors affecting performance enhancement
Methodology
4.1 Data collection The research instrument used in this study comprised a structured close-ended questionnaire. A structured questionnaire is flexible because useful and practical questions about a given topic can be asked, thus allowing for flexibility in the analysis (Babbie, 1995). The questions focused on the respondents’ agreement or disagreement regarding the plantations’ strategies in enhancing performance. The structured closeended questionnaire with a list of answer choices based on a four-point scale (1 = strongly disagree, 2 = disagree, 3 = agree and 4 = strongly agree) was designed to get data from respondents. As described by Sekaran (2000), a closed-ended questionnaire helps respondents to choose among several alternatives and helps researchers to code the information easily for subsequent analysis. The questionnaire also included questions pertaining to company’s profile, respondent’s profile and current infrastructure. The questionnaire was validated with the help of personnel from the Malaysian Palm Oil Board (MPOB) and academic staff from Universiti Putra Malysia (UPM). Further validation was made through a pilot test whereby ten questionnaires were sent to oil palm
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managers for their feedback. The sampling frame for the study was obtained from the list of plantations compiled in the MPOB directory. Only those with internet connections were included as the sampling frame. This gave a total number of 550 oil palm plantations, which was about 40.0% of the total population. A large number of oil palm plantations were in the rural areas; IT facilities and infrastructure in these areas were limited. The study used a stratified random sampling, where the population was divided two strata, Peninsular Malaysia (West and East Coast) and East Malaysia (Sabah and Sarawak). The sample from Peninsular Malaysia and East Malaysia was taken at the ratio of 70:30. Questionnaires were mailed to the respondents who were the managers of the selected oil palm plantations. Follow-up calls were made a month after the questionnaires were sent out. Out of 196 questionnaires sent out, 80 responses were returned and usable for further analysis giving a 41.0% response rate.
4.2 Data analysis The study used descriptive analysis and regression model. In the descriptive analysis, frequency and percentage were used to describe profiles of the oil palm plantations. Mean was used to identify strategies that have contributed to enhance the performance of oil palm plantations. Mean was also used to determine to what extent the oil palm plantations have used KMS to manage primary and support activities along the supply chain. The mean was calculated based on the managers’ responses to each of the relevant questions about the primary and support activities. A mean score of 3.0 or above indicated that the oil palm plantations had managed their primary and support activities effectively. Regression models were used to explore relationships between one continuous dependent variable and several independent variables or predictors. The analysis would be able to show how well a set of variables were able to predict a particular outcome of the dependent variable. In this study, two sets of regression equations were estimated, one for performance improvement due to sourcing of raw materials activities while the second was for performance improvement due to production activities. The regression equations are shown below: Y1
f A, SF , SA , Q, LEC , LWC
(1)
Y2
f A, SF , SA , Q, LEC , LWC
(2)
where Y1 = performance improvement due to sourcing of raw materials activities (mean score) Y2 = performance improvement due to production activities (mean score) A = KMS application for primary activities (mean score) SF = field workers (number) SA = administrative workers (number) Q = qualification of the respondents (1 = high school, 2 = diplomas and below, 3 = degrees)
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LEC = 1 if plantation is located in East Coast of Peninsular Malaysia, 0, otherwise LWC = 1 if plantation is located in West Coast of Peninsular Malaysia, 0, otherwise.
