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APPLICATION OF SUPPLY CHAIN MANAGEMENT IN

AGRICULTURE OF SAARC NATIONS
Dr. Swati Chakraborty, Somnath Chaudhuri
Introduction
The predominant sector of the SAARC countries is agriculture. The prime source of income for the
entire region comes from this sector, as majority of the population lives in the rural sector and
depends upon agriculture for their livelihood. To be more specific, agriculture in this entire region
provides livelihood to 70%-80% of the population, employing about 60%-70% of the work force, and
contributing 24%-50% to GDP.
Currently, this sector is facing several challenges in the entire region, threatening its growth and
sustainability. Different physical as well as economic factors are negatively affecting the agricultural
activities. The major challenges for the agriculture in the region are: (a) raising and sustaining
agricultural growth; (b) ensuring food and nutritional security; (c) facing impact of climate change;
(d) adjusting to changes in energy scenario; (e) maintaining biosafety and bio-security; (f) make
sustainable use of natural resources; and (g) protecting biodiversity.
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Hence, if the policy-makers need
to improve the economic conditions of the nations, then the only way to do that is to improve the
agricultural sectors of this region. One possible way by which this can be achieved is the successful
implementation of Supply Chain Management.
Objective
The objective of this paper is thus concerned with the concept of Supply Chain Management (SCM),
its effective implementation through SAP ERP and how effectively it can play a vital role in
developing the agricultural sectors in the SAARC countries.
Agricultural Scenario
The main occupation for the major section of the population, as already discussed is agriculture. Due
to increasing growth in population on one hand and a fixed land base on the other, the small farms are
becoming smaller. In fact, they are too small to be productive and hence unable to support the
livelihood for the families sufficiently. It is thus unable to compete in the global market
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(See Table
1).






1
Chand, R. (2010)
2
FAO (2002)
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Table 1: Structure of Landholdings and Status of Irrigation in SAARC Countries
Country Average Landholding Size (ha) Holdings Below 1 ha (%) Irrigated Area: % of
Arable Land
Afghanistan - - -
Bangladesh 0.46 86.46 56.1
Bhutan - - 31.2
India 1.41 61.58 32.9
Maldives - - -
Nepal 0.79 74.15 47.0
Pakistan 3.09 36.09 90.6
Sri Lanka 0.83 71.23 38.8
Source: 1. www.adb.org for farm size and holdings
2. The State of Food and Agriculture (2005), FAO, Rome
Since the productivity of agriculture is low, per worker income in agriculture is also low and hence
high proportion of population living under poverty.
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This is reflected in Table 2.
Table 2: Important Socio-economic Characteristics of SAARC Countries
Characteristics Period Afghanistan Bangladesh Bhutan India Maldives Nepal Pakistan Sri
Lanka
Per capita income
(US$)
2006-
07
345 462 1951 971 3277 361 1019 1658
Rural population
(%)
2005-
06
78.7 76.6 69.1 71.1 67.7 86.1 65.7 84.8
Share of
agriculture in
GDP (%)
2005-
07
39.5 18.7 22.4 17.5 - 38.2 19.4 16.5
Share of
agriculture in
workforce (%)
2006 69.6 51.7 - 56.14 3.84 76.0 43.4 32.19
Hunger
(Undernourished
population) (%)
2001-
03
30 20 17 23 22
Poverty (%) Latest 53 (2003) 40 (2005) 31.7
(2003)
27.5
(2004)
21 (2004) 30.9
(2004)
23.4
(2004)
22.7
(2002)
Note: Per Capita income refers to per capita gross national income.
Source: 1. Key Indicators, Asian Development Bank.
2. Country documents and databases available online at www.adb.org


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Paroda, R.S. etal (2000)
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Looking Ahead
SAARC Agriculture Vision 2020 should aim at evolving a strategy to achieve stable and efficient
output growth necessary for eliminating poverty and hunger, improving food and nutritional security
and income of farmers, and meeting other societal requirements, by making sustainable use of natural
resources and availing new opportunities and challenges. It should provide a road map to adapt to
climate change and prepare for facing challenges
of escalating energy prices, diseases and pests outbreaks, bio-security, bio-safety, biodiversity and
IPRs.
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In other words, it implies that SAARC Agriculture Vision must analyze to what extent agriculture can
help in future to eliminate poverty, improve in nutrition and supply safe food. Production activity of
any kind cannot be sustained in the long-run by overlooking the production base and the producers
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.

