ITC in Rural India

1. By
A.Arputha Selvaraj APMP IIM CALCUTTA

2. Company Logo
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 HKB
3
Future Scope4

3. ITC e-Choupal : An Introduction
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4.  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 India‟s Most Respected Companies (IMRB-Businessworld Survey
2006)
 Diversified conglomerate with interests ranging from Tobacco to Hospitality
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5.  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

6. 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

7.  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

8. ITC’s Supply chain of Soya bean before e-Choupal
Initiative
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9. Company Logo
Farmer
Agri-Input
Companies
Dealer/
Stockiest
Retailer
Agril University,
Met Dept,
Insurance Co.
VLW (of Dept of
Agriculture)
Money
Lender
Pakka Adtiya
(Registered Dealer)
Kaccha Adtiya
(Un-Registered Dealer)
Trader
Broker
Processor
ITC-IBD

10. Company Logo
The Tactical
Imperative
Capture of Intra-
day Price shifts
Seasonal price
Inflation
Daily price
inflation
ITC’s distance
from Farmer
The Strategic
Imperative
Horizontal
spread
Vertical
presence
Risk
management
The Social
Imperative

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

12.  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
Technologi
cal
support

13.  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
Technologi
cal
support

14.  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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Pricing
Inbound
Logistics
Inspection
Grading
Weighing
and
Payment
Hub
Logistics
Technolog
ical
support

15.  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
Company Logo
Pricing
Inbound
Logistics
Inspection
Grading
Weighing
and
Payment
Hub
Logistics
Technolog
ical
support

16.  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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Pricing
Inbound
Logistics
Inspection
Grading
Weighing
and
Payment
Hub
Logistics
Technolog
ical
support

17.  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
Inbound
Logistics
Inspection
Grading
Weighing
and
Payment
Hub
Logistics
Technolog
ical
support

18.  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
Inspectio
n Grading
Weighing
and
Payment
Hub
Logistics
Technological
support

19. Company Logo
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

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

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

22. Synergies for ITC
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23.  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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24. Company Logo
F
A
R
M
E
R
S
M
A
R
K
E
T
S
Cigarette Trade Marketing capability
Branded
Foods
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

25. Company Logo

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

27. Critical Analysis of ITC’s Supply Chain
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28. 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

29.  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

30. Company Logo
Drivers of
Supply Chain
Information
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

31. Comparison with Haryali Kisan Bazar
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32. Hariyali
kisaan
bazaar
Farmers
DSCL
ICICI Bank
Other companies
Loan for pass
through to farmers
Repayment of loan
with interest
Produce procurement
Extension service

33. 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

34. Future of e-Choupal
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35. Cmpany Logo

36. Parameters 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

37. 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.comCompany Logo

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