Supply Chain Management in Indian Agriculture

Supply Chain Management in Indian Agriculture

Definition:

“Supply chain means flow & movement of goods from the producers to the final consumers”.

Supply Chain is a sequence of flows that aim to meet final customer requirements, that take place within and between different stages along a continuum, from production to final consumption.

The Supply Chain not only includes the producer and its suppliers, but also, depending on the logistic flows, transporters, warehouses, retailers, and consumers themselves. In a broader sense, supply chains also includes, new product development, marketing, operations, distribution, finance and customer service.

A Graphical Presentation of Supply Chain

Supply Chain Management: The term ‘Supply Chain Management’ is relatively new. It first appeared in logistics literature in the 1980s, as an inventory management approach with emphasis on the supply of raw materials. Logistics managers in retail, grocery, and other high inventory industries began to realize that a significant competitive advantage could be derived through the management of materials that flow in their ‘inbound’ and ‘outbound’ channels.

Supply Chain Management involves following processes:

  • Integrated Planning
  • Implementation
  • Coordination
  • Control

Therefore, SCM is the integrated planning, implementation, coordination and control of all Agri-business processes and activities necessary to produce and deliver, as efficiently as possible, products that satisfies consumer preferences and requirements.

Contrasting Supply Chain Management with Traditional Management Chain

Element Traditional Management Supply Chain Management
Inventory management approach Independent Efforts. Joint reduction in channel inventories.
Total cost approach Minimize firm costs Channel-wide cost efficiencies
Time horizon Short-term Long-term
Amount of information sharing and monitoring Limited to needs of own current transactions As required for planning and monitoring purposes
Amount of coordination of multiple levels in the channel Single contact for the transaction between channel pairs Multiple contacts between levels in firms and levels of channel
Joint planning Transaction-based On-going
Breadth of supplier base Large to increase competition and spread risk Small to increase coordination
Channel leadership Not needed Needed for coordination focus
Speed of operations, information and inventory flows ‘Warehouse’ orientation (storage, safety stock). Interrupted by barriers to flows. Localized to channel pairs ‘Distribution Centre’ orientation (focus on turnover speed). Interconnecting flows; JIT, Quick Response across the channel

 

Agriculture Supply Chain Networks

An agriculture supply chain system comprises organizations/cooperatives that are responsible for the production and distribution of vegetable/Fruits/Cereals/Pulses or animal-based products. In general, we distinguish two main types:

  1. ‘Agriculture food supply chains for fresh agricultural products’ (such as fresh vegetables, flowers, fruit). In general, these chains may comprise growers, auctions, wholesalers, importers and exporters, retailers and speciality shops and their input and service suppliers. Basically, all of these stages leave the intrinsic characteristics of the product grown or produced untouched. The main processes are the handling, conditioned storing, packing, transportation and especially trading of these goods.
  2. ‘Agriculture food supply chains for processed food products’ (such as portioned meats, snacks, juices, desserts, canned food products). In these chains, agricultural products are used as raw materials for producing consumer products with higher added value. In most cases, conservation and conditioning processes extend the shelf-life of the products.

Issues Related to Agriculture Supply Chains

Participants in Agriculture supply chains, e.g. farmers, traders, processors, retailers, etc, understand that original good quality products can be subject to quality decay because of an inadequate action of another participant.

For example, when a farm leaves a can of milk for pick-up on a roadside, under the sun, without any cover, there will be a loss of quality that may even render the raw material unfit for processing.

Similarly, if processors, on the other hand, use packaging items and/or technologies that do not maintain freshness and nutritional characteristics of their products as much as possible, retailers will be likely to face customer complaints.

Characteristics of Agriculture Supply Chains and its impact on Logistics

Supply Chain Stage Issues with Product & Process Characteristics Impact on Logistic/Flow of goods.
Overall Shelf-life constraints for raw materials, intermediates and finished products and changes in product quality level while progressing the supply chain (decay).

Recycling of Materials Required.

• Timing constraints (goods have to be supplied quickly to avoid decay).

• Information requirements (correct information of goods is essential).

Growers / Producers • Long production times (producing new or additional agro-products takes a lot of time)

• Seasonality in production • Variability of quality and quantity of supply

• Responsiveness

• Flexibility in process and planning

Food processing industry • High volume, low variety (although the variety is increasing) production systems

• Highly sophisticated capital-intensive machinery leading to the need to maintain capacity utilization

• Variable process yield in quantity and quality due to biological variations, seasonality, random factors connected with weather, pests, other biological hazards

• A possible necessity to wait for the results of quality tests

• Alternative installations, alternative recipes, product-dependent cleaning and processing times, carry over of raw materials between successive product lots, etc.

• Storage buffer capacity is restricted, when material, intermediates or finished products can only be kept in special tanks or containers

• Necessity to value all parts because of the complementary nature of agricultural inputs (for example, beef cannot be produced without the co-product hides)

• Necessity for lot traceability of work in process due to quality and environmental requirements and product responsibility

• Importance of production planning and scheduling focusing on high capacity utilization

• Flexibility of recipes

• Timing constraints, ICT possibility to confine products

• Flexible production planning that can handle this complexity

• Need for configurations that facilitate tracking and tracing

Auctions / Wholesalers/ Retailers • Variability of quality and quantity of supply of farm-based inputs

• Seasonal supply of products requires global (year-round) sourcing

• Requirements for conditioned transportation and storage means

• Pricing issues

• Timing constraints

• Need for conditioning

• Pre-information on quality status of products

Issues Related to Supply Chain Management in India

 

By
Himanshu Arora
Doctoral Scholar in Economics & Senior Research Fellow, CDS, Jawaharlal Nehru University
CategoriesUncategorized
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