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Agribusiness Supply Chain of Shallot and the Development Strategy in Kuningan Regency, West Java
Tuti Karyani 1) and Ganjar Kurnia
Abstract
Shallot productivity in Kuningan Regency was still low (7.4 ton/ha) and the price fluctuated. The objective of this research was to find out how the supply chain of shallot in Kuningan Regency was, who the agents involved were, and how their business processes was going on. The other objective was to set the strategy for the development of shallot agribusiness in Kuningan. The method used was qualitative method with the case study in Kelompok Tani Mitra Saluyu. The analysis used was descriptive and SWOT analysis. The research result showed that the agents involved in shallot supply chain were farmers/farmer groups – wholesale buyers or pre-harvest buyers – processors – big wholesale buyers – traditional central markets or retail markets. For fried onion, the factory made a relationship with instant-noodle companies such as Indofood and Wings Food, where fried onion was of complementary products for their products. The shallot agribusiness development strategy referred to the result of SWOT Analysis as follows: utilizing land by adopting new technologies and optimize water resources; the enhancing the value added of shallots by processing the crops by Farmer Groups Association/cooperative business unit, and accompanying the farmer groups to access credits from banks for capital strengthening.
Keywords:Supply Chain, SWOT Analysis, Agroindustry
INTRODUCTIONIn fulfilling domestic need for shallots (Allium ascolonicum, L), the government
imported shallots every year. It was done because of the insufficiency of shallot supply to
fulfill people needs for shallots, which was the result of the shallot production decline,
especially during rainy season (General Directorate of Horticulture, 2015).
Kuningan Regency is one of shallot production centers in West Java, whose
productivity was still below the expected target. Shallot productivity in Kuningan was still
7.4 ton/ha, while the expected target was 9.4 ton/ha. Beside for household consumption,
shallots are needed for fried onion processing industry, and in Kuningan Regency, shallot
processing agroindustry is very potential, which makes the need for the raw materials not
able to be fulfilled by the production itself.
The other problem of shallot farming is the fluctuating price; sometimes the price could
be very high, reaching Rp 80,000/kg, when the supply was lower than the demand, but
sometimes when the crops were abundant, the price could fall into Rp 5,000/kg. So far, the
cost production of imported red unions (such as those from Taiwan and Philippine) was still
lower, compared to the domestic price, so that shallot importation was performed. Therefore,
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distribution and production setting of shallots as well as their domestic marketing are very
important, so the objective of this research was to describe how shallot supply chain in
Kuningan Regency really was, and how the development strategy was.
LITERATURE REVIEWShallot Agribusiness
Shallot or Allium Sp is an economically high-valued bulb, viewed from its function as
food flavoring, food processing industry materials, and herbal medicine. Shallot becomes one
of commercial vegetable commodities. As a commercial commodity, most of, even nearly all,
shallot crops are for sale, instead of for the farmers’ consumption. Farming income is one of
the forms of reward for the service of the managers (farmer), the workers, and the owned
capital (including land), and is obtained from the production activities in farming
(Tjakrawiralaksana, 1985). Farming is an activity of organizing or managing the assets and
techniques in agriculture. Farming can also be defined as an activity of organizing
agricultural production means and technology in an agriculture-related business (Moehar,
2001).
Shallot farming is usually done in irrigation and rainfed fields, even currently available
in sand dunes (Setyono and Suradal, 2009). The optimal height for shallot plant growth is 0-
450 meters above sea level. The technology used by farmers in shallot cultivation varies
greatly, and so does the production.
Beside as fresh consumption in the form of flavoring, shallots are also consumed in the
form of fried onions. It means that shallots have the value added that can be enjoyed by the
agents of shallot processing into fried onions, which are usually made for culinary
complement.
