CHARACTERISTIC OF FARMER-TRADER-PROCESSOR

COLLABORATION IN AGRI-PRODUCT PROCESSING AND

TRADE

Setyadjit1, R. Thahir1, S. Prabawati1, E.M. Lokollo2 and A. Dimyati3

1
ICAPRD : Indonesian Centre for Agricultural Postharvest Research and Development,
JL. Tentara Pelajar No.12. Kampus Penelitian Pertanian Cimanggu,
Bogor 161143, Indonesia
TLP/Fax. 61-0251- 321762
Email : pascapanen@yahoo.com
2
UN-CAPSA, United Nations-Centre for Alleviation of Poverty in Asia and Pacifics,
JL. Merdeka No.145, Bogor 16114, Indonesia
TLP 61-0251-356813, 343277
3
IAARD, Secretary Indonesian Agency for Agricultural Research and Development,
JL.Ragunan Raya No.29, Pasarminggu, 12540, Jakarta Selatan, Indonesia

Abstract

In SCM concept understanding the characters of relationships among the actors in the
chains in certain case chain is the first matter to have be done before doing further
improvement. Even though the application of SCM on agri-product are also rising in
developing countries following USA and Europe, the main topics of discussion in SCM
workshops such as in the workshop on ‘Agri-product Supply-Chain Management in
Developing Countries’ are still the SCM of fresh product. Inclusion of processor would
add a complexity to the SCM analysis. To add the discussion on SCM of agri-processing
product, to share our experience three collaboration systems in agri-product processing
i.e. the agro-industry model for mango puree, at Cirebon,West Java; semi manual
production of single strength citrus juice processing at Nabire, Papua; integrated fresh
handling and processing for citrus at Sambas, West Kalimantan; have been analyzed.
SCM approach on fresh product can also be used on SCM agri-product-processing. SCM
on agri-processing is focusing on the processor whilst on fresh product focusing on the
farmer. Results of the analyzes of the SCM manufactures showed that at Cirebon is at
early stage four, Nabire at the end stage one, and West Kalimantan at early stage two.
Analyses on the pattern of collaboration indicated that at Cirebon, the collaboration
system is operational-collaboration system (OCS) with the strong role of the government;
at Nabire the collaboration is the general trade system (GTS); and at Sambas will be the
operational-collaboration system (OCS) with the strong role from the private. The
understanding on SCM by performing the analysis existing SC provide help to the
research staff in developing and placing the agro-industry model to the society. It is
suggested that IAAT research staffs also received a sound training on SCM to help them
to perform their duties i.e. assessing the model of agro-industry to local community.

Key Words : SCM, banana, mango puree, single strength citrus juice, tofu, ago-industry-
model.
 INTRODUCTION
Supply chain management in agri-fresh produce has been discussed, and found
benefit to the industry. The concept which was also started to be discussed widely in
developing countries such as in the workshop on ‘Agri-product Supply-Chain
Management in Developing Countries’ (Johnson and Hofman 2003). The SCM as a
concept has been applied in USA and Europe, simply been defined as the management of
entire set of production, distribution, and marketing processes at which the consumers
having appropriate quantity, quality and price of the product (Woods 2003). Development
or enrichment of the concept has been suggested such as the possibility being merged
with SSM (soft system management) (Dimyati 2003). At deeper study, Singgih and
Woods (2003) looked on the effect of culture to the Supply-Chain of banana in Indonesia
and Australia (Singgih and Woods, 2003). Application of the SCM concept to find out
the problem for development on banana industry at a case study at Cikalong, Cianjur was
also been made (Setyadjit et al. 2003). There have also been done on other commodities
such as SOE mandarins at West Timor (Woods, Wei, Singgih and Adar, 2000; Wei, Adar,
Woods and Suheri, 2003), and introducing training for food safety in the chain of
vegetables (Morgan, Iwantoro and Lestari 2003). All the development or applications of
the concept are to the fresh horti-produce.
Even though it was mentioned that the concept been include the processor (Woods
2003) there was still limited discussion has been done to evaluate the role of processor in
SCM of the product during the workshop on ‘Agri-product Supply-Chain Management in
Developing Countries’. Include processor in an SCM discussion might add a complexity
by giving more actors and longer chain and thus causing loss of focus. The only example
presented during the workshop was the production of starch from cassava (Wheatly and
Peters, 2003).
It is already known that the added value giving opportunity both to the farmers
and processors to have an economic benefit in developing countries. The need for raw
material for the processing industry is a development of the customer and means a
sustainable production to the farmers. Horti-products are perishable and seasonal. Thus,
processing the product would provide opportunity for wider distribution of the product,
preventing product loss, increasing the price at farm gate by absorbing the excess of

