CV Laktatridia goatdairy farmer in Bandung

Indonesia

Achmad FirmanAndre Revianda Daud

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CONTENTS Summary ..................................................................................................................................... ii

1. Introduction ............................................................................................................................. 1

2. Findings of the case study ......................................................................................................... 2

2.1. History and development of CV. Laktatridia ................................................................................ 2

2.2. Responding to high demand and low supply ............................................................................... 4

2.3. Terms of supply contract between milk farmer groups .............................................................. 6

2.4. Dairy goat products of CV. Laktatridia ......................................................................................... 6

2.5. Quality management and certification ........................................................................................ 7

2.6. Supply chain structure ................................................................................................................. 8

2.7. Product distribution ................................................................................................................... 10

2.8. Value addition in goat milk supply chain ................................................................................... 10

2.9. PSA analysis of CV. Laktatridia supply chain .............................................................................. 11

3. Conclusions ............................................................................................................................ 17

References ................................................................................................................................. 18

LIST OF TABLES, FIGURES, AND PHOTOS Tables Table 1: Goat population in Indonesia, 2002–2006 ................................................................................ 1 Table 2: Retail agents of CV. Laktatridia products .................................................................................. 3 Table 3: CV. Laktatridia’s supply partners............................................................................................... 4 Table 4: History of goat milk production at CV. Laktatridia .................................................................... 5 Table 5: Supply and demand gap of goat milk at CV. Laktatridia (litre/month) ..................................... 5 Table 6: Net margin for goat milk (January 2008) ................................................................................ 11 Figures Figure 1: Location of CV. Laktatridia ....................................................................................................... 2 Figure 2: Structure of CV. Laktatridia supply chain of goat milk ............................................................. 8 Figure 3: Reproduction and milk production cycles of dairy goat .......................................................... 9 Figure 4: PSA graph for participating group in CV. Laktatridia goat milk supply chain ........................ 14 Figure 5: PSA graph for non-participating group in CV. Laktatridia goat milk supply chain ................. 15 Photos Photo 1: CV. Laktatridia goat milk in 175 ml cup .................................................................................... 7 Photo 2: Goat pen in Gema Putera farmers’ group ................................................................................ 9

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SUMMARY This case study investigates the small enterprise “CV. Laktatridia”1 which has focused their business on the development of dairy goat products in West Java. It reports on the partnerships and coordination the enterprise has created to manage its marketing chain for goat milk. Laktatridia business partners have been expanding their marketing network, which has led to higher demand for their dairy products. Laktatridia’s marketing network with retailers is based on a win−win concept. The problem faced by Laktatridia was how to fill the milk demand from the market. Previously Laktatridia had bought milk from other producers with cash payment. However, because of increasingly higher prices from other producers, it started to encourage farmers to start keeping goats and supply milk to the enterprise. Laktatridia staff facilitated the formation of groups of farmers who are willing to start dairy goat production. Laktatridia also provided credit facilitation in the form of a loan of dairy goats. Furthermore, Laktatridia also provides market and price guarantee to farmers, and support to the group until they can survive with their dairy goats. The existence of CV. Laktatridia has had a positive impact for the farmers’ group and retailers. CV. Laktatridia has built a network with both information and price transparency for all supply chain actors. Therefore, CV. Laktatridia can be seen as the coordinator of the supply chain for dairy goat milk in Bandung.

1 CV = Comanditer Venotscape (Dutch language). It is used as a legal name for small and medium enterprises.

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1. INTRODUCTION Dairy goat, a new commodity in Indonesia, has positive development prospects. People currently still consider that goat milk is a medicine to cure some diseases such as asthma and tuberculosis. Therefore, its price is relatively expensive. On the other hand, goats can be used for dual purposes: they are both milk and meat producers. In investment terms, a dairy goat farm needs less starting capital compared with a dairy cattle farm and it remains easier to manage. According to Table 1, the largest dairy goat population in Indonesia is located in Central Java Province followed by East and West Java. The goat population has been increasing. This suggests that there is also an increase in the preference for goat farming in West Java. West Java has 16 districts and nine municipalities. Based on data revealed by the Livestock Services Office of West Java Province (2006), districts which are having a large number of goat are Karawang (284 162 heads), Bogor (122 084 heads), and Ciamis (112 522 heads). Bandung District has only got 60 145 heads of goat in that same year. Table 1: Goat population in Indonesia, 2002–2006

