Description
The objective of this presentation is how ITC's e choupal turned profitable and empowered farmers.
2003
Prepared By
KUTTAYAN ANNAMALAI SACHIN RAO
Problems with Agriculture Sector
• • •
•
Corrupt and inefficient systems Unprofessional business environment Small land holdings
80% of the families own less than two hectares
Lack of information and resources with farmers
Origins of E-Choupal
• • • •
ITC created International Business Division (IBD) in 1990
ITC began with buying and exporting de-oiled soy cake
In 1998 competition forced ITC to explore the options of sale, merger, and closure of IBD Idea of use of information technology to gain competitive edge E-Choupal was finally born in 2000
•
Before E-Choupal
Distribution System for Soy crops
Mandis
? ? ?
The APM Act legislated the creation of “Mandis” Delivery point where farmers bring produce for sale to traders A mandi typically serves around 700 square Km. (For
soy growing areas of M.P.)
Adatiyas
? ? ?
Mandi trading is conducted by commission agents called adatiyas
Generally adatiyas belong to a single community
Formidable presence due to personal networks & financial influence
Mandi Operation Process
? ? ? ? ? ?
Farmers transport their produce from farm to mandi Open air display with check for moisture content only Open oral auctions Weighing of sacks on a manual scale
Payment is given to farmer by agent
Agent pays mandi a fees of 1% of purchase value
Problems created by Mandi operations
Problem for Farmers
?
? ? ? ? ?
Limited information on price
Unscientific inspection process favoring buyers Agents collude to create exploitive trade practices Lots of spillage waste Under weighing of farmers produce Only a part of purchase price is paid on spot
Contd..
Problem for companies
?
? ? ?
Distortion of price by agents
Non uniform quality of crops Exploitation of price shifts by agents Agents commanding operating margins of 2.5% to 3% instead of official 1% No information about crops, farmers causing supply risks
?
E-Choupal - Virtual vertical integration
VISION AND PLANNING Re-engineer, Not Reconstruct Address the Whole, Not one Part
An IT-Driven Solution
Manage Bureaucracy
Business Model for E-Choupal
A local farmer acting as a sanchalak (coordinator) who runs the village e-Choupal
Sanchalak
Profile: median wealth and some status, ability to read and write, and a part of an extended family
$
$
Treasurer
A local commission agent, who provides logistical support.
Profile: An agent willing to work with ITC
Samyojak
Cond..
E-Choupal
Source: Use of ICT in Agribusiness (Sharma 2004)
E-Choupal’s supply chain
?
? ?
Mandi closing price is used to determine FAQ price
Quality assessment and conditional price quote Farmer transports crop to nearest hub with price quote
?
? ?
Weighing of crop on electronic scale
Visual and chemical analysis of crop is done by a chemist Full cash payment including transportation cost is given to farmer
Gains due to E-Choupal
Farmer gains
?
Access to prices of several nearby mandis and external pricing sources No transportation cost for farmer Better returns due to accurate weighing and no spillage Time saving Respect Incremental Income – Rs. 270/ton (2.5% > Mandi) Availability of cheap Agri-inputs
? ? ? ? ? ?
ITC gains
?
? ? ? ?
Reduction in cost of intermediation.
Savings in transport cost (50% savings) Quality of crops received is better Better relationship with supplier security Excellent source of information about farmers
Towards a new Horizon
Scaling the model
?
Crop Specific Intervention
Customizing e-choupal system for different crops
?
Low-Cost Last Mile.
Transformation e-choupal into a distribution super-highway
?
Intelligent First-Mile.
Using ideas from Farmer to serve new products
Execution problems & solutions
?
No or poor telecom reach Use of Satellite communications No Power; Erratic Voltage where it exists Use of Solar Power First Time Computer Users Lot of effort on Capacity Building
?
?
?
Resistance from traditional middlemen Farmers dealt with them
Contd..
Challenges Ahead
?
Radical shift in computing access could alter community
based business.
? ?
Threat of unionization by sanchalaks Uneasy relationship with samyojaks
Strategy for future
?
Wave 1- Soy e-Choupal
?
?
Wave 2- Value creation through identity preservation through
the chain.
Wave 3- Building the concept of traceability into the supply
chain
?
Wave 4- E-Choupal serving as market place for multiple
buyers
? ?
Wave 5- Rural marketing and distribution network Wave 6- Sourcing IT-enabled services
Thank You
?
Setup cost Rs 135000 and Rs 270000 and requires
about Rs 4500 per year to maintain
?
Sanchalak benefits from increased prestige and a commission paid him for all e-Choupal transactions
around 1%
doc_765299848.pptx
The objective of this presentation is how ITC's e choupal turned profitable and empowered farmers.
