A Sunrise 2.0 Case Study on Unilever’s inclusive Black Soy Supply Chain

1. © 2014 ir. A.R. Sjauw-Koen-Fa
SUNRISE 2.0 Case Study
Unilever’s inclusive Black Soy Supply Chain
August Sjauw-Koen-Fa

2. 1109135 © 2014 ir. A.R. Sjauw-Koen-Fa
Historical back ground of the black soybean
supply chain of ULI
• ULI acquired a majority stake in a Javanese company producer of sweet
soy sauce brand ‘Kecap Bango’ in 2001.
Regular suppliers of black soybeans are local and regional commodity
traders.
• Large Indonesian market for soy sauce, but growth of KB is limited by a
shortage of local black soybean.
• Possible sourcing strategies to expand soybean supply are:
- to import black soybeans
- to expand buying from regional commodity traders
- to develop of an own black soybean supply chain.
• ULI choose to develop an own supply chain of small-scale rice farmers.
• However, the smallholder farming system need to be upgraded to meet
market standards and sustainability agricultural practices.

3. 1109135 © 2014 ir. A.R. Sjauw-Koen-Fa
Collaboration model for smallholder supplier
development
• In 2003 Unilever Foundation and Procurement Indonesia start
collaborating with University of Gadja Mada (UGM), farmers
cooperatives, NGOs and local government.
• The aims of the Farmers Development Program (FDP ):
- To increase farm productivity
- To produce sustainable according the SAC
- To improve livelihood of farmers
- To build capacity in particular of cooperatives.
• Characteristics of the FDP: Price guaranty before planting,
buying commitment of all produced soybeans, provision of farm
services.
• Women primary role in the value chain are in sorting of
soybeans, although they also participate in planting activities.

4. © 2014 ir. A.R. Sjauw-Koen-Fa
Collaboration model of Black Soybean Farmers
Development Program
Cooperatives
G o v e r n m e n t
UGM & NGO for
community
development
Buying commitment
Unilever Indonesia
Foundation
Advisory
•Training / Skills Development
•Encouragement
•Community Development
Unilever
Indonesia.
Farmers groups
• The potential area selection
• Extension officer on field
• Cooperative development
•Operational support
•Capacity building
•Financial access
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5. 1109135 © 2014 ir. A.R. Sjauw-Koen-Fa
FDP performance indicators 2007-2012

6. 1109135 © 2014 ir. A.R. Sjauw-Koen-Fa
Characteristics of relationship with
regional commodity traders
• Traders are selected: they have to comply to Unilever’s
business principles.
• ULI Procurement visits farming area and meet their farmers
to ensure they have dedicated, competent and reliable
farmers or farmers group.
• Formalized in Purchase order Document: Volume, fixed
prices, harvest time, quality, delivery condition and
commitments.
• Drivers of the relationship are not only price and buying
commitments, but also to be partner of ULI network.
• Traders use mostly informal verbal ‘contracts’, based on
long standing mutual trust.
• Could provide fertilizers, seeds or credit to farmers.

7. © 2014 ir. A.R. Sjauw-Koen-Fa
Critical success factors (1)
• Strong value proposition due to large potential market for
Kecap Bango. By using local produced black soybean the
brand has a clear connection to the rural economy and local
communities.
• Proactive sustainability program within Unilever
accompanied by clear ambitions regarding challenge of food
security and small-scale agriculture in developing and
emerging economies
• Provision of price guarantee before planting.
• Open and transparent pricing system, based on a standard
cost price calculation, provides space to cooperatives (and
farmers) for negotiation about the price and delivery
conditions.
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8. © 2014 ir. A.R. Sjauw-Koen-Fa
Critical success factors (2)
• A multi-stakeholder collaborative approach to bring public and
private resources and short and long term interests together.
• Focus of ULI Procurement and UIF on a common strategic goal:
Development of a sustainable smallholders supply chain for
the business.
• Clear division but compatible tasks, resources/funds and
competences, and open communication between ULI
Procurement and UIF are critical conditions for smallholder
supplier development.
• Existence of collaborative and committed cooperatives and
traders as intermediaries for facilitating smallholder supply on
a long term win-win and trust-base.
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9. © 2014 ir. A.R. Sjauw-Koen-Fa
Critical leverage points
• Pricing system and buying conditions
• Improvement of the relatively low yield per
hectare of black soybean: further
intensification
• Deepening of cooperation with regional
traders
• Review of curerend Collaboration model for
the FDP
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10. © 2014 ir. A.R. Sjauw-Koen-Fa
Challenges to scale
• Further improvement FDP
• Transformational of the Collaboration model to
facilitate doubling/tripling of the supply
• Broader assessment of other constrains of
producing KB sauce
• Implementing SAC (from FDP as well as Traders)
• Review of the sourcing model of the traders
• Review of internal organizational barriers to scale
(Procurement and Foundation)
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11. © 2014 ir. A.R. Sjauw-Koen-Fa
Inputs for procurement/supplier guide
• Define a concrete value proposition and an appropriated sourcing
strategy from a supplier development perspective.
• Transactional relationship with suppliers must turn into cooperative
relationship.
• Empower producers organization/suppliers to organize smallholder
supply effectively and efficiently.
• Collaborate with government and NGOs to help improve
smallholder farming system (a case of public-private investment and
benefits)
• Smallholder supply must be link to the market as reference to
determine the price and buying conditions.
• Create an accurate registration, monitoring and reporting system
of the planting process and build flexibility of contract prices to
minimize supply disruption.
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