Stable and Profitable Trading Platforms for Smallholder Commodity Supply Chains

Digital platforms connecting smallholder farmers and intermediaries promise traceability and better livelihoods, but participants may return to informal networks if the platform provides too little value. Combining an optimization model with data from Indonesia’s palm-oil supply chain, we find that profitability depends critically on controlling transportation costs and learning at least part of the informal network. Payments should go primarily to farmers, and minimum-cost matching is usually best—except when unusually well-connected intermediaries must be prioritized to keep the platform stable.

Major revision at Manufacturing & Service Operations Management