Post on 13-May-2015
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SUPPLY CHAIN ANALYSIS OF ITC E-CHOUPAL
By
A.Arputha Selvaraj APMP IIM CALCUTTA
AGENDA
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ITC e-Choupal : An Introduction, Stake holder Analysis
1
Comparison of status of Supply Chain before and after ITC e-Choupal
2
Critical Analysis, and Comparison with HKB3
Future Scope4
ITC e-Choupal : An Introduction
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ITC :AN OVERVIEW Incorporated on August 24, 1910 under the name of 'Imperial Tobacco
Company Company rechristened 'ITC Limited‘ in 1974 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 Tobacco to 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 programme 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
Low Risk Appetite
Weak Market Orientation
Low InvestmentLow Margins
Low ProductivityLow Value Addition
Caught in a vicious cycle of
underdevelopment
The predicament of Indian Farmers
ITC E-CHOUPAL Started in the year 2000 Target Area so far 38,000 villages, 6500 kiosks, 9
states Wholly owned by ITCWhy it become a success ? Only initiative to attempt 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
ITC’s Supply chain of Soya bean before e-Choupal Initiative
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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
Pro
cess
or
ITC-IBD
WHY ITC THOUGHT OF E-CHOUPAL
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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
ITC’s Supply chain of Soya bean after e-Choupal Initiative
SUPPLY CHAIN POST RE-ENGINEERING
PricingPrevious day’s closing price used as benchmark price
for next dayMandi prices communicated to sanchalak through e-
Choupal portalSanchalak inspects the sample, assesses quality and
gives farmer a conditional quote and a note (name/village/quality tests/approx. quantity/conditional price), if farmer decides to sell to ITC
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Pricing Inbound Logistics
Inspection
Grading
Weighing and
Payment
Hub Logistics
Technological
support
Inbound LogisticsFarmer proceeds to the nearest ITC procurement hub
with the noteSome procurement hubs are ITC factories, others are
purely warehouse operations ITC’s aim is to have a processing centre within 30-40
km radius of its farmers
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Pricing Inbound Logistics
Inspection
Grading
Weighing and
Payment
Hub Logistics
Technological
support
Inspection and GradingAt the ITC procurement hub, laboratory tests are
conducted on a sample of farmer’s produceTo 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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PricingInbound Logistic
s
Inspection
Grading
Weighing and
Payment
Hub Logistic
s
Technological
support
Inspection and GradingAt the ITC procurement hub, laboratory tests are
conducted on a sample of farmer’s produceTo 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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PricingInbound Logistic
s
Inspection
Grading
Weighing and
Payment
Hub Logistic
s
Technological
support
Weighing and PaymentFarmer’s produce is weighed on electronic
weighbridgeHe is then given full cash paymentFreight expenses are reimbursedAppropriate documentation at each stage and farmer
is given a copy of thatSamyojaks handle cash operations
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PricingInbound Logistic
s
Inspection
Grading
Weighing and
Payment
Hub Logistic
s
Technological
support
Hub LogisticsFarmer transports his produce to the nearest
processing centre or storage hub ITC incurs the transportation costThe farmer bears the risk of transportation until
produce is delivered and the sale is completed
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PricingInbound Logistic
s
Inspection
Grading
Weighing and
Payment
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s
Technological
support
Technological support Nodal platform catering to commodity blending,
agricultural trading, 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 languagesCompany Logo
Pricing
Inbound
Logistics
Inspection
Grading
Weighing and
Payment
Hub Logistic
s
Technological
support
A WIN-WIN DEAL
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Farmers gain
• Better information Content
• Better info timing• Less
transportation Cost
• Transaction duration
• Weighing accuracy
• Professionalism
ITC gains
• Disintermediation savings
• Freight costs• Quality control• Risk management
TRANSACTION COST IN MANDI CHAIN (BEFORE E-CHOUPAL)
Source: Seminar on Bottom of the Pyramid and CSR, IIM-K, Sept. 24, 2008
TRANSACTION COST IN MANDI CHAIN (AFTER E-CHOUPAL)
Source: Seminar on Bottom of the Pyramid and CSR, IIM-K, Sept. 24, 2008
Synergies for ITC
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Generation of Goodwill & positive public opinion
Better supply chain for ITC’s Food & Agri BusinessesCosts, Quality, Traceability
Access to the Underserved Rural MarketsThrough a Virtuous Cycle created by “Larger
Incomes”, and founded on “Trust” that is built New ITES Business Opportunities
Health, Education, Entertainment, eGovernance
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SYNERGY REDEFINED :THE FUTURE
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FARMERS
MARKETS
Cigarette Trade Marketing capability
BrandedFoods
Expanded FMCG distribution capability
e-choupal rural two-way fulfillment capability
VPN providing SCM, ERP & CRM capability
Lifestyle retailing
Education Stationery
Matches & Agarbattis
A basis for strategic partnerships with other FMCG brand owners
OTHER E-CHOUPAL INITIATIVE
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COMPANIES USING E-CHOUPAL NETWORK
Source: Seminar on Bottom of the Pyramid and CSR, IIM-K, Sept. 24, 2008
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 costs and 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
Adatiyas)
Gain access to global markets through ITC and commission to compensate some of the loss revenue
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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Drivers of Supply Chain
Information
Logistics at hub
Transportation
Storage facilities at hub
Who are in problems
Local Mandi
Mandi laborers
Market near Mandi
Small processors
Risk associated
with e-ChoupalEroded dominance of Commission
agent
Authenticity of information
Problem of Power and
internet connectivity
Comparison with Haryali Kisan Bazar
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HARIYALI KISAAN BAZAARHariyali kisaan bazaar
Farmers
DSCL
ICICI Bank
Other companiesOther companies
Loan for pass through to farmers
Repayment of loan with interest Produce procurement
Extension service
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
Future of e-Choupal
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E-CHOUPAL 2.0
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VERSION 1.0 V/S VERSION 2.0Parameters Version 1.0( the start) Version 2.0( the scale-up)
Idea The concept gave a power of scale to
the small farmers by aggregating them as
sellers ( of produce) and as buyers
(of farm inputs)
By 2006, 40,000 villages covering 4 million
people.
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
E-CHOUPAL 3.0.The Deepening NEW BUSINESSES: 1) Rural jobs and employability 2) Personalised agri services.
MORE INTERACTION: Through Choupal Saagars and Haats and via mobile phones
NEW TECHNOLOGY: Use of especially enabled mobile phones, analytics, new partner
www.themegallery.comCompany Logo
ITC E-CHOUPAL FOOTPRINT
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THANK YOU