Supply Chain
According to Keith Oliver (1982), supply chain is a coordinated system of organization,
activities, information, and resources involved in either physical or virtual movement of a
product or service from producers to consumers. In his book, Hugos (2003, 2-3) gave several
definitions of chain supply as follows:
“A supply chain is the alignment of firms that bring products or services to market.”
(Lambert, Stock and Ellram (2001) in Hugos, 2003, 3).“A supply chain is a network of
facilities and distribution options that performs the functions of procurement of materials,
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transformation of these materials into intermediate and finished products, and the distribution
of these finished products to consumers.” (Ganeshan and Harrison in Hugos, 2003, 3).
Furthermore, Chopra and Meindl (2001) stated that supply chain has dynamic
characteristic, yet it involves three flows to manage:
1. Flow of goods from upstream to downstream. The example is raw materials sent
from suppliers to factories. After having produced, the products are sent to
distributors, then to retailers, then to last users;
2. Flow of money from upstream to downstream;
3. Flow of information that can happen from upstream to downstream, or vice versa.
Another definition states that supply chain is a system whose constituents include
material suppliers, production facilities, distribution services, and customers, which are
connected by forward flow, feedback information, and financial capital (Stevens, 1989).
Supply chain can also analogized as a form of industrial organization where both buyers and
sellers who are separated by time and place can progressively increase ad accumulate values,
in line with the movement of a product from one link to the other links (Hughes, 1994,
Fearne, 1996, Handfield & Nichols, 1999).
Opportunity and Challenge
International trade globalization gives opportunities as well as challenges for the
national economy, including for agribusiness. On the one hand, the agreements of GATT,
WTO, AFTA, APEC, and other world trade organizations can give opportunities for
agriculture sector in Indonesia if the agribusiness performed has competitiveness, yet on the
other hand, they can be threats for agriculture commodities if they have no competitiveness.
Competitive ability can be viewed from the comparative and competitive excellences.
Shallot is a potential horticulture commodity which has high multiplier effect in
agribusiness system because it has strong connectedness to the sector of upstream agricultural
industry as well as to on-farm agriculture, which can create added value for the production,
and absorb workers through secondary agricultural activity (downstream agriculture). On the
other hand, shallot is one the horticulture commodities which have quite high price
fluctuation and sensitivity, particularly because of the change of demand and supply. This
condition needs serious attention because it influences inflation.
By considering the potentials, opportunities, and challenges, it is needed the strategy for
the development and growth of shallot agribusiness. The development and growth of shallot
agribusiness as an excellent commodity that is well managed not only give prosperity for the
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farmers and the agents involved in the supply chain of shallots, but also, in turn, grow and
develop the shallot central regions.
RESEARCH METHOD
The research object was agribusiness supply chain of shallots and the opportunities as
well as the challenges to the development in Kuningan Regency. The research subjects
covered the agents on each agribusiness sub-system (from upstream to downstream) involved
in the chain. The research design used in this research was qualitative research, meaning that
the researcher aimed at describing the research study in institutional role, and tried to
understand the phenomenon of the research object as such (Idrus, 2007), while the research
technique used was case study research technique with Kelompok Tani Mitra Saluyu as the
case. According to Moehar (2002), study case is a method used to study a member of the
target groups of the research subjects intensively or deeply.
Data Analysis Design
In identifying the supply chain, it was going to be used the mapping that would
describe information flow, goods flow, money flow from each flow on each agent and on the
whole. Furthermore, it was descriptively dug out about the opportunities and challenges
regarding the development of shallot agribusiness, which in turn it would give
recommendation to the policy of the development of shallot agribusiness itself.
In this research, the data analysis technique was SWOT (Strengths, Weaknesses,
Opportunities, and Threats) analysis. In SWOT analysis, there are three stages to perform: (1)
Data Collection, (2) Data Analysis, and (3) Strategy Formulation. The stages can be
elaborated in six phases, so that it was finally gotten the chosen alternatives of strategy. The
phases are as follows: (1) identifying the strengths and weaknesses in internal environment,
(2) identifying opportunities and threats in external environment, (3) making an internal
factor matrix, (4) making an external factor matrix, (5) analysis phase, and (6) strategy
formulation phase.
