PROMOTING AGRICULTURAL DEVELOPMENT THROUGH SUPPLY CHANGE MANAGEMENT
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1 Tin Htut Oo, CEO Agribusiness and Rural Development Consultants
2 WHY SUPPLY CHAIN MANAGEMENT BE INTERESTED? - commodity orientation to agribusiness focus - changes in competitive environment for food, feed, fibre & fuel products THE NEW GREEN REVOLUTION: RETHINKING NEW VISION FOR SUSTAINABLE AGRICULTURAL DEVELOPMENT - production orientation to welfare orientation SUPPLY CHAIN MANAGEMENT - understanding supply chain (supply network and value chain) and its management - supply chain management for sustainable agricultural development
3 WHY SUPPLY CHAIN MANAGEMENT BE INTERESTED? (1)the role of agriculture is changing rapidly with the development of agribusinesses: from subsistence to commercial farming with more emphasis on standards in food and nutrition quality and safety; (2)changes in the competitive environment for food, feed, fibre and fuel products have triggered the interest in supply chains together with;- (i) globalization and regional integration; (ii) rapidly growing urbanization and income; (iii) declining terms of trade for producers, particularly the small holder farmers; (3)Traditional commodity orientation in R&D and production to business to business relationships through ppp ;
4 FIVE MAJOR COMMON FACTORS LARGELY RESPONSIBLE FOR INCREASING ATTENTION TO SUPPLY CHAIN MANAGEMENT IN THE REGION! (1) Information and Communication Technology (2) Changing demography and consumer behavior (3) Competition (4) The importance of speed (5) Visibility of best practices
5 DEVELOPMNT THROUGH SUPPLY CHANGE MANAGEMEENT THE NEW GREEN REVOLUTION: RETHINKING NEW VISION FOR SUSTAINABLE AGRICULTURAL DEVELOPMENT First Green Revolution High Yielding Approach Seeds : HYVs Agrochemicals Irrigation Technology transfer Public sector led movement New Green Revolution Income and Welfare Approach Hybrid Seeds and biotechnology - nanotechnology Soil and nutrient management Water management Knowledge and technology transfer: ICT application GAP, nutrition and food safety Public-private harmonization Agribusiness development : supply chain management from plow to plate
6 DEVELOPMENT THROUGH SUPPLY Upstream Agribusiness Seed/seedling, parent stock Agro-chemical Agri-machinery On-farm Agribusiness Food, horticulture Estate Crops Livestock & Fishery Forestry Bio-fel/Biomass Downstream (Processing) Food, feed, fuel Beverages Tobacco Natural fiber Bio-pharmacy Agro tourism Marketing Distribution Promotion Market Information Trade Policy Market Structure Supporting System and Services Credit, subsidy and insurance Research and development Education and Extension ICT Transportation and Storage Government Policy (micro, macro, spatial) Input Supply Agricultural Production First Level Handling Processors Wholesalers/ Distributors Retailers Consumers
7 Supply chain management- managing the entire set of production, distribution and marketing processes by which the market is supplied with a desired product Supply chain management can reduce asymmetry of information at interface with each subsequent level, thereby reducing transaction costs as well as increasing feedback and improving response rate to changes in consumer taste and preferences which is greatly facilitated by ICT There is value addition along supply chain supply chains and trading networks provide linkages to manufacturing and services sectors that can be managed in concerted manner for sustainable growth
8 A supply chain can be looked into as a set of agribusiness activities and products that lead to a produce that reaches the final consumer. Supply chain management in agribusinesses can help in understanding: q How the products reach the final destination; q The economic relationship (structure) between the members in the chain; q Change of this structure over time; q Key threats to the entire value chain; q Key determinants of the share of profits created by the chain
9 COMMON ISSUES IN SUPPLY CHAIN MANAGEMENT (1) Relationship between members of the chain-particularly relationship between individual farmers to create a trading entity with capacity to supply sufficient quantity and continuity to be a credible supply chain member; (2) Competition for market share between chains and between the domestic and global retailers-applying new technologies such as biotechnology and using the information within the chain to innovate in both products and processes will provide opportunities for competitive advantage base on differentiation as well as cost leadership;
