Since Sayurbox started in 2016, Indonesia’s agritech space has since gained a lot more interest. It has been hitting headlines and was more recently dubbed as reaching an “inflection point”. The country’s agriculture market is estimated to be $140B and accounts for roughly 13% of GDP — a huge market that remains technologically untapped.
With the impact of the coronavirus, this inflection point is taking on new meaning. Demand is expected to increase for fresh produce like fruits and vegetables. People and businesses are avoiding wet markets but still want to stock up on essential, healthy food items. However, the problems Sayurbox co-founder and CEO Amanda Susanti discovered in the fresh produce supply chain when she started a farm five years ago still persist. Now they are straining under the weight of the demand.
We sat down with Amanda to talk about these long-standing supply chain inefficiencies and learn how Sayurbox has been slowly cultivating a farm-to-table culture in the country.
Miles to go before Indonesia reaps change
With the lack of transparency and excess of middlemen across the supply chain, it’s no surprise that only around 10% of the value chain goes to farmers. This results in supply chain wastage. The fragmentation is such that farmers often don’t know where to sell their produce. They also don’t have direct access to the logistics facilities that will enable them to turnover their crops. As a result they end up not being able to sell 30% of their harvest.
The crops they do sell are not subject to price transparency. Middlemen take advantage of this. For a vegetable to go from the farm to the consumer in the traditional supply chain, it can cost upwards of an additional $2/kg. This is a burden on end consumers and businesses that rely on fresh produce for their goods and services. The presence of a grossly unnecessary amount of middlemen across the supply chain also produces food wastage of up to 50%.
Because of these deeply rooted problems, Indonesia is still miles behind markets like China and India. The growth of companies like NiceTuan, Meicai and Ninjakart in those countries is a promising sign that Indonesia can head towards that same direction.
Uprooting farmers’ pain points
Tackling these problems need a localized approach, given the unique infrastructure, logistics, and culture of Indonesia’s farming sector. Luckily Amanda had been able to build experience and connections over time having worked in agriculture for the past five years. In that time she’s realized how valuable it is to have an understanding of the local farming culture, how farmers think, and what consumers value when it comes to fresh produce.
In particular, when it comes to building a presence in farm areas and setting up sourcing hubs in those areas, there is quite a lot to take into consideration with the uncertainty of supply and demand. Amanda and her team work around the reality that farmers want everyone to take their harvest whether it’s good grade or bad grade produce.
With this in mind, Sayurbox has taken a multi-demand approach to distribution, covering both B2C and B2B customers. It’s easier to forecast B2B demand but in case there are external factors that influence the supply side — for example, if there’s an over-harvest, they are able to flush out excess supply to B2C customers because the demand from that side is easier to influence from the pricing. By getting all the harvest from farmers, they are able to secure the produce at a better pricing and reduce waste down to 5% along the supply chain.
Meeting consumer demand for speed and transparency
Understanding what the end consumer values has also been critical in setting up distribution and operations. That is convenience and transparency on items that customers are getting. With the company running a tight ship on their supply chain, they are able to show exactly which farms the produce is coming from so they know it’s gone through quality control — that it’s clean and safe.
Harvest and delivery is done within 24 hours, keeping turnover to a bare minimum, with one day for vegetables and two to three days maximum for fruits. QC checks and QC stocks are lined up throughout the supply chain in our sourcing hubs, so the delineation is clear between good grades and the lower grades. Essentially the aim is to give to consumers what they’re paying for and give transparency over that.
Now with the coronavirus issue, customers are also looking for more transparency, they want to know where their food is coming from. Through the app consumers are able to know exactly which farms the produce is coming from; they know that it is checked and it is clean and it’s safe.
Fruits of their efforts
The fruits of their efforts can be told through the avocado. It’s one of the best-selling produce on the platform, considering that it can be relatively expensive to procure with the traditional supply chain. But the reality is that Indonesia has a variety of good avocados from Flores and other areas. Sayurbox is able to source such a large amount that they can sell stock cheaper than wholesale markets.
What they’ve seen with the avocado is the result of a more efficient distribution network versus the traditional supply chain. Once this network scales with more hyperlocal farm deliveries, Sayurbox plans on achieving faster fulfilment times and distributing more types of produce with fewer barriers. Along with built-in products, they can designate more precise grade types, ensure better food safety, and also cater to a wider variety of fresh produce grade preferences.
While there’s certainly still a long way to go in eliminating supply chain inefficiencies, Amanda and her team have clearly planted seeds of change in the industry — ensuring both the pain points of farmers and needs of consumers are addressed with tight, technology-enabled operations.