2
product during the peak season, overcoming the bottle neck in connecting the farmer to
consumers, and increase the opportunity of export of off grade product by changing the
form.
The aim of the activity was the characteristics a supply-chain management
concept in the farmer- processor-customer system for a agri-processed-product without
comparing it with the SCM concept of farmer-customer system on fresh produce. There
were also efforts to find out the best system for formation of a alliance company applying
an innovation from the R and D institution (i.e. agro-industry- model by ICAPRD) with a
participatory approach. To achieve the goals three cases of agri-product industry model
were analyzed.

MATERIALS AND METHOD

Materials
Three case studies have been used for the sources of study. First is collaboration
at Cirebon-District, West java. In the collaboration the farmer is involved, the champion
is CV. PU, and ICAPRD is source of technology, and other source of funding is Cirebon
Agriculture Authority (DINAS). The main target product was mango puree which has
been developed to other fruit such as soursop, strawberry, lime, white guava and pink
guava.
Second is semi manual production of single strength citrus juice processing at
Nabire, Papua. Involvement of private company PT APM, PT SAP, and ICAPRD is
source of technology. Directorate of Civil Mobilization, Department of Labor and
Transmigration provided the fund.
Third is the integrated fresh handling and processing for citrus at Sambas, West
Kalimantan. The champion is PT SKS in collaboration with Tlekung Citrus Loka,
Institute for Research and Assessment of Agriculture Technology of West Kalimantan,
Sambas local government. The industry is medium scale businesses with semi automatic
single strength citrus juice line process and planning for the upgrade of the machinery to
the concentrated product in 2006.

3
Method
There are three types of approach has been performed, first is by using the six
principles of supply chain concept namely knowing customers and consumers, creating
and sharing value, make sure the products meets what the consumers want, effective
logistic/distribution, information/communication strategy, and effective relationships
(AFFA2002; Ledger, Lindsay, Hofman, Woods, and Singgih 2002; Setyadjit et al. 2003;
Woods 2003).
Second approach is application of SCM by analysing the level of SCM being
applied (Indrajit and Djokopranoto 2002) such as step one is independent among the
member of the chains or collaborators, step two is integrated planning in limited member
of the chain, step three is integrated planning and monitoring, step four is integration in
concept, planning, implementation, and monitoring.
Third is looking at pattern of collaboration ( Sumardjo, Sulaksana and Darmono
2002) such as Nucleus and Plasma System (NPS), Sub Contract System (SCS), Agent
System (AS), General Trade System (GTS), and Operational Collaboration System
(OCS). NPS is one nucleus with more than one up to many plasma (Appendix Fig. 1),
SCS is one main company working with more than one of group of collaborators
(Appendix Fig. 2), AS is one company collaborators working with group of collaborator
which selling their product to consumers or society (Appendix Fig 3), GT is collaboration
between company collaborators with group collaborators, the company selling directly to
the consumers/industry (Appendix Fig.4), OCS is one company collaborators working
with group of collaborators sharing resources (Appendix Fig 5).

