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ISSN : 1598-7248 (Print)
ISSN : 2234-6473 (Online)
Industrial Engineering & Management Systems Vol.18 No.3 pp.407-416
DOI : https://doi.org/10.7232/iems.2019.18.3.407

Effect of Service Innovation and Market Intelligence on Supply Chain Performance in Indonesian Fishing Industry

Kittisak Jermsittiparsert*, Jutamat Sutduean, Thanaporn Sriyakul
Department for Management of Science and Technology Development, Ton Duc Thang University, Ho Chi Minh City, Vietnam Faculty of Social Sciences and Humanities, Ton Duc Thang University, Ho Chi Minh City, Vietnam
College of Innovative Business and Accountancy, Dhurakij Pundit University, Bangkok, Thailand
Faculty of Business Administration, Mahanakorn University of Technology, Bangkok, Thailand
Corresponding Author, E-mail: kitisak.jermsittiparsert@tdtu.edu.vn
May 29, 2019 June 3, 2019

ABSTRACT


Supply chain improvement often results in better economic value; therefore, important insights to improve the supply chain performance (SCP) in fishing industry of Indonesia are investigated. Fishing industry of Indonesia has important role to create employment opportunities and has important role in economic development. However, supply chain issues in this industry are more threatening towards the performance of this industry. Low performance of this industry has adverse consequences on economic development. The current study attempted to address the problem through service innovation and market intelligence. Hence, objective of this study is to investigate the effect of service innovation on SCP. The role of market intelligence is also examined. After collecting the data from managerial employees of fishing companies, it was analysed through structural equation modelling which revealed that service innovation and market intelligence has crucial role to boost SCP. Better service quality and market intelligence mechanism improves the performance of fishery companies. Thus, these companies should focus on service innovation and market intelligence.



초록


    1. INTRODUCTION

    Production quantity of Indonesia in fishing industry has been increased in 2011-2015. Majorly, this quantity increased in capture fisheries and aquaculture. In the year of 2015, the production has increased and reached at 22.31 million metric tons (MT) shown in Figure 1, valued at approximately US$ 18.10 billion in 2015. Moreover, in case of capture fisheries (inland and marine), the trend of production was steady in 2011-2015 as shown in Figure 2, after that there was a sharp growth in the production from aquaculture during the same period. Therefore, the Indonesian fishing industry is growing rapidly. Production trend is shown in Figure 1 and Figure 2.

    Fishing industry of Indonesia has important role in nation’s development. As it provides various employment opportunities for the public (Crowley et al., 1993;Geheb and Binns, 1997;Moss and Terkla, 1985;Petersen, 2007). By contributing in employment opportunities, it has important role in gross-domestic product (GDP) (Nastav et al., 2013;Villasante et al., 2013;Zeller et al., 2006). Therefore, it has significant importance for the Indonesian economic growth. Because it also has significant contribution per year in economic development.

    However, the performance of this industry is suf-fered due to supply chain issues. As the supply chain is the major part of fishing industry (Jensen et al., 2009;Peterson and Fronc, 2007). Low performance of supply chain decreases the overall performance of fishing industry. Therefore, it is needed to introduce various strategies to increase the supply chain in fishing industry, particularly in Indonesian fishing industry.

    Therefore, this study providing important insights to improve the supply chain performance (SCP) in fishing industry of Indonesia. According to this research study, service innovation has critical role in supply chain process, as it is also proved by the literature (Grawe et al., 2009;Paton and McLaughlin, 2008). Therefore, various service innovation determinants such as customer services, service delivery method, service concept and information technology (IT) has important role (Alminnourliza, 2016). Therefore, service innovation determinants can improve the SCP in fishing industry.

    Additionally, market intelligence also has key role to increase the service innovation and SCP. Market intelligence has important contribution in decision making process (Amaravadi et al., 1995;Hill and Scott, 2004;Popovič et al., 2012). It increases the percentage of successful decisions. Therefore, service innovation along with market intelligence has crucial role in SCP. Thus, in the current study, market intelligence is considered as moderating variable.

