Ecosystem Aware

Global Supply Chain Management

GRIP Framework

N.Viswanadham

Ecosystem Aware
Global Supply Chain Management

SES Framework Can Help To Study

l GRIP

Framework

Governance of the Network

Risks from various sources including Social

Groups & Governments

Innovations: Indian Food & Retail
Performance
l Food Supply Chain Design avoiding social &
political risks and using innovations in regulations,
logistics, etc.

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Ecosystem Aware
Global Supply Chain Management

Performance

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Ecosystem Aware
Global Supply Chain Management

State of Indian Food Sector

Strengths
1.Vast natural resources (cultivable
land, water, seasons)
2.Established farming system
3.Growing economy
4.Supporting government policies
(FDI, APEDA, subsidies)
5. Vital outsourcing hub

Weaknesses
1.Small scale conventional farming
2.Primitive post-harvest methods
3.No channel master & many farmers
to consumers intermediaries
4. Hardly any Food processing industry
5. Inadequate storage & transport
(logistic )infrastructure

Consequences
1.Surplus food wasted away
2.Low incomes to farmers
3.Inefficient supply chain
4.Not meeting the young consumer
preferences (processed hygienic
food)

Opportunities for
1.Cold chain infrastructure builders
2.Processed food manufacturers
3.Food packaging & logistics providers
4.Food retailers and exporters
5.IT and data analysts
6.Research Institutions

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Economic Integration
Packaging Duties High

Trade Tariffs

Protectionist

Economic Policies

Logistics

Resources

No Cold Chain

Abundant

Connecting Technologies

FOOD
SUPPLY
CHAIN

Information
Technology

Resources
Management
Inefficient and
Fragmented

No Supply
Chain Visibility

Product Offering

Few Processed Products/Labs

Product & Value Chain Innovation

Supply Chain

Too many intermediaries

Resources & Management

Ecosystem Aware
Global Supply Chain Management

Benchmarking Indian Food Chain

Ecosystem Aware
Global Supply Chain Management

Inefficiencies in the Food Sector

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About 30 % of all foods produced in India are wasted

The producers share in the domestic consumers retail
price is 25 % . It is 50% in developed countries
Only 25 % of food grains use modern storage facilities
Annual post-harvest losses are estimated to total 10 % of
total food grain production.
India produces a wide range of both topical and temperate
fruits and vegetables and is the worlds largest producer
less than 2 per cent of production is processed
25 % is lost as wastage.

Warm tropical climate, high temperature and high

humidity conditions make cold chain mandatory

Ecosystem Aware
Global Supply Chain Management

Innovation

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Ecosystem Aware
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Competitive Indian Food Retail

l Innovations

along four dimensions need to

converge for Indian Food Retail to turn into a
highly competitive vertical
Supply Chain Innovation
Institutions
Resources
Delivery Services : Logistics and IT

We call this the SES framework for

Excellence in Innovation
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Ecosystem Aware
Global Supply Chain Management

Wider Innovation Policy Needed

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Traditional science policy is scientific discovery &

invention followed by commercialization.
A Wider innovation Framework should include both the
new to the market as well as new to the world innovations
Innovations in Management (like Outsourcing) and
Institutions (Social, Policy,Regulation and Governance)
need to be incorporated
Science, Technology, Engineering, Regulations & Policy,
Management (STERM) contribute to innovations in
services and determine the sectors competitiveness

N.Viswanadham

44

Ecosystem Aware
Global Supply Chain Management

Innovations In Food Supply Chain

l

Product and Value Chain Innovation

Seed-Feed agriculture, Food Processing, Protein rich food,

Nutritious food Affordable , Accessible Awareness created

for all sections of populations.
Low cost high quality food, Certified food like Halal ,
Organic etc. Store formats, Home delivery, e-retail,
International markets through JVs
Market Channel Innovation :Joint Inventory management,
CPFR, RFID, Category management, Operational
Innovation; Outsourcing

