CC BY
9
DOI https://doi.org/10.18551/rjoas.2021-03.03
DYNAMIC SYSTEM OF SWEET PEPPER SUPPLY CHAIN IN INDONESIA
Haryati Novi*, Citraresmi Ardaneswari Dyah Pitaloka, Fanani Rizki Sofia Febriana Angga Akbar, Syah Yafi Alam
Department of Agricultural Social Economics, Faculty of Agriculture, University of Brawijaya, Indonesia *E-mail: [email protected]
ABSTRACT
Agribusiness players play an essential role in creating good business relationships in every supply chain for agricultural products in Indonesia. This research was conducted with the aim of 1) Knowing the actors involved in the Sweet pepper product supply chain, 2) Knowing the roles of the actors involved in the Sweet pepper product supply chain, and 3) Knowing the relationship between these actors through a dynamic system. This research is descriptive with a case study on the cultivation and trading of sweet pepper, where this commodity has an excellent opportunity to be developed in Indonesia. Even though the export value is high, the sweet pepper commodity has a particular consumer and is not as many as other fruits. The research was conducted in Pasuruan, Indonesia, with a purposive method involving related actors. In this research, they were found six actors in the supply chain: farmers, collectors, middlemen/wholesalers, retailers, and consumers. The six actors carry out a harmonious business relationship in the cultivation sector, the first and second-tier product distribution sectors to consumers.
KEY WORDS
Dynamic system, sweet pepper, Indonesia.
The agribusiness sector is vulnerable because it is highly influenced by nature. Besides that, agricultural commodities have unique characteristics because of their sensitivity to climate change and consumption patterns. Consumer demand is also susceptible to cultural factors that affect the amount of demand on certain days, such as religious days, holidays, and the harvest season of a commodity. Besides, the agribusiness supply chain involves many actors in product transfer activities from producers to consumers. A supply chain in agribusiness involves farmers, collectors, wholesalers, retailers, and consumers (Lambert & Cooper, 2008). The relationship between actors in the supply chain impacts product transportation value, which means an inadequate relationship between actors in the supply chain will affect the supply chain's effectiveness (Janvier & Mbang, 2011).
Common problems often faced by farmers are high production risk and income gap in the agribusiness sector. As producers, farmers can rarely add value to the products they produce, so they often get the lowest income in the value chain. Information asymmetry and low bargaining power are why farmers are on the side that accepts the most significant production risk and the smallest income in a value chain. Many agricultural commodities have great potential in the market. However, stuck trade systems are often not profitable for farmers.
Sweet pepper is a commodity with an excellent opportunity to increase farmers' income. Sweet pepper is a commodity that can have a particular consumer who has a high selling value. Currently, many hotel industries use sweet pepper as a high-quality food ingredient. The fast-food and restaurant business sector also uses this type of vegetable as one of the ingredients to produce food with a distinctive taste. Over time, households also become sweet pepper consumers, although the numbers are not as high as the hotel and restaurant sector.
As the country with the largest production of chili and green sweet pepper in ASEAN, beating Malaysia and the Philippines, Indonesia has 96% of the ASEAN harvest area of chili and green sweet pepper (Indarti, 2015). Sweet pepper production in Indonesia also
continued to increase from 5,256 tons in 2016, then increased to 7,390 tons in 2017, the production of sweet pepper increased rapidly in 2018 to 18,151 tons 19,358 tons in 2019. of the total production of average sweet pepper. East Java contributes 47 percent annually, while in the last two years, East Java's contribution to sweet pepper production has reached more than 50 percent. while the largest sweet pepper producer in East Java is Pasuruan (BPS, 2017)
The availability of harvested land and productivity, which continues to increase throughout the year, makes sweet pepper a commodity which brings great opportunities. Therefore, it is necessary to understand the supply chain of sweet pepper and know the actors involved in it and each actor's roles in the supply chain. Research on supply chains in the agribusiness sector has been carried out using a combination of approaches. However, literature studies on the supply chain of sweet pepper are still scarce. Besides, analyzing the role of agribusiness actors is very important to do in order to understand the supply chain and optimize it so that it becomes better and more efficient. This issue is often neglected so that the supply chain effectiveness cannot well-optimized. Therefore, this study aims to describe the actors involved in the supply chain of sweet pepper and know the roles and relationships of actors in the supply chain.
