e-choupal by itc
TRANSCRIPT
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ITC E-CHOUPAL
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ITC E-CHOUPAL FOOTPRINT
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ITC e-Choupal : An Introduction
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ITC :AN OVERVIEW
Incorporated on August 24, 1910 under the name of 'Imperial Tobacco
Company
One of the 8 Indian Companies to feature in ‘Forbes A-list’ for 2004
Only Indian FMCG Company to feature in Forbes 2000 List
Among top in :• Sustained value creation (BT-Stern Stewart survey)
• Operating profits
• Cash Profits
Ranks No. 4 among Indian listed Private Sector Companies by market
cap. (@ April 09)
No. 1 in FMCG Sector
Rated as one of India’s Most Respected Companies (IMRB-
Businessworld Survey 2006)
Diversified conglomerate with interests ranging from Tobaccoto Hospitality
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ITC’S AGRI COMMODITY DIVISON
Farm linkages in 14 states covering Soya, Wheat, Marine products,
Coffee etc. Focus on value added agri-commodities.
Unique CRM program in commodity exports.
Leveraging IT for the transformational ‘e-Choupal’ initiative
Rural India’s largest Internet-based intervention
Over 40,000 villages linked through 6500 e-Choupals
servicing over 4 million farmers
Distinctive sourcing capability for ITC’s Foods
business
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Low Risk Appetite
Weak Market
Orientation
Low InvestmentLow Margins
Low ProductivityLow Value Addition
Caught in a viciouscycle of
underdevelopment
The predicament of Indian Farmers
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ITC E-CHOUPAL
• Started in the year 2000
• Target Area so far 38,000 villages, 6500 kiosks, 9 states
• Wholly owned by ITC.
Why it become a success ?
• Only initiative to attempt to combine Services and anEffective Business Model successfully
Designed to address the issues such as:1.Fragmented farms
2.Weak institutions3.Involvement of intermediaries
4.Information Asymmetry
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Analysis of Supply chain of e-Choupal Initiative
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Agri -InputCompanies
Dealer/Stockiest
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WHY ITC THOUGHT OF E-CHOUPAL
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ITC’s Supply chain of Soya bean after e-ChoupalInitiative
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SUPPLY CHAIN POST RE-ENGINEERING
• Pricing
• Previous day’s closing price used as benchmark price for nextday
• Mandi prices communicated to sanchalak through e-Choupalportal
• Sanchalak inspects the sample, assesses quality and givesfarmer a conditional quote and a note (name/village/qualitytests/approx. quantity/conditional price), if farmer decides tosell to ITC
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• Inbound Logistics• Farmer proceeds to the nearest ITC procurement hub with the note
• Some procurement hubs are ITC factories, others are purelywarehouse operations
• ITC’s aim is to have a processing centre within 30-40 km radius of its
farmers
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• Inspection and Grading• At the ITC procurement hub, laboratory tests are conducted
on a sample of farmer’s produce
• To change farmer’s attitude and appreciating produce quality,ITC is developing lab tests to reward farmers with reward
points for better quality supply
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• Weighing and Payment• Farmer’s produce is weighed on electronic weighbridge
• He is then given full cash payment
• Freight expenses are reimbursed
• Appropriate documentation at each stage and farmer is givena copy of that
• Samyojaks handle cash operations
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• Hub Logistics• Farmer transports his produce to the nearest processing
centre or storage hub
• ITC incurs the transportation cost
• The farmer bears the risk of transportation until produce is
delivered and the sale is completed
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• Technological support
• Nodal platform catering to commodity blending, agriculturaltrading, e-choupal &rural distribution
• 24,000 personalized business function points
• 110,000+ pre-built business function points
• Integrated Business Systems for Direct Agriculture
Procurement, Rural Distribution, e-Choupal Management,Exports, Insurance, Aqua Processing & Commodity blending
• Support for 8 local languages
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A WIN-WIN DEAL
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TRANSACTION COST IN MANDI CHAIN (BEFORE E-CHOUPAL)
Source: Seminar on Bottom of the Pyramid and CSR, IIM-K, Sept. 24, 2008
S C O COS C (
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TRANSACTION COST IN MANDI CHAIN (AFTER E-CHOUPAL)
Source: Seminar on Bottom of the Pyramid and CSR, IIM-K, Sept. 24, 2008
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Synergies forITC
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Generation of Goodwill & positive public opinion
Better supply chain for ITC’s Food & Agri-Businesses
• Costs, Quality, Traceability
Access to the Underserved Rural Markets• Through a Virtuous Cycle created by “Larger Incomes”, and
founded on “Trust” that is built
New ITES Business Opportunities
• Health, Education, Entertainment, e-Governance
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OTHER E-CHOUPAL INITIATIVE
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COMPANIES USING E-CHOUPALNETWORK
Source: Seminar on Bottom of the Pyramid and CSR, IIM-K, Sept. 24, 2008
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Critical Analysis of ITC’s Supply Chain
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STAKE HOLDER ANALYSISPrimary
Stakeholders
Interest
Farmer Community • Access to information – Empowered decisions – Improved agriculture
• Economic benefits through lower transaction costsand process efficiencies
•
Served with dignity• Knowledge bundled sale of goods and services• Co-opted in product design• Hope for a brighter future
ITC • Lower procurement costs• Direct interaction with farmers - Control on quality
& supply security• Low cost distribution channel• Access to market intelligence
Commission Agents
(Kachha & Pakka
• Gain access to global markets through ITC andcommission to compensate some of the lossrevenue
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EFFICIENCIES IN E-CHOUPAL NETWORK
Last mile low cost solution
Full Service approach
Demand aggregation
Third party seller
Extensive use of technology
Access to information about customers
Pull based strategy
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Comparison with Haryali Kisan Bazar
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E-chaupal Haryali Kisaan Bazaar
Main objective Procurement Rural Retail
Benefit to the
farmers
computer application to provide
market information
provide better method of cultivation by
trained agronomist
Synergies Synergies with products which
ITC is manufacturing
Synergies with what DSCL is selling(inputs
to agriculture plus other services
Economies of
scale
25-30 km area coverage 20-25 km area coverage
Procurement
centre
near small town Strategically placed near petrol pump
mainly
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Future of e-Choupal
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VERSION 1.0 V/S VERSION 2.0
Parameters Version 1.0( the start) Version 2.0( the scale-up)
Idea The concept gave a power of scale tothe small farmers by aggregating them as
sellers ( of produce) and as buyers
(of farm inputs)
By 2006, 40,000 villages covering 4 millionpeople.
Farmer’s gain The farmers get bargaining power and a
opportunity of have choice
Information on weather, price etc
Knowledge on farming methods,
soil testing etc
Purchase of seed, fertiliser to insurance
Farmers sell crops to the ITC centres
cattle care, water harvesting
ITC’s gain Access to inputs for its agri business;
offer the use of network to
other companies
ITC was able to procure
fresh commodities with
reasonable prices from the farmers
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E-CHOUPAL 3.0.
The Deepening
NEW BUSINESSES:
1) Rural jobs and employability
2) Personalised agri services.
MORE INTERACTION: Through Choupal Saagarsand Haats and via mobile phones
NEW TECHNOLOGY: Use of especially enabledmobile phones, analytics, new partner
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