RESULT AND DISCUSSION

Description of chains
From the description of study cases as chains (Table 1) it is clear that Study Case
1 and Study Case 2 are in final form while Study Case 3 is not final. The product of
Study Case 1 is mango puree at Cirebon, the product diversification is now available such
as soursop, strawberry, white guava, pink guava, lime, in the near future is also pineapple
puree; Study case 2 at Nabire is pure single strength citrus juice and concentrate by

4
addition of sugar; and Study Case 3 at West Kalimantan is planned for pure single
strength citrus juice, with concentrate.
Innovations from ICAPRD are Hygienic Process, Fresh Product, Natural aroma
and flavor, fast processing, waste treatment at Cirebon; Chemical treatment for
debittering, Natural aroma and flavor at Nabire; and Hygienic, better debittering method,
natural aroma and flavor, fast processing, waste treatment.
The champion is CV. PU for Cirebon, KUD GR for Nabire and PT SKS for West
Kalimantan all of them have business already. Sources of funding are Cirebon, ICAPRD,
DINAS, CV. PU, Minister of Research and Technology (collaborators: ICAPRD, Dinas,
CV. PU); At Nabire was Department of Labor and Transmigration (ICAPRD, PT APM,
PT SAP); at West Kalimantan will be Local Gov. ICAPRD, BPTP, PT SKS (Local Gov.
ICAPRD, BPTP, PT SKS).
At Cirebon customers are PT B; PT SF (started) (Farmer collaboration KTB,
Gapoktan); At Nabire customers not known (collaboration with farmer Not clear); At
West Kalimantan customers will be identified (Farmer collaboration will be developed
Through KUD).
The unit at Cirebon is Max 500 Kg per h of raw material/1 unit, semi automatic;
at Nabire is Max 150 Kg per h of raw material/2 units, semi manual; At West Kalimantan
will be Max 500 kg per h of raw material/1 unit.

Table 1. Description of chains of study cases

Attibutes Cirebon chain Nabire chain Sambas chain

Product Mango puree Pure Juice mandarin Pure juice mandarin
tight skin single tight skin single
strength strength.
Innovation by Hygienic, Fresh, Chemical treatment Hygienic, other
ICAPRD Natural aroma and for debittering, debittering method,
flavor, fast Natural aroma and natural aroma and
processing, waste flavor flavor, fast
treatment processing, waste
treatment
Champion CV. PU, having KUD, having other PT SKS, having
other business business other business
Stage of On going nearly Finished Started
collaboration established

5
Sources of fund ICAPRD, DINAS, Department of Local Gov.
CV. PU, Minister of Labor and ICAPRD, BPTP, PT
Research and Transmigration SKS
Technology
Collaborators ICAPRD, Dinas, ICAPRD, PT APM, Local Gov.
CV. PU PT SAP ICAPRD, BPTP, PT
SKS
Product Others : soursop, Single strength juice Single strength
development strawberry, white and old method of juice. Plan : modern
guava, pink guava, concentrate (sugar concentrate
lime. Plan : addition)
pineapple
Customer/consumer PT B; PT SF Not Known Will be identified
(started)
Farmer KTB, Gapoktan; Not clear Through KUD, will
collaboration contract be developed
Capacity/Unit Max 500 Kg per h Max 150 Kg per h Planned Max 500 kg
Number of raw material/1 of raw material/2 per h of raw
unit, semi automatic unit, semi manual material/1 unit
Patent 1 registered/1 1 plan 1 plan
follow

SCM six principles

Analyzing the chain is best when SCM on agri-product processing has been
existed. There is and innovation which is made by R and D institutions ready or nearly
ready. To make the innovations used by the society, and gives benefit, they have to be
adopted by the actors, thus, the chain has not existed yet.
For start, SCM analysis can be performed on the line processes own by the
champion to see how well, the performance of the champion and their chain. It is also
useful to analyze the SCM focus on the farmer to having data on product availability, and
use. The most prepare and known among the three is on SCM of mango processing at
Cirebon. Champion at Cirebon Model, all the time always trying to find out his customers
and knowing customers and possibly find out consumer. Without customer/consumer
there will be no order means no production and no profit.
Creating and sharing value among the member of the chains, is still difficult to be
calculated, but it is not impossible to be done. The reason is there is a strong separation of
management among three centers of SCM i.e. farmer, processor, and customer. The stock

