The ITC eChoupal Initiative
India’s agricultural sector in the 1990s can be characterized as fragmented with a fragile infrastructure. The mode of operation especially, soybean farming, has remained unchanged since their early ancestors. Along with unchanged practice, most of India’s farmers are illiterate and live in remote villages. The ITC’s e-Choupal tackles the challenges posed by Indian agriculture to identify how to improve the inefficient supply chain of agricultural goods.
ITC is a multi divisional company and it had identified that their International Business Division (IBD) was lagging behind other divisions. That being said, ITC seems to possess a strong sense of strategic competiveness, which allowed them to identify that the soybean portion of their model, which was two-thirds of their agricultural exports, was their key to success. ITC was able to identify and spawn their initiative through a tradition, which all-rural farmers were already dependent of, a choupal. Through the eChoupal ITC is hoping to fix the current ineffective supply chain. ITC truly believed that with “greater knowledge of just what it was purchasing when procuring crops from rural farmers, value increased for both the company and the farmer.” This would allow them to have better control over the quality of the product it sourced. It would also allow knowledge sharing between themselves and the farmers and higher quality products would lead to more competitive pricing in the international market. Currently, farmers were losing 60-70% of potential crop value and the standards were on a much lower level compared to the global demand, which again negatively effects their pricing. To make matters worse there was the inclusion of a middleman, the CAs, and the mandis, which again reduced profit margins. Farmers lacked critical resources and knowledge, which resulted in poor qualities and practices.
“On any given day, at least 1,000 farmers could be found trying to file into the market to sell their produce. Some had to wait for two or three days just to get into the crowed marketplace.” A clear illustration of the difficulties and inefficient methods a farmer had to endure in order to sell his crop. The process included the long trip to the mandi and the wait for the auction, which was excrutating due to the lack of simple amenities. Once, the process began they would then have to deal with the pricing and the usually low CA’s offers and would then have to wait for the cash payment. The CAs would then take the crops to the ITC processing facility where it would be sold at market value and not what was paid to the farmers. Any excess or unsold crops could not be stored. Regarding information, the Choupal was the only source of legitimate information for the farmers. It was done by word of mouth and the farmers lacked the basic concept of pricing models. Also, they had no access to weather reports, which made their planting of crops a crapshoot.
The new physical flow would allow an alternative to the mandi. But it will not completely alienate the mandi, ITC in 2003, was still procuring about 50 percent from the mandi and 50 percent from the eChoupal. ITC created 44 distribution hubs where the farmers would go directly to sell to ITC. The trips for the farmers were the same distance as the mandis, but were well worth it due to the improved facilities. Another great incentive was that the trip would be reimbursed by ITC due to the estimated savings of $5/ton on freight costs. These new hubs did it all, they were a “one-stop shop” ranging from restrooms to kiosks, which paid the farmer immediately, and ability to purchase their own soybean oil, which allowed ITC to “skip four or five people in that supply chain.” Most importantly was the shift in information flow. The farmers could now be armed with knowledge regarding the costs associated with traveling in order to compare their revenue from their cost of travel. They had real time...
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