Developing an inclusive corn supply chain

PT Santosa Utama Lestari (Vasham), a subsidiary of PT Japfa Comfeed Tbk. (Japfa), runs partnership program to respect suppliers farmers’ rights to a decent standard of living.

 PT Santosa Utama Lestari (Vasham), subsidiary of PT Japfa Comfeed Tbk. (Japfa), is an integrated agricultural social business. Vasham’s vision since its inception in 2013 is ‘creating a vertically integrated inclusive agricultural business that provides added value to all parties involved. ‘ Through a closer partnership program with farmers, companies can ensure farmers’ right to a decent standard of living.

 

“Company must have a larger mission than the company itself.”

– Irvan Kolonas, CEO Vasham

 

Konco Program: understanding the supply chain to become a ‘friend’ of farmers

 According to Irvan, Vasham is a social business, which is a business aiming to solve a social problem. Social businesses like Vasham should have a profitable and sustainable financial model and have positive impacts to the society.

One of Vasham’s programs is to provide a contract farming system called the ‘Konco’ Program, which means ‘the Friend’ program in Javanese. Vasham partners with farmers, traders and local communities through financing, sales, agricultural training, and risk management to increase farmer’s productivity and income. In 2018 alone, 100,000 tons of corn have been produced through the Vasham program.

To design a supply chain solution for corn commodity, Irvan and his team must go on the field to engage with farmers, middlemen, retailers, government and other parties in the supply chain.

According to Irvan, the problem in the supply chain is not always black and white. “In the beginning, I thought all middlemen were evil. After going to the field, it turned out that not all middlemen oppressed the farmers. There are tier 1 middlemen who provide services and assistance to farmers,” explained Irvan. “However, there are also tier 2 and tier 3 middlemen who act purely as brokers without added value for farmers,” Irvan added.

Vasham’s financing partnership aims to break the practice of middlemen who do not provide added value to farmers. Farmers often have to owe money to middlemen with high interest. Through the Konco Vasham program, farmers can owe capital with profit sharing scheme.

 

“The advantage for companies to partner with farmers is the certainty of supply.

 

According to Irvan, the contract farming model has been around for a long time. For example, Japfa has a partnership program with chicken farmers that began in the 1998 economic crisis.

What are the benefits of contract farming for the company? “The advantage for the company is the certainty of supply and sales.” Said Irvan.

 

Embed respect for human rights into the company’s DNA

Over time, Vasham was integrated into a subsidiary of Japfa.

“Initially I started Vasham as a social business separated from Japfa.” said Irvan. “However, as I developed Vasham, I realized overlapping point: to be a responsible company, the company must become a social business.”

 

“I realized overlapping point: to be a responsible company, the company must become a social business.” Irvan Kolonas, CEO of Vasham

 

“Through Vasham, Japfa now goes to corn farm centers directly in various regions such as Palu, Gorontalo and NTB.” explained Irvan.

Vasham provides facilities and market access in various areas. “For example, shipping corns from NTB was not possible, because small farmers could not use large ships individually.”

According to Irvan, the business model of social contract farming is simple and can be replicated by many other large companies.

“If the company wants it, actually the company can. The question is whether companies want to invest and mobilize energy to succeed in the long run.”

 

Source: Vasham

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