PT INDOFOOD SUKSES MAKMUR Tbk: Digital Transformation for Sustainability

Kevin Ariyanto 3220300367

Zhejiang University

Global Communication Management (GCM)

Technology & Organization

Professor: Dr. Lim, Jia Jia

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Table of Contents

1. Summary .................................................................................................................. 3
2. Introduction.............................................................................................................. 3
3. Current Key Issues .................................................................................................... 5
4. Objectives ................................................................................................................. 7
5. Strategy & Action Plans ............................................................................................ 8
6. Discussion .............................................................................................................. 11
7. Recommendations ................................................................................................... 12
8. Conclusion ............................................................................................................. 13
9. References .............................................................................................................. 14
1. Summary

The integration of digital technologies has the potential to transform organizations,

fostering sustainability and innovation. Indofood's efforts in digital transformation

illustrate how a company can leverage technology to enhance efficiency and promote

sustainability. This report will delve into PT Indofood Sukses Makmur Tbk as it

operates and governs the whole foods industry. It explores how PT Indofood Sukses

Makmur Tbk uses the bundling of technologies and soft elements to the effects of

examining how cultural and structural elements within the organization can accelerate

or decelerate this transformation

2. Introduction

A. Industry Introduction

The food service sector in Indonesia is undergoing a major transition towards a

more streamlined and effective methodology. Introducing the total food solutions

industry, a sector that claims it can change how businesses function in this dynamic

environment. The two key components of a total food solution company's business plan

are effectiveness and convenience. These companies fulfill all a restaurant's needs,

acting as one-stop shops. Fresh produce, processed meals, drinks, and other goods are

all accessible from a provider of comprehensive food solutions. Businesses in Indonesia

that provide food services stand to gain greatly from this—streamlined sourcing results

in significant time and cost savings. Furthermore, companies supplying complete food

solutions and having solid relationships with suppliers can find their costs to be more

reasonable for businesses. The dynamic nature of the food service sector is

demonstrated by the Indonesian total food solutions industry. This sector's potential to
 have a big influence on the operations of cafés, restaurants, and other food-related

businesses might make Indonesia's food service sector more efficient and competitive.

B. Company Introduction

PT Indofood Sukses Makmur Tbk (“Indofood” or ”ISM”) is a

Total Food Solutions company with operations in all stages of food manufacturing,

from the production of raw materials and their processing, to consumer products in the

market. It is renowned as a well-established company and a leading player in many

business categories in which it operates.

a. Value

"With discipline as the basis of our way of life; We conduct our business with

integrity; We treat our stakeholders with respect; and together we unite to strive

for excellence and continuous innovation.”

b. Vision

A Total Food Solutions Company

c. Mission

• To provide sustainable solutions for food needs

• To continuously improve our people, processes, and technologies

• To contribute to the welfare of the society and environment in a sustainable

manner

• To continuously improve stakeholders’ values

In its business operations, Indofood capitalizes on economies of scale and a

resilient business model with four complementary Strategic Business Groups, namely:
 • Consumer Branded Products (CBP)

Supported by the strength of its product brands, CBP Group produces a diverse

range of consumer-branded products including noodles, dairy, snack foods, food

seasonings, nutrition and special foods, and beverages.

• Bogasari

Bogasari Group is primarily a producer of wheat flour as well as pasta, with

business operations supported by its own shipping and packaging units.

• Agribusiness

Agribusiness Group’s principal activities range from research and development,

seed breeding, oil palm cultivation, and milling, to the production and marketing of

branded cooking oils, margarine, and shortening. The Group also cultivates and

processes sugar cane, rubber, and other crops.

• Distribution

With Indonesia's most extensive distribution network, the Distribution Group

distributes most of the consumer products manufactured by Indofood and its

subsidiaries and third parties to the market.

3. Current Key Issues

a. Global Warming and Climate Change Risk

The risks of extreme weather and climate change have risen at an alarming rate.

