AGRI-SUPPLY CHAIN

MANAGEMENT

March 21, 2020 1

SESSION I – INTRODUCTION TO SUPPLY
CHAIN MANAGEMENT AND AGRI-
SUPPLY CHAIN MANAGEMENT

March 21, 2020 2

COMPONENTS OF AGRI-SUPPLY CHAIN

I. Input Management
II. Procurement or sourcing (in case of dairy products)
III. Production management
IV. Logistic management
a. Transportation
b. Material management
c. Warehousing
V. Post Harvest Management
(Grading, Sorting, Cleaning, Processing, Packaging,
Branding, etc) March 21, 2020 3

VII. Retailing
 PROBLEMS AT VARIOUS STAGES OF AGRI-
SUPPLY CHAIN IN INDIA

Production Post Production Processing Marketing

• Poor extension • Lack of Storage • Lack of • Poor
• Low quality • Poor processing infrastructure
inputs transportation •Lack of quality • Lack of
• Inefficient • High wastages
• Multiple
• Poor returns grading
production
management intermediaries • Low capacity • Lack of
• Non demand • Fresh produce utilization market
linked transported to •Mismatch intelligence
production mandis in open between the • No linkages
• Improper post baskets or gunny varieties grown • Non-
harvest bags stacked one and processing transparency
management on top of the requirement in prices
resulting in poor other • Cold
• Long delays
quality chain absent or
broken, produce from producer
deteriorates to retailer
March 21, 2020 4
rapidly
• Food safety is
major concern:
COMPARISON OF TRADITIONAL AGRI-SUPPLY
CHAIN MANAGEMENT APPROACH WITH
MODERN AGRI-SUPPLY CHAIN MANAGEMENT

Coordinated Supply Chains Approach

Structured relationships among producers, traders,

processors, and buyers, whereby detailed specifications are
provided as to what and how much to produce, the time of
delivery, quality and safety conditions, and price.
These relationships often involve exchanges of
information, technology and finance.
Control of safety and quality and are more effective and
efficient than control only at the end of the supply
Marchchain
21, 2020 5
INTEGRATED SUPPLY CHAIN APPROACH

 Collection-cum-grading centers have been established

in rural
areas with all produce moving through a central
distribution facility having modern infrastructure
including cold storage, ripening rooms and controlled
atmosphere chambers.

 Growers are required to follow certain specifications and

are often provided with specific inputs and technical
March 21, 2020advice
6

about agronomic and post-harvest practices

 AGRI-LOGISTICS IN INDIA:
CHALLENGES

Inefficient price signals: The government has been buying

almost one-third of all rice and wheat produced in India through
the PDS system, but in other kinds of grains, fruits and
vegetables (both being highly perishable), the role of the
government is limited

Limited reach of mandis: Also, this procurement system has

failed to cover the entire country evenly (on an average, a
farmer needs to travel 12 kms to reach the nearest mandi and
March 21, 2020
 more than 50 kms in NE India), while according to 7the
recommendations by National Farmers Commission, availability
 AGRI-LOGISTICS IN INDIA:
CHALLENGES, CONT…

Too many intermediaries, information asymmetry: long

marketing channels, with multiple intermediaries, adding to
the woes of the producers of perishable agri goods.

Inadequate infrastructure for storage: The Planning

Commission has recently estimated the gap between agri-
warehousing supply and demand at 35 mn MT. Currently,
public sector agencies like the FCI, Central Warehousing
Corporations (CWC) and the various State Warehousing
March 21, 2020 8
Corporations (SWC) have a storage capacity of 71 mn MT, while
the private sector has close to 25 mn MT
 AGRI-LOGISTICS IN INDIA:
CHALLENGES, CONT…

Skewed distribution of capacity: Skewed distribution of

this capacity is another issue, with North India having
access to 60% of the total storage infrastructure

Lack of cold storage infrastructure: India’s current cold

storage capacity at 25 million MT, is barely sufficient for
10% of fruit and vegetables produced in the country

March 21, 2020 9

 SOLUTIONS

Comprehensive agriculture logistics solutions: Private

players like Star Agri that provide integrated post harvest
management solutions and other value added services
(quality testing, agri insurance, bulk procurement and rural
retailing) to its clients.

Integrated cold chain solutions: ColdStar Logistics and

LEAF provides customized solutions for cold storage and
refrigerated transportation across India for fresh and frozen
March 21, 2020 10
commodities. The services include specialized refrigerated
storage¸ warehousing¸ transportation¸ distribution and
 SOLUTIONS, CONT…

Alternate marketplaces: A young innovative company, eFarm, is

providing a way to bypass the long chain of intermediaries by directly
connecting buyers and sellers of agricultural produce and allied
services, via a web and mobile based information exchange platform.

