{"id":94179,"date":"2021-04-02T22:00:09","date_gmt":"2021-04-02T15:00:09","guid":{"rendered":"https:\/\/bahtera.jp\/seminar_20210414\/"},"modified":"2025-03-20T09:21:18","modified_gmt":"2025-03-20T02:21:18","slug":"seminar_20210414","status":"publish","type":"post","link":"https:\/\/bahtera.jp\/en\/seminar_20210414\/","title":{"rendered":"Accurate Cost Management and More Multifaceted Profit Management Sought in Indonesia"},"content":{"rendered":"

Amid Indonesia\u2019s COVID-19 pandemic, trends in systemization (DX) consultations from Japanese manufacturing companies highlight two key points: the need for accurate cost management and more multifaceted profit management, and an awareness of production management that prevents delivery delays.
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Production Scheduler in Indonesia<\/p>\r\n\t\t\t\t\t\t\t\r\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t

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In Indonesia’s Japanese manufacturing industry, the adoption of production management systems has been increasing. However, when it comes to one of the key challenges in production management\u2014creating feasible production plans that take machine and equipment loads into account\u2014manual work using Excel remains the standard practice. As a result, the demand for production schedulers is expected to grow in the future.<\/p>\n\t\t\t\t\t\t\t\t<\/div>\r\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t

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Impact of the COVID-19 Pandemic on Manufacturing in Indonesia<\/h2>\n

\"ImpactIn March 2020, Indonesia confirmed its first COVID-19 case. By April, large-scale social restrictions (PSBB) limited human movement, reducing consumption. May saw PSBB continue into Ramadan, with 32% of Japanese manufacturers facing over 50% production cuts due to order holds, reductions, or cancellations from domestic and international markets. The impact on production activities from March to May was truly significant.
\nIndonesia has faced economic downturns before\u20141998\u2019s currency crisis, social unrest from frequent bombings since 2002, and the 2008 Lehman Shock\u2014each time damaging the real economy of production, distribution, and consumption. My experience suggests private-sector IT investment lags real economic recovery by six months.
\nIn June, Indonesia entered a transitional PSBB phase (PSBB Masa Transisi), easing restrictions gradually and marking a shift to a \u201cNew Normal.\u201d By late June to July, with expatriates rushing back to Indonesia, I braced myself for manufacturing IT investment to pick up no earlier than December.
\nFrom late October, inquiries and leads slowly returned, but turning them into projects with down payment (DP) invoices took 1-2 months, and payment another month. The struggles of service businesses targeting local companies are beyond imagination.<\/p>\n

Impact on Japanese Companies\u2019 Performance and Investment Strategies<\/h2>\n

\"\"According to JETRO\u2019s survey, 37% of Japanese companies in Indonesia saw sales drop over 50% year-on-year in Q2 2020, while 27% experienced a 20%-50% decline. Meanwhile, 55% had cash reserves below three months of sales as of late February 2020. Naturally, this heavily impacts IT investment strategies that don\u2019t generate immediate cash.<\/p>\n

Surprisingly, future investment strategies showed little negative impact. With expectations of local demand and growth potential, and Indonesia\u2019s importance as a profit base, 69% of companies planned to maintain operations, 12% considered expansion, and only 15% contemplated downsizing.
\n\"JapaneseFrom questionnaires at three seminars held during the pandemic, business improvement initiatives included:<\/p>\n

\n
    \n
  • Production rotation scheduling<\/li>\n
  • Production plans adjusted for reduced output and strict stay-at-home policies, bonus compression<\/li>\n
  • Management department efficiency\/slimming, outsourcing<\/li>\n
  • Productivity improvement activities<\/li>\n
  • Review of product master data by category<\/li>\n<\/ul>\n<\/div>\n

    This reflects a heightened awareness of cost management and production planning, evident in inquiries to our company:<\/p>\n

    \n
      \n
    • Actual costs exceeding quoted prices<\/li>\n
    • Need for multifaceted, granular profit management<\/li>\n
    • Product inventory shortages at shipment<\/li>\n
    • Tracking linkage between orders and shipments<\/li>\n
    • Realistic plans ensuring on-time shipment<\/li>\n<\/ul>\n<\/div>\n

      Cost Aggregation in Make-to-Order Factories<\/h2>\n

      \"PurposeOf 1,489 Japanese companies in Indonesia, 871 are manufacturers (November 2019), with 25% in the two- and four-wheeler sectors.
      \nDuring the pandemic, customer awareness in inquiries focused on:<\/p>\n

      \n
        \n
      1. Need for accurate cost management and more multifaceted profit management<\/li>\n
      2. Need for production management preventing delivery delays<\/li>\n<\/ol>\n<\/div>\n