METHODS OF RESEARCH
The agribusiness supply chain is a system that involves many parties to distribute a commodity from farmers (producers) to consumers, while the actors involved in this supply chain system are farmers, collectors, wholesalers, intermediaries, and consumers (Krishnan et al., 2020). The involvement of agribusiness actors is not only in buying and selling activities but also in exchanging information and forms of cooperation with one another to get profit from the activities they carry out. Therefore, it can be said that every agribusiness actor plays an essential role in the agribusiness supply chain that cannot be separated from the supply chain itself (Humphries & McComie, 2010; Mena & Stevens, 2010). Given the significant role of each actor in the agribusiness supply chain, it is s therefore necessary to understand the role of agribusiness actors to optimize their role in the agribusiness supply chain.
Collaboration in the supply chain means recognizing the strengths between actors and building investment power, either materially, in the form of money or non-material, such as information, human resources, abilities, and knowledge to produce a value that they can share, not only during the contract period but also in the future. The heart of this cooperative relationship is the product or service produced. Each actor will have standards and systems that are interrelated to meet mutually agreed standards or in a win-win relationship. This complex system keeps them in mutually sustainable beneficial connection for a long time (Humphries & McComie, 2010).
However, each supply chain has a unique complex structure and differs from one another. Differences in supply chains in agri-products can be influenced by particular groups' commodity, location, culture, or values. The number of actors' involvement also influences the length and shortness of a supply chain in supply chain. The more actors involved, the more complex supply chain. There is not only product flow exist in the supply chain, but also information and finance flow. The attachment of one actor to another actor can also be described in a supply chain to define the relationship between actors in the supply chain.
The different structure of the supply chain causes actors' roles in the supply chain to differ according to the structure of the supply chain itself. Research on the value chain carried out by Rofi, (2018) on the coffee commodity shows that the coffee supply chain consists of farmers, collectors at the village, district, sub-district levels, district wholesalers (inter-provincial traders), inter-island traders, processing industries, food stalls, exporters, markets national, and consumers with six types of marketing channels. Where farmers act as coffee producers and coffee distributors in home industries, other research on value chain analysis on cabbage commodities show that the actors in the cabbage value chain consist of farmers, farmers, agents, wholesalers, retailers, traders, exporters, importers, supermarkets,
and consumers with five different marketing channels. Farmers act as producers of cubes and marketing agents to exporters even though they sell most of their products to agents (Arsanti et al., 2017). In the shallot commodity, the farmers act as shallot producers who distribute their products to other trading partners. Nevertheless, farmers also play a role as traders in online markets in marketing their products independently (Pamungkassari et al., 2018). However several studies state that farmer merely acts as a producer (Pratama et al., 2018; Rizqiah, Fatih. Setiawan, 2014).
Understanding the agribusiness supply chain and the role of actors in it is very important to know the problems faced by farmers in a supply chain. Although several studies state that the supply chain is fair enough for farmers with insignificant profit differences (Arsanti et al., 2017; Rofi, 2018), the findings of other studies show that farmers have the second-highest value-added ratio after distributors. However, farmers have the lowest profit value ratio in the value chain. The small profit ratio is also aimed at the Papaya Calina value chain, where farmers get the lowest margin ratio value than distributors even though they bear the most significant risk as producers and immense transition costs (Rizqiah, Fatih. Setiawan, 2014). each of the actors in this value chain has an insignificant income difference and can be categorized as a fair value chain (Arifin et al., 2020).