Provinces Year

2002 2003 2004 2005 2006 Number of heads A. Java Island 6 977 309 7 018 203 7 326 719 7 591 063 7 957 819

Banten 522 380 522 380 566 716 572 761 685 170 Jakarta 4 964 5 351 6 971 5 886 5 475 West Java 878 043 930 066 1 144 102 1 138 695 1 335 222 Center Java 2 984 434 2 984 845 2 993 138 3 224 067 3 245 910 East Java 2 315 318 2 334 554 2 359 375 2 384 973 2 418 714 Yogyakarta 272 170 241 007 256 417 264 681 267 328

B. Other islands 6 094 157 6 226 259 6 020 958 6 390 975 6 778 507 C. Total 12 549 086 12 722 082 12 780 961 13 409 277 14 051 156

Source: Directorate General of Livestock Service, 2006 A kind of goat widely found in Indonesia is Peranakan Ettawa (PE) which is dominantly used for meat rather than milk production. PE is as a crossing result between Ettawa Goat from India and Java Goat. Despite people’s common knowledge of the properties of goat milk stated above, goat milk actually has an interesting composition posting 3 percent protein and 3.8 percent fat, which is relatively similar to cow’s milk with 3.6 percent protein and 3.0 percent fat (Pennington and Helen, 1985). However, goat milk can be digested more easily than cow’s milk as its fat molecules are smaller and naturally homogenous and rich with vitamins A, B-complex, and C (Einsiedel, 2008). Biologically, goat milk productivity is 8−28 percent higher than that of cows. Goats usually give birth to one or two kids but produce a higher amount of milk than its kids need. Thus, the rest of the milk can be sold to consumers who need the milk. CV. Laktatridia is a small business focusing on dairy goat farming located in Bandung District. It works in an area of majority dairy cattle farming so its existence has become a focus point to neighbours for its different type of farm and products. This case study will show how the farming company has developed and how it has created and managed a supply chain for its sustainability.

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2. FINDINGS OF THE CASE STUDY

2.1. History and development of CV. Laktatridia CV. Laktatridia started with the existence of a group of dairy goat farmers. The group was started by Mr Eri Sobari who had found an interesting dairy goat market through a doctor he knew, Mrs Rini, who also had a dairy goat farm and collection business. He successfully gained three other partners and created the enterprise on 22 February 2005. The purposes of the farming establishment were:

1. To undertake livestock farming through dairy goat production; 2. To provide qualified livestock and dairy production training and consulting services in

order to develop Indonesian livestock; 3. To make profits out of the activity and to make a contribution to the district’s

economy.

Each one of the four business partners specialized in one of the following management activities: production, administration, marketing and overall leadership. The first step taken was to collect funds for the purchase of land, the dairy goats and for the construction of a building for pens. Almost 85 percent of the funding was from Mr Rifanzi Chandras, which made him the leader of the enterprise. The next step was to find a suitable location for the farm with a connection to the main road and good road condition. However, the location found turned out not to be optimal in terms of road conditions to connect to the rest of Bandung District (cf. Figure 1). Figure 1: Location of CV. Laktatridia

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At first one pen was built to house 30 does and 2 bucks, which was about 2.5 m wide and 3.5 m long. The first goat milk batch produced in May 2005 totaled 74.4 litres from four does. Average milk production for each doe was 0.6 litre per day. At first the production was sold to Mrs Rini’s farm to supply patients in Hasan Sadikin Hospital. However, as time went by and with the increase of its dairy goat population and milk production, the group used another channel of selling the milk: door-to-door sales. By the beginning of 2006 the business had created its own network of marketing outlets. The following steps were taken by CV. Laktatridia in order to expand their farm:

1. Selling goat milk in frozen form as it is a perishable good that will only last for 3−4 hours under normal temperature;

2. Promoting and selling its products in events such as exhibitions hosted by the government or other institutions;

3. Bringing other partners into a partnership to deal with the same product. Until 2008 there were eight marketing agents working for the farm (see Table 2).

