Supply Chain Analysis

of ITC e - Choupal

By
Shitansu
XIMB
Agenda
ITC e-Choupal : An Introduction,
1 Stake holder Analysis

Comparison of status of Supply Chain

2 before and after ITC e-Choupal

Critical Analysis, and Comparison

3 with HKB

4 Future Scope

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 ITC e-Choupal : An Introduction

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Ø Incorporated on August 24, 1910 under the name of 'Imperial Tobacco

ITC :An Overview

Company
Ø Company rechristened 'ITC Limited‘ in 1974
Ø One of the 8 Indian Companies to feature in ‘Forbes A-list’ for 2004
Ø Only Indian FMCG Company to feature in Forbes 2000 List
Ø Among top in :
 Sustained value creation (BT-Stern Stewart survey)
 Operating profits
 Cash Profits
Ø Ranks No. 4 among Indian listed Private Sector Companies by market
cap. (@ April 09)
l No. 1 in FMCG Sector
Ø Rated as one of India’s Most Respected Companies (IMRB-
Businessworld Survey 2006)
Ø Diversified conglomerate with interests ranging from Tobacco to
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Divison
Ø Farm linkages in 14 states covering Soya, Wheat, Marine
products, Coffee etc. Focus on value added agri
commodities
Ø Unique CRM programme in commodity exports
Ø 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
Ø Distinctive sourcing capability for ITC’s Foods business

The predicament of Indian Farmers

Low Risk
Appetite

Low Margins Low Investment

Caught in a vicious
cycle of
Low Value underdevelopment
Low Productivity
Addition

Weak Market
Orientation
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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Agri -Input Dealer/
Companies Stockiest

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Why ITC thought of e-Choupal





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


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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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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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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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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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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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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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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A win-win Deal

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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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qGeneration of Goodwill & positive public
opinion
qBetter supply chain for ITC’s Food & Agri
Businesses
Costs, Quality, Traceability
qAccess to the Underserved Rural Markets
Through a Virtuous Cycle created by “Larger
Incomes”, and founded on “Trust” that is
built
qNew ITES Business Opportunities
Health, Education, Entertainment,
eGovernance


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Synergy Redefined :The
Future VPN providing SCM, ERP & CRM capability

F M
A e-choupal rural two-way fulfillment A
R capability R
M K
E Cigarette Trade Marketing capability E
R T
Expanded FMCG distribution capability S
S

A basis for strategic partnerships with other FMCG brand

owners
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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 Gain access to global markets through ITC and commission to

(Kachha & Pakka compensate some of the loss revenue

Adatiyas)
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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Comparison with Haryali Kisan Bazar
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Hariyali Kisaan Bazaar
Other companies

Loan for pass

through to
farmers Extension
service

Repayment of
loan with
interest Produce
procurement
 E-chaupal Haryali Kisaan Bazaar

Main objective Procurement Rural Retail

Benefit to the computer application to provide provide better method of cultivation by

farmers market information trained agronomist

Synergies Synergies with products which Synergies with what DSCL is selling(inputs
ITC is manufacturing to agriculture plus other services

Economies of 25-30 km area coverage 20-25 km area coverage

scale

Procurement near small town Strategically placed near petrol pump

centre mainly
Future of e-Choupal


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e-Choupal 2.0

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Version 1.0 v/s Version
2.0
Parameters Version 1 . 0 ( the start )
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)
Farmer ’ s gain The farmers get bargaining power and a
opportunity of have choice
ITC ’ s gain Access to inputs for its agri business;
offer the use of network to
other companies
Version 2 . 0 ( the scale - up )
By 2006, 40,000 villages covering 4 million
people.
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 was able to procure
fresh commodities with
reasonable prices from the farmers
e-Choupal 3.0.
The Deepening
qNEW BUSINESSES:
1) Rural jobs and employability

2) Personalised agri services.

qMORE INTERACTION: Through Choupal Saagars

and Haats and via mobile phones


qNEW TECHNOLOGY: Use of especially enabled

mobile phones, analytics, new partner
www.themegallery.com Company Logo
ITC e -C h o u p a lFo o tp rin t

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Thank You !