Reducing the information asymmetry: Riding on the high mobile

penetration in rural India, Reuters Market Light and Fasal Intuit are
working on the problem of information asymmetry for agricultural
producers, by making personalized agricultural market information
available to the farmers at minimal costs, throughMarch
a mobile
21, 2020 based
11

service.
 SOLUTIONS, CONT…

Innovative ICT tools for supply chain management:

Logistimo is a hosted web service for supply chain
management, which can be accessed via basic mobile phones
and web browsers, which makes it uniquely suitable for rural
markets.

It is a configurable service which offers customers the ability to

capture and share data in a simple, low-cost way, empowering
them to make better logistics decisions March 21, 2020 12
 REGULATORY REFORMS UNDERTAKEN TO
STRENGTHEN AGRI-SUPPLY CHAIN IN INDIA

A Warehouse Development and Regulation Authority

has been set up. This is entrusted with the task of
negotiable warehouse receipt in the agriculture sector.
This will go a long way towards saving the farmers from
distress sale of their produce

A Food Safety Regulatory Authority has been set up to

look after the food safety and quality issues.

March 21, 2020 13

 REGULATORY REFORMS UNDERTAKEN TO
STRENGTHEN AGRI-SUPPLY CHAIN IN INDIA

Launching of the Infrastructure scheme and the Rural

Godown Scheme has gone a long way towards attracting
private investment to agricultural marketing sector.

Market Research Information Scheme of Government of

India has been successful in disseminating price and arrival
related information from almost all the wholesale markets of
the country. (AGMARKNET)

The Terminal Market scheme of the government has the

March 21, 2020 14
potential to promote setting up of a chain of Hub and Spoke
 CHALLENGES RELATED TO SUPPLY
CHAIN OF HORTICULTURAL PRODUCE

 Inadequate post harvest management infrastructure

 Poor packaging practices (e.g. Mahagrapes)

 Long and multi-layered supply chain

 Lack of scientific ripening facilities for crops like Banana and

Mango
 Lack of cold chain facilities March 21, 2020 15
 CHALLENGES RELATED TO
PROCESSING UNITS

 Power supply (uneven, demand load, etc) (e-

Choupal)

 Human resources – Labour laws: 3 shifts,

women safety, etc

 Common facility centres (HOPCOMS, VAPCOL)

 Incubation centres (new product dev, market

dev, etc)
March 21, 2020 16
 Quality testing / assurance labs
(Mahagrapes)
March 21, 2020 17
 Chapter II - Supply Chain
Management in Horticulture

March 21, 2020 18

 HORTICULTURE PRODUCTION IN THE
NATIONAL CONTEXT

 India is the fruit and vegetable basket of the world.

 It grows a variety of fruits and vegetables and has huge
production of both fruits and vegetables.
 India is the second largest producer of both fruits and
vegetables in the world after China.
 In fruits, India is the largest producer of banana, mango
and papaya, sixth largest producer of pineapple and seventh
largest producer of apple in the world.

March 21, 2020 19

HORTICULTURE PRODUCTION IN THE
NATIONAL CONTEXT

In vegetables,

It is the largest producer of okra,

Second largest of producer of brinjal, cabbage,

cauliflower, onion and potato

Third largest producer of tomato in the world

March 21, 2020 20

HORTICULTURE IN ANDHRA PRADESH- A
CASE STUDY

 It has the highest production in respect of some of the country’s

horticulture crops, due to its varied climatic conditions such as
tropical, sub-tropical and warm temperate zones.

 Andhra Pradesh ranks second in area of cultivation of fruits

among all Indian states. It ranks ninth in production of total
vegetables produces about 5% of the total vegetable production
in the country.

 It also ranks first in production and second in area under

major spices and contributes about 29.5% of the country’s total
production of spices. The state is the leading producer of some of
the spices such as chillies, turmeric, tamarind ginger,
coriander, etc.

 Crop wise, Andhra Pradesh ranks first in production

March 21, of
2020citrus,
21
papaya and spices; second in mango and tomato; third in
pomegranate, fourth in banana, grape and okra in the country
 SUPPLY CHAIN OF HORTICULTURE
CROPS IN A.P.

Snapshot:

Multiple intermediaries
Mishandling, which sometimes leads to high physical wastage
and/or value loss of the produce.
Although the supply chains may vary from produce to produce but
the main players in most of the horticultural produce supply chain are
farmer, post-harvest contractor/aggregator, commission
agent, wholesaler, retailer and final consumer.
Supply and value chains of some of the major crops are given below
for illustration
March 21, 2020 22
EXAMPLE OF BANANA SUPPLY CHAIN IN
A.P.

