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Int. J Sup. Chain. Mgt Vol. 9, No. 1, February 2020

Moderating Effect of Supply Chain Dynamic

Capabilities on the Relationship of Sustainable
Supply Chain Management Practices and
Organizational Sustainable Performance: A Study
on the Restaurant Industry in Indonesia
Dewi Budhiartini Yuli Isnaini*1, T Nurhaida#2, Ikbar Pratama#3

*1
Faculty of Economics Management, Universitas Amir Hamzah, Medan, Indonesia.
#2
Politeknik Mandiri Bina Prestasi, Medan, Indonesia.
#3
School of Accountancy, College of Business, Universiti Utara Malaysia, Sintok, Malaysia.
Corresponding author: [email protected]

Abstract- The sustainable supply chain management (SSCM) To handle all of these issues, there is a need of time for
is a fairly new topic that has become a superior attention for the firms to transforms a better supply chain (SC) model.
the researchers recently. The current study is investigated Moreover, firms also need to build a friendly
empirically moderating effect of Supply chain dynamic environmental SC model to achieve or reach the harmony
capabilities (SCDC) on the relationship of SSCM practices with the nature. The firms which gain a competitive
and organizational sustainable performance (OSP) advantage and lead in the international markets have good
indicators namely; “economic performance, environmental level SC practices in their systems. For instance, Unilever
performance, social performance” in the restaurant industry that is multinational company implemented a project
of Indonesia. For this purpose, data was collected from the which name was The Unilever Sustainable Living Plan in
210 supply chain managers by using the simple random 2020 which entirely provide help to improve the health
sampling technique which yield a 78% response rate. For condition of the people. It also impacts the environment
data analysis Smart PLS 3 software and PLS Structural and achieve the 100 percent agricultural sustainable
Equation Modeling (SEM) approach was employed. The packages and raw material [1].
SEM analysis has shown, SSCM practices has a significant The sustainable supply chain management (SSCM) is
association with the OSP indicators. Moreover, the findings
entirely based on the combination of the SCM and
sustainable theory [2, 3]. In the same vein, the digitization
of the current study also shown that SCDC is significantly
and globalization has posted a most challenges for the
moderates on the relationship of SSCM practices and OSP in
modern SCM with respect to dynamicity which could
the restaurant industry of Indonesia. This shows that SCDC
require a dynamic capabilities (DC) which are higher in
is considered to be an important contribution of the study.
the supply chain management (SCM). The linkage of the
The current research also contributes a body of knowledge in
SSCM and SC has concerned with a parallel
the way of theoretical and practical implications. The study environmental condition and creating the concept of the
limitations and future directions are also discussed at last of DC in field of SSCM is considered a reasonable optimal
the study. [4, 5]. At last, the research based on how to improve the
DC of SC to achieve the competitive advantage of the
Keywords; supply chain dynamic capabilities, sustainable supply firms and sustainable performance based on after deep
chain management, organizational sustainable performance, understanding of SC is considered to be high valuable
Indonesia topic. Most of the research on the SSCM has been
1. Introduction conducted on developed countries [6-8].
In the contemporary environment, supply chain Whereas, the research on the developing countries has a
management (SCM) has become one of the main source limited attention as a SSCM practices in the under
for the firms to increase their performance, and even their developed countries [8, 9], especially in the restaurant
cost when the firms face more competition from the industry in Indonesia [10]. In this regards, the
market. Nevertheless, with the several emerging issues, improvement in the SSCM within the developing country
like, transparency of the firms, benefits of the employees, (Indonesia) is bearded a significant value within more
environmental protection and concern with the security. developing countries. In addition, most of the previous
studies have been conducted a direct effect of SSCM
______________________________________________________________ practices and organization sustainable performance, that
International Journal of Supply Chain Management shows inconsistent findings. Whereas as per the best
IJSCM, ISSN: 2050-7399 (Online), 2051-3771 (Print)
researcher knowledge, the indirect moderating of SCDC
Copyright © ExcelingTech Pub, UK (http://excelingtech.co.uk/)
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Int. J Sup. Chain. Mgt Vol. 9, No. 1, February 2020

