International Business Review


From Soil to Shelf
Removing Middlemen from the Produce Supply Chain

12 May 2015

The agricultural sector is an integral part of the Malaysian economy. It nurtures employment and boosts earnings especially in rural regions, and secures the nation’s supply of food. In recent times, the image of agriculture has been gradually evolving to keep up with modern business methods, giving rise to enterprise-savvy farmers who engage in diverse agro businesses, able to clinch spots in the top 20% of Malaysia’s income group. Instead of adhering to old-fashioned ways of retailing their products, these new-age farmers look at other options to bridge the gap between them and their buyers, such as Agribazaar.

Selling Inefficiency Initially, produce from the farm was marketed in a more traditional way in Malaysia, especially when it came to distribution. The marketing route made use of a number of intermediaries which resulted in high marketing costs. This meant that the producers or farmers were alienated from the market centres due to filtered communication and insufficient exchange of information. This in turn resulted in the producers not growing enough harvest to satisfy demand.

Currently, the movement and distribution of fresh vegetables and fruits from the farm to retailers is controlled by wholesalers. On top of that, second level wholesalers also take part in the collection and distribution of fresh fruits and vegetables. This is especially the case for retailers whose establishments are located far from the wholesale markets, and who acquire produce in small quantities. Therefore the role of collectors and transporters are pertinent for smaller remote farms where it is not economically viable to transport produce to the market using the farmer’s own means.

Agribazaar Boost

In an effort to leverage the advantage to producers, the Malaysian government, namely the Ministry of Agriculture, has teamed up with national information and communication technology provider MIMOS to create the Agribazaar portal. By channelling their sales through the portal, farmers are able to skirt around the middlemen and gain direct access to their buyers. Since its inception in 2004, it has been attributed to generating income (see sidebar) for farmers who have made substantial amounts of sales via the portal.

To further augment the functionality of the portal, MIMOS has recently launched Agribazaar version 2.0 for handover to the Department of Agriculture. This new version possesses the ability to match supply and demand, and provide the platform for transactions to be carried out in an expedited and efficient manner through the shopping cart, virtual store and e-payment functions. These fresh features supplement the appeal of the portal to farmers, encouraging them to abandon archaic methods of selling their hard work in the pursuit of unlocking greater profits.

To increase patronage of the portal and make it more comprehensive for the marketplace, Agribazaar keeps track and analyses transaction data, and offers it to members. Important stakeholders along the value chain, including farmers, retailers, wholesalers, distributors, farmers, exporters and importers, can utilise the data generated to arrange their activities to adjust to market supply and demand trends. This newer method of marketing has introduced efficiency into the whole system and proves to be advantageous to both the producer and the buyers.

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