POTENTIAL DEVELOPMENT OF AUTOMATION FOR

SMALL AND MEDIUM ENTERPRISES (SMEs) IN INDONESIA

Vania Alodia Nasution
2514 100 134
alodia.vania@gmail.com
INTRODUCTION
Industrialization process in Indonesia has been highly developed since
Soekarno run the government. It can be seen from the number of company
opened which results in the establishment of industrial estates across the
country, starting from Harmoni Nusantara Development in Aceh to Surabaya
Industrial Estate Rungkut. Aside from industrial estates which consist of big
enterprises that have sprung up lately, micro to medium enterprises are also
opened. The type of enterprises that is going to be explained more is small and
medium enterprises (SMEs).
According to Perkumpulan untuk Peningkatan Usaha Kecil (PUPUK), Small
and Medium Enterprises (SMEs) is a term that refers to small-scale enterprises
which have a maximum net worth of about Rp200.000.000, not including land
and buildings. While according to Keppres RI no. 99 tahun 1998, SMEs are smallscale economic activities of the people in which the type of business field is
heterogeneous and need to be protected by the government to prevent unfair
competition. Thus it can be concluded that SME is a small-scale type of business
which have a maximum net worth of Rp200.000.000 and need to be protected by
government because the continues growth of industrialization increases
competition between each company.
Previously, small and medium enterprises did not experience any
significant progress in terms of both quantity and of quality, because at that time
there were no serious attention from the government, attention is directed as a
formality only. But since the monetary crisis in 1997 or 1998, it turns out those
enterprises have a relatively good resilience compared to large businesses. SMEs
in Indonesia can survive the economic crisis caused by four reasons: the majority
of SMEs produce consumer goods, the majority of SMEs rely more on nonbanking financing in the funding aspect of the business, in general SMEs conduct
rigorous product specialization in producing certain goods or services, and the
establishment of new SMEs as a result of the many layoffs in the formal sector.
Ever since that year, the governments have started really paying attention
to the development of SMEs in terms of both quantity and quality. The attention
that has been given made a huge difference. Today, SMEs have begun finding its
golden period. This business sector even dominated the economy in Indonesia;
estimated to be approximately 57.9 million small-medium enterprises in this
country (Kementrian Koperasi dan Usaha Kecil dan Menengah Republik Indonesia,
2013). For the ASEAN level, as much as 96 percent of companies engaged in the
SME sector with a contribution to GDP by 30 to 57 percent. Percentage of GDP
from SMEs in Indonesia can be categorized as high compared to the SMEs in
ASEAN countries. It has achieved an encouraging result.
It is also to be around 99% of all companies in Indonesia are small and
medium enterprises. Even only with the small and medium enterprises, they are
Vania Alodia Nasution | 1 | Industrial Automation

able to create jobs for the citizens of Indonesia. According to a survey from The
Asia Foundation in 2009, the average number of employees in this business
sector reached 27.6 people. Despite the fact that around 70% of SMEs employ
less than 20 people, while the remaining 5% have more than 400 employees. In
addition about 23 companies in this sector have a number of employees over
1000 people, and there's only one company that has approximately 9000
employees.
Based on the data above, it can be concluded that SMEs in Indonesia has
an important role as a pillar of the economy. The main driver of the economy in
Indonesia during this time is basically the SME sector. Because of that, there are
main functions of SMEs in moving Indonesian economy: the SME sector as a
provider of jobs for the millions of people who are not accommodated in the
formal sector, it has contributed to the formation of Gross Domestic Product
(GDP), it acts as a source of foreign exchange through the export of various types
of products produced by this sector.
CONTENT
It is known that the GDP of Indonesia is supported by the development of
the industries in Indonesia. To be able to compete with other countries, Indonesia
should continue to improve its productivity by using more advanced industrial
technology. In this case, the role of instrumentation and automation technology is
needed. Automation is the technology concerned with the application of complex
mechanical, electronics, and computer based systems in the operation and
control of production (Sandom and Harvey, 2004). Automation in its full sense, is
achieved through the use of a variety of devices, sensors, actuators, techniques,
and equipment that are capable of observing the manufacturing process, making
decisions concerning the changes that need to be made in the operation, and
controlling all aspects of it (Gupta and Arora, 2013). To make it simpler,
automation is a process occurring in industry where the operations are converted
from manual to be automated. It basically changes the human thinking with
computers and machines, this is one of the reasons the term automation
always refers to industrial robotics.
What we want to achieve is the industries, from small level such as smallmedium enterprises to large enterprises, which are already utilizing automation.
But in the reality, there are still many industries that use manual system or even
conventional system (old machines). This conventional system is actually
detrimental to the company itself because it not only requires a long production
process (low efficiency) but also in terms of safety, is clearly harmful.
According to the Sales Director of Endress + Hauser Indonesia, the
industry in Indonesia is growing so well. To be able to fulfill the needs of the
market, every industry has to improve their effectiveness by implementing an
efficient system. The company then saw a good opportunity of the industrial
development in Indonesia to compete with the global because there are
approximately 57.9 million small-medium enterprises in this country, as stated
before in the previous paragraph. This number of small-medium enterprises
shows that automation has a really good potential to be implemented in
Indonesia, moreover, most SMEs in Indonesia is still manufacturing their products
in an old-fashioned way. These SMEs alone has contributed around 58.92 percent
GDP of Indonesia. If the productivity can be increased by using automation in
Vania Alodia Nasution | 2 | Industrial Automation