Possible Solution

One possible way to achieve the above mentioned objectives is the successful application of
appropriate technology. One such technology is SCM, which basically deals with the flow of products
as well as information between different supply chain members organizations. A large set of diverse
activities like purchasing, quality control, demand and supply planning, material or inventory control,
production planning, scheduling, control and many more are part of supply chain management; but all
under the same network with two main objectives: timeliness and quality, so that the organizations
can avail correct and valid information easily and at the earliest in their premises
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Technical Aspects:

SCM can be effectively implemented in agriculture by using a fully integrated software package like
SAP ERP. By the application of this technical tool, SCM can be made more efficient, inventory
reduction and lead to time reduction.

Now, if we discuss about the development and maintenance of Supply chains information systems
then both the hardware and software play a vital role.
The hardware is basically related to the data storage i.e. different sorts of advanced storage media and
the computers input and output devices.
On the other hand, software includes all the application software that help in proper storage of related
data using minimum memory space, quick and efficient retrieval of data from the database, processing
transactions management control, strategic and reliable planning and decision-making. There are
increasing numbers of software packages that are quiet reliable and can be effectively utilized to help
the companies in maximizing efficiencies in their supply chain.

In this paper well concentrate on a specific application software that helps in proper functioning of
the supply chain management in the field of agriculture, which is SAP ERP. The SAP ERP is a
complete automated integrated system; it provides real time information available to SCM for quick
and pro-active decision making and no duplication of manual efforts. SAP ERP helps in input
management, HR management, and production, financial and marketing management of any

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Chand, R (2010)
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IPCC (2007)
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Wikipedia, The Free Encyclopedia
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farm. It is one of the most advanced and comprehensive farm management software
solution implemented in the SCM that suits in small, medium to large sized farms.

Basic Features of SAP ERP:
System Application & Products (SAP) is focused on Enterprise Resource Planning (ERP).
The basic modules of SAP ERP that helps in efficient implementation of SCM in the agro sectors:
Financial Module
This module is integrated with all functional departments. It keeps track of the overall
financial transactions, profit or loss etc. and helps in generating different financial reports.
Logistic and material management Module
It is related to the quality control management, excise management and inventory. This
module is responsible for maintaining the database and all sorts of query analysis.
Human Resources Module
This module takes care of Personnel Management, Organization Management, time
management and manage campaigns and promotions.
Supply Chain Management Module
It is related to product configuration, supply chain planning and tracking of production and
demand and supply
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Fig: Transition from normal ERP to intelligent Supply Chain


Source: Integrating ERP, CRM, Supply Chain Management and Smart Materials, Dimitris N. Chorafas, ISBN 0-8493-
1076-8 (Page: 43)