4. In 2006 the enterprise started organizing other dairy goat farmers to start dairy goat production so as to increase goat milk production in order to supply the increasing demand (see Table 3). Another farming group named Gema Putera was formed about 2 km away from the CV. Laktatridia and it could supply milk from this other group as well as from other dairy goat producers to fulfill its own orders.

5. In the beginning of 2008 the enterprise received a supply offer from a supermarket in Bandung Municipality, Yogya Department Store. However, the production was not enough to supply the supermarket. Besides, CV. Laktatridia could not accept the payment system of two weeks after the supply of products to the supermarket because the enterprise needed a cash payment system to cover its recurrent costs of production.

Table 2: Retail agents of CV. Laktatridia products

No Name of retailers Location Demand (litres/month)

1. Mr Asep Supena Cimahi City 50 2. Mr Nono Cimahi City 150 3. Mrs Nenden Bandung City 80 4. Mr Odang (Neqtasari shop) Bandung District 20 5. Mr Andri Bandung District 20 6. Mr Dwi Budianto Jakarta City 100 7. Miss Lucy Handika Jakarta City 100 8. Mr Khaerudin Sodiq Sumedang District 80 TOTAL 600

Source: CV. Laktatridia, 2008

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Table 3: CV. Laktatridia’s supply partners

No Name of farmer Name of farmer’ group

Number of members

Number of dairy

goats (head)

Location Note

1. Mr Dedeng Gema Putera 6 25 Bandung District Set up by

Laktatridia

2. Mr Hamdi Hadi - - 6 Bandung District Set up by Laktatridia

3. Mr Heri - - 6 Bandung District Set up by Laktatridia

4. Mr Yadi - - 6 Bandung District Set up by Laktatridia

5. Mr Toni - - 45 Bogor District Partner 6. Mr Syahrial - - 65 Bogor District Partner 7. Mr Bangun - - 86 Bogor District Partner 8. Mr Eman - - 72 Cianjur District Partner

Source: CV. Laktatridia, 2008 In addition to collecting goat milk from other producers, CV. Laktatridia built two other pens for 30 goats each, yet, it could not fulfill the pen’s capacity because of lack of funding. Beside the pen, the enterprise has constructed a room for milk processing and packaging followed by freezing. Another achievement was the hiring of additional labour around the area in order to respond to a steep expansion in production.

2.2. Responding to high demand and low supply Goat milk produced by CV Laktatridia has not fulfilled its buyers’ need yet. According to data from the group, monthly production of goat milk averages 200 litres (see Table 4). However, goat milk demand from the enterprise’s customers reaches up to 600 litres per month, as shown in Table 2 above. Therefore, the gap is about 400 litres and the additional supply is filled from the Gema Putera farmers’ group and other supply partners. Nevertheless, there is still a gap of 125 litres per month between supply and demand (Table 5). Based on the interview with the group of managers at CV. Laktatridia, the low productivity of dairy goat farming can be influenced by two factors:

1. The upland location of the farm brings cool temperatures of 15oC−23oC while the suitable area for Ettawa dairy goat herding is on lowland with temperatures of 23oC−28oC.

2. Goat feed supply is not sufficient when it is needed, especially feed from agricultural by-products such as the mixture of rice and bran. Up to now, the company has not been able to make its own feed stock or storage facility. In the dry season, grass fodder is difficult to find so the farmers have to use leaves they collect from trees.

Therefore, the only way out of the milk supply problem is to form another group of dairy goat producers.