    Various studies are carried out in the field of fishing industry (Hameri and Pálsson, 2003;Isaacs, 2013;Islam and Habib, 2013), however, none of the researcher formally documented the role of service innovation and market intelligence in this industry. Thus, the objective of this study is to investigate the effect of service innovation in SCP. Secondly, this study investigated the moderating role of market intelligence. The relationship between service innovation, market intelligence and SCP are shown in Figure 3.

    2. LITERATURE REVIEW

    Services have been ignored by innovation research-ers and largely ignored by innovation as well as technology policymakers (Preissl, 2000). In spite of diversity, the treatment of services in examinations of financial and in respect to change has been examined as one dimension. The work on service innovation is less focused. Given the unarguable development in the position of service sectors, growing numbers of researchers as well as policymakers have looked at service related practices (Drejer, 2004).

    Indonesian fishing industry is also overlooked by the researchers on service innovation. It is most crucial part of every industry (Den Hertog and Bilderbeek, 1999;Edvardsson et al., 2000;Ordanini and Parasuraman, 2011). Indonesian fishery is divided into four major parts. Individuals holding 64.52% of this industry following by business group with 24.5% share. Moreover, private companies are holding 9.82% share and foreign investment is 0.78% which is quite low. It is shown in Figure 4.

    From previous 5 years, this industry is growing with constant growth. Increases in growth increases the eco-nomic contribution. However, service innovation issues decrease the overall performance. Service innovation has basic purpose to advance existing services, produce new value propositions or create new service systems. Thus, service innovation is another name to improve the existing services (Ali and Haseeb, 2019;Haseeb et al., 2018;Haseeb et al., 2019;Suryanto et al., 2018).

    Various researchers have different definition of ser-vice innovation, but a well-known definition which fo-cused the interactive component as well as grounded on multidimensional framework is from (Den Hertog et al., 2003). According to this definition “it is a new or considerably changed service concept, client interaction channel, service delivery system or technological concept that Various researchers have different definition of ser-vice innovation, but a well-known definition which fo-cused the interactive component as well as grounded on multidimensional framework is from (Den Hertog et al., 2003). According to this definition “it is a new or considerably changed service concept, client interaction channel, service delivery system or technological concept that individually, but most likely in combination, leads to one or more (re)new(ed) service functions that are new to the firm and do change the services or goods offered on the market and do require structurally new technological, human or organizational capabilities of the service organization.”

    Innovation is infrequently being identified with ser-vices earlier to 1980s. From that point, worldwide re-search examinations have concentrated on administration enterprises as critical areas of innovation (Preston et al., 2009). Moreover, innovation is considered as RandD exercises for administration of businesses (YongQiang et al., 2010). It provides value-added insight to the administration and improve the performance of the administration (Cainelli et al., 2004). It has various determinants such as customer service interface, service delivery system, service technology and service concept.

    The interfaces among service renders and customer are the point of focus of a reliable deal of service innovations. Within the area of service, customers are major part of the production. The method they cooperate can be a foundation of invention. Integration with customers, supplier and employees has relationship with SCP (MacDuffie and Helper, 1997;Petersen et al., 2005). It also increases the satisfaction level of employees (Shah et al., 2018) which has impact on SCP. It is evident that service quality increases the logistic performance (Hameed et al., 2018a).

    The benefits of service innovation are not clear. It is not clear on which results of the innovations that the organization should accomplish (Victorino et al., 2005). For example, a few organizations have executed the service innovation just to maintain the share in market. This recommends that a few innovations may simply raise the expense of working together without a noteworthy monetary advantage, other than to safeguard current business and without giving a competitive advantage (Dan Reid and Sandler, 1992).

