Lecture :Sandra Sunanto, Ph.DProf. Meine Pieter Van Dijk

VALUE CHAIN MANAGEMENTGLOBAL VALUE CHAIN of VEGETABLES

Presented By:Jovian Tedja - 2014811005

MAGISTER MANAJEMENPROGRAM PASCASARJANAUNIVERSITAS KATOLIK PARAHYANGAN2015

Vegetables Distribution Process :Final UsersOther Intermediary UsersHotelRestaurantsOther CountriesExporter AgentsFarmersRetailer (Supermarket or other mass merchandiser)Retailer (Traditional Market)Other RetailersIntermediary WholesalersWholesale MarketsDistributor (Out of Wholesale Markets)ImportersForeign Producers

Distributors / Collectors / Transporters

INTRODUCTIONIndonesia is a one country in South East Asia, that located on the equator and lie between the Asia and Australia continental and lie between the Indian Ocean and the Pacific Ocean. Indonesia is the biggest archipelago state which contain 13.466 islands which we usually called Nusantara.Indonesia is the second highest biodiversity country after Brazil. Because of this condition, Indonesia is also known as an agrarian country. According to BPS (Badan Pusat Statistik), GDP Indonesia in 2013 reach Rp 9,084 trilion and 14.43% of that is contributed by the agricultural sectors.Many of Indonesian citizen consume vegetables everyday. Unfortunately because of the development process in the late 10 years, a land that used to be use to do an agricultural process decreases from year to year. 10 years ago, this agricultural sector contribute 15.19% of the total GDP. However, Agricultural is still a main GDP contributor. Although Indonesia is an agrarian country, this several years, Indonesian consumers prefers to buy an imported vegetables rather than buy the local one. The imported vegetables have a better quality than the local one with a price that is not much different. This fact make many farmers switch into another professions.Why can this thing happened? The main cause of this thing allegedly because of the imported ones have a better quality and a bad value chain process. Is it true? Lets take a further examination.

ROLE & BENEFIT OF EVERY MAJOR ACTORSYou can see the value chain process in the first page of this papper. Here is the role & Benefit of every Major Actors:Farmers. They are the vegetable producers. They plant the seeds, flush them, give fertilizer and preserver the vegetables.Importers. Some of Indonesian vegetables users not satisfied with the quality of their local vegetables. So they prefer to pay more and consume the imported ones. Importers role here take care of the administration process, deal with the import tax regulation, deal with the foreign producers, and etc.Exporter Agents. Some of the high quality vegetable products are favourable to be consume from consumers from the other country. Beside that, because of the climate condition and some type of soil, there are some kind of vegetables that only grow in Indonesia. These kind of vegetables often be export to the other country. Usually the farmers dont directly deal the business with the costumers from the other country. They often use an exporter agents service to do an export process.Major Importers. Importers limit their activities to the import and wholesaling of imported vegetables. They sell mainly to wholesale markets or other distributor (outside of wholesale markets). Importers facilitate some retailers (especially supermarkets) to do an import process more convenient rather than directly interact with the foreign producersDistributors / collectors. Collectors are a combination of farmers supplementing their income, specialised village collectors. Farmers usually sell their vegetables to collector who pick up their produce several month from the farm gate. The collectors then go to sell to the wholesale markets.Wholesale Markets. These are large wholesalers generally registered businesses which have a warehouse, large refrigerator and other technologies inside the wholesale markets. Retailer (Supermarket) deal the business directly from the wholesalers. Supermarkets are a big enterprise, so they have a power to do a bulk buy.Intermediary Wholesalers. These traders, who are largely unincorporated physical persons, assemble a variety of local and imported fresh produce for the needs of their clients, usually small retailers (Traditional Markets).They purchase pallets of imported products from importers which they combine with domestic products purchased by small domestic wholesalers. Small retailers like traditional markets needs to do a business rather than directly deal with the wholesale markets because they offer them (traditional markets) to be in debtRetailers (Traditional Markets, supermarkets, etc. ). The retailers are represented through the people operating in the market of vegetables, located in the traditional markets or supermarkets who sell directly to consumers to the markets or other places inside and in suburbs of the big cities. In general conditions, users buy vegetables directly from the retailers (whether it is a supermarkets or traditional markets).Users. Users are the consumers of the vegetables product. Some users like hotel or restaurants cook the vegetables and sell vegetables in a dish form to final users.

