AN ANALYSIS OF CONTRIBUTION RATES IN RELATION WITH FUNDING STRUCTURIZATION IN FORMULATING THE INDONESIAN

NATIONAL STANDARDS (SNIS)

Ike Permata Sari National Standardization Agency of Indonesia (BSN) Master Candidate, University of Geneva, Switzerland

e-mail: ike@bsn.go.id

Arfan Bakhtiar Department of Industrial Engineering, University of Diponegoro, Semarang, Indonesia

Technical University of Berlin, Germany e-mail: arfbakh@yahoo.com

Ary Arvianto

Department of Industrial Engineering, University of Diponegoro, Semarang, Indonesia e-mail: aryarvi@yahoo.com

Abstract: Standard formulation/development processes/stages are important to be analyzed as they determine whether a standard is acceptable in the market and/or able to meet the stakeholders’ expectation.

This research aims to identify the contribution rates of the SNI (Indonesian National Standard) formulation stages. The order of SNI formulation stages based on contribution rate is compared with that based on funding structurization to analyze the relations between them. Analytical Hierarchy Process (AHP) method is considered effective and efficient to measure contribution rate to evaluate the SNI formulation stages while activity-based costing (ABC) technique is used to identify the funding structurization.

The research concludes that the existing SNI formulation stages are still relevant to be used. The rate contribution shows differences between stages but not significant. The stage of publication has the largest contribution rate (0.197703) while the stage of concept drafting has the largest funding structurization (USD 624.- ). There are differences in the order of importance of SNI formulation stages between the contribution rates and funding structurization. Moreover, this research also concludes that priority setting can be used to monitor the allocation of limited resources in order to be more effective. Thus, contribution rate analysis can become a tool to implement it. Also, the funding structurization can be used as a basis to create an equation to determine standard formulation costs that include fixed and variable costs. Further research can be conducted to analyze the relationship of contribution rate with other resources such as time requirement and human resources in the SNI formulation stages.

Keywords-Contribution rate; funding structurization; AHP; SNI

978-1-4799-3735-6/13/$31.00 ©2013 IEEE

his research paper was made to follow up a research made by [2] about funding structurization based on level importance in formulating Indonesian National Standard (SNI).

As it is known, the benefits of standards in market and society as a whole have been written in the literature and understood in general. However, the contributions of standard formulation stages are still poorly understood. The stages become important to be considered because standards formulation processes will determine whether the standards become acceptable in market. This argument is based on [4] who has explained that results of standardization processes can affect the market structure.

According to the National Standardization Agency of Indonesia (BSN), Indonesian National Standards (abbreviated as SNI) is the only standards applied nationally. SNIs are formulated by a Technical Committee established by BSN. In its technical works, BSN facilitate SNI development process for identical adoption’s type. As of the mid of July 2009, BSN has published 202 SNIs with 113 of them are identically adopted from the international standards by using the method of translation. Considering the dominant proportion, this research focuses on this kind of SNI. The formulation process of this type of SNI contains seven different stages, i.e. concept drafting, technical meeting, consensus meeting, final improvement, e-balloting, establishment, and publication. The formulation process is determined based on its importance and applicability. According to [7], appropriate methodology for standard formulation process can contribute to better standardization performance.

Therefore, this paper aims at measuring the contribution rate of each SNI formulation stage to analyze the appropriateness of the whole stages. Furthermore, this paper also calculates the cost of each SNI formulation stage to be compared with its contribution rate.

Analytical Hierarchy Process (AHP) method is used to measure the contribution rate. This method is considered as an effective and efficient way for the purpose. On the other hand, activity-based costing (ABC) technique is used to calculate the formulation costs. This technique is considered accurate to identify and calculate funding structurization in SNI formulation stages.