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Table 4: History of goat milk production at CV. Laktatridia

Month

Year 2005 2006 2007 2008

Productive dairy goat

(head)

Milk production

(litre/month)

Productive dairy goat

(head)

Milk production

(litre/month)

Productive dairy goat

(head)

Milk production

(litre/month)

Productive dairy goat

(head)

Milk production

(litre/month) 1 January 17 263.5 20 221.7 10 124.0 2 February 14 196.0 19 102.5 10 112.0 3 March 8 124.0 11 85.9 4 April 10 180.0 10 54.6 5 May 4 74.4 6 93.0 23 229.4 6 June 6 144.0 6 108.0 18 232.6 7 July 10 248.0 9 167.4 16 295.7 8 August 12 260.4 14 217.0 19 394.2 9 September 16 288.0 17 255.0 21 435.7

10 October 12 260.4 18 279.0 21 351.4 11 November 17 306.0 19 285.0 21 274.6 12 December 17 316.2 19 294.5 21 226.7

Source: CV. Laktatridia, 2008 Table 5: Supply and demand gap of goat milk at CV. Laktatridia (litre/month)

Supply source of goat milk Milk supply Total milk supply Demand Gap

CV. Laktatridia own production 200 475

600

125 Purchase from Gema Putera Group 75

Purchase from other producers 200

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2.3. Terms of supply contract between milk farmer groups Mr Dedeng Sutisna has been managing the second group of dairy goat farmers: Gema Putera. At the beginning Mr Dedeng was interested in starting a dairy farm under the oversight of CV. Laktatridia. His farm was started in 2006. When CV. Laktatridia asked him to get other farmers and create his own group, Mr Dedeng easily found five other people to establish Gema Putera in September 2006. The group then made a deal with CV. Laktatridia so as to farm dairy goats under the following conditions:

1. Gema Putera group has to:

a. Provide land for pen and grazing area. b. Build pens for 22 heads of dairy goats; total surface of pen 5 × 15 m = 75 m2; c. Provide a freezer for frozen milk storage; d. All operational expenses on the farm must be borne by the group itself; e. All the goat milk produced has to be distributed to CV Laktatridia.

2. In counterpart, CV. Laktatridia provides:

a. Loan for as many as 32 goats equivalent to IDR55 million2. The loan must be paid after two years of production;

b. Guaranteed price at IDR11 000 per litre to be revised every six months; payment every 15 days;

c. Supervision and training to Gema Putera group of farmers. The agreement was sealed in No. 1/Laktridia/II/2007 on 17 February 2007. An in-depth interview with Mr Dedeng identified the factors that made him change his livestock system from dairy cattle to goat: lower investment needed to create a herd of goats; guaranteed price from CV. Laktatridia; bad experience with the dairy cattle cooperative; investment by the business partner into his own farm; expected profits were higher.

2.4. Dairy goat products of CV. Laktatridia

After expanding its business, CV. Laktatridia not only sells its product as frozen goat milk, but also sells processed goat milk. CV. Laktatridia sells frozen milk using various sizes of packaging: plastic bags (1 litre and 250 ml), and plastic cup containing 175 ml. The business partners have decided not to undertake pasteurization or sterilization because the process would change the structure of the milk’s fat content and it would change the smell of the milk. Therefore, a short term packaging is preferred to keep the milk fresh while being able to hold it for a long time in freezing storage. The goat milk is sold under the brand name of “Etta”. The product has been through quality, health, and safety tests from the government. There are six retailers who use this product in their trading; two out of these only buy the milk product and add their own-label on it. This use of own-label by the retailers has been accepted by CV. Laktatridia as it is an extra distribution outlet and source of income for the enterprise.