6
will be made available for sale to farmer and company customer, could be the solution to
make a better relations.
In making sure the products meets the customer wants, the champion always
having discussion with customer, the specifications normally coming with the order.
Puree is better if it comes with certain sugar content and certain packaging system suite
requirements of company customer.
In effective logistic/distribution, the distribution of raw material and product
require cost; this normally comes from who will pay for the transport of the product. Is it
included in the price or not.
Information/communication strategy, is normally not working well among the
center of actors i.e. farmer, processor and company customer. Neutral sides such as
ICAPRD and DINAS have to have initiatives for meetings, and provide the topic of the
meetings.
In effective relationships among the member of the chain is not always easy to be
done since every actor naturally wants maximum profit from the system (see the SCM
contract farming for solution).
In Study Case two, the relationship that from the company to the ICAPRD is very
clear, but there is no relationship to the source of fund. The relationship of the champion
with others is not clear, even though the activity is no longer been funded. It is because
the relation is classified as general trading (see SCM contract farming, study case 2).
In case study three the relationship among the actors is not yet been defined even
though the actors has been identified. The nearly full plan (see SCM-contract farming)
showed that 2 supply chain will be put together in one system.

SCM manufacture principles

First Case Study; by concentrating to the processor, the concept is understood
well by all collaborators such as CV. PU, DINAS, Farmer, and ICAPRD, but it is only for
mango puree line process. The motto i.e. the important of the economic development by
introducing the processor in the system, will also provide job opportunity to the local
community.

7
 Planning for production were done together between farmer, and contract also
being made to anticipate the peak season when the price is at the lowest level during the
year i.e. at the month of 10, 11, 12. Not all mangoes produced by local farmer is able to
be absorbed by processor. During peak season the price is normally the lowest along the
year, thus many farmer did not harvest their mangoes because of the low price and
incapability of the trader to absorb all products. The referee for the transactions are Dinas
and ICAPRD. The planning for production at processor level is discussed by CV. PU and
PT SF but PT B is prefer to have one week order system. However, the referee is still un-
available.
Implementation of all plans have also been done between farmer and CV. PU and
so far has also been done by CV. PU and PT B and PT S. It is the understanding among
the collaborator when one of them having expectation that has not been met.
The monitoring is now already been done between ICAPRD and CV. PU and
some time Dinas. However, still no simultaneous monitoring between CV. PU and their
collaborators at raw materials side and customers side. Looking at four stages, then, the
SCM is at the beginning of step four. The monitoring is still required to be developed to
have better implementation.
Second study case, for the whole chain is end of step one since there is no
correlation between KUD and ICAPRD, and the sponsors. Third is still very early of
steps two since the whole chain is still growing. Expectation the chain will apply the
SCM principles.

8
SCM contract farming
Five Patterns (see Annex) of SCM contract farming (Sumardjo et al. 2002). In CS
1 (Fig 1), at Cirebon there is one private company as a centre; couple of government
institutions (Dinas and ICAPRD) supporting the private company. The ICAPRD also
received the start up capital from Research and Development Minister for application of
new borne technology. There is sharing in capital, land, building, technology and capital.
The company received the raw materials from Gapoktan (contract supply); and the
company marketed their product to PT B and PT SF. Since there is a share in their usaha,
thus the pattern is operational collaboration system (OCS). The role of the government is
still very strong thus it is categorized as OCS with strong role of the government.