When the fruits are ready for harvesting, the farmers visit the
Banana Supplying Company or Commission agent and
requests for the price

The farmer, then requests the commission agent to visit the

farm and inspect the quality of the fruits

The commission agent in turn sends the pre-harvest

contractor in the village/block of the farmer to visit the farm
and report the quality of the fruit

The commission agent is in contact with the wholesalers in the

consumption markets, who place the orders depending
March 21, 2020
on23
demand in their markets.
EXAMPLE OF BANANA SUPPLY CHAIN IN A.P.,
CONT…

The commission agent on getting a confirmed order from the

wholesaler, in turn instructs his pre harvest contractor to visit
the farm by matching the supply (quality and quantity of
produce) with demand and
arrange for harvesting.

The commission charges of the commission agent vary from

region to
region and market to market. The commission agent also
charges some service charges to the buyer.

Harvesting cost, transportation to the main road for

loading into the vehicle, weighing charges, preharvest
contractor expenses are borne by the farmer. March 21, 2020 24
 LOOPHOLES

 Lack of knowledge on Price Intelligence

 Lack of value addition

 Lack of proper handling

 Lack of storage facility

 Many layer of intermediaries

 Lack of scientific ripening facilities

 Lack of PHM
March 21, 2020 25
 Lack of cold chain
SUPPLY CHAIN OF CHILLIES IN GUNTUR
DIST. OF A.P.

 The farmer harvests, dries the chillies and brings the produce
to the APMC mandi.
 In the mandi, the produce is sold in open auction.
 Firstly, a model auction is conducted.
 Purchase and sale of chillies usually commences at 7:00 AM.
 The arrival register records the arrival of chillies in the
market yard.
 The commission agents arrange the stock in their shops in
grower wise lots for sale. March 21, 2020 26
SUPPLY CHAIN OF CHILLIES IN GUNTUR

 Traders/wholesalers purchase chillies in an open auction after

inspecting the lot on quality parameters.
 Though the method of sale is open auction, it is practiced to a
limited extent and the sale and purchase is generally carried out
by mutual negotiation.
 Multiple varieties of chillies are reported as a practical constraint
for auction system to be practiced.
 The commission ranges from 2 % to 8 %. Additional handling
charges of Rs 10 to 20 per bag are also levied. The payment is
made on the 13th day from the sale of produce, failing which the
commission agent pays an interest to the seller atMarch
the21,
rate
2020 of 24
27 %

per annum
 LOOPHOLES

 Grading, Sorting (multiple varieties)

 Unprofessional commission system (2% - 8%)

 Lack of value addition

 Payment gestation period is more

March 21, 2020 28

Supply Chain Management in Dairy

March 21, 2020 29

March 21, 2020 30
PROCUREMENT

March 21, 2020 31

VILLAGE LEVEL COLLECTION CENTRE

VLPP: Village Level Pooling Point

VLC: Village Level Collection
March 21, 2020 32
 BMCC TO PROCESSING UNIT

BMCC: Bulk Milk Chilling Centre

MCC: Milk Chilling Centre
March 21, 2020 33
 COMPLETE SUPPLY CHAIN

Raw Milk Chilling Pasteurization

Standardization

Packing

Distribution
Channel
March 21, 2020 34
 PASTEURIZATION

High-Temperature, Short-Time (HTST) milk is forced

between metal plates or through pipes heated on the outside
by hot water, and the milk is heated to 72 °C (161 °F) for
15 seconds. Milk simply labeled "pasteurized" is usually
treated with the HTST method.

UHT, also known as ultra-heat-treating, processing holds

the milk at a temperature of 140 °C (284 °F) for four
seconds. During UHT processing milk is sterilized and not
pasteurized. This process lets consumers store milk or juice
for several months without refrigeration. The process is
achieved by spraying the milk or juice through a nozzle into a
chamber filled with. After the temperature reaches 140 high-
temperature steam under pressure°C the fluid is cooled
instantly in a vacuum chamber, and packed in March
a pre-sterilized
21, 2020 35
airtight container.
 STANDARDIZATION

 Standardization of milk refers to the adjustment which

means rising or lowering of fat and solids.

 The standardization of milk is commonly done in case

condensed milk, milk powder, ice-cream and cheese etc.