According to [9], “standard is a document, established by consensus and approved by a recognized body that provides for common and repeated use, rules, guidelines or characteristics for activities or their results, aimed at the achievement of the optimum degree of order in a given context”. Based on [12], there are seven stages normally used in the SNI formulation process for identical adoption type. The first is the drafting concept, in which the technical committee or sub-technical committee appoints a drafter team to formulate the RSNI1 (the first draft of SNI). Secondly, there is a technical meeting in which the RSNI1 is discussed to obtain views and feedbacks from all members of the technical committee or sub-technical committee. After the improvement is made, the output is called RSNI2 (the second draft of SNI). Thirdly, there is a consensus meeting in which minimum quorum requirement should be fulfilled (should be attended by two-third of the members and all stakeholders should be represented). RSNI3 (the third draft of SNI) is then established from the meeting. The consensus meeting should be attended by standardization experts assigned by BSN in order to control the quality of SNI formulation. Fourthly, the RSNI3 is then improved by the technical committee or sub-technical committee. This final improvement stage produces RSNI4 (the fourth draft of SNI). Fifthly, the RSNI4 is then submitted to BSN for e-balloting through SISNI (the information system of SNI). The output of this stage will be RASNI (the final draft of SNI). In the sixth stage, BSN establishes the RASNI into SNI by issuing a decree of the Director General of BSN. Finally, SNI is published through BSN website in two months after the establishment at the latest. The full text of SNI will be available in BSN website for one year.

Analytical Hierarchy Process (AHP) method is used to calculate contribution rate of every stage. Reference [15] has explained that AHP is a multi-criteria decision-making approach and it has been proven to be a useful method for decision making. The method builds a hierarchy (ranking) of decision elements and then makes comparison between each possible pair (alternatives) in the form of matrix. The literature also says that the acceptability of alternative is measured in terms of Consistency Ratio (C.R.). If C.R. is less than or equal to 10%, then the level of inconsistency is acceptable. Otherwise, it should be improved by collecting another questionnaire. This argument is based on [1] who has mentioned that if C.R. has a value of more than 0.1, it means the judgment is untrustworthy because it was too close for comfort to randomness. Therefore, the assessment becomes valueless or must be repeated.

Activity-based costing (ABC) is a procedure that can be used to improve the accuracy of product/service costing and can also assist manager in understanding and evaluating how resources are used across firm’s value-chain in delivering strategic outcome [5]. Reference [5] also explains six stages of ABC system implementation, which are: “(1) initiation, in which feasibility analysis is done; (2) adoption, in which decision to invest some level of resources is made; (3) adaptation, in which analysis is made according to firm’s activities and cost drivers, and ABC information is available but not yet used by non-accounting staff for decision making; (4) acceptance, that occasionally used by upper management for decision making; (5) routinization, which is commonly used by upper

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management for decision making and considered a normal part of the information system; (6) infusion/integration, that is used extensively and fully integrated within the primary financial system”.

A. METHODS

With regard to the analytical hierarchy process (AHP) method, the research was conducted according to the following steps: (1) identifies criteria to measure the contribution rate; (2) data collection using questionnaire technique; (3) create matrix of pairwise comparison; (4) measure contribution rate for each criteria; (5) calculate the consistency index for each criteria. The design phase of research was carried out to determine the criteria used to measure the contribution rate in SNI formulation stages. This method uses primary data in the form of questionnaires distributed to the respondents to identify the contribution rate. The respondents were selected based on purposive sampling method. The method is relevant because in this research sampling was seen as series of strategic choices about with whom, where and how to do the research [11]. Selection of respondents was made by considering the competences of the persons in the standard formulation stages. In this case the respondents were all the people working in the center of standard formulation at the National Standardization Agency (BSN).

For the activity-based costing (ABC) method, the following steps were taken: (1) identify the cost of components; (2) identify the value of each component; and (3) calculate the costs of each SNI formulation stage. The technique used secondary data in the form of historical data of formulation cost. This paper explains the results of the formulation cost using average inputs value.

B. RESULT Measuring the Contribution Rate

Indonesian National Standard (SNI) formulation stages involve mainly two centers and one bureau, i.e. the center for standards development (PPS); the center for information and documentation on standardization (Pusido); and the bureau for law, organization, and public relations (BHOH). Pusido involves in the stages of e-balloting and publication while BHOH in the stage of establishment. The center for standards development involves in all of the SNI formulation stages. In the stages of e-balloting, establishment, and publication, although they are more relevant with the other units, PPS has the responsibility to conduct verification before the draft is distributed to the relevant units. Also, PPS has the responsibility in monitoring the process to keep it in line with the time constrain.

