A study of agribusiness supply chain systems for small farmers in dryland areas of Lombok Island Indonesia : a pluralistic approach

Abstract

Despite the contribution that agriculture makes to the Indonesian Gross Domestic Product, the income of small subsistence farmers continues to fall. While many development activities and policies have been implemented to reduce the gap in income between farmers and non-farmers, the situation remains unchanged. In part this is because the majority of research has focused on improving production rather than addressing the social and economic aspects of farming and its supply chains. Very few approaches have adopted a holistic systems approach. This study examines holistically the agri-food supply chains of dryland farmers of Lombok, in eastern Indonesia, using a pluralistic approach. The objective of this study was to investigate the utility of developing a pluralistic model which combined the benefits of SSM with hard systems approaches like statistical and technical efficiency analyses and test this approach on the agri-food supply chains of dryland farmers of Lombok, in eastern Indonesia.Agribusiness is a complex social system both to understand and to manage but is also driven heavily by the need to produce efficiently for a market. This means that solving problems within such systems requires the melding of both the qualitative and quantitative aspects in a pluralistic way. The research presented here combines an interpretative research approach the Soft Systems Methodology (SSM) with hard systems tools like descriptive and inferential statistical analyses, and technical efficiency analysis.The SSM analysis was successful in identifying a feasible pathway for change for the agri-food supply chains studied. The key benefits of adopting this approach was its ability to produce realistic and feasible solutions in a culturally acceptable way and to unconsciously help the supply chain members to understand, look at, think, analyse and solve their problems through collaborative action. It is however, a complex tool to use and there is a need to develop a simplified SSM approach which significantly reduces the sophisticated systems jargon and technical terms that have been developed by the SSM research community if it is to be adopted more widely for use in solving agri-food supply chain problems in developing countries.The farm productivity analysis found significant variations in the technical efficiency of the farms analyzed; from 47.6 to 94.5 per cent, indicating that there is still significant opportunity for improvements in production practices. Age and education were found to significantly affect farm-specific technical efficiency suggesting that programs that educated the rural young generally, but more specifically in new innovations and farm management practices, would show production efficiency benefits.An analysis of the marketing system revealed that a number of market intermediaries were involved in the marketing and distribution of agricultural commodities. Market intermediaries arrange for the collection, consolidation and subsequent transport of the product and to varying degrees, with the sorting, grading and packing of the product to better fulfill downstream customers’ needs. Quality at the farm gate was problematic, for much of the product is sold under the tebasan system where there are few incentives for quality and farmers face difficulties in disposing of product which fails to meet customers’ expectations. As the quality of the product deteriorates as it moves down the supply chain, the marketing margin increases to cover the increasing losses, and the uncertainty of price inherent in highly volatile commodity markets. In order to reduce risk, farmers and downstream market intermediaries prefer to transact with those exchange partners with whom they have developed long-term relationships. However, in the absence of reliable market information and the propensity for actors to sell to whichever market intermediary offers the highest price, little trust is evident in the exchange. As the geographic distance between actors increase, relationships down the supply chain become increasingly less personal and more businesslike.This study resulted in a new pluralistic model for analyzing the agribusiness supply chain of Lombok referred to as the Lombok Method (LM). This pluralistic approach was found to be a more effective way to analyse and design solutions than SSM alone for the following reasons. First, the inclusion of hard system analysis enhanced the robustness of the model produced which in turn means it can be validated and challenged. Secondly, hard systems approaches were used to verify the findings of the SSM and also provide feedback into the SSM. Finally, the SSM was able to bring the experience of the participants to the interpretation of the hard system analysis.While the model was successful in providing some solutions to the problems experienced in the supply chains, the research also highlighted the need to do further studies that 1) identify the nature and scale of market failure, 2) apply optimization techniques to supply chain systems and 3) identify a means of including external variables like climate in the model. There may also be a role for modeling the relationships between supply chain participants using structural equation modeling (SEM) or causal loop diagrams (CLD). With a focus on SSM there is a need to develop a simplified approach for use in developing countries and establishing standards for the conduct of human interaction in the SSM process.