RESULT AND DISCUSSION
The Agents of Shallot Supply Chain and the Business Process in Kuningan Regency
1. Farmers
Farmers were the direct agents of shallot cultivation. Shallot cultivation in highland and
lowland (rice field). In Kramat Mulya, shallots were planted in rice fields, most of which
were tenements from crooked lands, while in Hantara Village, they were planted in dry fields.
Farmers cultivated shallots in highland three times a year with the planting season in
January, April, June, and October. In lowland, shallot plantation was done after rice harvest,
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in dry season around June for one planting season. The planting patterns which commonly
occured in both regions were as follows:
1. Highland : shallot – corn/chili – shallot
2. Lowland : rice – rice – shallot
The used shallots seeds purposed for fried onion industry were those of Sumenep
variety, while those for the purpose of consumption used Bima Curut variety. Sumenep
variety had not been labeled yet, while Bima Curut variety had been. Sumenep variety came
from Kuningan, Losari, and Tanjung, and according to some information, the labeled shallot
seeds of Sumenep variety were going to be released. Most of the seeds were currently used
from generation to generation, so that the result was, of course, that the productivity was less
good.
The way the farmers processed shallot bulbs into seeds was that they were just dried
manually by hanging them on shelves in the farmers’ kitchens. However, during rainy season,
the drying process of the bulbs to be made as seeds was done by smoking, so that the hanged
bulbs would keep dry and not covered with mold or not rotten. Then, fungicide spraying was
done with dithan and pondazep, which was one spraying. 250 ml fungicide could be used to
spray 2-3 tons shallots. The purpose of spraying is to make the onions not covered with mold
during the drying process into seeds.
The production phase consisted of land preparation, tillage (making ditches, nourished
plots (guludan), land texture/plots improvement), plantation, stitching, and maintenance of
the plants (watering, fertilization, pest control, weeding). After 2-3 months, the shallot would
be ready to harvest.
The land availability in Kuningan Regency was limited only to about 463 Ha, so that
the business development was not in the shallot cultivation, but rather focused on processing
shallots into fried onions. However, with the limited land availability, the cultivation business
of shallots could be intensively performed, so that it could fulfill the needs for raw materials
in fried shallots industry. The production cost of shallots was Rp 7,500,000 per hectare, while
the income was between Rp 9,000,000 and Rp 15,000,000 per hectare.
Post-harvest treatment for shallots included storage and cleansing. The harvested
shallots were stored for 2 days, then the roots and stems/leaves were removed, then they were
sent to the warehouse. The treatment cost was about Rp 500 per kg. The storage for fresh
shallots by using cholestorid could last for two months. To get good price, there was a
Ministry of Trade’s program regarding warehouse receipt which previously ever ran in
Kuningan, and was managed by the farmer group association (Gapoktan). However, after the
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warehouse had been built, the warehouse receipt system had not worked because it had not
got banking support.
2. Farmer Groups/Farmer Group Association
Farmer Groups played their role as the farmers’ place for knowledge, most of which
was related to cultivation techniques. There were several activities done by the farmer groups
as follows:
1. Holding regular meeting once a month, discussing the condition of the forthcoming
activity plan;
2. Preparing input production for farmers, including fertilizers, medications, and tools
rented such as cultivator and handsprayer.
The other role, which was to strengthen new farmers’ economy, could be attempted
through the formation of a pre-cooperative. Farmers agreed to pay the main and obligatory
dues. The main due was Rp 50,000 while the obligatory due was equivalent with 10 kg rice
per planting season. This attempt of the farmer groups to collect fund would be developed
into a cooperative.
Farmer Group Association consisted of three groups, each of which had 15 farmers.