in the association of SSCM practices and organization growth. A further discussion has been elaborated by
performance is limited. Dubey, et al. [13] who further categorized the SSCM into
Therefore, this current paper has a main concerned on two groups which are, management philosophy and
the moderating effect of SCDC on the relationship of management process set.
SSCM practices and organizational sustainable The SSCM practices has been comprises internal and
performance in the restaurant industry of Indonesia external practices of the firms that are used to make the
because the Indonesia is entirely considered to be a fastest supply chain within the organizations more sustainable
developing country in the current environment. The with respect to three dimensions of the sustainability [16].
Indonesia economy is considered to be severe condition of The firms which has good practiced about the sustainable
transformation, and without any ambiguity is become a supply chain are able to enhance their sustainable
one to hottest topic in the Indonesia in these days. The competences. Various scholars have been done a various
objective of this is to be changed the excessive status researches on the SCM practices. Nonetheless, a little
supply, wastage of the resources and unreasonable attention has been reviewed in the extant literature on
structure, low value adding and low quality products [10]. SSCM practices and case analysis has been used to
With respective to a micro level, for the Indonesia firms to discussed about the practices through diversified
survive and also established a new direction for the industries and has been explored the practices in the
sustainable development of restaurant industry. Moreover, manufacturing industries [17].
the society sustainable development is considered to be Furthermore, several researcher has been used the
good point for the supply side reform. The focus of the qualitative method for analysis to investigate the
current empirical research is how SSCM could affect the combination of SSCM and the best practices [18, 19]. In
sustainable performance of the Indonesia restaurant addition, [19] further categorized the SSCM practices into
industry in a sustainable way beneath the various three perspectives that are “strategic orientation,
circumstances of the various market economic reforms. In collaboration, supply chain continuity, risk management
the meantime, the integration model of the coupling and pro- activity”. Whereas, [20], further identified SSCM
SSCM and DC theory [4], this paper has embedded the SC into four dimensions which are process design, product
dynamics within the frameworks and also examined design, and sustainable association with the customer as
whether the SC dynamic capabilities is might to be well as suppliers. Likewise, [18] have also focused on four
moderated within the relationship of SSCM and areas which are, “sustainable design, sustainable
sustainable performance of the restaurant industry of distribution, sustainable production and investment in the
Indonesia. SSCM practices”. Nevertheless, SSCM practices which
In the rest of this paper, a background which is are discussed in the extant literature streams has the
theoretically has been discussed and hypothesis for inconsistent findings and also there is little attention on
research are also developed. in addition, sections are also the combined effect of SSCM practices. Therefore, current
described about methodology, findings which are based research has been endeavored to implement the SSCM
empirically, and discussions are as follows. At last, practices. For this purpose, in the current study has been
implication, limitations and future direction has been also proposed a five SSCM practices dimensions which are
discussed. taken about the core practices into the account which are
entirely based previous literature stream.
2. Literature Review
2.1. Sustainability Supply Chain 2.2. Supply Chain Dynamic Capabilities
Management In previous literature, it has been shown that SSCM
It has been described by [11] that firms should be more could estimate the sustainable growth of the supply chain
focused on the social responsibility and not only be with respect to a specific period which required a
focused on the profit maximization. The social confident static capability within the supply chain
responsibility described, it is the responsibility of the management (SCM) [21]. Nevertheless, in the fluctuating
firms to work and act at the best interest of environment environment, such type of abilities has a need to be
and as a whole society. Through introducing the social adjusted continually. The SC has could be able to only
and environmental topic within the supply chain contented the market demand if the novel abilities has
management (SCM) which is traditional in nature, the been created to increase or enhance the long term
SSCM has extended the traditional realm of the idea by sustainable efficiency [2]. For creating the new ability, it
taking in the deliberation the economic sustainability, is important the dynamic capacity of the enterprise.
society and environmental time of conniving and the According to [22], the dynamic capability has been
supply chain optimizing [12, 13]. There are numerous flourished regularly to integrate and built the internal and
researchers who defined the SSCM that it could be external competencies to address the environment which
deemed as a SCM major focusing to maintain the is rapidly changed with the passage of change. The
environmental, social and economic stability to achieve dynamic capabilities theory (DCT) is the resource based
the long term sustainable development [14, 15]. theory (RBV) extension. However, the emphasized of the
Moreover, in other words, [14] further explored that RBV theory is on the resources choice, or the selectin of
SSCM is considered to be a management of information, the resources which are considered to be appropriate,
material and flow of capital and as well as among the while the dynamic capability has emphasized on the
firm’s cooperation along with the supply chain whereas renewal and resource development [23]. As per the
enchanting the goals from three components of sustainable recommendation, [23] who explained that resource which
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Int. J Sup. Chain. Mgt Vol. 9, No. 1, February 2020