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Ecosystem Aware
Global Supply Chain Management

Innovations In Food Supply Chain

l

Regulatory Innovation
Green, VAT, Customs for perishable goods, Trade, Hygiene,

Regulations on packaging, formulations, pricing, procurement

like APMC act, Essential commodities act, Minimum support
price for PDS

Delivery Services & Technologies: Logistics and IT

Cold chain, Packaging, Manual handling, Sensor networks for

visibility, Delivery with bad infrastructure, Distribution

backbone, product recalls,

Resources and Resource Management

Water, Power, Post harvest research, Food clusters, Food courts,

Product development and Testing laboratories, Talent

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Ecosystem Aware
Global Supply Chain Management

Seed-Feed: Value Driven Agriculture

Current Scenario, Supply driven : The farmer is
unaware of the market, Crops something and tries
to sell in a mandi or to an agent and expects a fair
price & immediate payment.
l Desirable Scenario: The farmer crops to market
demand the right (Optimal) grade of produce and
sells to right customers to get maximum income
l Need to transform the way agriculture works,
create business orientation among the farming
community
l

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Ecosystem Aware
Global Supply Chain Management

Food Product Market Estimation

l Estimate

your market right

How many people will buy orange
juice packets if it is as cheap as a
coffee or tea on a road side stall and
costs only Rs 5
Look at the reduction in the disease
burden

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Ecosystem Aware
Global Supply Chain Management

How to achieve astounding

'breakout growth'
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Sell value chains not products

Start by asking what should be the scale
of operations to support low enough
prices required to spur higher growth
and penetration in the packaged food
market?

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Ecosystem Aware
Global Supply Chain Management

Food Manufacturing : Opportunities

Halal hub (Export to South-East Asia, Middle
East, ..);Vegetarian hub ;Organic food hub
(Europe and USA); Sea food hub
l Food processing SMEs in Rural India
l Distribution System
l Cold chain management
l Post-harvest technologies
l

l Potential

for Huge employment

creation
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Ecosystem Aware
Global Supply Chain Management

IT in Food Supply Chains

Farmer

Processing

Transport

Distribution
Centre

Stores

Ecosystem Aware
Global Supply Chain Management

Big data Analysis in Agriculture

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Advise from Agro-Meteorological Data

Hydrology: Surface Subsurface water budget
Meteorology: atmosphere conditions
Pedology: Soil type and Condition
Phenology: Biological stages of plant development

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Weather model ( precipitation, Humidity, temperature, Wind)

Soil Moisture, Soil temperature, Evaporation
Advise for field preparation, sowing, weeding, irrigation,
harvesting, chemical application.

N.Viswanadham

Ecosystem Aware
Global Supply Chain Management

Retailing: Disruptive Changes

l

Retailers can gain an understanding of how shoppers move

around the stores where they go, in what order, how long
they stay, when they come to the store, and how all of these
questions map to actual sales.
Retailers need to develop predictive models for price
discounting, advertising, and couponing.
Forecasting based on past data, batch size calculation
using square root formula are being replaced by real time
visibility and delivery on demand
Develop technology platform, tracks connections between
people, products, brands and uses this to make product
recommendations to customers.

N.Viswanadham

Ecosystem Aware
Global Supply Chain Management

Integrated Distribution Centers

Logistics backbone Network for India
l Distribution center location, design and operation
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Distribution center architecture and warehouse design

Transportation scheduling from DC to consumption
Green Shared IT and Logistic Resources
Built under PPP

Plant locations are now at the forks and not at the

hubs creating outbound logistics (Finished
Goods) problem
l Trucks and other moving equipment manufacture
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Ecosystem Aware
Global Supply Chain Management

Innovate How to efficiently use

existing Infrastructure
Take advantage of the vast network and logistical
capabilities of the existing institutions such as
Post office, Road transport corporations, Banks,
etc to bring a host of services to rural
populations.
Do not wait for the infrastructure to be available

