In this
week’s reading about the supply chain networks, the article “Smarter Medicine”
draws my interest towards the similar case that revolutionized the whole supply
chain. “Smarter Medicine” is very interesting case about intelligently addressing
the basic problems in a supply chain, which is network management. I came
across a similar case of eChopal that tells somewhat similar story of innovation
in supply chain networks.
eChopal initiative
was taken by ITC, a corporate giant in India to empower the farmers back in
1998-99. Company is a very big consumer of raw soybean and produce soybean
products that are sold in domestic and international markets. Back in those days company was facing the
challenge of soybean raw materials ineffective supply chain. There were many problems
such as lack of fine inputs, farming practices, inconsistent availability and fragmented
farms that are dependent on mansoon rains. The main challenge before ITC
management was to find ways to secure the competitiveness of the entire value
chain so their business achieves full potential within limited budget.
In the decades
old traditional system, farmers used to bring their grown product to an agricultural
marketplace where potential buyers i.e. middleman rate their product. “These middlemen used unscientific and
sometimes outright unfair means to judge the quality of the product to set the
price.” [2] The middleman intentions were to make most of the profit
as illiterate farmers had no idea about the worth of their commodity. After putting
so much time and effort in growing and transporting the commodity to market,
farmers had no choice but to sell even on loss.
In villages, farmers after a long day of work gather in
evening at a common place to chitchat about the daily affairs of business and
life. ITC took advantage of the cultural norms of the rural people. ITC introduced
eChopal system in which they setup a kiosk in villages. In every kiosk a computer
with internet connection and a printer was setup. ITC linked the domestic
prices of soybean to the international market and this information was made
available on these computers. They carefully selected capable, trustworthy and
influential people from each village and offer them commission based incentive
to operate these kiosks.
Previously ITC was buying the soybean mostly from middlemen
as farmers could not afford to bring their crop directly to ITC. Now ITC
established the collection centers at carefully selected locations to purchase
the soybean directly from the farmers. They even reimbursed the transportation
costs to farmers. In marketplace, farmers were losing 5% of their crop in
weighting errors but ITC make sure the farmer get the fair value for the actual
weight of the crop. Dealing with middleman, farmers might have to wait for days,
even weeks to get their money but ITC make sure that farmers are paid immediately.
It was very important for the farmers’ business that is generally low on cash
and where delays in any activity may adversely affect the crop production.
The setup of eChopal facilitated the new kind of supply chain
network in which the technology was at the curx. Farmers now have the direct
access to international market trends. In addition they had access to weather
forecasts, best practices, crop information and FAQs. They now have the
opportunity to learn from each other as well as from ITC professionals. Collection
at hubs minimized the influence of middleman. Hubs also served the additive
purpose of selling seed, fertilizers and equipment. Soil-testing in labs at
these hubs and free advice from researchers helped the farmers to get better
yields. By selling back the finished products of ITC at low prices, they
established the sense of belonging and care among farmers.
The features such as knowledge, real-time access, transparency
and above all trust made this ITC supply chain network a success.
[1] ITC eChoupal Initiative - Harvard Business Review
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