Reimagining Indonesia’s agriculture by strengthening the supply chain
Optimizing supply chain to be more efficient and resilient can manage Indonesia’s agricultural risks
Indonesia is known as one of the world’s major agricultural nations and some of the world’s largest producers and exporters of crops such as rubber, copra, palm kernels, palm oil, coffee, cocoa, and spices. However, Indonesia’s agriculture technology and productivity fall behind neighboring countries, something we believe that we can improve the industry by improving the supply chain.
In the third panel discussion in the East Ventures Summit 2022, titled “Reimagining Indonesia’s Agriculture By Strengthening the Supply Chain”, we touch on how digitalization through agritech startups can provide solutions to the old and existing challenges in the industry. The panel consists of Utari Octavianty, CSO and Co-Founder at Aruna, and Samuel Tirtasaputra, CEO and Co-Founder at Gokomodo, moderated by Devina Halim, Principal at East Ventures. They sat down to dive deep into the ongoing supply chain crunch that has been plaguing the agriculture industry.
Agriculture is a massive sector contributing 11% of ASEAN’s total GDP and 14% of Indonesia’s GDP in 2020. One of the biggest challenges within the agricultural sector that can be alleviated by digitalization is the supply chain issues.
Agricultural supply chain disruptions
A 2022 McKinsey report showed that supply chain disruptions have increased in frequency since the pandemic, compounded by wider geopolitical and macroeconomic factors. These shocks caused a ripple effect across the global supply chain, such as congestion at major ports and other delays, which pushed shipping logistics costs up by 200% to 300%.
The supply chain crunch from the ongoing conflict in Ukraine is also a major risk to Indonesia’s agricultural yields. Despite being a major supply chain input, Indonesia still imports the majority of our fertilizer consumption from Eastern Europe. The result is increased fertilizer prices and widespread stock shortages.
Indonesia’s supply chain issues can also be attributed to the country’s unique geography. Multimodal transportation is needed to transport goods across the archipelago, yet the lack of infrastructure isolates remote regions from equal distribution of goods, resulting in high prices. The flow of information is also fragmented between regions, and technology adoption tends to be slower.
Agritech’s solution in mitigating the supply chain hurdles
To address these supply chain hurdles, Aruna and Gokomodo, two of East Ventures’ portfolio companies operating in the agriculture scene, leveraged digital solutions in their own ways.
As backlogs and supply chain breakdowns have occurred more frequently, Aruna emphasized the importance of agility and collaboration. During the pandemic, Aruna discovered a profitable alternative and grew tenfold by shifting its business model and expanding into the B2C market. Aruna also unlocked opportunities for profit margin optimization and infrastructure development through collaboration with various stakeholders, such as communities that interact directly with the fishermen and the government.
The ongoing global supply chain crunch also exacerbated the gap between fishermen and the end market. One of Aruna’s initiatives to address this is the ArunaHub, Aruna’s processing plants where the fishermen are given the tools to navigate volatile supply chain conditions and have better market access. Aruna’s Local Heroes will teach fishermen about technology, product treatment to keep seafood of the best quality, and sustainable fishing practices. Local Heroes are the term for the youth in every region who act as Aruna’s representatives throughout Indonesia and run various programs for coastal communities and introduce them to the technology that Aruna has developed. Aruna believes technology will help fishermen connect with the right market and will strive to empower fishermen with knowledge and know-how of global standards.
Gokomodo’s solution to supply chain disruptions is establishing the digital supply chain ecosystem that enables visibility throughout the entire supply chain. Agricultural companies can make better procurement decisions because they are able to anticipate logistics inefficiencies in the supply chain.
Gokomodo also provides a solution to the fertilizers supply gap from the Russia-Ukraine conflict. Gokomodo provides customers with access to a variety of agricultural input products such as fertilizers, harvesting tools, and agrochemicals in different provinces.
By partnering with Waresix, a logistics tech platform and fellow member of East Ventures’ ecosystem, Gokomodo was able to secure domestic routes and containers. Together, the two companies have transported over 300,000 tonnes of fertilizer across Indonesia. In the coming term, Gokomodo aims to set up the right infrastructure for technology adoption and use it to build a bridge between corporations and smallholders to make the supply chain more efficient and resilient.
The panel discussion can be rewatched on demand on our official YouTube channel.