are intangible in nature are considered to be bundle to been shown by the various other studies, [17] argued
create the capabilities. currently the dynamic capabilities are relatively
In addition to this, supply chain management considered to be a new concept, and there is also limited
capabilities has been integrated by the DCT, is the research how it could affect to sustainable performance. A
capability to adjust the SCM. Currently, it is considered to study explored by [18] on the luxury industry and found
be a developing and popular concept and yet it essence is the positive impact of supply chain dynamic capabilities
very difficult to understanding [24]. On the other hand, on sustainable performance and on the new products of
[25] further explored that the organization become a more firms. On the other hand, various other researchers also
flexible from the supply chain dynamic capabilities analyzed this relationship through the various specific
(SCDC), and therefore, it could be more easily to adapt dimensions and found that strategic cooperation ability
the trend of the market and also efficiently to tackle the could help to increase the sustainable advantage of firm.
volatility in the market, and ultimately provide assistance The SSCM would provide help to achieve the
to firm to attain the for the industrial competitive competitive advantage which are short term, which in the
advantage. The firm competitive advantage not only based turn could be boost with the further development of the
on single sub capability, but it could be achieved from the dynamic capabilities [32]. The combination of both of
different sub-capabilities combination [26]. SSCM and dynamic capability is limited with respective
to empirical research. All kind of information in is
2.3. The Relationship between SSCM provided by the customer orientation and participation in
Practices and Organizational Sustainable the SSCM practices [33], and to some of the extent
encourage the dynamic capabilities and improve the
Performance sustainable performance. In addition, [34] further explored
Various studies have been conducted who investigated that cultivation and spillover of the firm’s capability in
that how the SSCM practices could increase the global supply chain has shown that firms are able to gain
organizational sustainable performance (OSP). A study the knowledge and resource’s from various chain
conducted on the manufacturing firms by the [27] who members and therefore has improved their capability [34].
found that SSCM practices have positive and significant Moreover, [35] also elaborate that trust of the supply
association with the sustainable performance, especially chain partner is considered to be a vital in dynamic
from the social perspective and economic perspective. In capabilities of the firms.
the same vein, a further study [28] that was conducted on It is proposed by [36] that SSCM practices might not be
the five different firms also the positive effect of SSCM considered as the source of competitive advantage. In
on the sustainable performance.[29] confirmed that firms addition, [13] further argued that SSCM could impact on
SSCM activities has significant and positive association the competitiveness of the enterprise through the
with the sustainable performance. [30] further used the moderating linkage. With respective to the resource base
explorative method to found the positive effect of SSCM view, dynamic capabilities could be often moderate the
on the brand of firms as well as also on the performance sustainable resources to improve the performance [37]. [9]
within the industry of the Scottish cashmere. Similarly, it further investigated that dynamic learning capability could
is also found in the other studies that SSCM has a positive be more effectively moderate the impact of the SSCM
association with the sustainable performance [31]. Thus practices on the performance. On the other hand, various
after seeking this associate association it is hypothesized other scholars also explored the relationship among the
that: sustainable supply chain management , dynamic
H1: SSCM practices has a significant association with capabilities and business performance [38, 39]. The
the organizational sustainability performance of restaurant researcher has started their work from the dynamic and
industry of Indonesia. proposed that the relationship of the supplier has a
H1a: SSCM practices has a significant association with positive effect on the flexibility of the production and
the economic performance of restaurant industry of optimization of the product, hence improve the sustainable
Indonesia. performance. They further also confirmed the combined
H1b: SSCM practices has a significant association with effect of dynamic capabilities within the supplier and firm
the environmental performance of restaurant industry of efficiency relationship. Thus based on the previous
Indonesia. discussions, it is hypothesized that:
H1c: SSCM practices has a significant association with H2: SCDC significantly moderates in the relationship of
the social performance of restaurant industry of Indonesia. SSCM practices and organizational sustainable
performance of restaurant industry of Indonesia.
2.4. The Relationship between Sustainable H2a: SCDC significantly moderates in the relationship
Supply Chain Management Practices, Supply of SSCM practices and economic performance of
Chain Dynamic Capabilities and restaurant industry of Indonesia.
Organizational Sustainable Performance H2b: SCDC significantly moderates in the relationship
Previous researches on the dynamic capabilities has of SSCM practices and environmental performance of
shown that it has a positive and significant effect on the restaurant industry of Indonesia.
business performance. It is further investigated by [32] H2c: SCDC significantly moderates in the relationship
that dynamic capabilities has the abilities to gain the of SSCM practices and social performance of restaurant
competitive advantage and hence also provide help to gain industry of Indonesia.
the performance of the industry. Similar findings have
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Int. J Sup. Chain. Mgt Vol. 9, No. 1, February 2020