The method to calculate the contribution rate of each SNI formulation stage is Analytical Hierarchy Process (AHP). This method requires respondents who really understand with the concerned issue. In other words, the respondents should be competent persons who know, understand, and can make judgments based on their knowledge and experiences.

Purposive sampling is the most suitable method to select the respondents, resulting in 15 people who work on the center for standards development, BSN. Most of the respondents have been working at PPS between 8 to 21 months (7 persons). Reference [1] has explained that arithmetic or geometric average can be used for aggregating individual priorities. Therefore, this research conducted geometric average as the value that was inserted into AHP matrix pairwise comparison.

Identify contribution rate of SNI’s formulation

stages

Drafting concepts

Technical meeting

Consensus meeting

Final improvement

E-balloting

Establishment

Publication

Comply with international requirement

Figure 1: Hierarchy model of SNI’s formulation stages

Furthermore, the hierarchical model for the research was based on the results of the preliminary study conducted earlier. The study has identified only one criterion for assessment of the contribution rate, which is in accordance with the international requirements. The international requirements used are the principles developed by the Committee on Technical Barrier to Trade of the World Trade Organization, consisting of “Transparency, Openness, Impartiality and Consensus, Effectiveness and Relevance, Coherence, and a Development Dimension” [6].

As mentioned, at the normal process the SNI formulation consists of the following stages: drafting the concept, technical meetings, technical consensus, polling, final improvement, e-balloting, establishment, and publications. Fast-track procedure is used in SNI formulation for identical adoption. Compared with the normal procedure, fast-track procedure eliminates two stages, which are technical meetings and polling. However, for identical adoption of SNI with translation method, the stage of technical meetings should still be done in order to discuss the contents of the translation from the international standards that are adopted. Meanwhile, the polling stage is no longer appropriate because the substance is identical with the international standard. Therefore, opinion from the stakeholders for changing the content of standard should not be required. Figure 1 shows the hierarchy model for the research.

Nowadays, there are some softwares that can run the AHP method. The research has used “Super Decisions Software” as it is a non-commercial one, so easier to be obtained. This software is used for decision-making with dependence and feedback. It uses “fundamental prioritization process based on deriving priorities by making judgment on pairs of elements, or obtaining priorities by normalizing direct measurements” [16]. The other advantages of using this software are there, firstly because a few types of model are offered that could be appropriate in the form of tool for checking consistency [8]. Furthermore, it provides some models for the application example and the model can be created easily.

The first step to calculate the contribution rate in super decision software was constructing a hierarchy model similar to Figure 1. The model includes clustering that consists of elements of goal, criteria, and alternatives. After it was formed, the next step was to submit the value for each comparison of alternative into matrix based on geometric average from the respondents. Table 1 shows the geometric means for each comparison.

Table 1: Geometric averages of SNI’s formulation stages comparison

E-balloting Establish-ment

Drafting concept

Final Improvement Publication Consensus

meeting Technical meeting

E-balloting 1,0000 0,6730 1,0070 1,1208 1,3335 0,9296 0,6730

Establisment 1,4860 1,0000 1,2673 1,0997 1,9816 1,2397 1,3459 Drafting concept 0,9931 0,7891 1,0000 1,1618 1,3045 0,6617 0,7268

Final Improvement 0,8922 0,9094 0,8607 1,0000 1,2190 0,5397 0,7306

Publication 0,7499 0,5046 0,7666 0,8203 1,0000 0,5210 0,6859 Consensus

meeting 1,0757 0,8066 1,5112 1,8530 1,9195 1,0000 1,4262

Technical meeting 1,4860 0,7430 1,3759 1,3687 1,4579 0,7012 1,0000

The results of contribution rates calculation can be seen in Table 2. It explains the score for each alternative with inconsistency index of 0.0075 (less than 0.1). It means that this model is valid and the judgments are trustworthy.