The role of the farmer groups or farmer group association in farmer development activities,
counseling about cultivation, and preparing the means and infrastructure of production for the
members of the farmer groups or the farmer group association, in our opinion, still lacked.
The intensity to hold meetings was still low because of the respective farmers’ bustles. The
active role of the farmer groups or the farmer group association could have been felt if there
had been some government programs that had to be performed.
3. The Processors of Shallot into Fried Onion
The need for raw shallots in fried onion industry could reach 500 tons a month. This
need was fulfilled from various production centers in West Java (Majalengka, Bandung, and
Cirebon) and outside West Java (Brebes). Shallot was divided into 3 grades: Quality 1 mesh
4, Quality 2 mesh 10. For the fried onion industry need, the Quality 2 was used. The target of
this fried onion market was Indofood and Wings Food who used fried onion as a
complementary matter for instant noodle, while the shallot with the Quality 1 was for export,
and for traditional market, they were usually mixed (not graded).
For the interest of fried onion industry, it was necessary the shallots of Sumenep
variety. The process was cleansing, mincing into small pieces, and processing. If it is
described, it will be as follows:
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Figure 1. The Process from Shallots into Fried Onions
The processors of onions had 53 units, consisting of 41 formal work units and 12 non-
formal units. The employees recruited were 443 people, with the investment value 4.098
billion. The partnership with Wings Food and Indofood had been lasting for a long time,
more than 10 years.
4. Wholesale Buyers
Wholesale buyers here means the people who bought shallots from farmers or farmer
groups. They then marketed them to the central markets of Kramat Jati, Cibitung, Jaga Satru,
Caringin, Losari, Pasar Baru Kuningan, and others.
Among them, there were also those who acted as pre-harvest buyers (penebas), or the
people who bought shallots before harvest. They would buy shallots from the farmers even
before the onion plants were pulled out from the soil. Therefore, the pre-harvest buyers really
needed to calculate the number of onions that they would get, so that they would not suffer
financial loss. Thus, this pre-harvest trading risks a lot. Then, after there had been a deal
between the farmers and the pre-harvest buyers, the next phase was preparing cash money
and looking for employees to pull out the shallot plants and transport them to the road by
carrying them on their shoulders or using motorcycle.
5. Marketers
The target of raw shallots was divided into 2: traditional market and export market. For
export market, it is estimated 30% with the quality grade 1 or super, and the 70% others for
traditional market with mixed quality. Many exporters had their domicile in Brebes and
Cirebon, but there were no farmers/farmer groups and shallot vendors in Kuningan who had
directly relationship with the exporters.
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Frying
ProcessingMincingCleansing
Shallot Supply Chain in Kuningan
The flow of shallot supply chain in Kuningan Regency was divided into 3 (three) parts:
the flow of goods/materials in the form of shallot marketing, the flow of information received
by each agent, and the flow of money.
1. The Flow of Goods (Shallots) in Kuningan
The farmers sold their onions to wholesale buyers, or through farmer group association,
and there were some of them who sold theirs to pre-harvest buyers, who were also the
wholesale buyers. The wholesale buyers sold them to processors (industry) and to retail
markets around Kuningan Regency, and Caringin and Kramat Jati central markets. The off-
graded shallots were sold to processing industry which many grew in Kuningan. Indeed, there
were 2 quite high agents of fried onion industry who built partnership with Indomie (instant
noodle).
Figure 2. Goods Flow of Shallot in Kuningan Regency The shallots for Kramat Jati central market were usually domestic shallots without the
removal process of roots and leaves. This removal would be done after the shallots arrived at
Kramat Jati central market, because they had their own standard of removal, sparing the stem
part close to the bulbs longer than those which were done in pre-harvest buyers’ place.
From the material flow in Figure 2 it can also be seen the value structure of shallot.
