“farm to fork” Agro value chain development ..operational excellence through integration

Anil Chopra MD, Competent AgriSolutions Pvt Ltd

anil.chopra@agrisolution.in +91-98118-14559, 98681-64559

www.agrisolutions.in

Nothing happens till something sells

agenda

changes happening in worldwide agricultural industry drivers of change new opportunities – fresh challenges value chains - strategic tool to tap new opportunities and face challenges value chains or supply chains? developing supply chains managing supply chains benefits of value chains supply chain tools role of govts in development of supply chains success and risk factors case study last thoughts

the wind of changes is blowing the agri way….

agricultural industries world over are in the midst of major structural changes: changes are in; product characteristics, production and consumption, technology, size of operation, geographic locations, consolidation, concentration and integration of input supply

and product processing

the pace of change is increasing day by day

Bangladesh is no exception

increasing globalization is driving these + changes globalization offers tremendous opportunities to producers and

exporters, particularly in developing countries. opportunity to supply fresh agricultural produce all year round. multinational retailers and importers are expanding their

international operations to meet new consumer demands. demand is no longer confined to local or even regional areas. fresh produce can now be shipped from faraway places at

lower costs and competitive prices. advanced information technologies now enable traders to

respond quickly to changes in consumer demand. modern logistic systems facilitate smooth flow of goods in

today’s highly complex global marketplace. In nutshell - market forces and liberalization are the main drivers

these opportunities are throwing new challenges tough retail standards for:

quality, packing, transport

compulsion to minimize costs - increasing competition. consumers’ mounting concerns for:

food quality, safety, hygiene, nutrition , and health

government implemented trade regulations care for environment, social components and animal welfare is

becoming increasingly important sustainability is any civil society’s new goal

summarizing three market driving forces market segmentation

product and service differentiation value-added demand satisfy the need for; quality safety sustainability health animal welfare low cost strategy

Profitable agro supply chains anywhere will have to suitably handle these forces

introducing value and supply chains ….a strategic tool for exploiting opportunities while facing challenges

three market driving forces urge supply chain partners

to collaborate and create value at all touch points supply chains links different players and stakeholders

from ‘farm to fork’ to achieve a more effective and consumer-oriented flow of products

supply chains may include growers, pickers, packers, processors, storage and transport facilitators, marketers, exporters, importers, distributors, wholesalers, and retailers.

value chains vs supply chains a supply chain and a value chain complement each other

Supply chain integrate business processes enabling the flows of products, supplies and services in one direction – downstream from the source to the customer

value as represented by demand and cash flow in the other – upstream from customer to source

Both chains ride the same network

primary difference between a supply chain and a value chain is a fundamental shift in focus from the supply base to the customer.

supply chains focus upstream on integrating supplier and producer processes, improving efficiency and reducing waste,

value chains focus downstream, on creating value for customer. in current context we will use the words interchangeably

supply chains

value chains

developing agro value chains Agro value chains are not developed on its own.

Development requires a lot of efforts, competencies and follows a certain methodology

first step in agro supply chain development is the analyses of the existing trade system and the trade environment

From this analysis potential supply chain players, their functions, role and relationships in the trade system are identified and mapped.

Chain partners sets and measures criteria and benchmarks for performance for parameters like efficiency, responsiveness, flexibility, innovation etc.

Through this benchmarking, the different aspects of the supply chains can be analyzed and the critical success factors can be determined.

a SWOT-analysis is conducted for the overall assessment of the supply chain The success of a supply chain depends on a strong chain leader. The explicit acceptance of the chain leader is very important for initial chain

formation and the sustainable supply chain collaboration.

managing agro supply chains Managing supply chains requires an

integrated approach chain partners jointly plan and control the

flow of goods, information, technology and capital from ‘farm to fork’.

to react effectively and quick to consumer’s demand, supply chain management is consumer-oriented.

coordinates and control all production processes

supply chain management as a business strategy..