2 At the time of study US$1 ≈ IDR12.5

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Photo 1: CV. Laktatridia goat milk in 175 ml cup

2.5. Quality management and certification CV. Laktatridia owners have understood that their existence and product reputation was also linked with the capacity of the Gema Putera farmers’ group to deliver good quality goat milk in a regular way. Likewise, the quality attributes of the products coming from their suppliers should satisfy the expectations of their retailers. In order to improve the quality and guarantee the safety of their product for the consumers, CV. Laktatridia has registered its product for quality, health and safety, and Halal tests with two certifying bodies: PT. Succofindo, Medicine Surveillance Committee (Badan Pengawasan Obat dan Makanan/BPOM) under the Health Department of Indonesia, and Cosmetics and Food Studies Institution of Indonesian Ulema Council (Lembaga Pengkajian Pangan dan Kosmetika MUI/LPPOM MUI). The results of the three quality and safety tests are available upon request to both distributors and consumers so as to certify the good quality and appropriate safety of the enterprise’s products. According to the test implemented by PT. Succofindo on 3 May 2006, the milk distributed by CV. Laktatridia consists of the appropriate fat, protein and mineral content of standard goat milk. A health and safety test was done by BPOM on 23 December 2005 with registration number of PP 1105-306 which gave the following results:

1. 1. MPN Coliform : < 3/ml (Standard ≤ 20/ml) 2. E Coli : Negative (Standard Negative) 3. Salmonella : Negative (Standard Negative) 4. Enterococcus : Negative (Standard Negative) 5. Arsenic (As) : Negative (Standard ≤ 0.5 µg/ml) 6. Pb : Negative (Standard ≤ 0.3 µg/ml) 7. Zinc (Zn) : 0.01 µg/ml (Standard ≤ 0.5 µg/ml)

According to these results, CV. Laktatridia obtained a product license BPPOM RI MD 205110001962. This number can be used as a health and safety guarantee for the consumers who purchase the milk. CV. Laktatridia also underwent a Halal test to make Muslim consumers feel comfortable that the goat milk does not contain any other substances which are considered impure by their religion. The test was made by LPPOM MUI on 21 March 2007 with registration number of MUI-JB 01041020500307.

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2.6. Supply chain structure Supply chain management refers to the coordination, configuration, and alignment of materials procurement, processing, product and services, distribution, financial and information flows for the activities and the processes that are involved in a supply chain (Simchi et al., 2000). Internal coordination within a supply chain is an important element to reach similar goals for the marketing partners. The supply chain of dairy goat milk coordinated by CV. Laktatridia is illustrated on Figure 2. Analysis shows that the existence of the Gema Putera farmers’ group along with all but two of the retailers involved were established shortly after the existence of CV. Laktatridia. The partnerships built were all established through a formal contract. The enterprise holds control of the coordination between all chain stakeholders. Figure 2: Structure of CV. Laktatridia supply chain of goat milk

Figure 2 shows that CV. Laktatridia provides credit attribution, market guarantee, and payment of sales to Gema Putera, thus investing more time than with its other milk suppliers. Furthermore, CV. Laktatridia facilitated a request from the farmers’ group for government aid in 2008. Nevertheless, CV. Laktatridia’s main role in the supply chain is as a dedicated wholesaler for all its suppliers, which means that the enterprise is the decision maker of the supply chain; it also provides information and

Gema Putera

Wholesaler CV.

Laktatridia

Retailer Mr Asep

Retailer Mr Nono

Retailer Mr Dwi

Budiyanto

Retailer Miss Lucy Handika

Retailer Mrs Nenden

Retailer Mr Andri

Retailer Mr

Khoerudin Sodik

Retailer Mr Odang

Producer Mr Syahrial

Producer Mr Bangun

Producer Mr Eman

Producer Mr Toni

Credit Education and

Training Market guarantee Payment guarantee Information

Agreement to deliver goat milk

Goat milk supply

Cash payment

Agreement to deliver goat milk

Special price Safety product

guarantee Product packing

Payment Consumer

information

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technical assistance to improve supply chain decision control, especially in increasing both quality and quantity of the product produced. In dairy goat farming there is no seasonal period of producing milk as goats produce milk after delivery of the kid up to the dry interval and their next pregnancy. The Ettawa goat breed can become pregnant at the age of 1 to 1.5 years. Goat milk production lasts for six months, as shown on the goat reproduction cycle on Figure 3. Farm management should be induced based on consideration of the reproduction and milk production cycles. Therefore, with a goat herd, milk can be produced and sold every day without empty period. CV. Laktatridia has used this strategy for sustainable milk production as is shown in table 4 above. Figure 3: Reproduction and milk production cycles of dairy goat

