Supply chain management in agriculture along with the prevailing bottlenecks and policy suggestions to overcome.

1. Agri-Supply Chain
Management (SCM):
An Overview
Dr. B. Swaminathan
Assistant Research Scientist
Department of Agricultural Economics
Junagadh Agricultural University
Junagadh – 362001, Gujarat, India
email: beswami@gmail.com

2. Flow of the Presentation
• Supply Chain: Genesis & Introduction
• Supply Chain Management (SCM): Focus & Processes
• SCM: Role and Relevance
• Supply Chain: Components, Actors, Flows & 5 Vs
• SCM: Perspectives and Prerequisites
• Supply Chain Typology
• Supply Chain Performance Measures and Tools
• Why Agri-Supply Chains Fail? – Status Quo and Bottlenecks
• Ways Forward
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3. Power of Supply Chain
Management
At best, we are trying to manage only the supply
and not the supply-chain of crop produce.
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4. Supply Chain: Genesis & Intro
• Supply chain is a concept of an interconnected system comprising the
network of physical and virtual flow of goods, services, finances and
information to satisfy the customer demand suiting their desired service levels
at optimum cost. Supply chain is actually a web or a series of networks and
not functions as a single linear chain.
• Keith Oliver coined the term “supply chain management” in 1982.
• Original definition: “Supply chain management (SCM) is the process of
planning, implementing, and controlling the operations of the supply chain
with the purpose to satisfy customer requirements as efficiently as possible. It
spans all movement and storage of raw materials, work-in-process inventory,
and finished goods from point-of-origin to point-of-consumption.”
• Variant 1: SCM is ‘the management of the entire set of production,
distribution, and marketing processes by which a consumer is supplied with a
desired product.’
• Variant 2: SCM is the proactive management of the two-way movement
and co-ordination of goods, services, information and funds (i.e., the various
flows) from raw material sourcing to end user satisfaction.
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5. In a nutshell, what is SCM?
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6. What SCM Focuses on?
1. Acquisition
2. Management of flow
3. Value addition
4. Integration
5. Balancing supply and demand
6. Optimal management of resources
7. Relationships
8. Maximizing value for mutual benefits
9. Economical, social and environmental sustainability
“Supply Chain
Management: The art
and science of finding
maximal intersections
of mutual needs of
the actors involved.”
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7. Supply Chain: Role and Relevance
• It is characterized by a market-focused collaboration of a set of enterprises
working together to produce, process and market products and services in an
effective and efficient manner.
• It involves a set of actors conducting a linked sequence of activities in an
interdependent complimentary way.
• It integrates even small holder farmers with other key actors and higher order
processes.
• It promotes access to quality farm inputs, technology, quality standards, hassle
free credit, access to processing and market link.
• It aids in better, quick and informed decisions in VUCA (Volatile, Uncertain,
Complex and Ambiguous) world.
• It is central to meeting the rising demand for agricultural commodities
expanded and diversified in line with consumer tastes and preferences for
branded, well packed, exotic, off-season, healthy and safe food at door steps.
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8. Supply Chain Processes
1. Purchasing: It is the central focus of all organizations/actors/processes.
2. Quality control: Mandatory for all the suppliers to abide by.
3. Demand and supply planning: Demand planning identifies forecasts of
anticipated demand, inventory adjustments, etc. Supply planning is the process
of taking demand data and developing a supply, production, and logistics
network capable of satisfying demand requirements.
4. Material or inventory control: Full emphasis on physical distribution (i.e.,
outbound or downstream) side of the supply chain.
5. Order processing: Represents a link between producer and external customer.
6. Production planning, scheduling & control: Mandates a time-phased
schedule.
7. Warehousing/distribution: In line with forecasts of future sales.
8. Customer service: Spotlight on customer satisfaction.
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9. Supply Chain Components
• The upstream supply chain: Major activity is procurement. Deals with the
farmer linkages with the first-tier suppliers to procure raw materials and second-
tier suppliers and thereon to sell the produce.
• The internal supply chain: Concerned with production management,
processing, and inventory control once the produce leaves the farm gate. The
supplies received are transformed into the organization’s outputs.
• The downstream supply chain: Deals with activities involved in delivering the
products to the final customers. It is directed at distribution, warehousing,
transportation, and after-sale services.
• Thereby, SCM is a total systems approach, which is consumer-oriented, and
it results in lower transaction costs with increased margins for all the actors
provided it is built upon trust, transparency, interdependence, open
communication, and mutual benefits.