these SMEs, it is very possible that the GDP will increases too, increasing this
countrys standard of living. Ever since Endress + Hauser entered Indonesia in
1990, it has provided a variety of services and solutions in the automation of
industrial processes in various types of industries varying from chemical and
petrochemical to food and beverages. Endress + Hauser is just one of those
services and automation solutions company in Indonesia.
However, this high number of SMEs has contributed in labor absorption
around 97.30 percent. Suppose all of SMEs in Indonesia has implemented semiautomated operations in their manufacturing process, these people will lose their
job which then resulting in the increasing number of unemployment. But, this
short-term unemployment is not necessarily the disadvantage of automation, it
actually will force them to gain and developed new skills in order to get more
appropriate jobs. For example, in India roads were used to be tarred manually by
more than 10 people working for almost a week and it ended up with only small
stretches of road. Now the process has been automated. The impact is really
incredible. The roads were built in only few days, and the costs are lesser
because less tax money wasted. People around can continue their daily activities
without being disturbed by the unfinished road. Moreover, the new and finished
road can make the mobilization more optimal (less time on roads). On the other
hand, what about the people that lost their jobs? Some of them learned new
skills, such as operating the road rollers, how to supervise and manage the team,
many of them also moved on to other jobs. However, in Indonesia we know that
the level of education is still relatively low and there are still a lot of less
educated people. Suppose that there are lots of unemployment because of the
implementation of automation, then it will take a long time for those people to
learn new skills and compete with the more educated people, thus
unemployment can still occur in a long period of time. Another disadvantage
would be high initial investment costs to buy automated or semi-automated
machine. The considerations of SMEs cash flow may make the automation in
Indonesia difficult, even if the rate of return is high. Thus they tend to choose the
conventional way of manufacturing.
Based on those problems, there are several ways to make the industrial
automation potentially developed in Indonesia. Improving the quality and
competences of the labor, such as giving education and training carried out by
the government or by SME itself. By doing this, it will be easier for the society to
get a decent job and learned new skills. For the high initial costs, government
should provide enough capital and access to sources and financial institution.
Another way is by providing low costs machines for SMEs. The governor can
cooperate with universities in Indonesia to make some technology innovations.
The technology that can answer the problems above called intermediate
technology. It is generally recognized as encompassing technological choice and
application that is small-scale, decentralized, labor-intensive, energy-efficient,
environmentally sound, and locally controlled (Hazeltine and Bull, 1999). This
term also used in developed country to describe the use of technology and
engineering that result in less negative impacts on the environment and society,
i.e., technology should be both environmentally sustainable and socially
appropriate (Huesemann, 2011). Based on these two statements, intermediate
technology is basically a technology that is commonly used by small-scale
industries for producing mass production products, the technology itself is more
Vania Alodia Nasution | 3 | Industrial Automation

effective than conventional system but still less expensive and environmentally
friendly.

Figure 1 Manual Soy Sauce Filling Process by Labor in Cap Jeruk Pecel Tulen Company
(Source: bisnis.tempo.co, 2012)

An example of intermediate technology in Indonesia can be implemented

in the process of producing soy sauce. Soy sauce has become a common product
in Indonesian food industry. it can be seen that every restaurant in Indonesia uses
soy sauce as one of their ingredients, making the demand really high. Because
Indonesia used to be an agricultural country, the main occupation of its
population is famers. This has influenced the production of food, such as
soybeans, become abundant. It can be seen by the amount of soybean
production reached 780.163 tons in 2013 (Badan Pusat Statistik, 2013). These
soybeans will be processed to produce three types of products, tempeh, soy
sauce and tofu. The production process of soy sauce itself should include the use
of intermediate technology to accelerate the operation. The intermediate
technology is applied in the packaging part of the soy sauce which is the
automated soy sauce filler. This technology uses the same concept as beverages
filling system. Basically, the liquid is transferred from the tank to the container
(either plastic or glass bottle). Different system and different technologies may
be used in this filling system. These systems are divided into three categories:
filling by level sensing, filling by using volumetric flow meters and filling by
weight. The first category, which is filling by level sensing, is the most traditional
and commonly used type of filling machines. The level of liquid to be filled in the
bottle is determined by the length of the tube that enters the bottle. If the level
of liquid wanted to be changed, the tube must also be changed. The next
category is filling by flow meters. This type of filling machines will automatically
stop filling when the bottle is at the desired volume. A flow meter is fitted in
every filling nozzle to measure the volume. This device is usually called electronic
filling machine. And the last category of filling machine is filling by weight. This
machine will identify the weight of the bottle first and the measures the weight of
the product entering the bottle.
CONCLUSION
The evolution in industry has given an incredible impact to the way of
manufacturing. Companies have started to produce their products in a more
sophisticated way. These automated operations able to produce products in large
quantities and low production costs with good quality, besides that, it also
provides safety for the workers. This automation system has been implemented
Vania Alodia Nasution | 4 | Industrial Automation

in Indonesia, especially in a large company. But it does not rule out the possibility
of applying this system in SMEs. SMEs in Indonesia itself have a really strong
correlation with GDP of Indonesia. The high number of SMEs indicates that
Indonesia has a good potential for the development of industrial automation,
moreover most SMEs usually operates using conventional machines that are
dangerous and less effective. If the automated system can be applied to the
SMEs in Indonesia, then it will have the possibilities that GDP of Indonesia will
increases too, reflecting from the data that SMEs alone has contributed around
58.9 percent of GDP. This might be sound very tempting but there are also some
disadvantages because of automation, such as high investment and
unemployment.
To simply solve this problem, the use of technology that is cheaper and can
accelerate the process is needed. This technology is called intermediate
technology. It can simply be used in any types of SMEs in Indonesia. Intermediate
technology can help the SMEs for example in soy sauce factory for filling the
sauce into the bottle. The concept of this sauce filler is the same as beverages
filling machine. It uses sensors which can be divided into three types according to
the company desires. With the use of this technology, the company can improve
its productivity as well as fulfilling the market needs.
.............................................................................
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