Photo 2: Goat pen in Gema Putera farmers’ group

Young female dairy goat (1 year)

1st Pregnancy

Born (1−2 kids)

6 months 2 months

4 months 2 months

2 months

4 months

1st milk production

Resting period

Born (1−2 kids)

2nd milk production

Cycle continues

3rd Pregnancy

Resting period

2 months

2nd Pregnancy

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2.7. Product distribution For marketing, milk is packed in frozen form at the production source for easy distribution and organization for both supplier and traders. The Gema Putera farmers’ group delivers milk to CV. Laktatridia by using 1 kg plastic bags every 2 to 3 days. The short distance (2 km) between the processing enterprise and the farmers’ group allows the goat milk to stay in good condition. Milk supply from other partners is delivered using 1 litre plastic bags in frozen form. Then, it is carried in a cooler box to keep it frozen because the distance from the farmers to CV. Laktatridia is somewhere between 60 and 150 km, which takes 2 to 5 hours on the road by car. The frozen milk products sent out from the processing plant are packed in styrofoam boxes for Bandung town and cooler boxes for distribution to Jakarta, which is 220 km away.

The distribution contract between CV. Laktatridia and its distributors specify the following conditions:

1. CV. Laktatridia is committed: 1. To provide goat milk in certain quality without damage; 2. To give brochure, leaflet, and name card for promotion; 3. To state special price for retailers in condition of:

Order capacity (litres) Price taken (IDR)

Below 20 21 to 50

More than 50

21 500 19 500 17 500

2. Retailers are committed:

- To sell at least 20 litres or 150 cups of goat milk per month; - To make cash payment to the supplier; - To be responsible for the unsold product or product that has reached the expiry date; - To return the goat milk whenever spoilage appears as a result of distribution by CV.

Laktatridia; - To order at least two days before distribution date.

The agreement is revised every six months for changing price and selling performance from retailers. On average, the retailers sell one litre of goat milk at IDR35 000 to their customers, 250 ml plastic bag containers sell for IDR8 750 while 175 ml cups of goat milk are priced at IDR7 000.

2.8. Value addition in goat milk supply chain The most important element from this case study is the added value created by each supply chain actor. The margin analysis can be seen on Table 6. The table describes production costs for each supply chain actors.

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Table 6: Net margin for goat milk (January 2008)

Cost

(IDR/litre) Margin

(IDR/litre) Income per month (IDR)

A. Producers 6 677 Cost of production 6 027 Grass 480 Concentrate 2 880 Farmers’ labour 2 667 Marketing costs of producer 650 Packaging materials (plastic bags)3 50 Transportation 600 Farm gate price 11 000 Margin of producers 4 323 648 500 B. CV. Laktatridia Hired labour 3 185 Purchasing price 11 000 Packaging materials (styrofoam and plastic bags) 84 Transportation (e.g. promotion pick-up feed) 189 Tax (ppn) 722 5 percent contingency 758 CV. Laktatridia price for retailer 21 500 Margin of CV. Laktatridia 5 598 2 515 133 C. Retailer 27 500 Purchasing price 21 500 Hired labour 6 000 Retail price 35 000 Margin of retailer 7 500 375 000

Notes: Average of milk production at producer level is about 75 litres per month; average of milk supply at CV. Laktatridia level is 475 litres per month; average of milk sale at the retailer’s level is 50 litres per month. Despite the highest margin going to retailers, the farmers also have a reasonable margin. The reason for CV. Laktatridia taking a low margin is because the company also bears some costs for its goat farming.