Dinas Res and Tech

ICAPRD

Land
Gapoktan CV. PU Bld PT. B
Technology
KTB 1,2 Capital
Farmer1,2,3
PT. SF

Fig. 1. Study Case 1, Cirebon District

At second case study at Papua (Fig. 2); there is whole model where the champion
received a complete paket of technology from the Directorate of Civil Mobility but the do
not have ability to provide the paket. Thus, they asked the PT APM and PT SAP to
provide the good. The good is provided by ICAPRD with demand from PT APM; but the
training is provided by PT SAP. Since PT SAP does not have the properties they borrow

9
technician from ICAPRD. Since the system is similar to general trading (Appendix Fig.
4), thus it is categorized as general trading system (GTS)

Dir of Cvl ICAPRD

Mobility

PT APM PT SAP

Farmer KUD GR Marked

Fig. 2. Study Case 2, Nabire Papua

The case study three (Fig 3) is even more complex compare to other 2. There are
2 activities which are closed together i.e. Fresh handling and processing. The local
government will give the umbrella to all the units and farmer. The IAARD will give the
umbrella to all the R and D institutes. There is also even more difficult is Provincial
Dinas that very difficult to place into the system. How the SKS fresh handling is
connnected to the SKS processing and how the farmer is connected is also another
problem. The chain system is being developed but the complexity is already clear.

10
 Sambas IARRD
LOC GOV

DINAS ICAPRD
Prov
DIN AG DIN IND LOKA TLK IAAT

KUD UB SKS FRESH HDL Central

KTB, 1,2 Mkt, JT

Farmer, 1,2,3

SKS Processing Unit Market ?

Fig. 3. Study Case 3, West Kalimantan

It is good to note the experiences by the Sumardjo et al. 2002 on the strength on
types of alliances such as Operational Collaboration System (OCS), and General Trade
System (GTS). In the OCS the benefit are there is independence among the members in
effort to have the profit, the chain is more competitive, and the economic development
is enhanced. In the GTS is the cooperator group produced goods to be marketed by the

11
company cooperator, thus the cooperator group do not have to market their product by
their own.
The weakness of OCS is the profit share taken by the collaborator company which
handle the marketing and processing of the product is too high, there is a tendency to be
a monopsoni by collaborator company, there is still no third party that can effectively
having role to solve the problem. In the GTS, practically the price and the production
capacity is developed only by the company collaborator, the trading system likely to
become consignment.
Solution in OCS is humanistic and family based solution (‘musyawarah’); in the
GTS is more commitment from the collaborator company, or association of producer to
performed win-win solutions.

General Discussion
According to the technology transfer, the technology produced by the ICAPRD
will be transferred or assessed by the I AAT. The technology produced by ICAPRD is a
in the form of model agro-industry or a complete example in the field. Next step the
model can be assessed by the IAATs at their own region. The IAAT, then, also have a
strong capability in understanding the SCM as concept or application so the technology
can be further adopted.
Analyzing one case with different thought i.e. SCM five principles, SCM
manufacture and SCM contract farming did not cause any confliction. One thought gives
supplementation to another to make even a better picture of the chain. Thus when we
trying to develop a alliance company such as the case of ICAPRD but there is a problem,
then we can analyze the chain with various thought, and the potential solution could be
there. The Concept of companies i.e. nucleus company, executor company, and puller
Company; might also be useful to develop an agro-industry model.

CONCLUSION

1. The SCM of fresh products can also be used to analyze the SCM on processed product.
SCM of fresh products is focusing to the processors.

12
2. In the SCM manufacture system, there is indication that SCM at Cirebon is early stage
4, at Nabire is end of stage 1, and West Kalimantan is early stage 2. The weakness of the
system is in monitoring.

3. In the SCM contract farming, the pattern of contract farming can be used in
categorizing the systems in the models of agri-processing. Thus, by analyzing the SCM
system, the weakness is identified thus can be anticipated.

ACKOWLEDGEMENTS
At this occasion we would like to thank to Ir. H. Sholeh the Director of CV. PU,
Dr H, Sathori Djauhari the previous head of Dinas Cirebon; Current head Mr. Ali; Mr.
Nyoman and Edi from Directorate of Civil Mobilization; Mr. Burhan Mayor Sambas
District, DR. Tatang Hidayat Head of Institute for Research and Assessment of
Agriculture Technology of West Kalimantan, Director of PT SKS Mr. Aon.