This research was conducted in April to December 2020 in Pasuruan, East Java Indonesia. The research location was chosen intentionally, based on the consideration that it was one of the regency in East Java which was the center of sweet pepper production. This is a descriptive study related to dynamics system of sweet pepper supply chain. The sampling technique used is non-probability method (purposive) by interviewing research respondents involved in sweet pepper supply chain management. Therefore, the type of data used in this study is primary data. Data analysis is carried out by using descriptive analysis
RESULTS AND DISCUSSION
Respondent Characteristic. Characteristics of actors studied included age, education level, main and side jobs, number of families, length of cultivation, and land ownership can be seen in Table 1. Respondents in this study were grouped according to their role in the sweet pepper supply chain. There are three male farmers aged 15-60 years. The sweet pepper farmers' average education in Pasuruan is that they have graduated from senior high school and have varied experiences in farming sweet pepper. Each of the three farmers has experience farming sweet pepper from 1-3 years, 3-5 years, and one farmer has experience farming sweet pepper for more than five years. In the sweet pepper supply chain in Pasuruhan, three collectors and one distributor are male and have the same characteristics, ranging from age, education level, and work experience of more than five years. There is only one preprocessor in this supply chain, namely the sweet pepper chip processor located in Batu. Apart from producing sweet pepper chips, the processed sweet pepper producers also produce mushroom chips, which have been done for more than five years, while sweet pepper chips' processing has only started in the last 1.5 years.
Sweet Pepper Supply Chain Management. The sweet pepper supply chain system consists of several actors or stakeholders who have needs and roles. Actors along the supply chain function optimally to achieve common goals.
Farmers are the main actors in the value chain. Farmers cultivate sweet pepper (on-farm), which changes the input (seeds), starting from preparing the land, planting, maintaining, until harvesting into output in the form of fresh sweet pepper, both green, red, and yellow sweet pepper. All of the sweet pepper harvests are sold to collectors in this study so that farmers act as producers and collectors' suppliers. In this study, farmers as producers of sweet pepper do not play a role as price takers. Thanks to the development of technology so that farmers can access sweet sweet pepper' price information. Fellow farmers in Bandung and Bali usually become information sources of the sweet sweet pepper' market price since they are the largest sweet pepper producer in Indonesia. With the knowledge of farmers, sweet pepper' selling price is determined based on an agreement between the farmer and the collector, taking into account the market price.
Figure 1 - Supply Chain Actors and Mapping
The buying process for sweet pepper is usually carried out in a collaborative manner where the collectors receive several farmers' produce. In the Pasuruan Regency, there are three main collectors who handle the sweet pepper farmers' harvest, and each collector has about 5-15 suppliers (farmers). They play a role in assist the distribution of sweet pepper products to consumers. The sweet pepper that farmers have sorted will be purchased for resealed by them. There are several sales channels used by collectors, among others, to retailers, traders outside the city, and wholesalers who can sell sweet pepper more widely.
Wholesalers will receive most wholesalers' sales and then transferred to the next actor in the value chain to reach consumers' hands. Fresh sweet sweet pepper in the green, red, and yellow color types with quality grades A and B are the final consumer's sweet pepper. Most of the sweet pepper supply chain traders have their operations center in Batu City so that the distribution of sweet pepper to the next actors takes place at Karangploso Market, which is one of Malang's central markets. Not all sweet peppers are sold on the market to consumers, but in and around Batu City, wholesalers selling sweet pepper target sweet pepper processors, hotels, and markets outside the city.
Retailers are displays of hands from market traders, and they are usually located in the Karangploso market. Retailers usually buy grade B sweet pepper to market directly to consumers. The target market for retailers is households, small restaurants. Retailers are generally traders who sell various types of vegetables in the market and have a high intensity of direct interaction with consumers.
Sweet pepper processing plays a role in increasing the added value of sweet pepper before finally reaching the consumer. In this study, the sweet pepper processor was the producer of sweet pepper chips. The processing of sweet pepper into chips can increase the selling value of sweet pepper and become a snack innovation as a form of food diversification. Sales of sweet pepper chips produced by sweet pepper processors in this study have reached the national market, even starting to enter the international market with shipments to Singapore and Korea.
