The impact of supply chain integration on operational performance with supply chain capability

Abstract

Force majeure in Indonesia, especially during pandemics, causes a drastic fluctuation in the market and makes many medicine products related to the pandemic become scarce and stocked out. Major pharmaceutical companies manufactured in Indonesia need solutions for the significant change in demand level and find solutions to balance the supply and demand level. According to the existing literature, by doing internal integration, supplier integration, and customer integration, and supported with supply chain capability, companies can find solutions regarding market fluctuation and increase their competitive performance. This research uses 102 listed Indonesians chosen by the purposive sampling method. Research analysis was conducted using structural equation modeling and SmartPLS 3 software. This research finds that, in general, supply chain capability influences competitive performance. Meanwhile, internal integration by sharing activity information in departments and coordinating integrated planning can positively and significantly affect supplier integration and customer integration. Sharing inventory and information with suppliers and coordinating with suppliers about materials availability significantly influence supply chain capability. Internal integration also has a significant influence on supply chain capability. Customer integration with information sharing with customers and the company involving the customers when demands influence supply chain capability. Supply chain integration (internal, supplier, and customer) does not directly impact operational performance, so supply chain capability is a perfect intervening variable. Supply chain capability can help internal and external integration better affect competitive performance. This research also makes practical contributions to give managers input about how internal integration, supplier and customer integration, and supply chain capability can affect companies' competitive performance.