    A large portion of the organizations viewed innova-tions as the intend to upgrade service increases the monetary profits (Alminnourliza, 2016). Thus, it is important to investigate further on this issue so as to comprehend the effect of service innovation on the service contributions especially on the service responsiveness which are desired by the clients as well as will profit financially to the organization.

    Moreover, service delivery system also has im-portant role in business (Armistead, 1990;Joseph et al., 1999;Rahimnia and Moghadasian, 2010). It increases the business performance. It also has significant relationship with supply chain (Kadlubek, 2007;Nadeem et al., 2018;Nazali Mohd Noor and Pitt, 2009;Pule, 2014). Increase in service delivery system increases the customer satisfaction level. As it is mentioned by (Hameed et al., 2018b) that communication with customers bring new ideas which facilitates innovation. Therefore, good service delivery system can be maintained with the help of com-municating with customers.

    Service innovation framework is the highlighting on the current authoritative structure, learning systems which should be adjusted to the necessities of the improvement for new services. Hence, business performance can be maintained by coordination’s with service supplier. Besides, coordination service should develop a learning organization, through improving the learning limit of big business and staffs, empowering innovations, and enhancing the limit of staff. Coordination with customers, supplier and employees always helpful in business performance (Langerak, 2001;Lei-lei and Xue-guang, 2007;Piercy, 2009).

    Furthermore, IT is much helpful in operations of supply chain. It increases the efficiency of supply chain operations which increases the performance of supply chain. Various studies found important relationship with supply chain and IT (Bagchi and Skjoett-Larsen, 2003;Devaraj et al., 2007;Prajogo and Olhager, 2012;Subramani, 2004). Therefore, IT increases the SCP by increasing the accuracy in operations. Figure 5 shows that how IT facilitates supply chain operations.

    Service concept innovation comprises the inno-vation of supply chain operation and management (Alminnourliza, 2016). The key parts of operation in supply chain and management innovation are com-panies net innovation, relationship and information. The goal of a company is to achieve net innovation to attain value of the customer through supply chain, communication and integrate the customers as well as concerned enterprise. These elements are linked with service concept innovation which has significant relationship with SCP. As stated by various studies, service concept innovation has relationship with business (Alminnourliza, 2016). Therefore, from the above discussion, below hypotheses are proposed;

    • H1: Customer service interface has relationship with SCP.

    • H2: Service delivery system has relationship with SCP.

    • H3: IT has relationship with SCP

    • H4: Service concept has relationship with SCP

    This investigation utilized market intelligence as a determinant for service innovation. The term ‘market’ typically identified with the area of marketing (Jaworski and Kohli, 1993) characterize market intelligence as the collection and appraisal of both clients’ needs and the powers that impact the improvement of requirements. Market intelligence in this investigation tended to the external elements which identified with the information of clients that turn into the determinants of service innovation.

    Kotler (1993) claims that innovation appears not only form inside the companies of the organization, however, also from outside the boundaries of the company which denotes to customers. Hence, implementation of customer's input in various services development is vital (Magnusson et al., 2003) since they are important for innovation related to services (Thakur and Hale, 2013). Additionally, the role of different customers changes with the course of the inno-vation procedure (Dörner et al., 2011).

    • H5: Market intelligence moderates the relationship between customer service interface and SCP.

    • H6: Market intelligence moderates the relationship between service delivery system and SCP.

    • H7: Market intelligence moderates the relationship between IT and SCP.

    • H8: Market intelligence moderates the relationship between service concept and SCP.

    3. RESEARCH METHOD

    3.1 Data Collection Procedure

    Data collection procedure is important part of study. The error in data collection can change the response rate which ultimately effect on end results of the study. Thus, it should be selected carefully. In this study data is collected from the managerial staff of fishing companies. Self-visit was preferred to these companies for data collection. First of all, the objective of study was explained to the respondents and them questionnaires were distributed among them.