Pearce and Robinson (2008) stated that value chain is a perspective that views business as a
chain of activities changing inputs into valuable output for customers. The flow of goods was
long because of some factors, including:
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90%
10%
10%
10%
90%
Industri mie (wings food dan Indofood)
Retail Market
Central MarketsOnions stored,
cleaned, packaged,
and weighed
Processor (fried onion)Wholesale Buyers /Farmer Group Association
Pre-harvest Buyers/Wholesale
Buyers
Farmers
a) the farmers’ dependency level on pre-harvest buyers and wholesale buyers was still
very high so that it prolonged the chain;
b) the lack of the roles of cooperative, farmer group association, and farmer groups in
marketing in order to shorten the chain (the flow);
c) the high cost of harvest and post-harvest caused farmers reluctant to do harvest and
post-harvest processes by themselves, so that the farmers just sold the onions to pre-
harvest buyers;
d) The proportion of the shallots which were bigger for traditional market than for
structured market, so that the chain became long;
e) The limitedness of storehouses, so that the farmers sold them directly after harvest.
2. The Flow of Information
The flow of information was related to the information of price, and the demanded
number and quality of shallots. This information then was followed up by activities done in
processor and supplier levels covering contract making with instant-noodle industry (Wings
Food and Indofood). The contract deal lasted for only 1 month, and then was reviewed. The
short contract duration of the mutual agreement was done in order to anticipate the
fluctuation of shallots’ price in traditional markets.
The following, Figure 3, is the description of the contract system done by the
processors and the instant-noodle industry.
Figure 3. Contract System between Industry and Fried Onion Processors
Information about the demand for fried onions to the processors was then followed up
by the demand for raw materials from processors to the wholesale buyers or farmer group
association/farmer groups, then delivered back to farmers. The information from the
wholesale buyers to farmer group association or farmer groups was done directly or through
cellular phone. Usually, the information was about shallots’ volume and price.
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Not informed about and not involved in the contract
Selling price agreement, and delivery capacity
Making a contract Farmers
Farmer Groups/Wholesale
BuyersProcessors
Instant-noodle industry
The case would have been different if the wholesale buyers had sold them to central
markets. The agreement between traders didn’t need written contract, but was performed
orally through cellular phone. The information about the volume and price of the goods were
forwarded to farmer group association/farmer groups, and finally to shallot farmers.
Figure 4. The flow of information in shallot supply chain
The flow of information also involves counselling activities from government officials
to farmer groups through letters or notifications by cellular phone. Ordinarily, the activities
performed regarded cultivation techniques, SOP, as well as institutional strengthening. The
source of information was from the government officials, counsellors or colleges, and
community empowerments.
3. The Flow of Money
The flow of money starts with the consumers in the form of buy and sell transaction
between the sellers and the buyers, who are both domestic and foreign buyers. The domestic
consumers were those who get the onion products from retail markets or central markets. The
payment done was usually by cash. In shallot supply chain in Kuningan, there were nobody
who sold to exporters from both farmers and farmer groups.
The flow of money also happened from instant-noodle industry to onion processors,
and then from them, the money flowed for the payment to wholesale buyers or farmer group
association and finally to farmers.
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Instant-Noodle Industry
Retail Markets
Central Markets
Processors (fried onion)
Wholesale Buyers
Pre-harvest Buyers/Wholesale
Buyers
Farmers
Retail Markets
Central Markets
The onions were stored, cleaned, packaged, and
Processors (Fried Onions)
Wholesale Buyers/Farmer Group Association
Pre-Harvest Buyers/Wholesale Buyers
Farmers
Figure 5. The flow of money in shallot supply chain
Internal Factors
Strengthsa. Availability of Land
Kuningan Regency has 63,000 hectares wetland width, while the planted land by
shallot plants are 243 hectares, because shallots are usually planted in wetland in the second
season. Likewise, dryland enables to be planted by shallots.
b. Availability of Water Resource and Irrigation
Kuningan Regency has good water resource. There are several rivers passing Kuningan
Regency: Cisanggarung River, Cijolang River, Cisande River, Cijangkelok River, and Citaal
River, plus Darma Reservoir. The availability of irrigation from the rivers and the reservoir
is very helpful for the farmers in watering shallot plants, so that they could plant them well.