2.9. PSA analysis of CV. Laktatridia supply chain The participatory system analysis methodology was implemented in two focus groups: one group of “Participating” farmers and one group of “Not Participating” farmers in dairy goat production for CV. Laktatridia. Twelve farmers took part in the group of “Participating” as well as one observer from CV. Laktatridia. The PSA for the group of “Participating” was held in the house of the leader of Gema Putera farmers’ group. In the group of “Not Participating”, the focus group was attended by ten farmers and one delegate from Neqtasari. Neqtasari is the name of the milk shop that was built by a farmer who produces, processes, and sells goat milk by himself.

3 Farmers use plastic bags to deliver their product to CV. Laktatridia

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The group of participating farmers was asked the question: “What are the reasons that have made you decide to start dairy goat production for CV. Laktatridia?” The following explanatory factors were voiced by the focus group:

1. Output price. CV. Laktatridia guarantees to buy goat milk products from farmers and gives an incentive price.

2. No competitors. There is no similar enterprise to CV. Laktatridia. 3. Asset owned. One only needs narrow land to keep dairy goat. 4. Lower production risk. The average goat milk production is less than 1 litre per day a head. 5. Technical support. CV. Laktatridia gives technical support to its supplier−farmers. 6. Lower production cost. Feed resources such as grass, leaves, and agriculture waste are

available in the area. 7. Minimum investments. A yearling goat is cheaper than a cow. It is only IDR3 million a head

(equivalent to US$300) for a dairy goat but a cow costs IDR15 million a head (US$1 500). 8. Former experiences. Farmers have experience keeping and milking cows. 9. Location of buyer. Farmers’ location is not so far from CV. Laktatridia. 10. Certainty. Market and supply guarantee by contract between farmers and CV. Laktatridia. 11. Access to information. CV. Laktatridia shares price information and is open to farmer’s

complaints. 12. Informal loan. CV. Laktatridia can give soft loans to farmers who need to purchase a goat. 13. Input credit. CV. Laktatridia can give inputs like concentrate meal on credit if it is necessary

for farmers. 14. Economic status. Keeping goats brings a new additional source of income for the farmer’s

household. The PSA graph and elemental scores are displayed in Figure 4. The participating farmers own and keep more dairy goats than the group of “Not Participating” farmers. They consider they can produce higher quality goat milk than the other group. Therefore, the group does not want to face higher risk if they try to sell their milk product on the spot market, as the other group has done. They need a dedicated customer and sell their product to CV. Laktatridia. Therefore, the interpretation of the PSA graph by this group of farmers contradicts their own classification as they claim they started to get involved in the CV. Laktatridia milk chain as a result of symptom and buffer elements, on which external action can have little effect, rather than from motor elements. The focus group of non participating farmers was started with the question: “What are the reasons that have made you decide NOT to start dairy goat production for C.V. Laktatridia?” The 22 explanatory factors voiced by the participants of the focus group were synthesized into nine factors:

1. Transportation cost. Need to pay for transportation if they have to deliver the product to CV. Laktatridia because there is no public transportation.

2. Low price. CV. Laktatridia buys goat milk at a lower price than the price they get from consumers.

3. Location of buyer. CV. Laktatridia location is far from their location. 4. Low production. Because they have only a few of goats, their milk production is low. 5. Payment term. C.V. Laktatridia gives money after 15 days for each payment. However, they

need ready cash money to operate their goat farm. 6. Information. Farmers have no information about CV. Laktatridia and its activities. 7. Subsistence activity. Keeping dairy goat is only a subsistence activity. 8. Market. They sell their product by themselves in the weekend. 9. Milk outlet only. CV. Laktatridia only buys goat milk and does not buy goats.

The PSA graph and elemental scores are displayed in Figure 5. The symptom quadrant consists of two elements: transportation cost and low price. The buffer quadrant consists of payment term. The

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critical element quadrant consists of two elements: location of buyer and market. The motor quadrant consists of four elements: low production, information, subsistence activity, and milk outlet only.