Global warming has led to unpredictable weather patterns and a higher

 recurrence of natural disasters. These events have a direct impact on the

Company’s facilities and assets and can cause disruptions to production, supply

of raw materials, and delivery of finished products.

b. Uncertainty of Global Economic Condition

Geopolitical conflict could threaten the post-pandemic recovery of global

economies. Disruptions in the main shipping routes could trigger a surge in

energy prices and hamper commodity supplies. These conditions could lead to

higher energy and raw material prices, increased inflation rates, fluctuations in

the IDR-USD exchange rate, and a slowdown in economic growth.

c. Commodity and Raw Material Price Increase Risk

The Company’s costs of production and prices of finished products are subject

to fluctuations in commodities and raw materials prices. Such fluctuations are

influenced by several factors, including the demand and supply of commodities

and raw materials, weather conditions, consumption trends, local regulations,

economic conditions, Rupiah exchange rates, and geopolitical events.

d. Food Safety Risk

As a packaged food and beverages producer serving consumers of all ages, the

Company is exposed to inherent food safety risks for the finished goods that

are produced, distributed, and consumed by consumers. To mitigate such risks,

the Company imposes stringent controls across all stages of manufacturing,

from raw material sourcing and handling to production, storage of finished

products, and product distribution.

e. Competition Risk

The Company operates in a highly competitive food and beverages industry,

where domestic and international companies are constantly vying for market
 shares and business opportunities. Such competition could affect the

Company’s ability to maintain or increase its sales volume, which could

directly affect the Company’s performance.

f. Sustainability Risk

The environmental, social, and economic aspects of the businesses are pivotal

to the long-term, sustainable growth of the Company. Environmental factors

affect the continuous supply of good quality raw materials and natural

resources needed for the Company’s operations, while social and economic

factors influence the productivity and well-being of employees, living

conditions of local communities around operational areas, and consumers who

purchase and consume the products.

g. Cyber Security Risk

As the world becomes increasingly connected, there is a growing need to

incorporate more digital technologies into daily operations. The rise of

digitalization, however, has led to a rampant increase in the number of cyber-

attacks and cyber threats. Being an organization with a significant level of

digitalization in its business processes, the Company has to stay vigilant by

constantly adapting its cyber security measures to safeguard IT systems and

day-to-day operations against any form of disruptions and data breaches by

malicious actors.

4. Objectives

A. Operational Performance, enhance efficiency and productivity through automation

and digital integration.

 B. Sustainable Performance, reduce environmental impact by minimizing waste and

optimizing resource use.

C. Innovation and Entrepreneurship, Foster a culture of creativity and continuous

improvement.

5. Strategy & Action Plans

A. Implementing Bundling of Technologies for the Better

a. Enhanced Efficiency and Productivity

Indofood has implemented various digital technologies to streamline its

operations. For example, the Noodles Division introduced an auto-recording

system using sensors and actuators integrated with a Supervisory Control and

Data Acquisition (SCADA) system. This transition to digital data has allowed

for more accurate and efficient record-keeping, reducing reliance on paper and

enhancing decision-making capabilities.

Similarly, the Corrugated Packaging Division adopted an auto-mixing system

that automates the glue-making process, improving precision and reducing

manual labor. This technological adoption has led to significant improvements

in productivity and operational efficiency.

b. Sustainability and Environmental Impact

Digital technologies contribute to environmental sustainability by reducing

waste and optimizing resource use. Indofood’s adoption of a paperless system

in the production line exemplifies this, as it minimizes paper waste and

promotes more sustainable practices. The paper used to produce their

corrugated packaging are FSC® or Program for the Endorsement of Forest

 Certification ("PEFC") certified. The shift to digital recording also means the

production line is now paperless, significantly reducing reliance on log sheets.

This transition enhances the quality and accuracy of record-keeping, aids in the

analysis of productivity, and facilitates better decision-making.

PT Indofood’s initiatives involve the identification and separation of waste,

allowing the reuse, recycling, or processing of valuable waste to create further

value. Reusable organic food waste is crushed prior redirected to animal feed

producers for reprocessing into animal feed, while recyclable paper and carton

waste in satisfactory conditions are collaboratively recycled with third-party

partners.

c. Digitalization and Data Integration

The integration of an Enterprise Resource Planning (ERP) system, including a

Warehouse Management System, has enhanced Indofood’s logistics and

distribution capabilities. This system facilitates better planning, monitoring, and

optimization of work processes, leading to increased productivity and efficiency.

B. The Role of Soft Elements

a. Organizational Culture

The Company’s culture is guided by the Indofood Core Values that encourage

employee behaviors that are aligned with the Company’s vision and mission.