Shallot farming needs high amount of water availability for irigation and watering.
c. Farmer groups/Farmer Group Association
The existence of farmer groups association has strengthened the farmers, at least for
nowadays, by increasing their knowledge about cultivation techniques. In the future, the
reinforcement of the groups’ role will be more in economical strengthening, including
increasing the capital and competitiveness. Currently, this attempt has been done, which is
by forming pre-cooperative.
d. The Products’ability to be Stored
Although shallot is vegetable product group , it has an advantage of being a product
that can be stored for a long time, up to 8 months. The durability can decrease the drop of
price during harvest. By storing shallots when the price drops, it is hoped that farmers can
avoid loss, even they can get more profit, because the price fluctuation of shallots is very
high; during harvest periods the price could be very low, while in other months, the price
could reach a very high price. This is proven with a high number of farmers whose lives are
more prosperous by storing shallots and then selling them when the price has been
considered maximum.
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Instant-Noodle Industry
Retail Markets
The onions were stored, cleaned, packaged, and
Weaknesses
a. Limited Human Resource
Human resource number for farming shallots was limited because the migration level in
Kuningan was known to be high, especially those who migrated to Jakarta. Workers were
brought in from other regions, so that the cost became high. The lack of workers was one of
the causes of the proliferation of pre-harvest trading system of shallots in Kuningan.
b. Limited Land Ownership
Land is an important factor in farming. Land productivity can influence the amount of
farming production obtained by farmers (Mosher, 1996, and Hansen 1981, in Gohong,
1993). Land properties owned by shallot farmers in Kuningan were in average less than 0.5
hectare. Of course, it made it difficult, or hindered, the effort for the development of shallot
farming. With the limited land properties, farmers would be difficult to progress and
develop, so that it needed a solution to increase the properties owned by the farmers.
c. Limited Capital of the Farmers and Lack of Access to Formal Financial Institution
On the average, farmers’ capital for shallot farming was still low. It is because when
planting season came, there were many farmers who lacked of fund to prepare for farming.
So far, to fulfill the need for fertilizer and farming medication, farmers usually bought by
credit in farm shops in their regions to be paid during harvest period with higher prices than
those by cash. Of course, this could increase the production cost paid by the farmers, and
finally could decrease their obtained incomes. The farmers’ accesses to financial institutions
was still low.
d. Farmers’ Habits
Farmers’ adoption of shallot cultivation technology was still low and tended to do
farming as usually done by their predecessors (from generation to generation). Likewise
were the planting pattern, fertilization, pest control, and post-harvest treatment. So far, they
only did shallot cultivation process in dry season, because they were still dependent on
sunlight support for the cultivation and the post-harvest drying of the shallots. Of course, this
condition often inflicted financial loss of the shallot farmers, because the unstable product
availability caused the price to fluctuate.
e. Limited Access to Market
The limitedness of farmers’ access to market was also one of the weaknesses in the
shallot development. All this time, shallot trading was only done through local wholesale
buyers, so that the price gotten depended on them. With the progress of technology available
in information, telecommunication, and transportation, it’s time for the farmers to begin
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expanding their market access in order to get better prices. With the expansion of market
access, it’s hoped that farmers could sell their crops with higher prices. Furthermore, it
would widen farmers’ insight and educate farmers’ entrepreneurship.
f. Traditional Supply Chain Domination
There hadn’t been any farmer/farmer groups who made direct partnership with both
modern market and exporters. Partnership had only been made with processors of shallot
into fried onions for the shallots which were off-grade.
