Lecture :

Sandra Sunanto, Ph.D

Prof. Meine Pieter Van Dijk

VALUE CHAIN MANAGEMENT

GLOBAL VALUE CHAIN of VEGETABLES

Presented By:
Jovian Tedja - 2014811005

MAGISTER MANAJEMEN
PROGRAM PASCASARJANA
UNIVERSITAS KATOLIK PARAHYANGAN
2015

Vegetables Distribution Process :

Foreign Producers

Farmers

Exporter Agents

Distributors / Collectors
/ Transporters

Importers

Other Countries
Distributor (Out of
Wholesale

Wholesale Markets

Intermediary
Wholesalers

Other Retailers

Retailer (Supermarket
or other mass
merchandiser)

Hotel

Restaurants

Final Users

Retailer
(Traditional

Other Intermediary
Users

INTRODUCTION
Indonesia 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 ACTORS

You 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 producers
Distributors / 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 debt
Retailers (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 PROCESS

As 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.

CERTIFICATION
Generally 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 ROLE
This 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 vegetables
Marketing 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 CHAIN

There 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.