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Ecosystem Aware
Global Supply Chain Management

Risk

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Ecosystem Aware
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Food Adulteration getting

deadlier by the day
Unscrupulous dairy farmers invented synthetic
milk - a deadly cocktail of urea, caustic soda and
vegetable oil.
lFruits, particularly mangoes, are ripened with
calcium carbide. There are reports of fish being
made to appear fresh with formalin.
l Adulterants calcium carbide and formalin are
banned and are known to be toxic. Some of them
are carcinogens or cancer causing substances.
l

N.Viswanadham

Ecosystem Aware
Global Supply Chain Management

Bird flu outbreaks in the World

Similarly H1N1 and other communicable diseases

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Ecosystem Aware
Global Supply Chain Management

Organized Retail runs into stiff

opposition from vested Social Groups
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The organized Retail outlets both Local and Global run in

to problems with the Kirana shops and Hawkers (Political)
social networks.
Reliance Fresh was vandalized and is barred from opening
shops in some states
Disquiet at the scale, impact and governance of global
companies
Bangalore Traders Action Committee and Swadeshi
Jagran Manch activists protested against opening of Metro
centre in Bangalore Mandi

l
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Ecosystem Aware
Global Supply Chain Management

Why Foreign wholesalers struggle

in India?
Despite a compelling value proposition and a
tremendous need for an intermediary, the
wholesalers struggle in India
l For businesses seeking a national presence, it is
important to investigate what policy spheres come
under the purview of the central government and
what involves the local discretion.
l In India, the central government oversaw FDI,
while state governments had sole control of
several other areas, including agricultural
marketing.
l

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Ecosystem Aware
Global Supply Chain Management

Governance

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Ecosystem Aware
Global Supply Chain Management

Three Types of Network Governance

l

The Network Governance model

Highly Centralized External Broker (Li & Fung, Olam Intl.)
Participant Shared Governance by Elected Board

(Healthcare , Dairies, Cooperatives)

Participant Shared Governance with a Lead Player
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Producer-driven (Cisco, Nike)

Buyer-driven (Wal-Mart, Carrefour, Levi)

All three governance forms are in practice & None

proved superior.

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Ecosystem Aware
Global Supply Chain Management

Producer-driven Chains
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In producer-driven chains, the lead firm, often a large

multinational manufacturer plays a central role in
coordinating a distributed network of suppliers.
The lead firm controls R &D, product design & innovation.
This type of chains are characteristic of capital- and
technology-intensive industries, such as automobiles, ICT &
semiconductors.
Food manufacturers play a major role in organizing producer
driven supply chains.
Although challenged by large retailers, their power lies in supplying

and processing key commodities, such as high-value bean crops (e.g.,

coffee, cocoa) or key ingredients for a wide variety of processed
foods (e.g., processing tomatoes).

Ecosystem Aware
Global Supply Chain Management

Buyer-driven Chain
Large retailers and brands (e.g. Target, Wal-Mart,
and Carrefour) play the lead role sourcing from
decentralized networks of independent suppliers,
defining product and process specifications and
standards.
l The buyer-driven chain tends to be characteristic
of labor-intensive, consumer goods industries, such
as apparel, footwear, agro-industry and consumer
electronics.
l In India, the big retailers such as Moore, Reliance
and Big Bazar are still in their early stages and the
regulations play as road blocks
l

Ecosystem Aware
Global Supply Chain Management

Governance in Food SCN

l Generally,

even big farmers have no place in

Governance except in cooperatives.
l Governments help the farmers through
Mandi procuring at a comfortable price for
PDS.
Food Corporation of India acts on behalf of the

