The increasing role of modern retail markets and supermarkets provides an opportunity for the Indonesian fruit and vegetable sector if supply chain issues can be resolved. This study discusses the multi-layer distribution system as it applies to the Indonesian fruit and vegetable sector and proposes more effective and efficient options. The paper outlines the advantages and weaknesses of multi-layer distribution channels. Despite being advantageous in marketing small farmers' products and providing employment opportunities as intermediaries there are various disadvantages. The long distribution channel increases risk of quality reduction and costs to maintain quality, higher transaction costs, inadequate technical requirements and limited information flow and asymmetry. Alternative systems proposed by the author include contract farming and direct collaboration with modern-supply-chain players; repositioning of existing cooperative networks to be business focused and self-reliant; creating producer organisations to achieve associated benefits (stronger bargaining position, reduced transaction costs and lobbying capacity); integrating consumer-oriented policies in all supply channels so that Indonesia can produce consumer preferred products rather than turning to imports; and creating a favourable political situation through redesign of policies.
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Soviana and Puspa
Conference on International Research on Food Security, Natural Resource Management and Rural Development, Göttingen, Germany 19-21 September 2012