 The standardization is mostly done to have a uniform

milk fat content in the finished dairy product. In India,
milk is toned to 3 % fat or double toned 1.5 % by
standardizing the fat content of milk March 21, 2020 36
CONSUMPTION PATTERN

March 21, 2020 37

SUPPLY CHAIN IN GCMMF

March 21, 2020 38

39
RISKS IN AGRI SUPPLY CHAIN

March 21, 2020 40

 TYPES OF RISKS

Types of Risks Micro Risk Meso Risk Macro Risk

Impact Level Individuals or Communities Nation or
Households regions
Production Hail, Frost, Non- Rainfall, Floods,
contagious landslides, Droughts,
disease, Pollution Pests,
personal Contagious
hazards, asset disease,
risks technology
Market Price Output price Change in land Change in input
price, Over and output
production price due to
trade policy,
new markets
March 21, 2020 41
 TYPES OF RISKS

Types of Risks Micro Risk Meso Risk Macro Risk

Financial Exploitation by Change in Change in
local money microfinance interest rates of
lenders interest rates financial
institutes,
access to credit
Legal Liability risk Changes in Changes in
local policy or regional or
regulation national policy
and
regulations,
environmental
laws,
agricultural
payments, etc

March 21, 2020 42

MAJOR THREATS TO SOIL QUALITY –
PRODUCTION RISK

 Loss of organic carbon

 Erosion
 Nutrient imbalance
 Salinization
 Water-logging
 Decline in soil biodiversity, urbanization
 Contamination with pesticides

March 21, 2020 43

SOME RISK MITIGATION STRATEGIES

 Replacement of kharif and rabi crops with each other

 Integration of IPM and INM with traditional method

 The climate risk information system should be strengthened

 Better water management system such as: water

conservation, rooftop water harvesting, development of
community ponds, development of watersheds, etc

 Priority investment for agri sector

March 21, 2020 44

SOME RISK MITIGATION STRATEGIES -
MECHANIZATION

 Increasing the reach of farm mechanization to small and

marginal farmers

 Custom hiring / agri-service centres

 Demonstration and capacity building of farmers for farm

machinery use

 Quality control of newly developed agricultural machinery

March 21, 2020 45
through performance evaluation and certification
 GOVT. POLICY INSTRUMENTS

Minimum Support Price:

Minimum Support Price (MSP) is a form of market intervention

by the Government of India to insure agricultural producers
against any sharp fall in farm prices.

The minimum support prices are announced by the Government

of India at the beginning of the sowing season for certain crops
on the basis of the recommendations of the Commission for
Agricultural Costs and Prices (CACP).

March 21, 2020 46

 MINIMUM SUPPORT PRICE:

 The major objectives are to support the farmers from

distress sales and to procure food grains for public
distribution.

 In case the market price for the commodity falls below the
announced minimum price due to bumper production and
glut in the market, government agencies purchase the
entire quantity offered by the farmers at the announced
minimum price
March 21, 2020 47
 CROPS FOR WHICH MSP IS
ANNOUNCED

 Cereals (7) - paddy, wheat, barley, jowar, bajra, maize and

ragi
 Pulses (5) - gram, arhar/tur, moong, urad and lentil
 Oilseeds (8) - groundnut, mustard, toria, soyabean,
sunflower seed, sesamum, safflower seed and niger seed
 Copra
 Raw cotton
 Raw jute
 Sugarcane
March 21, 2020 48
 Virginia flu cured (VFC) tobacco
 DETERMINATION OF MSP

 Cost of production
 Changes in input prices
 Input-output price parity
 Trends in market prices
 Demand and supply
 Inter-crop price parity
 Effect on industrial cost structure
 Effect on cost of living
 Effect on general price level
 International price situation
 Parity between prices paid and prices received by the farmers.
 Effect on issue prices and implications for subsidy

March 21, 2020 49

 MARKET INTERVENTION SCHEME

 Market Intervention Scheme (MIS) is a price support

mechanism implemented on the request of State
Governments for procurement of perishable and
horticultural commodities in the event of a fall in market
prices.

 The Scheme is implemented when there is at least 10%

increase in production or 10% decrease in the ruling
rates over the previous normal year.

 Proposal of MIS is approved on the specific request of

State/Union Territory (UT) Government, if the State/UT
Government is ready to bear 50% loss (25% in case of
North-Eastern States), if any, incurred on its
March 21, 2020 50
implementation
 MARKET INTERVENTION SCHEME

 Under the Scheme, in accordance with MIS guidelines, a pre-

determined quantity at a fixed Market Intervention Price (MIP)
is procured by NAFED as the Central agency and the
agencies designated by the state government for a fixed
period or till the prices are stabilized above the MIP whichever
is earlier.

 MIS has been implemented in case of commodities like

apples, kinnoo/malta, garlic, oranges, grapes, mushrooms,
clove, black pepper, pineapple, ginger, red-chillies, coriander
March 21, 2020 51

seed, isabgol, chicory, onions, potatoes, cabbage, mustard

 MARKET INTERVENTION SCHEME

During the year 2015-16, the MIS has been implemented in 6

States covering

Arecanut (Karnataka for 12,000 MTs),

Apple (Himachal Pradesh – 50,600 MTs),
Onion (Karnataka – 54,000 MTs),
Turmeric (Karnataka – 12,400 MTs)
Potato (Uttar Pradesh – 1.00 lakh MTs).

March 21, 2020 52

THANK YOU

March 21, 2020 53