References
AFFA (Separtment of Agriculture, Forestry and Fisheries Australia), University of
Queensland and National Food Industry Srategy 2002. Forming and Managing
supply cahin in Agribussiness: learning from others. Canberra, AFFA, CD-ROM.

Wheatly, C., Woods, E.J. and Setyadjit. 2003. The Benefits of Supply-Chain Practice in
developing Countries –Conclusions from an International Workshop. Eds.
Johnson, G.I. and Hofman, P.J. Agriproduct Supply-chain in Developing
Countries, ACIAR Proceedings No. 119, 188-194.

Indrajit, R.E and Djokopranoto, R. 2002. Konsep Manajemen Supply Chain, Cara Baru
Memandang Mata Rantai Penyediaan Barang, Jakarta, Grassindo, 264.

Morgan, W., S. Iwantoro, and A.S. Lestari 2003. Improving Indonesian Vegetable Supply
Chains. Eds. Johnson, G.I. and Hofman, P.J. Agriproduct Supply-chain in
Developing Countries, ACIAR Proceedings No. 119, 139-141.

Setyadjit, A. Dimyati, E.M. Lokollo, S. Kuntarsih, R.S. Basuki, A.Hidayat, P.J. Hofman,
S.N. Ledger and E.J. Woods. Analysis of the Constraint to Banana Development
in Indonesia Using the Supply Chain Concept. Eds. Johnson, G.I. and Hofman,
P.J. Agriproduct Supply-chain in Developing Countries, ACIAR Proceedings No.
119, 59-68.

13
Singgih, S. and Woods, E.J.2003. Banana Supply Chain in Indonesia and Australia :
Effects of Culture on Supply Chains. Eds. Johnson, G.I. and Hofman, P.J.
Agriproduct Supply-chain in Developing Countries, ACIAR Proceedings No. 119,
44-52.

Sumardjo, J. Sulaksana and W.A. Darmono. 2002. Teori and Praktik Kemitraan
Agribisnis. Panebar Swadaya, Jakarta, 88.

Wei, S., Adar, D., Woods, E.J., and H. Suheri. 2003. Improved Marketing of Mandarins
for East Nusatenggara in Indonesia. Eds. Johnson, G.I. and Hofman, P.J.
Agriproduct Supply-chain in Developing Countries, ACIAR Proceedings No. 119,
98-106.

Wheatly, C. and D. Peters. 2003. Who Benefits from Enhanced Management of Agri-
Food Supply Cahins? Eds. Johnson, G.I. and Hofman, P.J. Agriproduct Supply-
chain in Developing Countries, ACIAR Proceedings No. 119, 113-123.

Woods, E.J. 2003. Supply-chain Management : Understanding the Concept and Its
Implications in Developing Countries. Eds. Johnson, G.I. and Hofman, P.J.
Agriproduct Supply-chain in Developing Countries, ACIAR Proceedings No. 119,
18-26.

Woods, E.J., Wei, S, S. Singgih and D. Adar. 2000. Supply chain management as Beyond
Operational efficiency. Acta Horticulturae, 575, 425-431.

Plasma

Plasma Company Plasma

Plasma

14
Appendix Fig. 1. NCS

Colla Group Colla Group

Company
Colla

Colla Group Colla Group

Appendix Fig. 2. SCS

Supply

Colla Group Colla Company

Consumer/ Marketing of colla group

Society produce

Appendix Fig. 3. AS

15
 Supply
Colla group Colla Company

Consumer/ Marketing of Colla Group

Industry Produce

Appendix Fig. 4. GTS

Supply

Colla Group Colla Company

-Land -Cost
-Tools -Financial cap
-Technology -Technology
-Management

16
Fig. 5. OCS

17