5
Results and discussions
Figure 2 shows that about 49.0% of the oil palm plantations in the study were from East Coast region which consists of Kelantan (6.25%), Terengganu (6.25%) and Pahang (36.25%). West coast region covered about 26.0% of the respondents which include Johor (12.5%), Negeri Sembilan (8.75%), Selangor (1.25%) and Perak (3.75%). The other 25.0% of the oil palm plantations were located in East Malaysia, where Sabah and Sawarak, accounted for 21.25% and 3.75%, respectively. The questionnaires were mostly completed by managers, which accounted for 92.5% while assistant managers completed 7.5%. Most of the managers and assistant managers had bachelor degrees (74.0%); whereas, the other 26.0% had diplomas and lesser qualification. Slightly more than 36.0% of the oil palm plantations hired between 101 and 150 field workers. The highest percentage (56.3%) of the oil palm plantations had fewer than 10 administrative staff and only 2.5% had more than 21 administrative staff. Figure 2
Oil palm plantations based on regions
East Malaysia, 25%
East Coast, 49%
West Coast, 26%
5.1 Improving performance through sourcing of raw materials activities Table 1 presents the mean scores of the respondents’ view regarding their sourcing of raw materials activities. The result showed the highest mean score of 3.13 represents the activity of buying raw materials in large quantities by the managers to save cost. Another
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important mean score (3.10) was for the use of computerised inventory management systems (CIMS) to manage raw material inventories. The use of CIMS in the oil palm plantations was required to ensure better management of raw materials. The incoming and outgoing of raw materials data that were recorded in a computerised system allow managers to make better decisions. The managers were allowed to choose their own suppliers to ensure a smooth progress of operations in the oil palm plantations (mean score of 2.96). One of the main criteria required by the managers was that their suppliers were able to supply quality raw materials. The managers agreed that the current method of transporting raw materials from their suppliers was the most cost-effective method (mean score of 2.91). The overall mean score for sourcing of raw materials activities was 2.76. This finding suggests that the performance of sourcing of raw materials activities was moderate; nevertheless a few activities have been well managed by the plantations. On the average, 52.0% of the respondents agreed that their plantations have taken the appropriate sourcing of raw material activities to improve performance; however, still a significant percentage (33.0%) did not believe that they have done so. Table 1
Sourcing of raw materials activities in enhancing performance
Activities
Number of responses SDA DA A SA 9 17 43 11
Mean score 2.70
1
The company obtains raw materials from the nearest suppliers
2
The company is free to choose suppliers that can best satisfy the needs
6
13
39
22
2.96
3
The company uses own transportation to transport raw materials
7
42
24
7
2.39
4
The current method of transporting raw materials from the suppliers to the company is the most cost-effective method
1
15
54
10
2.91
5
In order to save cost, the company buys raw materials in large quantities
2
14
36
28
3.13
6
In order to save cost, the company signs long-term contract with suppliers
5
21
39
15
2.80
7
The company uses IT facilities (such as e-mail, the internet, 11 etc.) to communicate with suppliers 6 The company has good IT infrastructure to enable it to
35
31
3
2.33
35
37
2
2.44
0
12
48
20
3.10
1
16
54
9
2.89
1 11 The current method of managing inventory used by the company is better than the methods used by the competitors Overall mean score Average response percentage (n = 80) 5.0
24
53
2
2.70
8
conduct the business with suppliers effectively and efficiently 9
The company currently used CIMS to manage inventories
10 The current method of managing inventory used by the company is the most cost-effective method
2.76 28.0 52.0 15.0
Note: SDA: strongly disagree (score = 1); DA: disagree (score = 2); A: agree (score = 3); SA: strongly agree (score = 4).
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5.2 Improving performance through production activities Table 2 presents the mean scores of the respondents’ agreement regarding the effectiveness of various production activities in improving performance of the oil palm plantations. The highest mean score for production activities was related to best method of hiring labour (3.30). Being labour-intensive, hiring the right workers is usually critical and this could affect performance greatly. Another important mean score (3.18) was for the strategy of providing the best terms of service to the workers. Sufficient facilities, workers welfare and attractive salary are examples of good term of service. Another important activity carried out by the plantations was the use of the most cost-effective processing technologies and the strategy of owned processing plant (mean score of 3.06 and 3.02, respectively). Most of the oil palm plantations used their own processing plants to reduce costs of operation as well as overheads. Finally, the use of CIMS was another important production activity (mean score of 2.91) in the oil palm plantations. The overall mean score was 2.94, showing that the performance of oil palm plantations has been increased by a well-defined production activities. Compared with the sourcing of raw material activities, most of the plantations gave particular attention to their production activities. Slightly more than 80.0% of them agreed that they have taken the appropriate strategies to improve the performance of their production activities. Table 2
Production activities to enhance performance
Activities
Number of responses SDA DA A SA 2 15 54 9
Mean score 2.88
1
As much as possible the company utilises machines to produce the products (e.g. fresh fruit bunch (FFB))
2
For the company’s operations that are labour-intensive, the company employs the best method of hiring labours (e.g. contract labours, part-time labour, etc.)