        These two points stood out.
        \nFactory production methods split into make-to-order (MTO), where costs vary per order number, and mass production, where costs are generally uniform.
        \n\"JobMake-to-order is common in SMEs, aiming to improve future quote accuracy by accumulating performance data.
        \nIn one-off MTO factories, detailed blueprints often aren\u2019t available at quoting, and accurate material costs are calculated post-order based on detailed designs from the client. Thus, the volume and systematic accumulation of useful past performance data for budgeting at the quoting stage are critical.
        \nJapanese SMEs in Indonesia doing MTO could once dominate markets with unique, high-skill \u201ctown factory techniques,\u201d allowing rough cost estimates with hefty margins to secure orders.
        \nNow, it\u2019s an era of fierce competition with local firms and companies from China, Taiwan, Singapore, and Korea.
        \nWith all due respect, my candid impression is that despite their technical prowess, companies still clinging to the cost mindset of a few years ago\u2014when merely setting up a factory in Indonesia brought inquiries\u2014are struggling in today\u2019s price-competitive landscape.
        \nI don\u2019t believe DX is always the solution. However, as symbolized by the \u201cFAX issue,\u201d the pandemic exposed Japan\u2019s DX lag, with vested interests and past ties hindering progress\u2014a sentiment strongly felt at the operational level, underpinned by differences in decision-making speed.
        \nIndonesia, free from legacy system constraints or vested interests, saw rapid EC and mobile system adoption. In Japan, generational shifts from Baby Boomers to their successors will surely accelerate reform decisions. We must face harsh realities and move forward.<\/p>\n

        Cost Aggregation in Continuous Mass Production<\/h2>\n

        During the pandemic, many Japanese manufacturers sought system\u5c0e\u5165\u691c\u8a0e for cost management reviews. Compared to a decade ago, Indonesia\u2019s prominence as a manufacturing and sales hub has grown, and with rising labor costs, IT budgets for local subsidiaries seem more readily approved.
        \n\"AccountingIn recent years, core operations of Japanese firms in Indonesia have gradually systemized. Currently, one area least impacted by the DX wave is cost management, especially mass-production process costing. This is because adopting IFRS-approved methods like total average or moving average requires accurate production performance data.
        \n\"TotalProcess costing details can\u2019t be summed up briefly, but the pandemic raised more fundamental questions: \u201cWhy grasp costs accurately?\u201d and \u201cWhat do you want to do with it?\u201d Beyond lofty goals like social responsibility, a company\u2019s purpose is profit pursuit\u2014a condition for survival.
        \nProfit ensures survival\u2014securing cash and deposits. Starting with 100 juta in capital and 25 juta monthly fixed costs, without sales within four months (even in cash transactions), it\u2019s game over. Hence, layoffs (PHK) and salary cuts (Potong Gaji) to avoid cash shortages.
        \nMerely grasping costs accurately doesn\u2019t increase profit by a single rupiah. What matters is how much profit those costs generate. On-balance-sheet, it\u2019s ROI (return on investment), necessitating a shift from cost-center to profit-center thinking.
        \n\"Multi-AxisThis mindset shift means calculating gross profit from manufacturing costs on the P\/L, subtracting SG&A for operating profit, and judging cost validity vertically on the P\/L\u2014a managerial accounting approach. Furthermore, pandemic-era profit improvement demands multi-axis analysis expanding the P\/L\u2019s horizontal scope.<\/p>\n

        Production Management Preventing Delivery Delays<\/h2>\n

        During the pandemic, Japanese manufacturers cited two key improvement challenges: \u201caccurate, multifaceted cost management\u201d and \u201cthe need for production management preventing delivery delays.\u201d In manufacturing, production management covers raw material procurement to product completion, while sales management handles order receipt to shipment.
        \nA common operational pattern in Indonesian manufacturing:<\/p>\n

        \n
          \n
        1. Sales receives customer orders and shipment schedules.<\/li>\n
        2. Production starts per the shipment schedule.<\/li>\n
        3. On shipment day, insufficient product inventory forces the shipping department to ship what\u2019s available, covering shortages the next day.<\/li>\n
        4. Customers communicate directly with the shipping department.<\/li>\n<\/ol>\n<\/div>\n

          This narrows sales\u2019 scope to order management. Ideally, sales should collaborate with production management to create the Master Production Schedule (based on product completion dates), issue shipping instructions, and manage order fulfillment and backlogs.
          \n\"IssuesSales should lead invoice issuance to customers, passing sales slips to accounting for revenue and receivable postings. However, inability to manage order backlogs delays this, waiting for shipping\u2019s completion and updates. The root issue is insufficient product inventory at shipment and failure to produce on schedule.
          \nSince products aren\u2019t always ready at shipment, many factories shift customer contact from sales to shipping staff, disconnecting order, shipment, and production (and procurement) schedules. This causes delivery delays, reducing productivity through recovery production.<\/p>\n

          What DX Means During the Pandemic<\/h2>\n

          \"DXIf systemization aims for labor savings, efficiency, and error prevention, today\u2019s trending DX isn\u2019t just replacing old systems but a business reform enabling [\u201cWith IT, we can do these convenient things\u201d].
          \nTaiwan\u2019s Digital Minister Audrey Tang developed the \u201cMask Map\u201d app for real-time mask inventory checks, curbing shortages, hoarding, and reselling. Rather than cutting-edge tech, this leveraged OSS (open-source software) for swift, flexible government response, earning praise for building an adaptive community and operational framework.
          \nBusiness reform requires operational reform at the ground level. Creating a concept for operational reform via IT to achieve business and profit improvements is, I believe, the profound significance of DX.<\/p>\n","protected":false},"excerpt":{"rendered":"

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