Designing Risk Mitigation Strategies for Agricultural Supply Chain: A Supply Chain Finance-Based Approach

Abstract The agricultural supply chain is distinguished from the manufacturing and service supply chains by its complexity and length. These characteristics emphasize the importance of risk management measures for this supply chain, which will increase farmer income, market stability, and food security. This research aims to design risk mitigation strategies, especially demand risk, in the rice farming supply chain in Tana Paser District, Paser Regency, East Kalimantan. Monte Carlo simulation was utilized to predict the average rice demand and conduct sensitivity analysis. Three financial scheme strategies were compared: soft tolling, hard tolling, and contract farming, to assess the best strategy that provides maximum profits for agricultural supply chain actors. From the simulation results, the average predicted value for rice demand was 2.78 tonnes. The optimal quantities of q1 (processed material), q2 (raw material), and q3 (seeds) obtained from sensitivity analysis were 2.2 tons, 2 tons, and 2 tons, respectively. The soft tolling strategy provides maximum profits for all agricultural supply chain players, with a total profit of IDR 17,471,000.00, considering that implementing this strategy involves all supply chain stakeholders in determining the contract decision (q).