0
2
52
26
3.30
3
The labours employed by the company are highly skilled in their job
2
34
38
6
2.60
4
The company tries the best to make the employees happy by providing the best terms of service in the industry
0
5
56
19
3.18
5
The company uses CIMS to manage finished goods inventory
2
12
57
9
2.91
6
The finished goods inventory systems used by the company are better than the methods used by the competitors
2
27
50
1
2.63
7
In processing the inputs into finished products, the company uses own processing plant (e.g. palm oil mill) in order to reduce costs
2
11
50
17
3.02
8
If the company does not have own processing facilities, its will look for the most cost-effective way at processing the products (such as by utilising the nearest independent processing facility)
0
5
65
10
3.06
3
14
55
8
2.85
2.0
17.0
66.0
15.0
9
When shipping the finished goods to the customers, the company uses the cheapest mode of transportation Overall mean score Average response percentage (n = 80)
2.94
Note: SDA: strongly disagree (score = 1); DA: disagree (score = 2); A: agree (score = 3); SA: strongly agree (score = 4).
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5.3 Application of KMS in primary activities of oil palm plantations Among the primary activities as listed in Table 3, the highest mean score (3.04) was about the use of information technologies to manage inventory. This is consistent with findings of other studies such as the one by Beierlein and Miller (2000). They found that many firms are directing their searches for greater profit towards finding ways to reduce their operating costs by using computerised inventory systems. The results also revealed that KM has enabled the oil palm plantations to upgrade the quality of products and services (mean score of 2.90). However, it is argued that KM could not help to upgrade oil palm production because certain operations in the oil palm plantations do not require the use of IT. However, for the activities in which IT could play a significant role, there was an agreement by the managers that KM could upgrade the quality of the services. The overall mean score for KMS support on the oil palm plantations’ primary activities was 2.76, indicating that the oil palm plantations were not effectively using KMS to improve the primary activities along the supply chain. The overall result shows that 62.0% of the respondents agreed that the application of KMS in the primary activities, both sourcing of raw material and production, has improved performance. However, still a substantial number of them, about 29.0%, disagreed. Table 3
KMS support on primary activities
Activities 1
The use of KM has enabled the company to reduce the cost of transportation of raw materials from the suppliers 2 The use of KM has speed up the delivery of raw materials by the suppliers 3 The use of KM has enabled the company to store and retrieve the supplies effectively and efficiently 4 The use of KM has enabled the company to manage inventory better 5 The use of KM has enabled the company to differentiate the products from those of its competitors better 6 The use of KM has enabled the company to deliver the products to customers faster 7 The use of KM has enabled the company to provide better support service to customers 8 The use of KM has enabled the company to monitor activities carried out by it competitors better 9 The use of KM has enabled the company to upgrade the quality of its products or services Overall mean score Average response percentage (n = 80)
Number of responses SDA DA A SA 5 29 43 3
Mean score 2.55
4
23
50
3
2.65
2
20
54
4
2.75
1
8
58
13
3.04
4
24
48
4
2.65
4
21
46
9
2.75
3
15
54
8
2.84
4
22
44
10
2.75
2
18
46
14
2.90
4.0
25.0
2.76 62.0 9.0
Note: SDA: strongly disagree (score = 1); DA: disagree (score = 2); A: agree (score = 3); SA: strongly agree (score = 4).