    3.2 Sample Size

    In this study, the sample size is selected based on previous studies. Most of the previous studies used 300 sample size. Therefore, 300 sample size is appropriate. However, this study utilized 500 sample size. Thus, 500 survey questionnaires were distributed for data collection.

    3.3 Sampling Technique

    Selection of sampling technique is also important in research. As the wrong sampling technique may influence the results of the study. In this study, area cluster sampling was preferred to collect the data from managerial employees of fishing companies in Indonesia. It is used because the sampling frame was not available.

    3.4 Questionnaire

    In this study, a Likert scale was used. This scale is suitable to check the opinion and views of employees. As this study examined the effect of service innovation on SCP, therefore, Likert scale is suitable to examine the opinion and views of employees.

    4. ANALYSIS AND RESULTS

    Measurement model shows that all the factor loadings is more than minimum level to qualify for next analysis. It is recommended that factor loading must be above 0.7 (Hair et al., 2017). Factor loadings below 0.7 is not acceptable. To qualify for further analysis, composite reliability (Crowley et al., 1993) and AVE was assessed. It is found that CR is also above 0.7 and AVE is also above 0.5. It is given in Figure 6 and Table 1. The square root of AVE for discriminant validity is also given in Table 2.

    Moreover, in this study t-value and p-value exam-ined to test the relationship between variables. It is found that in case of IT and SCP, the t-value is more than 1.96 which is 3.922 which supported the hypothesis. In case of service concept, t-value is 3.226 which is above 1.96 and supported the hypothesis. However, the other direct hypotheses are not supported by the results. As the relationship between customer service interface and SCP the t-value is 0.14 which is not supported. The relationship between service delivery system and SCP is also not supported with t-value 1.582. Thus, H3 and H4 are accepted but H1 and H2 are not accepted by the study. The Hypotheses testing results have shown in Figure 7 and Table 3. Table 4

    In case of moderation effect, it is significant between IT and SCP as t-value is 3.099. It is also significant in case of service concept and SCP, it is significant with t-value 2.286. However, in other two cases, the moderation effect is insignificant. Thus, H7 and H8 are supported but H5 and H6 are not supported. Moreover, the r-square value is 0.851 which is shown in Figure 6. It is substantial variance explained by the model (Chin, 1998).

    5. CONCLUSION

    It is investigated that service innovation has role in SCP. Increase in service innovation increases the SCP in Indonesian fishing companies. Various dimensions of service innovation have role in SCP. However, few di-mensions have no role in SCP

    IT has major role to increase the performance of supply chain. It has direct relationship with SCP. If the companies introduce better technology, it will promote service innovation which automatically increase the SCP. Moreover, service concept also has significant positive relationship with SCP. Therefore, companies should focus on service concept and IT to promote SCP. However, customer service interface has no role to increase or decrease SCP. Moreover, service delivery system also does not have any role in SCP. Therefore, fishing companies should pay less attention on service delivery system and customer service interface. Thus, service innovation has reasonable contribution to SCP. Any change in service innovation will directly affect SCP. Future research is required to include other dimensions of service innovation.

    Figure

    IEMS-18-3-407_F1.gif

    Total production of fisheries in Indonesia (2011-2015).

    IEMS-18-3-407_F2.gif

    Capture fisheries production of Indonesia (2011-2015).

    IEMS-18-3-407_F3.gif

    Theoretical framework of the study showing the relationship between service innovation, market intelligence and SCP.

    IEMS-18-3-407_F4.gif

    Ratio of ownership of fishing licenses in marine capture fisheries in Indonesia

    IEMS-18-3-407_F5.gif

    IT facilitates supply chain operations.

    IEMS-18-3-407_F6.gif

    Factor loadings.

    IEMS-18-3-407_F7.gif

    The result of hypotheses testing.

    Table

    Reliability and convergent validity

    AVE square root for discriminant validity

    The statistics of hypotheses testing

    Moderation effect

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