.. rest on 4 Pillars Cross-company / business group process Integrated Supply Processes with best-in-

class Suppliers Alliances – internal & external World-class Supply Chain Management

techniques

benefits of value chains The advantages of the supply chain management

approach are numerous. Some important one are: Reduction of product losses in transportation and storage. Increasing of sales. Dissemination of technology, advanced techniques,

capital and knowledge among the chain partners. Better information about the flow of products, markets

and technologies. Transparency of the supply chain. Tracking & tracing to the source. Better control of product safety and quality. Large investments and risks are shared among partners in

the chain.

supply chain management tools List is endless but some important one are:

New generation coops and producer companies to strengthen the position of farmers’ groups

strategic partnering and vertical alliances to cement sustainable partnerships throughout the supply chain

MI tools - advanced market analysis tools, econometric analysis techniques, such as profitable demand analysis, unmet profitable demand or market window analysis.

National and international product and packing standards GAP, HACCP, TQM etc to ensure the quality and safety of products and to

guarantee acceptable social chain performance. Tracking and tracing systems to certify quality of products and ensure

transparency in the flow of goods throughout the supply chain. ECR, VMI, JIT etc to increase the consumer orientation and cost-effectiveness

of supply chains improved logistics systems which use ICT to boost quality management and

standardization – Crates, Pallets, RFIDs, data loggers

role of govts in agro chain development governments can improve the environment for agri-chain development by:

Organizing platforms for public and private actors to exchange information on bottlenecks in agricultural trade.

formulating and implementing policies Investing in infrastructure (transportation, communication and electricity). Offering incentives for sustainable use of production resources. Offering subsidies or co-financing supply for high -risk investments Establishing and enforcing a commercial code that includes property rights and

fair and expeditious judicial processes for resolving contract disputes. Ensuring the availability of (production, price, industry) information and statistics to

facilitate market activity and to monitor market progress. Building databases on supply chains through supported research institutions Government support might take the form of a public private partnership in a supply

chain. International organizations like WB, WTO, FAO etc. can also assist governments with

special and sustainable public interventions to upgrade cross-border supply chains.

Developing cross -border chains

stakeholders undertake following activities to foster supply chain development : raise awareness to gain stakeholder involvement

in the (emerging) chain institution building by both public and private

partners pilot projects, to provide insights and expertise Tools and case studies to disseminate

experience and knowledge to stakeholders

success factors

trust, commitment and transparency among partners improves communication and information exchange.

Awareness raising activities provide chain partners the opportunity to build up relationships. Chain partners jointly plan and control flow of goods, information, technology and capital. Implementation of ‘integral chain -care’ concepts through a close collaboration among the chain

partners. Development of models, tools, training material, etc. tackle bottlenecks in the supply chain. Knowledge -dissemination tools can spread insights and experiences gained in pilot projects. Certain aspects of chain development (e.g., food safety and social accountability) touch upon the

responsibilities and mandates of both public and private agents. Public-private partnerships seem indispensable in these areas.

Initiative and leadership of a private company in a chain project is important for continuation of the activities

Leadership should not be concentrated within one company in the chain, as different chain partners can be leaders in different areas, such as logistics, marketing, etc.

The number of chain partners participating in the project should be limited to ease the difficulties of partners having to switch from a product orientation to a market orientation.

Power should not be concentrated in one chain partner, as dominance by one partner in the supply chain may prompt other partners to conceal information.

risk factors

Social and cultural differences between persons, companies and countries can lead to misunderstandings and miss-communication between chain partners.

Hidden agendas of individual companies within a supply chain may hinder overall progress in the supply chain project.

Supply chain strategies are often set high in the hierarchies of the different chain partners. If these strategies are not translated into incentives at the operational level, conflicts within a company or among chain partners may result.

Chain collaboration is often based largely on the commitment of one or a few persons within a company; When such persons leave the company and the network, the knowledge is also lost.

Tightening trade regulations imposed by governments and retailers stifle trade between chain partners who have long-established relationships.

Selecting preferred suppliers entails disqualifying others. Often smallholders become unable to supply high-end supermarkets.

Safal – a case study

SAFAL’s objective was to facilitate creation of a direct link between fruit and vegetable growers and consumers to provide Delhi consumers high-quality, safe, fresh produce with reliable availability at affordable prices

birth of an innovation

Ministry of Agriculture, GOI, requests the NDDB to submit a proposal on marketing of Fruit and Vegetables in the Delhi metropolitan region.

In July 1984, the Government of India approves NDDB's proposal on Integrated Marketing of horticultural produce in,, Delhi.

Pilot operations start next year from a hired cold store premises.

