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Supply Chain Analysis of ITC e-Choupal

Group 16

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India is second most populated country in the world. Agriculture is the backbone of Indian economy. It contributes around 26% of the total GDP. Agriculture provides livelihood to about 65% of the labour force

and accounts for 8.56% of India's exports. The fragmented farms are constraining the risk taking ability. Large arable land, Rich & diverse agroclimatic zones Heavily dependent on Monsoon Strong institutional base in R&D Large domestic consumption base Poor extension work at farm level Numerous intermediaries Weak infrastructure & inconsistent quality

Introduction

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Hindi word meaning- Village meeting Virtual market place where farmers can transact directly with a

processor and can realize better price for their produce developed by ITC agri-business division

Brainchild of S Sivakumar Promoted by Y.C.Deveshwar, Chairman, ITC Launched in June 2000 Largest Internet-based initiative in rural India Benefits 4million farmers in 40000 villages Target Area so far 38,000 villages, 6500 kiosks, 9 states

What is E-Chaupal

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Why it became a success? Only initiative that attempted to combine Services and an

Effective Business Model successfully

Designed to address the issues such as: 1. Fragmented farms2. Weak institutions3. Involvement of intermediaries4. Information Asymmetry

Conventional Value Chain

Farmer

Agri-Input Companies

Dealer/

StockiestRetailer

Agril University, Met Dept,

Insurance Co.

VLW (of Dept of Agriculture)

Money Lender

Pakka Adtiya(Registered Dealer)

Kaccha Adtiya(Un-Registered Dealer)

Trader

Broker

Proc

esso

r

ITC-IBD

Traditional Transaction

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Demerits of Prior system

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The Tactical Imperative

Capture of Intra-day Price shifts

Seasonal price Inflation

Daily price inflation

ITC’s distance from Farmer

The Strategic

Imperative

Horizontal spread

Vertical presence

Risk management

The Social Imperative

Farmers profit

Information Asymmetry

Why ITC Thought of e-Choupal

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To enhance farm productivity by

Disseminating latest information on district level weather forecasts for short & medium terms

Best practices in farming

Supply of quality inputs (seed, herbicide, fertilizer, pesticides etc)

in the village itself

Identification of goals

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To improve price realization for farm produce by

Making available live data on markets viz. Location / Buyer wise prices offered.

International market prices of relevant agri-commodities.

Historical & Up-to-date information on supply & demand.

Expert opinion on expected future price movements.

Identification of goals

Helps minimize transaction costs in marketing farm produce by

Buying output directly from the farmers Through transparent pricing & weight management practices

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ITC accumulates information regarding weather, modern farming practices, and market prices from sources like Meteorological Department, Agri-universities, mandis (regional market) etc., and uploads all information on to e-Choupal web site.

It is an interlocking network of partnerships (ITC + Met Dept + Universities + Input COs + Samyojaks, the erstwhile Commission Agents) bringing the “best-inclass” information, knowledge and inputs.

Unique Business Model of e-Choupal

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Unique Business Model of e-Choupal

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Customer centric Used for many commodities & multiple transaction Easily scalable Uses local talent & local people & develops local leaders Extended to local as well as global procurers Nurtures local entrepreneurs. Uses all the existing institutions & legal frameworks

Characteristics of e-Choupal

Strategy behind the Interventiono Crop-specific intervention

o Low-cost last mileTies with ITCs larger goal of transforming the e-Choupal network into a distribution superhighway

o Intelligent first mileTransforming farmers from being consumers to participants in the process of product design

Strategy for the Interventiono Social impact with increase in ITCs mileage: Social impact of

e-Choupals ranges from short-term provision of internet access to the long-term development of rural India as a competitive supplier or buyer of a range of goods and services

o Reengineer, not reconstructKeeping efficient providers while creating roles for some inefficient providers from the existing system

o Address the whole, not just a part Created an alternative to village trader services by addressing

the entire gamut of needs by creating access to agriculture extension services

o Selection & maintaining credibility of Sanchalaks

Supply Chain Change: Farmer to ITC ITC communicates with Sanchalaks through the e-choupal

portal Price benchmark made wrt mandi’s closing price Sanchalak inspects produce for quality, make appropriate

deductions to benchmark price and generates a note for the farmer

This note is produced to the nearest ITC procurement hub Farmer bears the risk of transportation for the produce

delivered that is reimbursed by ITC

Inspection & Grading

Weighing & Pricing

Inbound Logistics

Weighing &

Payment

Hub Logistics

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Benefits to the farmersBetter information Access to price at

several nearby outlets

Better use of time Access to price choice prior to visiting mandi

Transportation cost ITC compensates its sellers

Transportation duration ITC no more than few hours in the entire process

Weighing accuracy ITC electronic scales are accurate and impartial

Granularity of weighing Single weighing concept eliminates the risk of pilfering

Professionalism and dignity

Dignity accorded to farmers by a professional process

Better price

Lower logistic cost

Benefits to ITC

Disintermediation saving Commission paid to agents replaced for only a half percent of commission to the Sanchalak

Freight cost Only half the cost paid to farmers as compared with agents initially

Risk management Long term supplier relationship with its farmers. The information yielded allows ITC to better plan future operations

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Challenges

Non familiarity with internet usage for first –time users

ITC also had to surmount regulatory barriers. The Agricultural Produce Marketing Committee Act (APMC Act) prohibits the purchase of specified commodities (including several that ITC deals in) from any source other than government-designated mandis. ITC had to convince political systems of state government

Rural India faces the problems of infrastructure bottlenecks such as outdated telephone exchanges, frequent electricity outage, and unreliable Internet connectivity.

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Gainers and losers

Commission agents- even after compensating for lost income, they had lower income after the e-Choupal

Mandi laborers- severely impacted. ITC’s long term vision to employ them in the hubs

Bazaars near the mandi-farmers diverted to shops near the ITC hubs, diversion of revenue

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Conclusion It is a low cost/multi business model operated by the

farmer representative. E-choupal has been one of the best ICT application platforms

that has been scaled replicated and sustained The Sanchalaks are selected carefully and they have been able

to induce the feeling of involvement E-choupal has provided economic benefits even for the

small farmers. Every beneficiary gets benefit and the equitable benefits make the adoption very rapid