REVIEW OF THE DISTRIBUTION PROCESSAs you see in the distribution process, The root production vegetable process can be starting from the foreign producers (imported vegetables) or from the local farmers. Importers deal with the foreign producers and deal with the tax and other administration process so the imported vegetables can enter Indonesia. The importers then sells the imported vegetables to the wholesale markets or the other distributors (Out of wholesale markets). Wholesale markets have a large warehouse, cold storage, and large refrigerator to keep the vegetables fresh.Wholesale markets then sell that vegetables to retailer (supermarket or the others that similar with supermarkets) directly. Retailer like supermarkets can buy directly from the wholesale markets because they do a bulk buy and dont need to be in debt. Beside that if they want, they can directly deal the business with foreign producers. Some of supermarkets also sell their own brand vegetables. In this case, they normally have their own plantation. They hire the local farmers to do the preservation process. They also have their own transportation (big truck) to delivery process by themselves. The other kind of retailers (Traditional markets) usually sells more of local vegetables rather than the imported ones. Unfortunately, because they need to pay in debt and buy in a small amount, they cant buy vegetables directly from the wholesale markets. They need the intermediary wholesalers as they representative to buy a large amount of vegetables and can offer them to pay in debt.After the vegetables has been moved to the retailer, the final users can buy it from them. Hotel, restaurants, and other intermediary users can do some works before they deliver it to the final users. They can cook them and serve the vegetables as a dish.For some people who live in a rural area and live near the plantation, they can buy the vegetables directly from the vegetables. However many of vegetables consumers are located in a big cities. So this kind of users (who buy directly from the farmers) is very scrimp.Some of the high quality vegetable products are favourable to be consume from consumers from the other country. Beside that, because of the climate condition and some type of soil, there are some kind of vegetables that only grow in Indonesia. These kind of vegetables often be export to the other country. Usually the farmers dont directly deal the business with the costumers from the other country. They often use an exporter agents service to do an export process.This kind of distribution process is almost similar with any Asian Country where traditional markets still take a big role as a retailers.

CERTIFICATIONGenerally there isnt any certification that vegetables need before it can be buy by the final users. If the vegetables get cook in hotel or restaurants, there is a halal certification that hotel and restaurants need before it can be sell to final users. Because many of Indonesians are moslims, halal certification is amust for them. However the form of the vegetables is get changed into dish, not pure vegetables anymore. So if they want to sell in vegetables form, there isnt any certification need.This day we know one kind of vegetables that we call sayuran organik (Organic vegetables). This kind of vegetables doesnt use any pesticide and have a better quality and healthier than the regular one. Farmers can sell the organice vegetables with the premium price.However if farmers want to sell this kind of vegetables, they must obtain an organic certification. There is some organization who can issue this certication. There is JIPOI which can be issued by LSO for the foreign producers if they want do in import process for the organic vegetables. If farmers went to sell the organic vegetables or do an export process they can obtain IFOAM certification which is published by inofice. And there is one more sertification which is publish by PAMOR INDONESIA which can be obtain in a cheaper price. However some countries dont admit this kind of certificate.

GOVERNANCE ROLEThis is some program that government use to support the agricultural structure:Pricing Policies. Like I have been mention before, many of Indonesian consume vegetables everyday. So if the price changes, it can have a great impact in vegetables demand. Government role in pricing policy is decide an upper and lower limit for price and the tax for the imported vegetablesMarketing Policies. Some kind of vegetables cant be bloom because the marketing process of these vegetables is not good. In order to make the marketing process better, government make some program to make this better. Government make an auction markets so some high quality vegetables can be sell in a higher price.Government also develop some warehouse receipt systems for some kind of vegetables so farmers can board out their product in a warehouse that government provide and sell that when the market price is high.Other Policies. There is some other policies that government do to make the vegetables distribution process better such as rule for imported vegetables and etc.

UPGRADING VALUE CHAINThere is some possibilities to make this value chain better:Provide financial support or facilities for farmers to get an organic certification. As I have been mention before, there is some kind of certification for the organic vegetables. However for many farmers it is very expensive to get that certification. If they cant get that certification, they still can sell their organic vegetables but in a cheap price. Government should provide any financial support or some facilities so they can get that certication easier than before. Beside that if the organic certification can be obtain in an easier ways, it can also support the local farmers to do an export process which also can increase the national GDP.Decentralization. If you compare to 10 years ago, many farmers in Indonesia is getting less. Main reason of this fact is because of their wrong mindset. That living in the big cities will make them richier. As they arrive in big cities, they get nothing and only can be a beggar. In this case the government role is do a decentralization and support the agricultural structure. So the farmers can get a better support from the government and make the agricultural structure better.