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Tech Boost for Indonesia’s Agricultural Supply Chain

A new digital marketplace where farmers could directly connect with customers is introduced in Indonesia to boost its agricultural sector as e-commerce started to take off in the country, especially during the COVID-19 pandemic. The developers realised that farmers, who usually reside in rural areas, are not quite familiar with technology and sales, so they quickly pivoted the business idea into a technology-enabled grocery service and B2B agricultural provider.

The tech company buys fresh produce from farmers and sells the goods back to end customers through an app and website. It also sells large quantities of produce to various supermarkets and beverage manufacturers in Indonesia. The firm streamlines the agriculture supply chain and logistics process by working with groups of farmers in West Java, Surabaya, and Bali. It also directly operates warehouses and sourcing hubs located close to the farming lands, making it easier for farmers to ship and store their fresh produce.

With millions of hectares of arable lands across 17,000 islands, agriculture is a vital sector in Indonesia, employing the largest share of the country’s workforce. Data provided by the Central Bureau of Statistics of Indonesia in 2020 shows that nearly 30% of Indonesian workers, or around 8.23 million people, depend on the agriculture sector for their livelihoods. Yet, the sector faces many problems, including poor supply chain infrastructure and lack of access to advanced technology.

One of the main problems of agriculture supply chains is that plantations are scattered in rural and remote areas with poor infrastructure, making transportation extremely difficult. Farmers have zero access to customers as they need to go through middlemen to sell their products, said the tech company.

The tech not only creates a sales channel for farmers but also provides business insights based on data collected by the app, so farmers can learn demand patterns in the market and adjust the supply accordingly. The tech team runs regular workshop programmes to educate farmers on reading the data to optimise their production, while it also shares frequent insights via messaging apps.

Supply and demand often do not match. For instance, the price of chilis fluctuates drastically due to erratic supply, while demand is always there. This can be prevented because chillies are not seasonal plant. They grow throughout the year, so farmers should be able to plan better to always meet the demand, added the tech developer.

The tech company currently partners with around 1,500 farmer groups in Indonesia, totalling over 10,000 individual farmers. The developer has five sourcing hubs in West Java to serve customers in Greater Jakarta and two other hubs in Surabaya and Bali. This number is certainly very small considering that Indonesia has more than 33 million farmers, so there is plenty of room for us the company to grow, they added.

Reports say that the Indonesian government and private initiatives are set to broaden agriculture’s contribution to economic growth and boost smallholder operations by encouraging the use of more advanced technology in the farming sector. Although economic diversification and urban migration have impacted the agricultural sector in recent years, the sector still provides a livelihood for most Indonesian households.

Indonesia is now turning to e-commerce and the greater use of digital tools to boost growth opportunities in a variety of sectors, including agriculture. Current government forecasts estimate a surge in e-commerce spending from USD 25 billion to USD 130 billion. In tandem with the various digital initiatives underway, the government is also looking to encourage the use of more advanced methods and inputs among smallholder farmers.

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