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5.4 Application of KMS in oil palm plantations’ support activities In the oil palm plantations, KM initiatives have also been applied to various activities supporting the two main primary activities. Table 4 reveals that most of the respondents carried out better analysis from the data captured by using IT (mean score of 3.01). As indicated by Beierlein and Miller (2000), IT gave managers the ability to collect, measure and analyse all data in the systems in a timely and cost-effective manner. The results indicated that with the use of KMS, information obtained from various departments or units could help management to make better decision and help managers and support staffs to communicate with one another (mean score of 2.99). This would allow the oil palm plantations to have better means of disseminating information (mean score of 2.98). The result also revealed that KMS has promoted internal communication in the oil palm plantations (mean score of 2.91). A good communication within the oil palm plantations allowed employees to exchange ideas extensively. The overall mean score was 2.83. This suggests the application of KMS has supported the managers to manage their support activities. The results in Table 4 show an overwhelming percentage (83.0%) of the respondents agreed that the application of KMS has been helpful for them to work more efficiently and effectively in supporting the primary activities of the oil palm plantations. Table 4
Use of KMS in oil palm plantations’ support activities
Activities
Number of responses SDA DA A SA 2 4 40 34
Mean score 2.70
1
With the IT infrastructures available in the company, the company is able to work with headquarters and other parties better than ever before.
2
Different functions within the company are well linked electronically
3
18
48
11
2.74
3
Technology greatly facilitates communications internally
2
11
53
14
2.91
4
Technology greatly facilitates communications externally
2
15
53
10
2.69
5
The use of KM has enabled the company to improve communication with all the employees
2
19
49
10
2.64
6
The use of KM has enabled the various departments/units to obtain information for better management decision making
1
7
56
16
2.99
7
The use of KM has enabled the support staffs, executives and managers to do better analysis from the data captured by the KMS
1
8
50
21
3.01
1
11
52
16
2.98
8
The use of KM has enabled the support staffs, executives and managers to disseminate and share information with the relevant parties faster Overall mean score Average response percentage (n = 80)
2.83 2.0 15.0
63.0 20.0
Note: SDA: strongly disagree (score = 1); DA: disagree (score = 2); A: agree (score = 3); SA: strongly agree (score = 4).
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5.5 The effects of KMS in primary activities on performance 5.5.1 Sourcing of raw material activities The primary activities of the oil palm plantations comprised mainly sourcing of raw materials activities (Y1) and production activities (Y2). These were treated as dependent variables in the regression analyses. Performances of the major primary activities were expected to depend on several independent variables. These include application of KMS for primary activities (A), number of field workers (SF), number of administrative workers (SA), qualification of the respondents (Q) and location of the oil palm plantations (LEC, LWC). Tables 5 and 6 show results of the regression analyses. The dependent variable in Table 5 was performance due to sourcing of raw materials activities. Value of the R2 was 0.252, which means that the model explained 25.2% of the variances in the performance of sourcing of raw materials activities. Among the independent variables, only one was found to be statistically significant. The result clearly indicated that the application of KM in the sourcing of raw materials activities significantly improved the plantation performance. The other independent variables, though important in carrying out the activities, were not statistically significant in enhancing performance. The dependent variable in Table 6 was performance improvement resulting from production activities (Y2). The value for R2 was 0.250, which means that 25.2% of the variations in improvement of performance due to production activities have been considered in the regression estimation. The R2 was relatively low due to the following reasons. Firstly, there were many factors which directly affected performance such as land fertility, labour productivity, capital expenditure and management. Secondly, cross sectional or survey data generally produce a relatively low R2. In this study, we specifically focused on the effect of KMS and other human factors on performance of the oil palm plantations. From Table 6, only one independent variable was found to be statistically significant. The result thus confirmed that the application of KM in production activities has had a significant effect in enhancing performance of the oil palm plantations. The other independent variables, though important in carrying out the various production activities, were not statistically significant in enhancing performance. Table 5
Factors enhancing performance of sourcing of raw materials activities
Variable Constant Application of KMS (A) No. of field workers (SF) No. of administrative workers (SA) Qualification of the respondents (Q) Located in the east coast (LEC) Located in the west coast (LWC) R R2 Adjusted R2 SE of the estimate Note: Dependent variable: Y1.