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10. Growers, pickers,
packers, processors,
storage and transport
facilitators,
marketers, exporters,
importers,
distributors,
wholesalers, retailers
and end-users/
ultimate consumers.
Supply Chain Actors
“Linkage of different actors from
‘farm to fork’ to achieve a more
effective and consumer-oriented
flow of products.”
Supply Chain Vs. Value Chain
While supply chain revolves around the flow
of goods and supplies from the source to the
customer, the value chain flows the other way
from customer, as demand, to supplier.
SC: Push strategy
VC: Pull strategy
SCs focus upstream on integrating supplier
and producer processes, improving efficiency
and reducing waste, while VCs focus
downstream, on creating value in the eyes of
the customer.
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11. Supply Chain Flows
Material flows: Physical products, raw materials, supplies, and so forth, that flow
along the chain. Also includes reverse flows—returned products, recycled
products, and disposal of materials or products. A supply chain thus involves a
product life cycle approach, from “dirt to dust.”
Information flows: All data related to demand, shipments, orders, returns,
schedules, and changes in the data. Also includes customer feedback, ideas from
suppliers to manufacturers, order flows, credit flows, & information to customers.
Financial flows: All transfers of money, payments, credit information and
authorization, payment schedules, e-payments, and credit related data.
Risk flow: Fueled by
demand uncertainties for
suppliers and quality
uncertainties for end-users.
Value flow: Low-cost and
sustainable processes with
affordable products for the
end-user.
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12. 5 Vs of Supply-Chain
The 5Vs of SC are largely not materialized due to : (i) Long & Fragmented
supply chain; (ii) Inadequate cold storage and warehousing facilities; (iii)
Logistics & Connectivity Issues; (iv) In-formalization & Unorganized
Operations; (v) Marginal landholdings; (vi) Underdeveloped Processed Food
Market & (vii) Fragmented Market.
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13. SCM: Perspectives and Prerequisites
• Organizational or institutional perspectives: Involve collaboration, business
environment, power and trust.
• Process perspectives: Involve process management issues such as costing,
supply chain organization, targets, throughput time and decision making.
• Performance perspectives: Involve performance measurements and consumer
behavior.
• Prerequisites: Knowledge about chains for developing a workable structure and
the knowledge within chains for assuring sustainability.
• Knowledge about chains: Involves chains strategy, chain formulation, chain
organization, chain design, chain management and partnership.
• Knowledge within chains: Involves chain marketing, chain logistics, quality
assurance, information flows, added value, technology and integration.
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14. MTS –
Make to Stock
MTO –
Make to Order
CTO –
Configure to Order
Forecasting
Supply Chain Typology
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15. SC categorization based on demand uncertainty
Supply Chain Typology (Contd.)
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16. Supply Chain Typology (Contd.)
Lack of pareto optimality; as all these models have inherent bias towards the driver.
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17. Supply Chain Strategy and
Performance Measures
• Superior value to the end consumer efficiently.
• More variety, quicker services at lower prices.
• Efficiency frontier: Best attainable combination of the
two dimensions of cost and service bundle at any given
time and place.
• Improving service at what cost? Minimum threshold of
service. Service overkill beyond a point is not
advisable; any service improvement will not produce a
significant increase in demand or revenue.
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18. Supply chain trade-offs: Cost, service, revenue & profit
(a) Supply chain cost and
service tradeoffs
(b)Revenue impact of
service level
(c) Profit impact of service
level
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19. SCO: Push the SC frontier curve downward via better forecasting,
location, transportation and inventory management decisions.
SCI: Push the SC frontier downward by focusing on minimizing the
wastages.
SCR: Push the SC frontier downward by moving from MTS to CTO
and product differentiation.
Bettering Supply Chain Performance
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20. Supply Chain Operations Reference (SCOR)
• Processes: Plan, Source, Make, Delivery, Return & Enable
• Categories: Cost, Assets, Reliability, Responsiveness & Agility
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21. • Supply chain inefficiency ratio:
SC Cost (SCC)= DC + INV X ICC (Distribution cost, inventory carry cost)
SC Inefficiency = SCC/NS
• Supply chain length:
Total length of chain = DRM + DWIP + DFG
(Days of raw material, work in progress, and finished goods respectively.)
