Operating Model for Partnership between Smallholders and Mills: A Study in Perak and Johor, Malaysia

Article history:
Received: 15 February 2022
Accepted: 28 July 2022

Available online: 30 September 2022

Page number: 27-41

Author: Parthiban Kannan1 *; Nur Hanani Mansor1 ; Mohd Haizal Zainal Abidin2 ; Rusnani Md. Rus2 ; Khairuman Hashim1 ; Zaki Aman1 and Tan Say Peng 1

There is an important need to sustainably increase food production across the supply chain amid the expected population growth in the future. However, most related researches in the past dealt mostly on the agricultural production aspect rather than the structure of the existing agricultural business models. In the context of oil palm, smallholders often do not have a direct relationship with mills resulting in low bargaining power and limited access to other benefits. The purpose of this study is to assess the willingness of smallholders to establish a partnership with oil palm mills. The assessment was made on smallholders located at two sites in Perak and Johor by means of questionnaire survey and interviews. Besides that, this study also looked at possible operating models for partnership. In addition, desk research and interviews were carried out among stakeholders along the supply chain. Majority of respondents indicated their interests to establish a partnership with oil palm mills with most of them favoured services related to land management. Based on the study, four potential operating models were proposed for a partnership establishment between smallholders and mills such as the extension services model, modular services, plantation management (fee model) and plantation management (lease model). The value proposition on each operating model was discussed as well as the strategy to increase the scale of the operating model. This study is likely to be in the interest of investors, company and policymakers who are seeking an alternative approach in connecting smallholders within the supply chain especially in the developing countries.

1Malaysian Palm Oil Board,
6 Persiaran Institusi,
Bandar Baru Bangi,
43000 Kajang,
Selangor, Malaysia.

2 Sime Darby Plantation Bhd.,
Plantation Tower,
No. 2, Jalan PJU 1A/7,
Ara Damansara,
47301 Petaling Jaya,
Selangor, Malaysia.

* Corresponding author e-mail:
parthiban@mpob.gov.my