In January 1988, an ultra modern Central Distribution Facility commissioned in Delhi.

emphasizing strength in the integrated chain

Project provides remunerative price to producers and reasonably affordable price to consumers.

Project achieves this - by taking steps to integrate the chain by handling entire range of operations right from supply management to marketing of fresh fruits and vegetables in and around Delhi.

Frozen and processed fruit and vegetables are marketed throughout India.

The Project also undertakes and supports: Production enhancement activities at farm level. Improved pre and post harvest practices. Efficient logistics from farm to the retail outlets. Minimum handling and scientific quality assurance. Education of grower, support staff and consumer.

infrastructural support for continual concern about efficiency

State-of-the-art Central Distribution Facility (CDF) for handling and marketing of fresh produce.

A chain of 400 plus consumer friendly retail outlets in and around Delhi.

CDF was initially designed to handle over 100,000 MT of fruit and vegetables, annually.

infrastructural support for continual concern about efficiency – some details

A pre-fabricated building with cold store chambers with different sets of temperature and humidity conditions.

Controlled atmosphere chambers / ripening rooms / deep freeze stores. Reception, preparation and dispatch facilities. Material handling is by specially designed plastic crates, pallets battery-

operated forklifts and trolleys. A modern refrigeration plant with screw compressors. Equipment for ripening and controlled atmosphere chambers. Thirty-three cold store chambers for eight separate groups of varying

dimensions, constitute 55,000 cu.m refrigeration capacity. Nine sorting/grading lines for mechanical sorting and grading. A freezing tunnel and preparatory lines to freeze 6 MT of fresh produce per

hour using IQF technology. A super mini on-line integrated computer system with over 60 terminals.

operation “Safal” –building institutions

The Project handles approximately 3,00,000 kg of fresh produce everyday, on year round basis.

A production and supply network has been established in the 10 neighboring North & West Indian States to procure fresh produce directly from 100 plus Growers' Associations.

The extension and technical staff have organized these Growers’ Associations, with 15000 plus growers.

Business linkages have also been developed with the existing horticultural cooperatives and other institutions in distant States.

Based on projected consumer requirements, a crop plan is worked out considering specific production pattern and agro-climatic conditions in different production areas.

Building institutions like FAs, SHGs and CCs are keys to Safal’s success

operation “Safal” – supply management

Growers' participate in their Associations, assemble their

produce at a Collection Centre established at a central location within a cluster of villages in the production belts.

Sorting / Grading, conforming to quality specifications developed by the Project over a period, is conducted at the Collection Centre.

Practically all quantities are sourced directly from the growers or their associations.

However, in case of any shortfall, quantities are also supplemented by direct purchase from the wholesale markets in Delhi.

backward linkages – a big plus

Projected consumers demand translates into a crop plan for farmers considering specific production patterns and agro climatic conditions. To realize this, project provides growers with: Professional advice and supply of good quality high

yielding seeds and seedlings Advice on integrated pest control management Advice on good agricultural practices Support and supply bio pesticides State of the art production technology and agri-

implements Market and environmental information

backward linkages – some innovations

Introduction of chiseling & wide bed technology with central planting in Tomato– Higher yields, good quality, low production cost.

Introduction of Autumn / winter Tomato crop in North Western plans by using leaf curl resistant hybrids – Extended availability from proximate areas

Development of new areas for late summer and spring availability of Tomato - Extended availability from proximate areas

Development of new areas for winter season availability of Capsicum - Extended availability from proximate areas

Introduction of chiseling & wide bed technology in Potato – Higher yields, good quality, low production cost.

High Temperature potato storage under CIPC application – Non-sweet stored potatoes, low refrigeration cost

backward linkages – some innovations

Introduction of hybrids in Chili, Brinjal, Bottle Gourd, Bitter Gourd, Okra, Cabbage and French Beans– Higher yields , better quality and extended availability

Development of new areas for French Bean for Winter supplies Introduction of a pneumatic direct seeder for onion, carrots, radish, cabbage

and cauliflower – Reduced nursery raising cost, increased yields and earliness and quality

Development and introduction new agri-implements for mechanization and increased productivity. Chisel Bed Maker Side dresser cum Fertilizer drill cum intercultural implement Potato Planter Boom Sprayer Potato Harvester Carrot Washer Tractor mounted potato / Onion grader

from ground to dining table - an efficient logistics.