SE T-statistic Coefficient (E) 18.046 9.075 1.989 13.623 2.880 4.731 0.003 0.016 0.239 0.150 0.172 0.138 0.358 1.499 0.920 0.542 1.974 0.275 1.087 2.247 0.484 0.502 Mean of dependent var. 0.252 F-statistic 0.191 Significant of F-statistics 6.96625
Significant 0.050 0.000 0.812 0.864 0.361 0.784 0.630 48.529 4.102 0.001
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Table 6
Factors enhancing performance of production activities Coefficient (E)
Variable
SE
T-statistic
Significant
17.385
2.179
7.977
0.000
Application of KMS (A)
3.255
0.688
4.731
0.000
No of field workers (SF)
0.001
0.005
0.223
0.824
Constant
No of administrative workers (SA)
0.005
0.048
0.099
0.921
Qualification of respondent (Q)
0.274
0.479
0.572
0.569
Located in the east coast (LEC)
0.431
0.630
0.684
0.496
Located in the west coast (LWC)
0.133
0.720
0.184
0.854
R
0.500
Mean of dependent var.
4.970
R2
0.250
F-statistic
4.050
0.188
Significant of F-statistics
0.001
Adjusted R
2
SE of the estimate
2.22929
Note: Dependent Variable: Y2.
Results of both regression analyses revealed that the oil palm plantations were focusing on activities and strategies to improve the overall performance of their activities. Most of the respondents agreed that the application of KM initiatives have indeed contributed significantly to this cause. By building value-added initiatives around the primary activities, the oil palm plantations have efficiently push products and services to market and offer more value to their customers. Thus, adding value in supply chain activities using KMS tends to establish a close relationship that makes it easier for the supply chain players to work together and arrive at a common goal of meeting the needs of the customers.
6
Conclusion and recommendations
SCM has become a successful strategy to link effectively all trading partners and ensure cost-effective and timely movement of materials from raw material suppliers to final customers of the finished products. To remain competitive, companies are constantly faced with challenges to reduce time to market, improve product quality and slash production costs and lead times. The introduction of information and communication technologies and the availability of internet technologies in the market have helped companies to achieve greater efficiency of their supply chain activities and remain competitive in the industry where they operate. Using advanced internet-based KMS offers a controlled knowledge sharing environment, where business data and processes can be used effectively which is important for competing in a challenging business environment. Results of this study clearly supported the notion that the application of KMS with IT as the enabler has significant and positive impacts on increasing the performance of organisations. In the MPOI, KMS with a strong IT support has played a significant role in supporting supply chain activities. The study revealed that most of the oil palm managers agreed that the KMS have, to some degree, helped the oil palm plantations increased their performance. However, the overall mean score, ranging from 2.76 to 2.94 out of 4.0, was
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relatively low. This shows that current activities and strategies undertaken by the plantations have not completely achieved the potential improved performance they hoped for. One reason is that the oil palm plantations have limited access to IT facilities and infrastructure, which tend to limit the application of KM initiatives. Based on the findings, the oil palm plantations could further improve performance of their supply chain activities by applying KM practices more vigorously using the available IT infrastructure. Increasing the skills of managers and staffs in effective KM application is important and this can be done by conducting more training sessions and ensuring that they use it as part of their routine work process. The existing IT infrastructure and accessibility to internet facilities should be upgraded so that KMS can be applied more effectively to improve performance at all stages of the supply chain of the oil palm plantations. The findings are also useful to other researchers, IT companies and policy makers to design a better IT infrastructure capabilities and policies. Findings of the current study relied heavily on the returned mail questionnaires. The percentage of returned questionnaires was lower than expected. The managers’ responses were also not verified. For future studies, we would suggest the number of responses and usable questionnaires be increased by conducting personal visits and interviews with respondents.
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