Introduction of supply chain management concept
- A supply chain is a link connecting producers with consumers to supply a product or service involving organizations, people, resources, information and various activities. It is a dynamic chain always changing trying to balance the demand and supply of a given service/good.
- The supply chain concept started with everything in the chain being done using manual labour to the era of digitized supply chains. In 1982, Keith Oliver in an interview with the Financial Times used the word “supply chain management”.
- In 1940s and 1950s the main aim of supply chains was to mechanize the process as much as possible to save time and labour.
- In 1960s, joint handling of warehouses, material handling and transportation was considered and was termed as “Physical Distribution”.
- A fundamental change in the model came on the 1960s and 1970s because of the computers. Before the computers all the transactions were recorded manually, all the operations research was theoretical to most extent. But with the introduction of computers anything and everything became possible.
- 1980s saw an immense revolution in the supply chain and logistics due to the ease of having a personal computer. It gave access to spreadsheets and data-analysis tools, real time and map-based interface leading to humungous improvements in supply chains.
Types of supply chains – B2B, B2C
|CHARACTERISTICS OF SUPPLY CHAIN||B2B||B2C|
|Negotiation power between parties||Almost equal||Unequal|
|Volume of Sales (per customer)||High||Low|
Properties of Agricultural Produce
To know how to manage a product its properties should be very well understood. Agricultural products commonly known as produce have their own properties which need to be efficiently merged with the supply chain to make the whole system more efficient. Agricultural produce has the following main properties:
- Seasonality: agricultural produce are highly seasonal in nature. They are mot available through out the year. They need to be produced in such a way that, they can be stocked up to be used out of the season too.
- Dependent on Climate: the quality and quantity of the produce is highly dependent on climate which is unpredictable.
- Short shelf life: majority of agricultural produce have very short shelf lives which means they need to be moved from producers to consumers within short time to maintain the freshness.
- Bulky: transporting, handling and maintaining the produce is a complex issue as they are very heavy and also sensitive to exterior factors.
- Non-Uniform quality: the quality of produce grown in the same season differs to a large extent based on climate, soil, fertilizer and pest and disease incidence. Different quality of produce fetch different prices in the market.
Utility of agricultural products
Utility is that ability of a product through which it satisfies the want of a consumer. Utility is of 4 types:
- Time: Supplying agricultural products at the right season and right time to consumers increases its utility.
Farmers Mandi standpoint: the deliveries are done early in the mornings so that retailers will have their produce at peak demand period.
- Place: Shifting the stock of agricultural produce from place of surplus to place of scarcity increases its value.
Farmers Mandi standpoint: This is managed efficiently as the information regarding surplus and scarce areas are specifically known.
- Form: The change in form of a product to match the requirements of the consumer increases its utility.
Farmers Mandi standpoint: This is accomplished by grading the produce before dispatching to customers into various grades as required by the retailers. This saves retailers time, as they do not have to waste time segregating the produce after its delivery and money, as they get a guarantee of quality for which they are paying.
- Possession: The ownership of the produce determines its utility to a great extent. Someone who is having more of it will value it less, therefore distributing it someone in scarcity of the product will increase its utility.
Farmers Mandi standpoint: People in need are given the ownership if the produce after properly collecting the produce from the surplus owners.
Terms of an agricultural supply chain
- Producer/Farmer – the one who is responsible for producing the crop/raw material.
- Wholesaler – the one who buys the produce in large quantities for its further distribution. His customers may or may not be the final consumers.
- Retailer – the one who buys smaller quantities from a wholesaler or directly from a farmer. His customers are usually the final consumers.
- Processors – these are the people who buy raw material and turn it into processed products.
- Markets – any place where exchange of good take place for a specified price and at a specified time. There are many types of markets based on which the supply chain will differ.
- Middlemen – those who come in between farmer/producer and final consumer.
- Price spread – the share in price paid by the consumer which is gained by the farmer/producer.
Types of supply chain in agriculture
- Joining the word agriculture before supply chain gives it an altogether different meaning.
- Agricultural Supply Chains (ASC) face a vast range of problems specific only to them along with added general problems of managing a supply chain.
- ASC can be of following types:
1) Transport of raw materials from farmers to retailers/wholesalers/processors
2) Transport of raw materials from farmers to consumers
3) Transport of processed goods from retailers/wholesalers/processors to retailers/wholesalers/processors further in the chain
4) Transport of processed goods from retailers/wholesalers/processors to end consumers.
- Each of the above have their own challenges to overcome.
Stake holders in Traditional Agricultural Supply Chain vs Stakeholder in Farmers Mandi Supply Chain
- Stakeholders can be described as the different parties/organizations involved in moving the product/service from one end of a supply chain to the other.
- In a traditional ASC the middlemen are more in number. This leads to a longer supply chain which ultimately leads to poor price spread to the farmers. The middlemen pay less to the preceding party and sell at higher prices to gain more profit. This ultimately increases the final price paid by the consumer while the farmer/producer receives a very meager amount of income.
- In the farmers mandi supply chain, there is only one stop between the retailers and farmers considerably decreasing the length of the supply chain. The prices charged are not exorbitant keeping in mind equal profits for all the stakeholders. The entire process in digitized to be most efficient in balancing the demand and supply of produce.
The digitization of supply chains
- With the development of technologies, smartphones and software to handle complex and huge problems with ease and efficiency, the supply chain has now entered the digitized phase.
- The logistics, sourcing and distribution of products has become much more transparent and cost-efficient owing to tech platforms offering apps and software to manage each process of a supply chain.
- This has managed to create more jobs in the economy by creating new roles – transport partners, delivery agents, logistics managers, supplu chain managers, operations manager, sourcing and procuring manager etc.
- This has increased the ease and comfort with which retailers/consumers can afford and avail the services of these supply chains form the comfort of their shops/home. This is leading to expansion of markets and target groups.
Smart use of the current technologies will help improve the status of every stake holder in the agricultural supply chain.