Opportunities
a. Development of Technology
The development of technology of agricultural tools and machines helps farmers
cultivating their land with the shorter time, lower cost, and better result. The progress in
fertilizer industry and agricultural medicines facilitates farmers taking care of their plants,
which is hoped to be better according to the guide and recommendation. The progress in
information also gives farmers opportunities to market their product with the wider market
reach. The progress in transportation (transportation modes and facilities) also facilitates
farmers in carrying and distributing their products.
b. Market Demand
Along with the increase of population, the demand for shallot commodities tends to
increase. It is caused by the fact that shallot is an everyday need, especially as a spice and a
complement (as fried onion). Thus, this condition becomes a good opportunity for shallot
development, because shallots will be always needed every time. Then, the demand from
abroad also gives a promising market opportunity. However, it must be followed also by
quality improvement of the products in order to fulfill the requirement determined by the
export target countries.
c. Processing Industry Demand
Beside direct demand of household consumers, the existence of the industry processing
agricultural products whose raw material is shallots to be consumed as a cooking spice, fried
onion, or in the form of other processed products is an opportunity for the shallot
development. The existence of the downstream industry, both on household scale and in big
industry scale, helps much the marketing of shallots.
d. Government Policy
Shallot is an excellent commodity in Kuningan. The government support is in the form
of the availability of the region for the shallot development which is stated in RJPMD of
Kuningan Regency.
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e. Availability of Credits
The limited venture capital can be added from outside capital or credit. The currently
available credit is KUR (a soft credit to the public) whose interest rate is currently 9% a year
under certain terms and conditions.
Threats
a. Climate Change
The current uncertain climate change caused by global warming is a threat faced in the
shallot cultivation development. The long-lasting dry season has caused drought in some
farmland, and has led to crop failure because of water shortage. The uncertain change of dry
and rainy seasons have made it difficult for farmers to determine appropriate planting
season. Likewise, the extreme changes in weather have made the growth of the plants
disturbed, so that they have an impact on the decline of land quality and productivity.
Therefore, the anticipation of the extreme climate changes needs to be done together in order
to prevent larger damages and failures in agricultural sector.
b. Imported Shallots
World free trade and ASEAN Economic Community (AEC), which are followed by
deregulation policy, has brought the consequence of the openness of Indonesian market for
the entry of the products from abroad, including shallots. The entry of imported shallots is of
course a competitor which can threaten the existence of local shallots, as imported shallots,
with cheaper price, usually have an average quality which is above that of local shallots. The
fact that the local shallot price is more expensive is mainly because the cost of goods is more
expensive as the result of the more expensive production cost, as well as the long marketing
channel. Therefore, to be able to compete with imported shallots, quality of local shallots
must be continually improved. Besides, the government as the policy maker must be able to
manage imported shallot commerce in order to protect local shallots.
c. The People’s Declining Purchasing Power
The unstable economic condition caused by economic crisis has caused people’s
purchasing power to decline. Meanwhile, the production cost increases and in turn people’s
demand for their consumed goods, including shallots, is going to decrease too.
d. Land Conversion
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Land conversion is a common phenomenon in Indonesia. Most of the shallots in
Kuningan were planted in rice fields, while some others in dry fields. The usage of both rice
and dry fields from agricultural usage into other usage can decrease the potentials of shallot
land area.
e. The Expensive Price of Production Inputs
The use of production inputs in accordance to the recommendation can influence
productivity rate. The price of production inpus, according to farmers, was expensive,
especially that of superior seeds. The capital limitedness made farmers not be able to use
production means optimally. Besides, the expensive price in turn makes the cost of goods
sold expensive too, so that they can’t compete with imported shallots.