The retailer plays the role of a seller who buys some fresh sweet pepper and then sells them directly to the final consumer. In this study, retailers are traders in Pasar Besar and Pasar Karangploso Malang. At Pasar Besar Malang, only fresh green and red sweet pepper is sold with grade B quality, and the products are purchased directly from collectors. Meanwhile, Karangploso Market retailers sell fresh green, red, and yellow sweet pepper with
grade A and B quality purchased from wholesalers. Retailers do not usually buy in large quantities.
Consumers are the last actors in the value chain. In this study, consumers consisted of consumers who bought fresh sweet pepper products and consumers who bought processed sweet pepper in sweet pepper chips. Some hotels buy fresh sweet pepper for a mixture of dishes at their restaurants and out-of-town traders.
Actors in the supply chain system have their own needs and roles in the supply chain. Table 1 presents the needs of each actor that must be met to achieve supply chain sustainability.
Table 1 - Actors in the supply chain and its role in Indonesia
No. Actors
Needs / Role
1. Farmers
2. Collector
3. Wholeseller / Middlemen
4. Proccessor / Industry
5. Retailer
6. Consumer
A product that is always available for sale A product that is always available for sale A product that is always available for sale
Availability of fresh sweet pepper as raw material for sustainable production A product that is always available for sale
Get fresh sweet pepper for final consumption_
Figure 2 - Supply chain system
The dynamic system model used in this study is divided into three sub-systems, namely the supply, demand, and production sub-systems. The supply sub-system consists of potential supplies from farmers. The demand sub-system consists of requests for processed products from distributors and retailers. Furthermore, the production sub-system is the production by farmers and farming capacity. The relationship between the variables in the system and how they affect one another can be explained in a causal diagram or a causal loop diagram (CLD). The feedback relationship between these variables on which modeling using dynamic systems is based can be identified. Based on the findings of literature reviews and field observations, the variables that affect the system are the cultivation sector, the first level product distribution sector, and the product distribution sector. Causal Loop diagrams will be limited to the product distribution sector at the first and second levels. This condition represents cases that often occur in Pasuruan, Malang Regency.
Cultivation Sector. Farmers carry out the sweet pepper cultivation sector. The sweet pepper cultivation sector starts with calculating the total production capacity. Maximizing the total production capacity will have an impact on increasing farmers' income. The factors that influence farmers' income are the area of cultivation land and production costs. Revenue in the cultivation sector is the multiplication of selling price and quantity. Here are the conditions that occur and are intersections with the product's distribution at the first level.
Product distribution sector at the First Level. The production capacity acquired from the cultivation sector will be used to satisfy collectors' and intermediaries' needs. Collectors act as actors who carry out supply chain management in the product distribution sector. Collectors are people who go to villages and cooperate with sweet pepper farmers to absorb their cultivation. Collectors buy sweet pepper products then sell them again. The collectors 'profits are obtained from the collectors' income minus the costs incurred during the transportation process. Collectors will re-sell it to middlemen in the next sector.
Note:
■■ Cultivation Sector
■■ Product distribution sector at the First Level ■■ Product distribution sector at the Second Level
Figure 2 - Dynamics System of Sweet Pepper Supply Chain
Product distribution sector at the Second Level. The product distribution sector at the second level is from collectors to middlemen. Brokers buy sweet pepper cultivation from collectors and sell it further, either to wholesalers, restaurants, or retailers. Middlemen benefit from the income reduced by the middleman's distribution costs. Middlemen sell again to the next party by setting the market price.
CONCLUSION
Actors involved in the sweet pepper supply chain in Pasuruan, Indonesia are farmers, collectors, middlemen or wholesalers, retailers and consumers. The case study in Pasuruan, Indonesia shows that out of the 6 actors, farmers, collectors and middlemen are the ones who most often carry out the trading system which is reflected in the cultivation sector, the first level distribution sector and the second level product distribution sector. Future research is expected to see the added value obtained from each actor involved in the supply chain.
