CHAPTER I

INTRODUCTION

1.1 Problem Background

Rice has strategic and important meaning for Indonesia people, because
rice becomes staple food most of its people (around 90%). 63% from the
household expense are applied to buy food and around 17% to consume
rice. Rice contributes 56% calorie and 49% protein. Rice industry covers
18 million farmers mostly is small-scale farmer and labor involve in
supply, production, processing, and marketing. Besides that rice has
strategic meaning because can give contribution in stabilize the economic
and politics condition (Saifullah, 2002).

Rice has interrelationship with economic stability through economic

growth, labor, inflation rate, and can economize the state's stock
exchange by minimizing import. Then politically rice as staple food must
be available, reached, and covers all Indonesia area in order to prevent
the social disquiet. Nevertheless, to fulfill requirement of rice, Indonesia
faced interregional imbalance rice production, and time production
differences. According to Statistic Center Institution (2004) that the
national rice production in 2004 mostly come from Java around 56%
from national production, and produce in 4 month period of great crop
between February until May, around 51.2% of annual rice production.

The imbalance of interregional production and time rice production

difference can be done through market mechanism, and government
interference to distribute the rice from surplus area to the deficit area, and
also handle the time difference production from surplus time production
(great crop) to deficit time production (summer or dry season). The
government through Bulog can handle the imbalance problem by
managing the rice commercial. Bulog take role as the imbalance
controller, with warehouse spread all over Indonesia, Bulog can distribute
from the surplus area to deficit area, and stock the rice.

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In order to prevent the decline in the price level of grain from farmer at
great crop, Bulog carried out the procurement in enormous number
(around 2 million ton dry grain), in addition, the government has
established programs to ensure food security for the low-income
communities’ trough program. In average rice for poor distribution
between 1998-2007 around 1,8 millions ton per year or 90% from the
total rice distribution of Bulog. Beside rice for poor program, Bulog also
distribute the rice for “Operasi Pasar” (Market Operation) program that
control the rice price in market; and natural disaster aid program
distribute trough the social department (Bulog, 2006).

One of the Bulog main tasks is to protect the producer's farmer by

carrying out the purchase of grain/the rice that done through the partner
to distribute as the reserved of the government rice as well as distribute
the rice for the poor household, the pure market operation.

In the procurement system of national food, the distribution of the Bulog

rice for poor and the market operation is the strength for Bulog.
However, at the same time, it is the weakness because Bulog dependent
on one market. Therefore, the rice for poor distribution and the market
operation have the important role from the aspect of marketing and
commercial. It is very critical for the Bulog existence in the future, if the
satisfaction of the benefit recipient is not fulfilled it will be the big threat
for Bulog.

1.2 Problem Formulation

Since several years ago, the main problem that dealt with Bulog has
always focused on the rice quality problem. Along with the number of the
consumer’s complaints about the rice quality, caused the biggest lost of
the rice marker share of the Bulog that are government workers, the
national army and national police. The distribution of the Bulog rice to
the government worker has been lost along with the reformation
movement that was marked by trade liberalization. Since 1 April 2000,
the government has launched the new policy, Keppress No.17 tahun
2000, the APBN for government workers, the national army, national

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police, and the retirement fund receivers along with the families will
received rice allowance in the form of cash that results in the lost of
“captive market”. Therefore, the rice distribution only focuses on rice for
poor and market operation. The quality of the rice should be concerned
more seriously because it could affects fatally to the existence of Bulog
in the future. If not, there is a chance the distribution outlet for rice for
poor program and market operation program will completely vanish.

Lately, the complaints of Bulog’s rice quality that distributed for rice for
poor and market operation are increase constantly because the income of
the society is also increasingly higher that always follow by the increase
of demand and expectation. The rice market becomes more competitive,
more integrated and more efficient so as the real value that receive by the
consumers is getting higher.

Moreover, the problem of the rice quality aroused because the existence
of the different perception between Bulog and the consumers. In carrying
out the procurement, the quality that desired by Bulog is oriented for the
aim of the storage, not based on consumer’s preference. Further as has
been discussed before, the society’s demand is getting higher, but the rice
quality that accepted by Bulog through the procurement still referring to
SNI IV.

Based on the historic data trend of the grain/rice procurement that was
done in great crop (the rain season) in March to June. Therefore the
grain/rice is kept in the very long period, this resulted in the decline in the
quality, regarding the grain/the rice is still carrying out the activity like
respiration, the formation of fat and protein, moreover if there is a lack in
the quality maintenance.

Here is the location of various problems and the complaint that often
emerged in the community addressing the quality of the Bulog rice. From
the background and the analysis of the Problem Formulation it could be
identified the problems that are dealt with so as could be more focus

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more directed in the activity of Bulog national procurement grain/rice.
Several questions could be formulated as follows:
1. How is the actual map situation of Bulog supply chain processes
especially in the area of Sub regional Division Karawang?
2. What are the factors influenced by supply chain processes in an
effort for quality improvement especially in Sub regional division
Karawang?
3. What is the alternative strategy should be carried out in supply
chain processes for quality improvement especially in Sub
regional division Karawang?