2003
Prepared By
KUTTAYAN ANNAMALAI SACHIN RAO
Problems with Agriculture Sector
• • •
•
Corrupt and inefficient systems Unprofessional business environment Small land holdings
80% of the families own less than two hectares
Lack of information and resources with farmers
Origins of E-Choupal
• • • •
ITC created International Business Division (IBD) in 1990
ITC began with buying and exporting de-oiled soy cake
In 1998 competition forced ITC to explore the options of sale, merger, and closure of IBD Idea of use of information technology to gain competitive edge E-Choupal was finally born in 2000
•
Before E-Choupal
Distribution System for Soy crops
Mandis
? ? ?
The APM Act legislated the creation of “Mandis” Delivery point where farmers bring produce for sale to traders A mandi typically serves around 700 square Km. (For
soy growing areas of M.P.)
Adatiyas
? ? ?
Mandi trading is conducted by commission agents called adatiyas
Generally adatiyas belong to a single community
Formidable presence due to personal networks & financial influence
Mandi Operation Process
? ? ? ? ? ?
Farmers transport their produce from farm to mandi Open air display with check for moisture content only Open oral auctions Weighing of sacks on a manual scale
Payment is given to farmer by agent
Agent pays mandi a fees of 1% of purchase value
Problems created by Mandi operations
Problem for Farmers
?
? ? ? ? ?
Limited information on price
Unscientific inspection process favoring buyers Agents collude to create exploitive trade practices Lots of spillage waste Under weighing of farmers produce Only a part of purchase price is paid on spot
Contd..
Problem for companies
?
? ? ?
Distortion of price by agents
Non uniform quality of crops Exploitation of price shifts by agents Agents commanding operating margins of 2.5% to 3% instead of official 1% No information about crops, farmers causing supply risks
?
E-Choupal - Virtual vertical integration
VISION AND PLANNING Re-engineer, Not Reconstruct Address the Whole, Not one Part
An IT-Driven Solution
Manage Bureaucracy
Business Model for E-Choupal
A local farmer acting as a sanchalak (coordinator) who runs the village e-Choupal
Sanchalak
Profile: median wealth and some status, ability to read and write, and a part of an extended family
$
$
Treasurer
A local commission agent, who provides logistical support.
Profile: An agent willing to work with ITC
Samyojak
Cond..
E-Choupal
Source: Use of ICT in Agribusiness (Sharma 2004)
E-Choupal’s supply chain
?
? ?
Mandi closing price is used to determine FAQ price
Quality assessment and conditional price quote Farmer transports crop to nearest hub with price quote
?
? ?
Weighing of crop on electronic scale
Visual and chemical analysis of crop is done by a chemist Full cash payment including transportation cost is given to farmer
Gains due to E-Choupal
Farmer gains
?
Access to prices of several nearby mandis and external pricing sources No transportation cost for farmer Better returns due to accurate weighing and no spillage Time saving Respect Incremental Income – Rs. 270/ton (2.5% > Mandi) Availability of cheap Agri-inputs
? ? ? ? ? ?
ITC gains
?
? ? ? ?
Reduction in cost of intermediation.
Savings in transport cost (50% savings) Quality of crops received is better Better relationship with supplier security Excellent source of information about farmers
Towards a new Horizon
Scaling the model
?
Crop Specific Intervention
Customizing e-choupal system for different crops
?
Low-Cost Last Mile.
Transformation e-choupal into a distribution super-highway
?
Intelligent First-Mile.
Using ideas from Farmer to serve new products
Execution problems & solutions
?
No or poor telecom reach Use of Satellite communications No Power; Erratic Voltage where it exists Use of Solar Power First Time Computer Users Lot of effort on Capacity Building
?
?
?
Resistance from traditional middlemen Farmers dealt with them
Contd..
Challenges Ahead
?
Radical shift in computing access could alter community
based business.
? ?
Threat of unionization by sanchalaks Uneasy relationship with samyojaks
Strategy for future
?
Wave 1- Soy e-Choupal
?
?
Wave 2- Value creation through identity preservation through
the chain.
Wave 3- Building the concept of traceability into the supply
chain
?
Wave 4- E-Choupal serving as market place for multiple
buyers
? ?
Wave 5- Rural marketing and distribution network Wave 6- Sourcing IT-enabled services
Thank You
?
Setup cost Rs 135000 and Rs 270000 and requires
about Rs 4500 per year to maintain
?
Sanchalak benefits from increased prestige and a commission paid him for all e-Choupal transactions
around 1%
doc_765299848.pptx