ITC e-Choupal

ByAmodAshish

ShaileshIkram

Agenda

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ITC e-Choupal : An Introduction, Stake holder Analysis

1

Comparison of status of Supply Chain before and after ITC e-Choupal

2

Critical Analysis, and Comparison with HKB3

Future Scope4

ITC e-Choupal : An Introduction

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ITC :An Overview Incorporated on August 24, 1910 under the name of 'Imperial Tobacco

Company Company rechristened 'ITC Limited‘ in 1974 ITC was ranked 3rd most admired company in 2013 Among top in :

Sustained value creation (BT-Stern Stewart survey) Operating profits Cash Profits

Replaced TCS as country’s most admired brand (ET 24-Aug-2014) No. 1 in FMCG Sector

Rated as one of India’s Most Respected Companies (IMRB-

Businessworld Survey ) Diversified conglomerate with interests ranging from Tobacco to

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ITC’s Agri Commodity Divison

Farm linkages in 14 states covering Soya, Wheat, Marine products, Coffee etc. Focus on value added agri commodities

Unique CRM programme in commodity exports

Leveraging IT for the transformational ‘e-Choupal’ initiative

Rural India’s largest Internet-based intervention

Over 40,000 villages linked through 6500 e-Choupals

servicing over 4 million farmers

Distinctive sourcing capability for ITC’s Foods business

Low Risk Appetite

Weak Market Orientation

Low InvestmentLow Margins

Low ProductivityLow Value Addition

Caught in a vicious cycle of

underdevelopment

The predicament of Indian Farmers

ITC e-Choupal Started in the year 2000

Target Area so far 38,000 villages, 6500 kiosks, 9 states

Wholly owned by ITC

Why it become a success ?

Only initiative to attempt to combine Services and an Effective Business Model successfully

Designed to address the issues such as: 1. Fragmented farms

2. Weak institutions

3. Involvement of intermediaries

4. Information Asymmetry

ITC’s Supply chain of Soya bean before e-Choupal Initiative

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Farmer

Agri-Input Companies

Dealer/

StockiestRetailer

Agril University, Met Dept,

Insurance Co.

VLW (of Dept of Agriculture)

Money Lender

Pakka Adtiya(Registered Dealer)

Kaccha Adtiya(Un-Registered Dealer)

Trader

Broker

Pro

cess

or

ITC-IBD

Why ITC thought of e-Choupal

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The Tactical

Imperative

Capture of Intra-day

Price shiftsSeasonal

price Inflation

Daily price inflation

ITC’s distance

from Farmer

The Strategic

ImperativeHorizontal

spread

Vertical presence

Risk management

The Social Imperative

ITC’s Supply chain of Soya bean after e-Choupal Initiative

Supply chain post re-engineering

Pricing Previous day’s closing price used as benchmark price for next day Mandi prices communicated to sanchalak through e-Choupal portal Sanchalak inspects the sample, assesses quality and gives farmer a

conditional quote and a note (name/village/quality tests/approx. quantity/conditional price), if farmer decides to sell to ITC

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Pricing Inbound Logistics

Inspection

Grading

Weighing and

Payment

Hub Logistics

Technological

support

Inbound Logistics Farmer proceeds to the nearest ITC procurement hub with the note Some procurement hubs are ITC factories, others are purely

warehouse operations ITC’s aim is to have a processing centre within 30-40 km radius of its

farmers

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Pricing Inbound Logistics

Inspection

Grading

Weighing and

Payment

Hub Logistics

Technological

support

Inspection and Grading At the ITC procurement hub, laboratory tests are conducted on a

sample of farmer’s produce To change farmer’s attitude and appreciating produce quality, ITC is

developing lab tests to reward farmers with reward points for better quality supply

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PricingInbound Logistic

s

Inspection

Grading

Weighing and

Payment

Hub Logistic

s

Technological

support

Inspection and Grading At the ITC procurement hub, laboratory tests are conducted on a

sample of farmer’s produce To change farmer’s attitude and appreciating produce quality, ITC is

developing lab tests to reward farmers with reward points for better quality supply

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PricingInbound Logistic

s

Inspection

Grading

Weighing and

Payment

Hub Logistic

s

Technological

support

Weighing and Payment Farmer’s produce is weighed on electronic weighbridge He is then given full cash payment Freight expenses are reimbursed Appropriate documentation at each stage and farmer is given a copy

of that Samyojaks handle cash operations

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PricingInbound Logistic

s

Inspection

Grading

Weighing and

Payment

Hub Logistic

s

Technological

support

Hub Logistics Farmer transports his produce to the nearest processing centre or

storage hub ITC incurs the transportation cost The farmer bears the risk of transportation until produce is delivered

and the sale is completed

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PricingInbound Logistic

s

Inspection

Grading

Weighing and

Payment

Hub Logistic

s

Technological

support

Technological support Nodal platform catering to commodity blending, agricultural trading,

e-choupal &rural distribution 24,000 personalized business function points 110,000+ pre-built business function points Integrated Business Systems for Direct Agriculture Procurement, Rural

