Banana is one of the main horticultural commodities in Indonesia and it is one of the
most important export commodities. In Indonesia, banana is mostly cultivated and
distributed to consumers through a long and complex supply chain. This both limits the
amount of good quality product that is available to consumers and the revenue that is
available to growers. A study of the banana supply chain from Lampung district to the
Cengkareng wholesale market in Jakarta indicated that 5–6 levels are usually involved
in traditional supply chains. On the other hand, in Lumajang district, only three levels
were employed. In traditional banana supply chains, most of the activities are
performed by traders in the Cengkareng wholesale market, where the fruit is stored,
ripened and offered to retail buyers. Product losses are high. In the improved banana
supply chain, many of the value-adding activities are performed by farmer cooperatives.
The improved banana supply chain has a better payment system where the cooperative
buys the fruit from the growers in cash. However, in traditional banana supply chains,
collector agents buy the fruit using three payment systems: advance payment, advance
loan and credit terms. This results in the grower having a weak bargaining position. As
the long chain distorts information on price and fruit quality, growers are often
unaware of quality problems. As a result, they do not get a good price. In the improved
supply chain, the cooperative provides guidance and advice to the growers about the
quality that is required by consumers, resulting in a better price. By implementing
improved supply chain management, it is possible to shorten the chain and increase the
market value. Besides, modern retail markets require better quality fruit than the
traditional banana supply chain.