2. Research Framework which is 78% response rate of the total. As a result, 210
Based on the previous discussions, research framework responses were included for the analysis.
of the current study has been established. The current
framework has shown the sustainable supply chain 5. Data Analysis
management practices (SSCMP) as an exogenous, supply Several prior studies adopted partial least square –
chain dynamic capabilities (SCDC) as a moderator and structural equation modelling (PLS-SEM) approach in
organizational sustainable performance (OSP) as an testing the direct and indirect relationship of variables
endogenous variable. All of the following variables are [37,38,39]. Therefore, the research hypotheses of present
depicted in the following Figure 1. research were assessed through PLS-SEM. The
measurement and structural model of the study were
assessed by using Smart-PLS 3 software. PLS-SEM
approach is appropriate in case of non-normal data or
small sample size [40].

5.1. Measurement Model of Study

To test the model, we used the structural equation
modelling (SEM) technique through using the partial least
squares (PLS) with Smart PLS 3.0 software [41]. This
software is called a second generation software that could
Figure 1. Research Framework be used to test the complex model along with the latent
variables. Table 1 has been showing the results which
4. Methodology were obtain through the measurement of model. Before
The present study is cross sectional and correlational in assessing the model, the construct reliability and validity
nature because the data been collected on time. A must be established [41]. Therefore, first, we assessed the
quantitative approach through using the self-administered convergent validity and discriminant validity of the
questionnaire was used to investigate the relationship measurement model. Table 1 presents the measurement
between the exogenous, moderator and endogenous model of the study. All the factor loadings that are less
variable in the restaurant industry of Indonesia. The than 0.5 are deleted from the model in order to establish
primary data for the current study has been collected by the indicators reliability. All the constructs have
using the five point Likert Scale from strongly agree=1 to cronbach’s alpha > 0.70, average variance extracted
strongly disagree=5. For measure all the variable the (AVE) > 0.5 and composite reliability (CR) > 0.60 that
questionnaires were taken from the extant literature or established the convergent validity of the model [41]. For
studies. Five items for the SSCM practices has been discriminant validity, in the fornell and larcker criterion,
adopted from the various studies [4, 40-42]. Similarly, the diognal values represents the square of AVE that must
five items have been adopted for the supply chain be greater that the constructs’ correlation with other
dynamic capabilities [33, 43, 44]. Moreover, three items variables and in the HTMT analysis all the values should
were measured to the economic performance that were be less than 0.85 [41]. Similarly, the results of the Fornell
adopted from the study [45, 46]. Three items for the and larcker criterion (in Table 2) and HTMT analysis (in
environmental performance has been adopted from the table 3) have established the discriminant validity of the
several studies [31, 45, 47, 48]. Lastly, three items for the construct.
social performance has been adopted from the studies of
[49-51]. For the data collection, questionnaire translated Table 1. Measurement Model of the study
both in the English and Indonesia language. Cronb A
Measurement Loadi C
At the time of study, there were almost 900 supply Items ach's V
Scale ngs R
chain managers were working in Indonesia five star Alpha E
hotels. The samples size 269 supply chain managers for Economic EcoP 0.5 0.
the current study was selected by using the [52] table Performance 1 0.707 0.72 7 80
which were working in the five star hotels in the Indonesia EcoP
by using a simple random sample technique. There two 2 0.826
sampling techniques which has been used in the EcoP
methodology. One is probability and other is non 3 0.725
probability. In the probability sampling, each element has Environmental EnvP 0.5 0.
an equal chance of occurrence while in non-probability Performance 1 0.791 0.73 2 76
not equal chance of occurrence of the elements. The EnvP
generalizability of the probability sampling is more as 2 0.542
compare to non-probability sampling. Therefore, for the EnvP
current study a simple random technique has been used so 3 0.803
that the generalizability of findings could be increased SC Dynamic SCD 0.729 0.5 0.
[53]. In this regards, total 269 self-administered Capabilities C1 0.79 4 86
questionnaires were distributed among the supply SCD 0.702
managers of five star hotels in the Indonesia. The total of C2
210 questionnaires were returned back from the hotels
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Int. J Sup. Chain. Mgt Vol. 9, No. 1, February 2020