Table … SWOT Analysis MatrixSTRENGTHS (S)
• Land availability• Water resource and
irrigation availabilities
• Farmer groups/farmer group association
• The products’ ability to be stored
WEAKNESSES (W)• Limitedness of
human resource as farmers
• Limited land ownership
• Limited capital the lack of access to formal financial institution
• Farmers’ habits• Limited market
access• Traditional supply
chain dominationOPPORTUNITIES (O)
• Technological development
• Market demand• Processing
industry demand• Government
policy• Credit availability
SO Strategy• The utilization of
the lands which have not been used by adopting new technologies and optimizing water resource and irrigation
• Enhancing the value added through processing the crops into fried unions by farmer group association
WO Strategy• Enhancing
attractiveness of agriculture so that the youths will not move to urban regions
• Optimizing lands by using technology
• Facilitating the direct partnerships of farmers/farmer group association/cooperatives
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Opportunities;Threats
Strengths; Weaknesses
or cooperative business unit
• Accompanying farmer groups to access credits from banking
langsung with industry/exporters through structured supply chain
• Ordering and expanding market networks
• Utilizing credit program to strengthen farmers’ capital
THREATS (T)• Climate changes• Imported shallots• Purchasing power
decline• Land conversion• The expensive
price of production inputs
Strategi STa. The enhancement
of risk mitigation attempt caused by climate changes
b. The implementation of Regional Regulation (PERDA) regarding rice field land-use planning control
c. Reducing production cost through efficiency in order to make them able to compete with imported shallots
Strategi WTa. The human resource
quality enhancement of the farmers and increasing the farm youths’ interest to farming
b. Regional Regulation on rice field land-use planning control
CONCLUSION AND RECOMMENDATION
1. a. Shallot supply chain consisted of material flow, information flow, and money flow.
Material flow was divided into 2: traditional market oriented and structured market
oriented. Structured market was a market which has done some partnerships with
instant noodle industry, so that there was certainty of the volume and price. For the
need of processors, the kind of shallots needed was Sumenep variety, but at that time
the shallots of Sumenep variety had not been labeled/certified. In partnership, the
farmers were not directly involved, but only the processors who were involved.
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b. The agents involved in fried onion supply chain were farmers, farmer groups/farmer
group association, pre-harvest buyers, wholesale buyers, instant noodle industry, retail
market, main market, and exporters. In the business process, there were the farmers
who planted them in wetlands and those who did in drylands. For the use of seeds,
there were still many farmers who used the seeds which were not certified, especially
the seeds of Sumenep variety.
c. Viewed from the aspect of capital, all of the agents used internal resource capitals
(self-financing) and outside capitals (loan), either from formal or informal financial
resource. Among the agents involved in the supply chain, farmers were rated having
the least accesses to formal financial institutions. Most of their accesses were to store
of production facilities, and those who had been group members could have their
accesses to the pre-cooperative that had just been founded, while about the accesses to
banking, there had not been many of them who were able to access it, because
banking required collaterals that couldn’t be fulfilled by the farmers.
2. Based on SWOT analysis, all the strategies planned in SO, ST, WO, and WT strategies
could be attempted, but the easier is of course the SO strategy that utilizes the
opportunities and strengths that have been owned.
Recommendation
1. To increase the productivity of shallots of Sumenep variety, serious attempt to certify
the shallot seeds of Sumenep variety is necessary;
2. It is needed the support of banks to develop shallot business by understanding about
shallot business;
3. It is needed the attempt of increasing the value added through the development of
shallot agroindustry which is more modern, healthy and halal certified;
4. It is needed the further research about the difference of production techniques of
shallot farming between on wetlands and dry lands, as well as the durability against
the climate changes;
5. It is needed an in-depth research about capital, especially about farmers’ perception
on formal financial institution, as well as the factors which influence the farmers’
access to the venture capitals;
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6. It is needed the research on the aspects of direct partnership and marketing of shallots
between farmers/farmer group association/cooperatives with the industry or the
exporters.
Acknowledgements
We express our sincere appreciation to Universitas Padjadjaran for supporting our
research through Academic Leadership Grant. In addition, we would like to show gratitude
to all colleagues who provided insight and expertise that assist greatly the research, and all
stakeholders who participated and ensure the completion of the study.
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