REFERENCES
1. Arifin, B., Wicaksono, E., Tenrini, R. H., Wardhana, I. W., Setiawan, H., Damayanty, S. A., Solikin, A., Suhendra, M., Saputra, A. H., Ariutama, G. A., Djunedi, P., Rahman, A. B., & Handoko, R. (2020). Village fund, village-owned-enterprises, and employment: Evidence from Indonesia. Journal of Rural Studies, 79(April), 382-394. https://doi.org/10.1016/jjrurstud.2020.08.052.
2. Arsanti, I. W., Sayekti, A. L., & Kiloes, A. M. (2017). Analisis Rantai Nilai Komoditas Kubis ( Brassica oleracea L ): Studi Kasus di Sentra Produksi Kabupaten Karo (Value Chain Analysis of Cabbages: Case Study in Karo District Production Centre). Pusat Penelitian and Pengembangan Hortikultura, Bps 2011, 269-278.
3. BPS. (2017). Badan Pusat Statistik (pp. 335-358). Badan Pusat Statistik. https://doi.org/10.1055/s-2008-1040325.
4. Humphries, A. S., & McComie, L. (2010). Performance measurement in the management of food supply chain relationships. In Delivering Performance in Food Supply Chains (pp. 19-36). Elsevier Ltd. https://doi.org/10.1533/9781845697778.119
5. Indarti, D. (2015). Komoditas Pertanian Subsektor Hortikultura Cabai. Pusat Data and Sistem Informasi Pertanian, 1-51.
6. Janvier, J., & Mbang, A. (2011). A New Introduction to Supply Chains and Supply Chain Management: Definitions and Theories Perspective. International Business Research, 5(1), 194-207. https://doi.org/10.5539/ibr.v5n1p194.
7. Krishnan, R., Yen, P., Agarwal, R., Arshinder, K., & Bajada, C. (2020). Collaborative innovation and sustainability in the food supply chain- evidence from farmer producer organisations. Resources, Conservation and Recycling, 105253. https://doi.org/10.1016/j.resconrec.2020.105253.
8. Lambert, D. M., & Cooper, M. C. (2008). Issues in supply chain management in Indian agriculture. Food for Policy, 83, 195-225.
9. Mena, C., & Stevens, G. (2010). Delivering performance in food supply chains: An introduction. In Delivering Performance in Food Supply Chains. Woodhead Publishing Limited. https://doi.org/10.1533/9781845697778.1.
10. Pamungkassari, A. R., Marimin, M., & Yuliasih, I. (2018). Analisis Kinerja, Nilai Tambah and Mitigasi Risiko Rantai Pasok Agroindustri Bawang Merah. Jurnal Teknologi Industri Pertanian, 28(1), 61-74. https://doi.org/10.24961/j.tek.ind.pert.2018.28.1.61.
11. Pratama, G. R., Hardjomidjojo, H., Iskandar, A., & Muhandri, T. (2018). Analisis Rantai Nilai Agroindustri Sagu Di Kabupaten Kepulauan Meranti. Jurnal Teknologi Industri Pertanian, 28(2), 199-209. https://doi.org/10.24961/j.tek.ind.pert.2018.28.2.199.
12. Rizqiah, Fatih. Setiawan, A. S. (2014). Analisis Nilai Tambah and Penentuan Metrik Pengukuran Kinerja Rantai Pasok Pepaya Calina ( Studi Kasus di PT Sewu Segar Nusantara ) Fatih Rizqiah (mencapai 20%), distribusi nilai tambah belum proporsional, inefisiensi biaya daya saing. Kegiatan manaje. V(1), 72-89.
13. Rofi, A. (2018). Strategi Peningkatan Pendapatan Petani Kopi di Desa Boafeo Kecamatan Maukaro Kabupaten Ende NTT. Majalah Geografi Indonesia, 32(1), 77-83.