SCD 0.792 5.2. Direct Effect

C3 In order to test the hypotheses, PLS-SEM was applied
SCD 0.759 using Smartpls 3.0. The model contains three endogenous
C4 variables i.e. economic performance, environmental
SCD 0.695 performance and social performance (dependent variable)
C5 having R2, 0.30, 29, 25 and Q2 0.15, 14, and 12
SSC 0.758 0.5 0. respectively (see Table 6) that establish the substantiality
SSCM Practices MP1 0.75 0 83 of the Model. Table 4 presents the results of PLS
SSC 0.748 bootstrap algorithms that confirms the significant direct
MP2 relationship of SSCMP and economic performance (β =
SSC 0.697 0.21, t value = 3.18, p value = 0.002), environmental
MP3 performance (β = 0.386, t value = 6.40, p value = 0.000)
SSC 0.747 and social performance (β = 0.357, t value = 5.57, p value
MP4 = 0.000). Thus, considering direct relationship, all the
SSC 0.578 hypotheses are supported in this study. These results are
MP5 consistent with studies of [28, 29], who found the SSCMP
Social SocP 0.745 0.5 0. as a significant predictor of sustainability performance in
Performance 1 0.71 2 76 various countries. Particularly in Indonesia, SSCM
SocP 0.723 practices will help to avoid purchasing of products that
2 can result in environmental degradation [54].
SocP 0.699 Consequently, it enables the organizations to improve
3 their financial performance [38] by improving profits and
Note: ECOP- Economic Performance, EnvP- sales through sustainability activities [19].
Environmental Performance, SCDC- SC Dynamic
Capabilities, SSCMP- sustainable supply chain Table 4. Direct Effect
management capabilities, SocP-social performance T
P Decisio
Hypothesis Beta S.E Valu
Value n
Table 2. Fornell and Larcker Criterion for Discriminant e
Validity SSCMP-> 0.20 0.06 3.179 0.00 Support
EcoP Env SCD SSC SocP EcoP 5 5 2 ed
P C MP SSCMP -> 0.38 0.06 6.403 0.00 Support
EcoP 0.755 EnvP 6 0 0 ed
SSCMP -> 0.35 0.06 5.571 0.00 Support
EnvP 0.436 0.72
SocP 7 4 0 ed
2
* SCDC = Supply chain dynamic capabilities, SSCMP =
SCDC 0.522 0.43 0.736
sustainable supply chain management practices, EcoP =
7
Economic performance; EnvP = Environmental
SSCMP 0.434 0.51 0.563 0.709
performance; SocP = Social Performance * Significance
SocP 0.353 0.68 0.407 0.472 0.722 level = 0.05
6
Note: ECOP- Economic Performance, EnvP-
Environmental Performance, SCDC- SC Dynamic
Capabilities, SSCMP- sustainable supply chain
management capabilities, SocP-social performance

Table 3. HTMT Analysis for Discriminant Validity

EcoP Env SCD SSC SocP
P C MP
E\coP
EnvP 0.761
SCDC 0.728 0.62
9
SSCMP 0.624 0.74 0.720
8
SocP 0.609 0.55 0.593 0.730
4
Note: ECOP- Economic Performance, EnvP-
Environmental Performance, SCDC- SC Dynamic
Capabilities, SSCMP- sustainable supply chain
management capabilities, SocP-social performance

Figure 2. Direct Effect.

