Self destruction program to become modern cooperative

Also long existing cooperatives in Indonesia can make the change from traditional cooperative to a modern new generation cooperative. In some years time, KPBS has made this change with help of Agriterra.

KPBS (Koperasi Peternakan Bandung Selatan = Livestock Cooperative of South Bandung) Pangalengan, Bandung is the oldest dairy cooperative in West Java. During the Dutch time, there were several dairy farms in Pangalengan, like De Friesche Terp, Almanak, van der Els, and Big Man; and for joint marketing their they established BMC (Bandungche Melk Center). Those farms were destroyed during the Japanese time and several cows were nurtured by local people. In November 1949 several local farmers established GAPPSIP (Gabungan Petani Peternak Sapi Indonesia Pangalengan = Livestock Farmer Group of Pangalengan), but it was closed in 1963. There was no commitment from the farmers to sell the milk to GAPPSIP and the farmer prefer to sell the milk to the collectors/intermediary. In 22 March 1969 several farmers were agree to establish KOPERASI PETERNAKAN BANDUNG SELATAN, or KPBS Pangalengan; and it was legally established on 1 April 1969 and registered as a legal entity on 30 November 1988.

Although KPBS is the second biggest dairy cooperative in West Java in term of production volume, i.e. 85 ton a day in 2017, KPBS chose to transform into modern cooperative by conducting self-destruction program. KPBS participated in Facility for Sustainable Entrepreneurship and Food Security (FDOV) Program started in 2013 and will end mid of 2018. Agriterra takes part in the program is to improve governance and financial management of KPBS.

Five year strategic plan

Agriterra assisted KPBS in drafting Strategic Plan 2015-2020. One of their strategic objective is to reduce loss rate from 1% or 7 ton a month to less than 0.1%. To achieve this strategic objective KPBS convert TPK (Tempat Pelayanan Koperasi = Cooperative Service Center)—where milk from members is collected and measured by its volume in liter—into new MCP (Milk Collection Point)—where milk from members is measured by its weight in kilogram. KPBS implement 5 (five) MCPs, also as part of the FDOV program, with total investment of IDR 15 billion (USD 1.1 million). About IDR 5 billion (USD 374,000) is finance by loan from the bank. As its result, KPBS could achieved their target on reducing loss rate in February 2017, earlier than their target time.

Association of dairy agribusiness entrepreneurs

As many other agricultural cooperatives in Indonesia, one of the biggest challenge is how to remove free rider in the cooperative. Free riders are farmers who make use of the services of the cooperative but don’t contribute by delivering product, capital, etc. In March 2016 KPBS decided to amend their Article of Incorporation and By-Laws (House Rules). KPBS wants to have more business minded dairy farmer as their member instead of subsistence dairy farmer. KPBS made a mechanism to categorized non-active member as dormant and after several period of time KPBS will end their membership.

Milk treatment

KPBS started processing milk to add value to their members’ product since 1979. In 2016 KPBS processed 11% of their milk into mozzarella, whipping cream, butter, yoghurt and pasteurized and flavored milk in their subsidiary milk processing company. In 2016-2017 KPBS built a café and rest area to sell direct their product in front of their processing plant.

Salary scale

Realizing competitive market in human resource and the need to professionalized management, KPBS introduced performance management and this resulted also to need to review their salary system. Staff should be paid on basis of their responsibilities and task and not based on years at the company and education. In April 2017 Agriterra provide advisory for salary scale and remuneration system. This is a delicate but strategic aspect. KPBS will start implementing several changes in 2017.