Table 2: Result of contribution rates calculation

Inconsistency index : 0.0075 Alternative Score Sequence

Publication 0.197703 1 Final Improvement 0.164151 2 Drafting concept 0.150624 3 E-balloting 0.148590 4 Technical meeting 0.116496 5 Consensus meeting 0.115569 6 Establishment 0.106867 7

Funding Structurization of SNI Formulation

According to [10], structure is defined “as the arrangement of relations between the parts or elements of something complex”. Based on simple observation by participants in the standard activities, a standard cost can be a price that is paid to acquire copies of documents that have been finished [3]. Therefore, it could be said that the funding structure of standard is an arrangement of the costs that must be paid to obtain copies of documents that have been finished.

Cost calculation was estimated based on the activities in the SNI formulation process and also by considering the assumptions used. The costs calculations focus on the identical adoption standard formulation with translation methods. BSN distributes the funding for developing standard of identical adoption type to the technical committee or subcommittee, but a standard still has to be developed based on its urgencies and concerns of K3L (Health, Safety, Security and Environment) criteria. In the process of SNI formulation for identical adoption, BSN only conducts one technical meeting and one consensus meeting.

The funding structure is divided into fixed cost (FC) and variable cost (VC) that are usually used in the formulation stages directly. Fixed costs include building rent, salaries of employees outside of the technical committee/subcommittee in the formulation of SNI, and depreciation, while costs of electricity and telephone are not included in the calculation due to their general and broadly used by the entire units in BSN.

For each of the SNI formulation stage, this research identifies the following components of cost that are used:

a. Concept drafting: FC in the form of conceptor training is USD 25.- for each standard. VC in terms of drafter salary is USD 223.- per standard; translation cost is USD 8.- per page.

b. Technical meeting: this stage consists of VC only. For each meeting, technical committee receives the salary of USD 45.- for the chairman; USD 28.- for the secretary; and USD 23.- for each member. Besides, there are also transportation cost of USD 6.- and consumption cost of USD 3.- for each person. Multiplication of material is charged for IDR USD 0.02 per page.

c. Consensus meeting: FC in the form of standardization expert training is charged for USD 30.- per SNI. The VC is similar to the technical meeting with an additional cost for assigning the standardization expert of USD 112.- per person-hour.

d. E-balloting: FC in the form of website maintenance is USD 2.- for each document and training of SISNI is USD 42.- for each SNI.

e. Final improvement: FC in the form of editor training is charged for USD 25.- for each SNI.

f. For the establishment stage, the research assumes there is no cost as the activity in this stage is included in the administrative routine job.

g. Publication: FC in the form of website maintenance is charged for USD 2.- for each document and the cost of new standard socialization is USD 40.- for each SNI.

The example of funding structurization for identical adoption of SNI formulation stages can be seen in Table 3. This example used the average number of pages that should be translated is 47 pages. The usual number of committee members participating in the standard formulation process is 13 persons. Almost all the cost of the establishment stage was administrative cost that is relatively small. So, it is considered zero.

Table 3: Example of Funding Structurization

Sequence based on contribution rate

SNI’s Formulation Stages

Costs in USD

3 Drafting concept 624 6 Consensus meeting 607.16 5 Technical meeting 455.22 4 E-balloting 44 1 Publication 42 2 Final Improvement 25 7 Establishment 0

Total Cost 1,797.38

Relation between Contribution Rate and Funding Structurization

The calculation results have explained that the average cost of the SNI formulation process is inconsistent with its contribution rate. The costs of the funding structure are highly fluctuative. This is in contrast with the contribution rates that also have differences but not too significant.

It can be seen that the stage of publication has the largest contribution rate while the stage of concept drafting has the largest cost. The cost of drafting the concept includes the largest unit cost in the standard formulation, which are the drafter salary and the varying number of pages to be translated. On the other hand, the role of publication is considered the most important because the objective of a standard is to be used by the stakeholders and useful for the market. Moreover, each stage also has different rank except for e-balloting and establishment stages that are on fourth and seventh ranks in both the contribution rate and funding structurization.