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Int. J Sup. Chain. Mgt Vol. 9, No. 1, February 2020

5.3. Testing Indirect Moderating Effect

The research model hypothesized that supply chain
dynamic capabilities moderates on the relationship of
SSCMP and sustainable performance of Indonesia
restaurant industry. The moderation test was employed by
using the two stage calculation approach. This approach
was employed as per the suggestion of [54], who
recommended that when the objective of study is whether
is that moderating variable significantly moderates in the
relationship of exogenous and endogenous variable. For
this purpose, to test the moderation hypotheses, this study
has used [55] criteria to determine whether the moderation
condition is exist.
The findings of the moderation (see Table 5) inferred that
SC dynamic capabilities moderates the relationship of
SSCMP with economic performance (β = 0.229, t value =
5.18, p value = 0.000), environmental performance (β =
0.124, t value = 3.09, p value = 0.002) and social
performance (β = 0.115, t value = 2.86, p value = 0.004).
These findings suggest that SCDC is considered to be
significant moderator in the relationship of SSCMP and
all the sustainable performance indicators. This shows that
higher level of SCDC in the business is considered to be
more significant in the relationship of SSCM practices and
sustainable performance of the Indonesia restaurant Figure 3. Moderating Effect
industry. These results replicate the findings of several
prior studies [19, 56]; who found the significant indirect Table 6. Predictive Relevance and R2 of the Model
role of SC dynamic capabilities in enhancing
organization’s sustainability performance through SSCM Endogenous variables R2 Q2
activities. These findings not only provide the mechanism Economic performance 0.30 0.15
for enhancing organization’s sustainability performance, Environmental performance 0.29 0.14
but will also motivate the managers to adopt the SSCM Social performance 0.25 0.12
practices to enhance their competitive strength and overall
business performance.
6. Conclusion
Table 5. Indirect Effect The presents study contributes to the existing literature
T P in several ways. First, it provides the empirical evidence
Decisi of the relationship between SSCM practices and
Bet Value Value
on organization’s sustainability performance in the context of
Hypothesis a S.E s s
SSCMP*SCDC - 0.2 0.0 Suppo restaurant industry in Indonesia that strengthen the
> EcoP 29 44 5.181 0.000 rted findings of prior studies [57, 58]. Second, this study is
amongst the few that explore the SSCM practices
SSCMP* SCDC 0.1 0.0 Suppo
relationship with organization’s sustainability
-> EnvP 24 40 3.085 0.002 rted
performance in developing countries specifically
SSCMP*SCDC - 0.1 0.0 Suppo
Indonesia. It also extends the literature and provide
> SocP 15 40 2.859 0.004 rted
generalizability to the findings of prior studies that
Note: SCDC = Supply chain dynamic capabilities, focused on developed countries [59]. Finally, our findings
SSCMP = sustainable supply chain management practices,
provide empirical support to indirect effect of SC dynamic
EcoP = Economic performance; EnvP = Environmental
capabilities in the relationship of SSCM practices with
performance; SocP = Social Performance sustainability performance and adds knowledge to the
* Significance level = 0.05
existing literature.
The present research provides considerable implications to
the practitioners specifically related to restaurant industry.
First it provides the mechanism of enhancing business
sustainability performance through SSCM practices.
Second, it encourages the managers to adopt SSCM by
establishing it link with overall business performance
from past studies. This will motivate them and enhance
their confidence in implementing sustainability activities
in their existing SCM system. Finally, this research will
help the restaurant managers in enhancing their
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Int. J Sup. Chain. Mgt Vol. 9, No. 1, February 2020

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