DRM = RM X 365/CRM | DWIP = SFG X 365/CP | DFG = FG X 365/CS
• Supply chain productivity:
SWC = INV + AR – AP (WC – Working capital)
SWCP = NS/SWC
Supply Chain Performance Metrics
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22. SCM Tools
• ‘Efficient consumer response’ (ECR) is developed to increase the consumer
orientation and cost-effectiveness of supply chains.
• New management systems are implemented to improve logistics, increase the use of
information and communications technologies and boost quality management.
• New generation cooperatives are emerging, strengthening the position of farmers’
groups and strategic partnering and vertical alliances are cementing sustainable
partnerships throughout the supply chain.
• Food safety concerns are addressed ‘integral chain-care’ tools such as social
accountability, good agricultural practice (GAP), total quality management, and
HACCP (hazard analysis at critical control points).
• Retailers (e.g., Walmart, Carrefour, Royal Ahold, Tesco and Sainsbury) have
increasingly established their own quality standards (e.g., EUREP-GAP and
BRC2) which suppliers must meet.
• Tracking and tracing systems, enabled by block chain technology, are used to
certify the quality of products and ensure transparency in the flow of goods
throughout the supply chain.
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23. Status quo of farmers in agri-supply chain
management in India
Traditional agri-supply chain: Small scale, unorganized, fragmented and disjointed
where the produce traversed through several redundant channels and players requiring
several touch points at farm gate.
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24. • Long & fragmented supply chain
• Absence of anchors with stake
and vision
• Logistics & connectivity issues
• Informalization & unorganized
operations
• Fragmented landholdings
• Lack of agile institutional
framework
• Lack of low-cost finance
Supply chain woes
or
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25. Urgent need:
Supply chains
more that are
more
sustainable,
transparent,
traceable and
innovative.
Impact of
anchoring
on supply
chains
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26. Why agri-supply chains mostly fail?
• The focus is only on how to reduce costs and wastes along the chain by
all the actors.
• Each actor operates in silos (isolation) of information.
• Each concentrates on own business without thinking about needs of
others or end-users.
• Each player wants to maximize own margins by cutting down costs and
maximizing sale prices.
• Thereby, the “push” orientated nature of food supply chains, with
little to no thought about the needs or wants of the end or next user,
mixed in with the aim of reducing costs and maximizing profits leads
to externalized costs, such as reduced worker quality of life, degradation
of soil health, increased wastage or low consumer trust.
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27. Enormous leaks and risks in supply chains. Organizations keep data around trade
flows, financial flows, and information flows among themselves wasting the
opportunity to leverage information to develop new products, provide traceability,
and improve efficiencies across the supply chain. This leads to delays, fraud, and
counterfeit goods moving along the supply chain.
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28. One collapse, one thousand ramifications
• $40 billion is lost annually due to global food fraud, farmers risk not
being paid, and only 43% of suppliers are confident in sharing data and
collaborating with partners.
• Indian farmers incur around Rs. 1 lakh crore per year in post-harvest
losses.
• 40% of the food produced in India is lost or wasted.
• In which, India loses 20% of its gross agri. output due to poor logistics
and supply chain disruptions alone.
• Every year in India, there is a total loss of 23 million tons of grains, 12
million tons of fruits and 21 million tons of vegetables.
• The total value of food loss and waste generated in India alone is
estimated to be around 10.6 billion USD.
• On the positive side, India’s food and grocery retail business alone
is estimated at $570 billion, while online retail market of food
business is alone valued $85.5 billion.
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29. The New Avatar of Agri-Supply Chains
Still not the best. What else is missing????
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30. How to build the best pareto
optimal agri-supply chains?
• Understanding the
end-user values
• Adding value with a
demand-pull
approach
• Sharing information
between actors to
improve business
practices
• Collaborative
relationships that
encourage innovation
and development
Replacing the existing agri-supply-chains with
data analytics and AI will not work.
Farm-fork models cannot replaced by end-to-
end employee run and corporatized structures
Need: Stronger, local, sustainable supply chains
• Motto: Supply-chain relationships should stop being
transactional.
• Vision: Long-term, solution-oriented view of the
agri. value chains, beyond lending, commerce or
technology.
• Mission: Enhancing the trust among farmers and
incentivizing their entrepreneurial spirit.
• Focus: Should not be on the activity but on the
actors, that too, on the farmers.
• Message: Making the farmers become efficient
is more crucial than replacing the system.
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31. Thank You…
The supply chain that is not armed with ethical
and transparent processes, and which does not
stand for good health and well-being of
farmers, and all other participants, including
the customers, up and down the streams is
bound to collapse at the slightest discomfort.