Rural market

1. ITC e-Choupal
By
Amod
Ashish
Shailesh
Ikram

2. 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 HKB
3
4 Future Scope

3. ITC e-Choupal : An Introduction
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4. ITC :An Overview
 Incorporated on August 24, 1910 under the name of 'ImperialTobacco Company
 Company rechristened 'ITC Limited‘ in 1974
 ITC was ranked 3rd most admired company in 2013
 Among top in :
 Sustained value creation (BT-Stern Stewart survey)
 Operating profits
 Cash Profits
 ReplacedTCS as country’s most admired brand (ET 24-Aug-2014)
 No. 1 in FMCG Sector
 Rated as one of India’s Most RespectedCompanies (IMRB-Businessworld Survey )
 Diversified conglomerate with interests ranging fromTobacco to Hospitality
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5. ITC’s Agri Commodity Divison
 Farm linkages in 14 states covering Soya, Wheat, Marine products, Coffee etc. Focus
on value added agri commodities
 UniqueCRM 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

6. The predicament of Indian Farmers
Low Risk Appetite
Low Margins Low Investment
Caught in a vicious
cycle of
underdevelopment
Low Value Addition Low Productivity
Weak Market
Orientation

7. 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 an Effective Business Model successfully
Designed to address the issues such as:
1. Fragmented farms
2. Weak institutions
3. Involvement of intermediaries
4. Information Asymmetry

8. ITC’s Supply chain of Soya bean before e-Choupal Initiative
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9. Trader
Broker
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Farmer
Agri-Input
Companies
Dealer/
Stockiest
Retailer
Agril University,
Met Dept,
Insurance Co.
VLW (of Dept of
Agriculture)
Money
Lender
Pakka Adtiya
(Registered Dealer)
KacchaAdtiya
(Un-Registered Dealer)
Processor
ITC-IBD

10. Why ITC thought of e-Choupal
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The Tactical
Imperative
ITC’s distance
from Farmer
Daily price
inflation
Capture of Intra-day
Price shifts
Seasonal price
Inflation
The Strategic
Imperative
Horizontal
spread
Vertical presence
Risk
management
The Social
Imperative

11. ITC’s Supply chain of Soya bean after e-Choupal Initiative

12. Supply chain post re-engineering
 Pricing
 Previous day’s closing price used as benchmark price for next day
 Mandi prices communicated to sanchalak through e-Choupal portal
 Sanchalak 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
Technologi
cal support

13.  Inbound Logistics
 Farmer proceeds to the nearest ITC procurement hub with the note
 Some 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
Technologi
cal support

14.  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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Pricing
Inbound
Logistics
Inspection
Grading
Weighing
and
Payment
Hub
Logistics
Technologi
cal support

15.  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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Pricing
Inbound
Logistics
Inspection
Grading
Weighing
and
Payment
Hub
Logistics
Technologi
cal support

16.  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 given a copy of that
 Samyojaks handle cash operations
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Pricing
Inbound
Logistics
Inspection
Grading
Weighing
and
Payment
Hub
Logistics
Technologi
cal support

17.  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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Pricing
Inbound
Logistics
Inspection
Grading
Weighing
and
Payment
Hub
Logistics
Technologi
cal support

18.  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 languages
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Pricing
Inbound
Logistics
Inspection
Grading
Weighing
and
Payment
Hub
Logistics
Technological
support

19. 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

20. Transaction cost in Mandi Chain (before e-Choupal)
Source: Seminar on Bottom of the Pyramid and CSR, IIM-K, Sept. 24, 2008

21. Transaction cost in Mandi Chain (after e-Choupal)
Source: Seminar on Bottom of the Pyramid and CSR, IIM-K, Sept. 24, 2008

22. Synergies for ITC
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23.  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, eGovernance
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24. Synergy Redefined :The Future
F
A
R
M
E
R
S
VPN providing SCM, ERP & CRM capability
e-choupal rural two-way fulfillment
capability
Expanded FMCG distribution capability
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M
A
R
K
E
T
S
Cigarette Trade Marketing capability
Branded
Foods
Lifestyle
retailing
Education
Stationery
Matches &
Agarbattis
A basis for strategic partnerships with other FMCG brand owners

25. Other e-Choupal Initiative
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26. Companies using e-Choupal network
Source: Seminar on Bottom of the Pyramid and CSR, IIM-K, Sept. 24, 2008

27. Critical Analysis of ITC’s Supply Chain
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28. Stake holder Analysis
Primary
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

29. 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-Choupal
Eroded dominance of
Commission agent
Authenticity of
information
Problem of Power and
internet connectivity

31. Comparison with Haryali Kisan Bazar
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32. Hariyali Kisaan Bazaar
Hariyali
kisaan
bazaar
Extension service
Farmers
DSCL
ICICI Bank
Other companies
Loan for pass
through to farmers
Repayment of loan
with interest
Produce procurement

33. 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

34. Future of e-Choupal
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35. e-Choupal 2.0
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36. 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 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

37. 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.theme
gallery.com
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38. ITC e-Choupal Footprint
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