The Company’s core values are:

• Discipline

• Integrity

• Respect
 • Unity

• Excellence

• Innovation

The emphasis that Indofood places on events such as "Dairy's Innovation

Day" reflects the company's commitment to promoting an innovative culture.

Indofood fosters innovation and ongoing learning by pushing staff members

to develop digital transformation plans and engage with cutting-edge

technology.

b. Leadership and Vision

The success of digital transformation initiatives often depends on strong

leadership and a clear vision. Indofood’s participation in the Indonesia 4.0

Conference & Expo, where they shared their digital transformation journey,

demonstrates their proactive approach to leadership in industry-wide

digitalization efforts. The achievement of digital transformation endeavors

frequently depends on robust leadership and a well-defined vision. Indofood's

proactive leadership in industry-wide digitization initiatives is demonstrated

by their participation in the Indonesia 4.0 Conference & Expo, where they

told their story of digital transformation.

c. Employee Engagement and Development

Through the incorporation of many evaluation stages from planning to

development, Indofood's online Performance Appraisal System helps to

connect individual goals with organizational objectives. This method ensures

that workers have the skills needed to accomplish the objectives of the digital

transformation whilst also increasing enthusiasm among staff members.

6. Discussion

A. Pros and Cons of Digital Technologies

a. Pros

• Increased Efficiency: Automation and digital systems streamline processes,

reduce errors, and increase overall efficiency.

Example: Technological Integration, The bundling of digital technologies,

such as ERP systems and smart operations, transforms Indofood's operations

by increasing efficiency and reducing costs.

• Data-Driven Decision-Making: digital systems provide valuable data that

can be analyzed for better decision-making.

• Sustainability: reduction in paper use and optimization of resources

contribute to environmental sustainability.

• Scalability: digital technologies can be scaled up to meet growing business

needs without proportional increases in cost or resource use.

b. Cons

• High Initial Costs: Implementing new technologies can be expensive and

require significant upfront investment.

• Cybersecurity Risks: As the world becomes increasingly connected, there is

a growing need to incorporate more digital technologies into daily

operations. The rise of digitalization, however, has led to a rampant increase

in the number of cyber-attacks and cyber threats. Being an organization with

a significant level of digitalization in its business processes, the Company

has to stay vigilant by constantly adapting its cyber security measures to

 safeguard IT systems and day-to-day operations against any form of

disruptions and data breaches by malicious actors.

Solution: The Company has implemented security platforms with automated

controls to detect and prevent cyber-attacks and other digital threats,

strengthened and upgraded its cyber security tools, established IT security

policies, and conducted IT general controls audits and testing. For

contingency planning, a disaster recovery system has been established to

ensure business continuity in the event of system disruptions.

• Resistance to Change: Employees may resist new technologies due to fear

of job loss or discomfort with new systems.

Solution: Indofood uses the Training Management Online (“TMO”) tool to

digitalize training delivery of most of the internal training programs, to

allow employees throughout Indonesia to connect and take part in training

sessions. In addition to the training delivery, the TMO also manages the

management of training submissions and evaluations. TMO is also used to

develop self-learning and facilitate the transfer of knowledge.

7. Recommendations

• Invest in Cybersecurity: Implement advanced security measures to mitigate

cyber threats.

• Enhance Change Management: Develop comprehensive change

management strategies to support employees during the transition, including

training and clear communication.

 • Adopt Incremental Implementation: Use a phased approach to technology

adoption to manage costs and allow employees to adapt gradually.

8. Conclusion

PT Indofood Sukses Makmur TBK is a powerhouse in the total foods solution industry.

They have embraced digital transformation to increase, efficiency, and security, and

mitigate risks. By leaning toward technologies such as Enterprise Resource Planning

(ERP) systems and Supervisory Control and Data Acquisition (SCADA) and their work

culture revolving around their employees, PT Indofood Sukses Makmur Tbk can

achieve robust operations. However, some challenges also arise such as cyber security

risks, employee resistance, etc. PT Indofood Sukses Makmur Tbk must continue to

develop plans to mitigate these risks. By effectively addressing these challenges and

continue leveraging digital technologies, Indofood can solidify its position as the leader

in the total food solutions industry while contributing to a sustainable future.

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