Compost fertilizer business supply chain management strategy for stability of potential added value of waste raw materials in Jambi Province, Indonesia

Abstract

This article describes strategies and policies for compost development based on the potential value-addition (VA) of waste raw materials and the problems faced in the supply chain. This research, which was conducted in the central area of smallholder oil palm plantations in Jambi province in Indonesia, is important because it is an integral part of the oil palm farmer's household independence efforts in the face of temporary income loss during the oil palm replanting program. In general, this study aims to develop a supply chain management strategy to maintain added value stability by ensuring the availability and price stability of the supply of waste raw materials, and product marketing policies in dealing with a single buyer (monopsony market). The data collected consisted of group historical data, interviews, and participatory observations. The method of analysis was descriptive based on data analysis using a value-added approach in a supply chain management framework. The research results show that: 1) the compost developed is not only able to provide VA but also encourages an increase in the selling value of the waste, 2) varies VA of is waste influenced by the price factor compared to the proportion of its use, 3) the VA is quite sensitive to changes on output price. The problem encountered in the downstream supply chain is the increase in the price of raw material for solid waste in cowsheds due to the gap between demand and supply. The level of availability of raw materials for cowshed solid waste depends on efforts to accelerate livestock population growth, such as through the implementation of sharia-based profit-sharing investments. In the upstream supply chain, the weak bargaining position of compost entrepreneurs due to the monopsony market has caused output prices to drop dramatically. The monopsony market that is faced has resulted in the low bargaining power of the compost business groups in price negotiating. Based on the findings, it can be concluded that government intervention is urgently needed to encourage the development of organic crop cultivation to create a more diversified market demand for compost.