DESIMMAL modeling, simulation, animal-farm system

Risk and performance inter-relationship in milk agribusiness: a system dynamics approach (Daud, 2013)

Agribusiness is entangled with any stakeholder and so are supply chain risks. In an earlier date, risks and uncertainties is usually dealt with a single specific firm. It is today realized that since the agribusiness is a complex bonding of several stakeholders, distortion at one of the components distorts the entire chain in varying degrees. Therefore, risks management in an agribusiness gains more importance in recently. The risks management process start with identification of the risks and ends with the risk mitigation through the risks response development. Identifying potential risks and its related strategy to mitigate risks have been found to be the key success factor in particular industry. According to the situation as stated above, it is interesting to explore the topic of risk and supply chain risks in dairy (milk) agribusiness in Indonesia. One of most important characteristic in the milk agribusiness is the number of actors involved. It may include traditional farmers, provider of inputs, producer organization or cooperative, processors and manufacture of milk products. In the perspective of agribusiness chain risks, the business inter dependency between those actors, given various characteristic among the actors, will generate more complexity in understanding
risks compared with a single individual business. In such industry, such question about how the actors behave and manage the risks along the agribusiness chain may be aroused. Unfortunately, it is rare to find any earlier studies that address specifically risks in the milk agribusiness industry. Hence, there is a need for more exploration on this area to fortify the concept of milk agribusiness risks. Generally, there are two main emphasizes in exploring the topic of risks in the milk agribusiness. First is on the risk managing behavior of actors in the milk chain. It is considered to be important owing to the lack of previous study in similar field. The second is on the relationship between performances in the industry given the presence of risks. This is considered also to be important in this as the issues of relationship in the chain are gaining more attentions from many stakeholders. In fact, this study will give more attention to the latter issue. Therefore, the purposes of this study are twofold;  first, to identify and build the inter-relationship between element in milk agribusiness system;  and second, to determine how changes in some elements — which can be considered as sources of risk could be affected the level of agribusiness producer’s welfare. This paper will be organized as follows. As starting point, I will review the extant of some elements that can be
considered as sources of risk faced by producer. This review is based on my prior observation on the particular agribusiness system. In the next section, a brief description
of system dynamics methodology will be presented. It will be followed by the detail description of the model that is built in this study. The rest of the paper will be devoted to scuss the finding and conclusion from this study.