C. DISCUSSIONS The voluntary consensus-based standard is known as a type of standard that has voluntary nature of its

implementation while it is developed based on the principles of consensus. This type of standards is usually used, for example, in the technical regulation and/or multi-stakeholder regulation. For the technical regulation, it has been reminded by the issue of the likelihood of standards to create technical barriers to trade. That is why using a standard that has been validated through consensus is believed to be able to minimize the barriers because it has been approved by its stakeholders. The reason of choosing identical adoption type of SNI is also in accordance with the explanation above as this type of standard is fully adopted from the international one. BSN supports the harmonization of Indonesian National Standards with the international ones.

Furthermore, standardization has become very popular recently because it is used as a tool of business regulations and/or regulations by the non-state actors. The rise of the multi-stakeholder regulations explained by [13], represents changes in the relative power and influence of states, trade unions, NGOs, social movements, global corporations and other business enterprises by using ‘regulatory standard setting (RSS)’, for example United Nation Global Compact, ISO 26000 on Social Responsibility, Global Reporting Initiative (GRI), Fair Trade Standard, and Forest Stewardship Council (FSC) standard, as the regulation tools. The Multi-stakeholder regulations emerge around the issues of sustainability and differentiation between Northern and Southern civil society actors [13]. Furthermore, [13] have described that the regulatory schemes initiated by the Northern actors to be implemented in the South face two substantial challenges, which are “the ability of Northern civil society actors (especially NGOs) to truly appreciate the different historical experience of Southern actors (especially in their relationships with cooperation and states) and to understand and respect their aspirations; while also to develop truly democratic structures in regulatory initiatives and social movements, ones which neutralize power-differential between actors, and provide for appropriate and effective representation by (and across) Southern actors, who bear most of the risk in the decisions that are made”. From the challenges above, it can be argued that standard development process is very important. A standard, which is developed by taking into consideration both Northern and Southern actors’ point of views is believed to be accepted broader. This argument could be implemented together with the use of principles developed by the Committee on Technical Barrier to Trade, World Trade Organization in order to avoid unnecessary barrier to trade. The principles consist of “Transparency, Openness, Impartiality and Consensus, Effectiveness and Relevance, Coherence, and a Development Dimension” [6].

The Indonesian National Standards (SNIs) can be classified as voluntary consensus-based standards. All stages in the SNI development process are considered as necessary in order to achieve the maximum satisfaction of the stakeholders. This argument is supported by the results of the contribution rate calculation (Table 2) showing different values that are not too significant. The stage of publication has the largest contribution rate (0.197703) while the stage of drafting the concepts has the largest cost (USD 624.-). There are differences in the orders of SNI formulation stages between the contribution rates and funding structurization. To further explain the differences, this paper suggests that further research on this topic to be conducted.

D. CONCLUSION

This research also concludes that priority setting can be used to monitor the allocation of limited resources in order to be more effective. Thus, contribution rate analysis can become a tool to implement it. The funding structurization also can be used as a basis to create an equation to determine standard formulation costs that include the fixed and variable costs. Further research can be conducted to analyze the relationships between contribution rates with other resources such as time requirements and human resources in the SNI formulation stages.

E. ACKNOWLEDMENT

This paper was made based on a final project report (bachelor thesis) of Industrial Engineering Program, Diponegoro University of [14]. The report was made under the supervision of Bakhtiar, Arfan and Arvianto, Ary.

The authors would like to thanks the Indonesian Ministry of Education through its Bureau of Planning and International Cooperation and National Standardization Agency of Indonesia for providing first author scholarship to study master program standardization, social regulation and sustainable development at the University of Geneva, Switzerland and the IEEE-SIIT organizing committee for providing the author a travel grant to attend the conference. Also, the authors would like to thanks the Indonesian Ministry of Education through its Directorate General on Higher Education in providing the second author scholarship to study at the Technical University of Berlin, Germany.

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