Grower This is where it all starts basis consumer demand He harvests a fully grown, mature, quality product, preliminary

sort/grade it, pack it gently and bring the packs to Collection Centre of the Growers' Associations as per given schedule.

Collection Centre store-sort/grade, repack if required , weigh the produce in specially designed plastic crates and dispatch the material to the Project at Delhi.

After the Association official has filled in the formal consignment note for the pooled produce, supplies are ready for dispatch.

Record of contribution by an individual grower for each grade of an item is maintained at the Collection Centre.

from ground to dining table - an efficient logistics.

Transport. Everyday, thousands of plastic crates find their way from growers

in the rural areas to the Project at Delhi. The grower either delivers the produce himself or entrust this job

to a professional transporter. Specialized transport companies bring the produce to Project

from all parts of India. In order to optimize on transportation cost, transport routes are

so developed that maximum available capacity of the vehicle is utilized.

At present more than 90% of the total Project supply is organized through professional transporters.

Transporters use temperature controlled insulated vehicles

from ground to dining table - an efficient logistics.

Arrivals. The grower's produce is in good hands with the

professional transporter. The transporter delivers the products at the Central

Distribution Facility, Delhi. With consignment note entered into the computer

system, he unloads the crates After deliveries transporter takes empty crates back to

Growers' Associations, for they must be able to move produce the next day, too.

from ground to dining table - an efficient logistics.

Distribution As soon as the consignment notes have been entered into the computer

system, plastic crates are moved using electro-mechanical conveyors to the dispatch hall.

Project officials inspect the quality of different items before the produce is allowed to be put in the dispatch hall.

The dispatch hall has an optimum climate that ensures the quality is preserved.

Batches for individual retail outlet containing different items (at least three outlets per vehicle) are arranged near the nineteen doors in the dispatch hall.

Batch making and distribution staff of the Project ensures that more than 70% of indented quantity of various items required by the retail outlets is supplied in the early morning.

Efficient handling by the transporters guarantees that more than 10000 transactions are received at the exact destination and at scheduled time everyday - an example of technical and professional ingenuity.

from ground to dining table - an efficient logistics.

The Afternoon Supply. The Project can go to any length to satisfy consumer needs and

requirements. To replenish the retail outlets with fresh produce for afternoon

buyers, around 30% of the indented quantity is supplied in the afternoon.

The transporters repeat the morning beat with a precision. As vehicles are leaving Project, officials in the afternoon are

processing the next day's requirements and gearing up to arrange supplies. .

The cycle completes for the day at retail outlet at consumer’s end

Same day the cycle commences at the grower's farm for the next day.

And so it goes on, all the year round, day in and day out.

from ground to dining table - an efficient logistics.

At the Retail Outlet Most of the quantities of different items are put on the

aesthetically designed display shelves. Part of perishable items is put into the cold room. The consumers purchase around 95% of the fruit and

vegetable quantities supplied on the same day. Transporter collects empty crates of the previous day

supplies. The estimated quantities required for next day are also

sent to the Project through transporters.

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consumer is the king

Concern about consumers' desire is Safal’s second nature

The modern consumer wishes to have consistent quality product, the whole year round.

Safal views it as a challenge to provide the critical consumer a wide range of quality products, in abundant supplies, at reasonable prices and throughout the day, everyday.

Parting words

The heart of the working of supply chains is how processes of people, strategy, and operations link together.

Agro businesses have to master the individual processes and the way these three work together as a whole.

This is the foundation for the discipline of execution, at the center of conceiving and executing a strategy.

EXECUTION is what differentiate between one supply chain manager and its competitors and its closeness to its customers.

Supply chains are not about creating equality between trade partners, but about creating sustainable and interdependent relationships.

Thank you

Anil Chopra Cell. +91-98118-14559, 98681-64559 Ph: +91-11-2756-2421, 2755-2396 Blog: www.anilchopra.com email: anil.chopra@agrisolutions.in MD – Competent AgriSolutions Pvt Ltd and Founder ‘vegfru’ 720, Amba Tower, DDA Commercial Complex, Sector-9, Rohini, Delhi-110 085 Reach us at.. www.agrisolutions.in www.vegfru.com

we conduct workshops for building food retail, food supply chains and turnaround projects for startups, organized retailers, processors & food service sector