Distribution, e-Choupal Management, Exports, Insurance, Aqua Processing & Commodity blending

Support for 8 local languages

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Pricing

Inbound

Logistics

Inspection

Grading

Weighing and

Payment

Hub Logistic

s

Technological

support

A win-win Deal

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Farmers gain

• Better information Content

• Better info timing

• Less transportation Cost

• Transaction duration

• Weighing accuracy

• Professionalism

ITC gains

• Disintermediation savings

• Freight costs• Quality control• Risk

management

Transaction cost in Mandi Chain (before e-Choupal)

Source: Seminar on Bottom of the Pyramid and CSR, IIM-K, Sept. 24, 2008

Transaction cost in Mandi Chain (after e-Choupal)

Source: Seminar on Bottom of the Pyramid and CSR, IIM-K, Sept. 24, 2008

Synergies for ITC

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Generation of Goodwill & positive public opinion

Better supply chain for ITC’s Food & Agri Businesses Costs, Quality, Traceability

Access to the Underserved Rural Markets Through a Virtuous Cycle created by “Larger Incomes”, and

founded on “Trust” that is built

New ITES Business Opportunities Health, Education, Entertainment, eGovernance

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Synergy Redefined :The Future

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FARMERS

MARKETS

Cigarette Trade Marketing capability

BrandedFoods

Expanded FMCG distribution capability

e-choupal rural two-way fulfillment capability

VPN providing SCM, ERP & CRM capability

Lifestyle retailing

Education Stationery

Matches & Agarbattis

A basis for strategic partnerships with other FMCG brand owners

Other e-Choupal Initiative

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Companies using e-Choupal network

Source: Seminar on Bottom of the Pyramid and CSR, IIM-K, Sept. 24, 2008

Critical Analysis of ITC’s Supply Chain

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Stake holder Analysis

Primary

Stakeholders

Interest

Farmer Community

Access to information– Empowered decisions– Improved agriculture

Economic benefits through lower transaction costs and process efficiencies

Served with dignity Knowledge bundled sale of goods and services Co-opted in product design Hope for a brighter future

ITC

Lower procurement costs Direct interaction with farmers - Control on quality

& supply security Low cost distribution channel Access to market intelligence

Commission Agents

(Kachha & Pakka

Adatiyas)

Gain access to global markets through ITC and commission to compensate some of the loss revenue

Efficiencies in e-Choupal network

Last mile low cost solution

Full Service approach

Demand aggregation

Third party seller

Extensive use of technology

Access to information about customers

Pull based strategy

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Drivers of Supply ChainInformation

Logistics at hub

Transportation

Storage facilities at hub

Who are in problems

Local Mandi

Mandi laborers

Market near Mandi

Small processors

Risk associated

with e-Choupal

Eroded dominance of Commission

agent

Authenticity of information

Problem of Power and internet connectivity

Comparison with Haryali Kisan Bazar

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Hariyali Kisaan Bazaar

Hariyali kisaan bazaar

Farmers

DSCL

ICICI Bank

Other companiesOther companies

Loan for pass through to farmers

Repayment of loan with interest Produce procurement

Extension service

E-chaupal Haryali Kisaan Bazaar

Main

objective

Procurement Rural Retail

Benefit to the

farmers

computer application to provide

market information

provide better method of cultivation by

trained agronomist

Synergies Synergies with products which

ITC is manufacturing

Synergies with what DSCL is

selling(inputs to agriculture plus other

services

Economies of

scale

25-30 km area coverage 20-25 km area coverage

Procurement

centre

near small town Strategically placed near petrol pump

mainly

Future of e-Choupal

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e-Choupal 2.0

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Version 1.0 v/s Version 2.0Parameters Version 1.0( the start) Version 2.0( the scale-up)

Idea The concept gave a power of scale to

the small farmers by aggregating them as

sellers ( of produce) and as buyers

(of farm inputs)

By 2006, 40,000 villages covering 4 million

people.

Farmer’s gain The farmers get bargaining power and a

opportunity of have choice

Information on weather, price etc

Knowledge on farming methods,

soil testing etc

Purchase of seed, fertiliser to insurance

Farmers sell crops to the ITC centres

cattle care, water harvesting

ITC’s gain Access to inputs for its agri business;

offer the use of network to

other companies

ITC was able to procure

fresh commodities with

reasonable prices from the farmers

e-Choupal 3.0.The Deepening

NEW BUSINESSES:

1) Rural jobs and employability

2) Personalised agri services.

MORE INTERACTION: Through Choupal Saagars and Haats and via mobile phones

NEW TECHNOLOGY: Use of especially enabled mobile phones, analytics, new partner

www.themegallery.com

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ITC e-Choupal Footprint

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