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Figure 4: PSA graph for participating group in CV. Laktatridia goat milk supply chain

Coordinates of elements

No. Elements Activity ratio Degree of inter-relationship

1 Output price 5.4 9.1 2 No competitors 5.9 17.2 3 Asset owned 1.3 122.2 4 Lower production

risk 0.5 198.9 5 Technical support 0.8 135.9 6 Lower production

cost 0.5 141.9 7 Minimum

investments 0.6 161.7 8 Former

experiences 6.7 32.3 9 Location of buyer 2.2 36.5 10 Certainty 1.9 132.0 11 Access to

information 0.5 49.0 12 Informal loan 0.4 23.4 13 Input credit 1.1 107.7 14 Economic status 0.6 136.2

110

220 Symptom Critical element

Buffer Motor

Deg

ree

of in

ter-

rela

tions

hip

Activity ratio 10

Technical support

No competitors

Informal loan

Minimum investments

Location of buyer

0 1

Access to information

Output price

Former experiences

Lower production risk

Asset owned

Lower production cost Certainty

Input credit

Economic status

15

Figure 5: PSA graph for non-participating group in CV. Laktatridia goat milk supply chain

Coordinates of elements

No. Elements Activity ratio Degree of inter-relationship

1 Transportation cost 0.9 91.0

2 Low price 0.5 88.4 3 Location of buyer 1.3 73.0 4 Low production 1.1 56.3 5 Payment term 0.7 49.9 6 Information 1.1 38.3 7 Subsistence

activity 1.1 52.4 8 Market 1.1 112.1 9 Milk outlet only 1.3 35.3

70

140 Symptom Critical element

Buffer Motor

Deg

ree

of in

ter-

rela

tions

hip

Activity ratio 10

Location of buyer

0 1

Low price

Payment term

Information

Market

Transportation cost

Subsistence activity

Low production

Milk outlet only

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The focus group and PSA gave mixed results as what intervention factors could be implemented in this context of linking smallholders to markets. However, more discussions with the farmers revealed that only two decision making factors had a potential to change their behaviour: the location element for the group of “Participating” and the information element for the group of “Not Participating”.

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3. CONCLUSIONS CV. Laktatridia was established by four partners who started from a small goat farming enterprise to become a real livestock agribusiness. The enterprise has also coordinated a supply chain of actors dealing with goat milk. CV. Laktatridia has been able to expand from only goat milk production into processing and distribution by creating its own market. The four original partners created business partnerships with suppliers and retailers to expand their own business. To continue supplying an increasing demand for goat milk products, they have created another group of goat farmers by providing credit facilities and consultation services; they have also identified other goat milk producers to supply from. The achievement of this business project is that there is transparent coordination by CV. Laktatridia of milk goat products, prices and information needed by each actor in the supply chain. Some barriers nonetheless remain for the dairy goat farming enterprise. Indonesians are not yet accustomed to drink goat milk and it remains for medicinal usage. Goat milk price is relatively expensive. The goat milk market in Indonesia remains a niche market consisting of a small number of people of Arabian descent who are used to this milk. The results of the PSA analysis point to improvements in this supply chain to encourage increased participation by other farmers: establishment of extension services, field trials, farmer training and transportation system, especially in the villages that are further away from the milk distribution outlets.

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REFERENCES Directorate General of Livestock Service. 2006. Statistical book on livestock 2006. Directorate General of Livestock Service, Agriculture Ministry of Indonesia, Jakarta. Einsiedel, M. 2008. Raw goat milk versus pasteurized cow milk (available at www.dairygoatjournal.com). Livestock Services Office of West Java Province. 2006. Statistical book on livestock 2006. Livestock Services Office, Government of West Java Province, Bandung. Pennington, J.A.T. & Church, H.N. 1985. Bowes and Church’s food values of portions commonly used. Philadelphia, J.B. Lippincott. Simchi-Levi, D., Kaminsky, P. & Simchi-Levi, E. 2000. Designing and managing the supply chain: concepts, strategies and case studies. Boston, Irwin/McGraw-Hill.