Value Chain Inefficiencies in Local Agribusiness: Diagnosing the Long and Costly Agricultural Supply Chain in Majene Regency, West Sulawesi, Indonesia Using Porter's Value Chain Framework

Abstract

Agricultural supply chains in peripheral regions of Indonesia are characterized by structural inefficiencies that systematically disadvantage smallholder farmers while enabling disproportionate margin capture by multi-tiered intermediary networks. This study examines the supply chain architecture of Majene Regency, West Sulawesi—a predominantly agrarian coastal district whose smallholder farmers produce cocoa, coconut, cassava, and horticultural commodities yet consistently receive among the lowest farm-gate prices in the province. Employing Porter's (1985) Value Chain Framework as the primary analytical lens, supplemented by transaction cost economics and commodity systems analysis, this qualitative study maps the full supply chain from farm gate to end market, identifying value creation and value destruction points across five primary and four support activities. Data were collected through semi-structured interviews with 42 key informants—including smallholder farmers, village collectors (pengepul), sub-district and district-level traders, government extension workers, and cooperative officials—complemented by field observation and secondary data analysis. Findings reveal a supply chain characterized by five to six intermediary tiers, post-harvest losses of 20–30%, severe information asymmetry between farmers and traders, near-absent cold chain infrastructure, and monopsonistic buyer power concentrated among a small number of inter-regional traders. The cumulative effect is a retail-to-farm-gate price margin of 83–130%, with Majene farmers capturing only 8–15% of final consumer prices. Drawing upon the value chain analysis, the study develops a Agribusiness Value Chain Optimization Framework (AVCOF) and proposes six evidence-based policy interventions targeting chain compression, infrastructure upgrading, cooperative revitalization, digital price transparency, quality certification, and agricultural financial inclusion. Findings contribute to the literatures on agricultural value chain governance, smallholder market integration, and regional agribusiness development in Eastern Indonesia.

Keywords: value chain analysis, Porter's framework, agricultural supply chain, smallholder farmers, Majene, West Sulawesi, agribusiness inefficiency, transaction cost econom