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Implementation of SAP ERP with SCM in the Agro field:
The basic concept of SCM is the flow of products as well as information between different supply
chain members organizations. Now with the help of this application software we can maintain the
information of all the sectors in a relational database.
Another feature of SAP ERP that helps in effective implementation of SCM in different agro sectors
is the centralized control in all respects. Beforehand, the application software in this field were
decentralized one, not tightly integrated and required significant manual intervention for integrating
with the different systems. But by careful and efficient implementation of SAP ERP we can accelerate
SCM by improving logistics, keeping relevant information of demand and supply for different
products in different locality and with varying period of time in order to reduce product losses,
identify and correct process inefficiencies, and increase profitability.
With the help of SAP ERP we can keep track of all the relevant past and present data in the data base.
It is easy to retrieve and process those stored data; As a result, it becomes easy for the people in the
agro sectors to get a quantitative as well as qualitative comparative-analysis of the present production
and the demand supply. At the same time, as this package can maintain historical trends of the supply
chain in the agro sector for any farms it helps in decision making and to determine what should be the
quantity of production, how much is to supplied to local retailers and how much to be supplied to
those retailers where demand is 0opopkeep in stock or design a better supply chain management
system.
To discuss about the effective application of SAP ERP in the SCM for overall development of
agriculture we can site the example of Reliance Retail Limited (RRL) in India. This organization has
started its operation in the year 2006. Within this short time span it has grown into an organization
that caters to millions of customers, thousands of farmers and vendors. Though till now SCM has a
low value-add activity in India (as supply-chain costs in India is placed approximately 12-50% across
product categories), but Reliance Retail Limited serves over 2.5 million customers every week and has
the patronage of more than 6.75 million customers related to the agricultural and business related to
agro products
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Another relevant example that can be sited in this respect is the Florida Dairy Case. Though it is
not directly related to the agriculture, but dairy items can be considered as agro products. With the
help of this case study we can state that technological innovation and competition have led to
improvements in supply chain management for food products. Supply chain improvements reduce
inventories, waste, and costs, and thus increase efficiency within the firm and the market channel
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The basic features that help in efficient implementation of SCM in the agro sector by using SAP ERP
can be pointed out as:
it is easy to-use, user-friendly compliant computer software system,
it is suited for any sort of agro farm with the facility to manage multiple farms at multiple
locations,
maintain and manage the stock and inventory,
production, demand-supply, marketing every details for regular interval of time in different
locations is properly maintained in a central database,
financial transactions, assets, liabilities, income, expenses details can be stored to
get various financial reports

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Glenn, S. J., etal (2001)

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Thus, this software package plays a vital role in decision making and proper implementation and
functioning of SCM in agriculture which will help in fostering the growth of the SAARC nations
through overall development in the agro sector
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Conclusion:

SCM is concerned with the monitoring, co-ordination and integration of the movement of materials,
information and finances in a sequence right from the supplier to the customer via manufacturer,
wholesaler and retailer. The ultimate goal of an effective SCM is to reduce inventory, assuming the
fact that products are available when needed.
Technological innovation and competition have led to improvements in supply chain management for
agricultural products. In this paper we have focussed on a complete, automated integrated application
software SAP ERP, which helps in effective implementation of SCM in agro sectors. We have pointed
out that this technical tool helps us to keep records of the details of the production, the demand and
supply records of different agro items in different locations in a relational database and under a
centralized control, which helps in quick and pro-active decision making and no duplication of
manual efforts. This application of SCM in agriculture using SAP ERP package would help in
fostering the growth of the SAARC nations. But this is just an opening in the application of IT and
SCM in the agricultural sector. It is possible to develop this kind of combined tools which help
in development of the agricultural sectors and finally led to the overall development of agro nations.











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References
1. Chand, R (2010) SAARC Agricultural Vision 2020, Agricultural Economics Research
Review, Vol. 23, pp 197-208 (July-December)
2. FAO (2002) Reducing Poverty and Hunger: The Critical Role of Financing for Food,
Agriculture and Rural Development, Food and Agriculture Organization, Rome, February,
Paper prepared for the International Conference on Financing for Development, Monterrey,
Mexico, 18-22 March 2002.

3. Glenn, S.J., Kilmer, R.L., Stevens, T. J. (2001) Supply Chain Management & Production
Agriculture: A Florida Dairy Case, Choices, Vol 16 (4): pp 24-25

4. IPCC (Intergovernmental Panel on Climate Change) (2007) Climate Change 2007: Impacts,
Adaptation and Vulnerability. Contribution of Working Group II to the Fourth Assessment
Report of the Intergovernmental Panel on Climate Change, Cambridge University Press,
Cambridge, UK. pp. 273-313.

5. Paroda, R.S. and Kumar, Praduman (2000) Food production and demand in South Asia,
Agricultural Economics Research Review, 13(1): 1-24

6. Mishra, R.K. (2004) Role of Information Technology in Supply Chain Management,
Department of Business Administration, Sambalpur University.

Web Sites
1. http://www.softaiminnovations.com/web/index.php?option=com_content&view=article&id=
36&Itemid=58
2. http://www.ril.com/html/business/