Govt. and owns warehouses, people and other

accessories. But rated poor
l Amul,

E-Chopal and other private players

play lead role in procurement.
l Need attention and Improvement

Ecosystem Aware
Global Supply Chain Management

ITC---E-Choupal

Ecosystem Aware
Global Supply Chain Management

e-Choupal Infrastructure and Services

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Internet kiosk in the house of a trained farmer (Sanchalak)

within walking distance of target farmers
Warehousing hub managed by the erstwhile middleman,
within tractorable distance of target farmers
Customized knowledge on farm and risk management
Better supply chain for ITC -- lower transaction costs, better
value through traceability
Relevant real-time information results in higher income
Commodity prices, local weather, news, customized
knowledge despite heterogeneity, reduced transaction
costs
Direct marketing channel for farm produce
Screened for quality, demand aggregation for competitive
prices and efficient logistics

Ecosystem Aware
Global Supply Chain Management

Intermediaries roles are redefined

They are called samayojaks (coordinators), who
assist ITC in setting up new e-choupals by
conducting village surveys and by identifying the
best sanchalaks.
l They manage the physical transportation of sales
made at the e-choupal, collect price data from local
auctions, and maintain records.
l These coordinators earn a 1% commission on
product processed.
l

Ecosystem Aware
Global Supply Chain Management

The Selling Process for the Farmer

l

The farmer carries a sample of his produce to a local kiosk

and receives a spot quote from the sanchalak. If he accepts
the quote, he can then transport the produce directly to an
ITC collection center and get payment within two hours.
The material handling systems at the ITC collection center
ensure that tractors, trolleys, or trucks can directly unload
their produce without spilling any grain, and a modern
weighbridge ensures precise weighing. The transportation
cost is reimbursed to the farmer.
If the farmer is located in a remote area, he has the option
of selling his produce to the sanchalak or to a nearby
collection center

Ecosystem Aware
Global Supply Chain Management

The ITC eChoupal Scale

l 6500

Choupals are serving over 4 million

farmers and villagers across 40000 villages
in 10 states.
l ITC Limited plans to scale up to 20,000 eChoupals by 2012 covering 100,000
villages in 15 states, servicing 15 million
farmers.

Ecosystem Aware
Global Supply Chain Management

E-Choupal
l

The Sanchalak (person selected and trained by ITC) of an EChoupal acts like a hub or an orchestrator who connects the
various stakeholders in the ecosystem
According to social network theory, Sanchalaks fill structural
holes (Static holes that can be strategically filled by
connecting one or more ties to link together disconnected
components)
Sanchalaks key role in innovation diffusion and information
dissemination needs to be recognized

Ecosystem Aware
Global Supply Chain Management

Olam International: Orchestrator of Global

Agri-food Networks
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Olam International has evolved as a global leader in agricultural

commodities with its base in Singapore from a small Nigerian company
Olam does not own farms, but orchestrates a network of many small
producers.
Olam International Limited supplies raw and processed agricultural
commodities, grown mainly by small and medium-size producers in
developing and emerging countries, to well-established regional and
international customers.
Olam directly engages in the sourcing, processing, transport, warehousing
and distribution of a broad range of commodities, including cocoa, rice,
timber, cashew nuts, cotton, coffee, sugar, sesame, sheanuts, and spices.
Olam is a supplier to many of the worlds most prominent brands offering
reliability, consistency, trust, traceability, & other value-added services.

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Ecosystem Aware
Global Supply Chain Management

Conclusions

Ecosystem Aware
Global Supply Chain Management

India - Moving up the Value Chain

India need to move to a more sustainable
growth model of concurrently maintaining
a vast manufacturing base, efficient
demand driven agriculture and world
class business services for the market and
welfare of 1.2 billion consumers and
provide the world with high-value goods
and services.

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Ecosystem Aware
Global Supply Chain Management

In Summary:
Truly breakout food industry is possible
l

Creating awareness among farmers

Demand driven agri production
Seed to feed culture

Relaxing regulatory hurdles

On sale of agri produces
Reducing taxes on processed food items

Creating of laboratories for nutritious food

product development and testing, encouraging
growth of strong food processing industry
l Developing talent for rural supply chain
management
l Developing an IT enabled distribution backbone
l

N.Viswanadham