1.3 Research Objectives

The level of the producer at the time of the Bulog harvest carried out the
procurement in the relatively big number (around 2 million-ton grain rice
rolled). In order to prevent the decline in the grain’s price, the
government gave the market guarantee in the form of the procurement to
the low-income social class and the food shortage through the rice for
poor program. For the period 1998 - 2006 distribution of the rice for poor
in general around 1.8 million ton per the year or 90% from the total
distribution of the Bulog rice. Apart from rice for poor produced by the
Bulog Procurement, it also distributed for the market operation, for the
natural disaster that distributed through the social department (Bulog,
2006).

In the procurement system of national food, the distribution of rice for

poor is the strength for Bulog and at the same time; it is the weakness
because of the Bulog dependence on one market. Therefore, the
distribution rice for poor holds the important role from the aspect of the
marketing and commercial and for Bulog’s existence in the future, if the
satisfaction of the benefit recipient was not fulfill, it will be the big threat
for Bulog existence.

Lately, the complaints of Bulog’s rice quality that distributed for rice for
poor and market operation are increase constantly because the income of
the society is also increasingly higher that always follow by the increase

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of demand and expectation. The rice market becomes more competitive,
more integrated and more efficient so as the real value that receive by the
consumers is getting higher.

Moreover, the problem of the rice quality aroused because the existence
of the different perception between Bulog and the consumers. In carrying
out the procurement, the quality that wanted by Bulog is oriented for the
aim of the storage, not based on consumer’s preference. The quality of
the rice should be concerned more seriously because it could affects
fatally to the existence of Bulog in the future. If not, there is a chance the
distribution outlet for rice for poor and market operation will completely
vanish.

The objectives of this research are:

1. Identifying and analyzing that affect the grain/rice quality on the
supply chain processes.
2. Identifying factors that caused supply chain processes problems in
order for quality improvement.
3. Formulating solutions to give better solution to Bulog to increase
the quality of rice.

1.4 Problem Boundaries

The focus of the study is only in supply chain processes. More over the
key point to improve the quality of the rice is in the improvement of the
supply chain processes that involving Sub regional division Karawang

The location for research, Karawang regency area, Bekasi regency, and
Bekasi city. This is done with consideration that Karawang regency rice
barn and the biggest rice production West Java that including the area
that produces the most rice in Indonesia also enable to be made as the
rice provider for the other areas surrounding Karawang regency.

Moreover the Karawang area is also supplemented with facilities and the
Infrastructure of the community with the quite good rice processing, so it
will be able to support the improvement of the quality in the Bulog

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procurement activity. With the existence of the study of supply chain
processes in Sub regional division Karawang, it is expected to get the
map situation concerning the supply chain processes in Bulog generally
especially in Sub regional division Karawang. Further it could be
analyzed accurately and therefore determine the alternative strategies that
could be undertaken in order to quality improvement in Bulog.

Writer limits the problem in this study, in order to bind the problem in the
field of study. Some of the problem limitations are:
1. The research is carried in government institution non-department
Bulog, Sub regional division Karawang.
2. The focus of research is studying the supply chain processes in
Sub regional division Karawang.
3. The research using historical data from 2005 to 2007 for data of
procurement, stocking, and distribution

1.5 Report Outline

The structure of report outline is shown below:

CHAPTER I INTRODUCTION
This chapter is state about short study the problem background, problem
formulation, research objectives, problem boundaries, and report outline
of the final paper.

CHAPTER II STUDY LITERATURE

This chapter concludes the theories, which is relate to the research, and as
basis to identify, analyze, process, and conclude the presented problem.

CHAPTER III METHODOLOGY

This chapter studied the systematical steps to solve the problem, from
preliminary survey, problem identification, study literature, research and
data collection, processing and analysis data, up to conclusion and
recommendation.

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CHAPTER IV DATA COLLECTION AND ANALYSIS
This chapter filled with collected data through observation, discussion,
interview, and study literature with related party in supply chain
processes in Bulog Sub regional division Karawang. The collected data
consist of two type, primary data, and secondary data. The collected data
are general company data consists of company’s profile such as
company’s history, organization structure. The other data are about
procurement data, stock data, and distribution data, etc. The analysis is
from the business process of the company, and then there would be some
solution to solve the problem.

CHAPTER V CONCLUSION AND RECOMMENDATION

This chapter will studied the conclusion of the research based on data
procession and analysis from the previous chapter. And also include the
recommendation such as implementation plan, new business process, and
topic reference for future research, as an advice to be considered for the
company, Bulog Sub regional division Karawang.

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