Why the e-Choupal Model?
The main motivation of e-choupal centers was the IBD's idea of recreating its vision of creating a sourcing network with direct links to the farmers in the rural areas, which would inherently assure supply for the company and also bring down the costs through improving the efficiency of procurement value chains and also to use the same platform to provide informational services and other beneficial services to farmers, implying that the farmers also benefitted, getting paid better price for their products with the elimination of middlemen and also bringing down their operational and other costs with the use of e-choupal.
The prevalent issues were :
IBD lagging behind other divisions
Ineffective supply chain for agricultural goods
Farmers losing 60-70% of potential crop value
Agricultural yields of 1/3 to ¼ of global standards
Middlemen reduced profit margin
Farmers had limited capacity for risk
Minimized investment in crops
Lower crop value, slimmer margins
Farmers didn't want to risk new farming methods
Old & new physical flows & information flows in the channel
Old Physical Flow New Physical Flow
1. Farmers hauled produce on a 1-day journey to "mandi" for auction
Often had to wait 2-3 days to get into market
1700 farmers per day
1. Eliminate the “middle-man” – the "mandi "
2. Farmers at mercy of CA's offer
No way to store unsold produce
2. Farmers sold directly to one of 44 ITC hubs
Same distance as mandi
3. Then hauled to winning bidder's shop for weighing
Manually operated scales resulted in 0.5% loss
3. ITC hubs serve as “one-stop shop”
Herbicides, sowing seeds, gas lanterns, soy bean oil
4. Cash payment delayed after unofficial credit period
4. ITC saved $5/ton on freight cost
5. CA brought produce to ITC processing facility
CA receives reimbursement for soybeans
5. In return, reimbursed farmers for travel time, resulting in $8/ton increase fore farmer.
Old Information Flow New Information Flow
1. Choupal served as primary source of information for farmers
1. Transparency of information
2. Due to isolation of farmers, no market price information other than word of mouth
Farmers hauled to market in hopes of receiving enough to cover their costs of transport
Forced to settle for whatever they could get 2. Access to information via eChoupal
Global crop standards
Market prices from around the world
o Demand, production, prices: highs & lows
o 7-10 day market outlook on Chicago Board of Trade
3. No access to weather report
3. Q & A Forum
4. Poor access to crop education
4. News Page
PRINCIPLES EMPLOYED TO BUILD THE NEWLY FASHIONED SUPPLY CHAIN IN THE RURAL AREAS
Foundation in existing structure
The e-choupal model of business development depends strongly on trust and confidence on the part of farmers as a group and also individually.
Freedom of choice: No obligation to sell a certain or any proportion of their produce.
The web site was created to be a tool to assist the farmers and used by the farmers in their efforts to understand and decide and deliberate the best mechanism to pursue, which for them whom to sell the produce to.
Never bound any farmer to any sort of contract.
Convinced the governments of the potential benefits to the farmers and the economy.
The transparency of the e-choupal - the website was available to anyone.
Sanchalak was appointed to serve as a link between e-choupal centers and the other surrounding villages in the vicinity of the main village in which the e-choupal centre was based.
Created a system for the famers to register their complaints or any grievances that they had with the process in place.
BARRIERRS FACED BY ITC IN EMBARKING ON THIS PROJECT
To make people familiar with the concept of internet and World Wide Web
The current supply chain must be broken
Legislation: Transactions outside the mandi was prohibited by the Agricultural Produce Marketing Act :
Regulatory practices in place then by the Agriculture Produce Marketing Committee Act that prohibited the purchase of specified commodities from other sources than the government designated mandis.
The cultural infrastructure in the villages
Perishable product (soybeans) = time pressure
Trust : Suspicious of intent of ITC
Lack of technology in villages
Lack of adequate telephone exchange in place
Frequent electricity outage.
Fears of existing middlemen: They might cause trouble considering the fact that their position and power was threatened.
The solution was that if middlemen could add value then don't remove them.
DEVELOPING THE E-CHOUPAL PLATFORM FOR THE FUTURE
o More Hubs, Kiosks, and Choupals
o Create a barrier to entry for competitors
Expand Into Other Regions and Markets
o Coffee, Seafood, Wheat
o Maintain Founding Principle of Trust and Transparency
Continue to Innovate
o Continue to Provide Beneficial Information
o Continue to Update and Enhance Information Technology
Take education of village population as a project under CSR: Educated villagers means increased efficiency of e-choupal system.
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