Supply Chain Analysis

of ITC e-Choupal
By
Priyankka Chaurasia
IT, UIT-RGPV

Agenda
1

ITC e-Choupal : An Introduction,

Stake holder Analysis

Comparison of status of Supply Chain

before and after ITC e-Choupal

Critical Analysis, and Comparison

with HKB

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Future Scope

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
One of the 8 Indian Companies to feature in Forbes A-list for 2004
Only Indian FMCG Company to feature in Forbes 2000 List
Among top in :

Sustained value creation (BT-Stern Stewart survey)

Operating profits

Cash Profits

Ranks No. 4 among Indian listed Private Sector Companies by market cap. (@
April 09)

No. 1 in FMCG Sector

Rated as one of Indias Most Respected Companies (IMRB-Businessworld

Survey 2006)
Diversified conglomerate with interests ranging from Tobacco to Hospitality
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ITCs Agri Commodity Divison

Farm linkages in 14 states covering Soya, Wheat, Marine

products, Coffee
commodities

etc.

Focus

on

value

added

agri

Unique CRM programme in commodity exports

Leveraging

IT

for

the

transformational

e-Choupal

initiative

Rural Indias largest Internet-based intervention

Over 40,000 villages linked through 6500 eChoupals

servicing over 4 million farmers

Distinctive sourcing capability for ITCs Foods business

The predicament of Indian Farmers

Low Risk Appetite

Low Margins

Low Value Addition

Caught in a vicious
cycle of
underdevelopment

Weak Market
Orientation

Low Investment

Low Productivity

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.
2.
3.
4.

Fragmented farms
Weak institutions
Involvement of intermediaries
Information Asymmetry

ITCs Supply chain of Soya bean before eChoupal Initiative

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Why ITC thought of e-Choupal

The Tactical Imperative

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ITCs Supply chain of Soya bean after eChoupal Initiative

Supply chain post re-engineering

Pricing

Pricing

Previous days closing price used as benchmark

price for next day

Mandi prices communicated to sanchalak through eChoupal 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
Farmer proceeds to the nearest ITC procurement
hub with the note
Some procurement hubs are ITC factories, others
are purely warehouse operations
ITCs aim is to have a processing centre within 3040 km radius of its farmers
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Pricing

Inspection and Grading

At the ITC procurement hub, laboratory tests are
conducted on a sample of farmers produce
To change farmers attitude and appreciating
produce quality, ITC is developing lab tests to
reward farmers with reward points for better
quality supply

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Pricing

Inspection and Grading

At the ITC procurement hub, laboratory tests are
conducted on a sample of farmers produce
To change farmers attitude and appreciating
produce quality, ITC is developing lab tests to
reward farmers with reward points for better
quality supply

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Pricing

Weighing and Payment

Farmers 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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Pricing

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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Pricing

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
Farmers gain

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Transaction cost in Mandi Chain (before eChoupal)

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

Transaction cost in Mandi Chain (after eChoupal)

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 ITCs 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

VPN providing SCM, ERP & CRM capability

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

Lifestyle
retailing

Education
Stationery

Matches &
Agarbattis

A basis for strategic partnerships with other FMCG brand

owners
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M
A
R
K
E
T
S

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 ITCs Supply

Chain

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Stake holder Analysis

Primary

Interest

Stakeholders

Farmer Community

ITC

Commission Agents
(Kachha
Adatiyas)

& Pakka

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
Lower procurement costs
Direct interaction with farmers - Control on quality
& supply security
Low cost distribution channel
Access to market intelligence
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

Drivers of Supply Chain

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Comparison with Haryali Kisan

Bazar

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Hariyali Kisaan Bazaar

Other
companies
Loan for pass
through to
farmers

Repayment of
loan with
interest

Extension
service

Produce
procurement

E-chaupal
Main

Procurement

Haryali Kisaan Bazaar

Rural Retail

objective
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

ITC is manufacturing

selling(inputs to agriculture plus other

services

Economies of 25-30 km area coverage

20-25 km area coverage

scale
Procurement
centre

near small town

Strategically placed near petrol pump

mainly

Future of eChoupal

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e-Choupal 2.0

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Version 1.0 v/s Version

2.0
Parameters
Idea

Version 1.0( the start)

The concept gave a power of scale to

Version 2.0( the scale-up)

By 2006, 40,000 villages covering 4 million

the small farmers by aggregating them as people.

sellers ( of produce) and as buyers
(of farm inputs)

Farmers gain The farmers get bargaining power and a Information on weather, price etc
opportunity of have choice

Knowledge on farming methods,

soil testing etc
Purchase of seed, fertiliser to insurance
Farmers sell crops to the ITC centres
cattle care, water harvesting

ITCs gain

Access to inputs for its agri business;

ITC was able to procure

offer the use of network to

fresh commodities with

other companies

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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Thank You !