10 (3) Technical and professional issues in supporting the operation of supply chain include facilitating; the development of relationships between farmers to allow their participation, the development of relationships between members of the supply chain, information flows between members of the supply chain, establishing common standards between members of the supply chain, and optimizing performance within each level of the supply chain and in the linkage processes
11 Rice Supply Chain in Myanmar: Economic Activities along supply chain Stockpile/ Buffer Stock TIER I INPUT / PRODUCTION / OUTPUT CURRENT/FUTURE OPPORTUNITIES End uses, End uses enabled by science & technology innovations TIER II INTERMEDIATE SUPPLIER & SUPPORT SERVICE Inputs, Machinery & Equipment, Metal industry Industrial Chemicals, Paper industry, Printing Logistics, Business Services TIER III FOUNDATION PROVIDERS Infrastructure, Finance, HR Development Technology, Regulatory Environment Source: Dr. Larry Wong, TIES
12 Rice Supply Chain in Myanmar: Its strength is determined by its weakest links EXPORT INPUTS FARMING MILLING WHOLE- SALING STOCKPILE SMUGGLING RETAILING C O N S U M E R S WEAK LINK 1 Agro-support services to get agriculture moving - input supplies, research, extension, marketing, credit Purity of key varieties suspect need proper Certified Seed Programme PPP? WEAK LINK 2 Cultural practice leads to suncracking high brokens Lack of proper drying & storage facilities at mills WEAK LINK 3 Exports consistency of quality and supply not assured Little or no Buffer stocking/stockpiling rationale, strategic approach, social obligation Parallel market illegal border trade price gap/differential WEAK LINK 4 Little or No sharing of data/ information along supply chain - collected and disseminated by different interest groups Data quality & consistency problem Source: Dr. Larry Wong, TIES
13 Rice Value Chain in the Mekong Delta: Case study in Vinh Long province, Vietnam Input Production Collection Trade Consumption Channel Input suppliers: Seeds Fertilizers Pesticides FARMERS 60% 40% TRADER S 100% Processing exporting Companies 20% 60% Domestic 80% Export A C T O R S Input supply Companies/agents Extension networks, Plant protection agents, DARD Governmental authorities (all levels) Source: Nguyen Ngoc De, MARD Commercial Banks, Credit agents Research Institution, Universities Vietnam Food Association (VFA) S U P P O R T I N G S Y S T E M S
14 e-choupal in India- concieved by ITC Agribusiness Division, one of the largest exporters of agricultural commodities, as a more efficient supply chain aimed at delivering value to its customers on a sustainable basis; e-choupal model specifically designed to tackle the challenges characterized by fragmented farms, weak infrastructure and involvement of numerous intermediaries, among others; e-choupal unshackles the potential of farmers trapped in a vicious cycle of low risk taking ability>low investment>low productivity>weak market orientation>low value addition>low margin>low risk taking ability; e-choupal makes use of the physical transmission capabilities of intermediaties-aggregation, logistics, counter-party risk and bridge financing; e-choupal leveages Information Technology to virtually cluster all the value chain participants-village internet kiosks (sanchalaks) managed by farmers themselves enable the agricultural community access ready information in their local language on weather and market prices, facilitate the sale of farm inputs and purchase farm produce and disseminate knowledge on scientific farm practices and risk management;
15 Multi-brand foreign chains, such as Walmart and Tesco, must operate as joint ventures, of which they may now own up to 51% and may operate only in cities of 1m people and more. Foreign firms will make life harder for small shopkeepers and middle men. But their cash and know-how could help modernise Indian farming and move crops faster from fields to shopping baskets.
16 Based on OECD projections on future trends, most of the growth in demand of food will be middleclass consumption in the large developing countries including China, India and Indonesia in the region; Major global retailers will take part as supply chain partners building retail facilities in most profitable locations such as areas of high population, high income growth rates and low supermarket penetration; Although price will remain the primary basis of competition the participation of exporting competitors will force the gradual adoption of global quality standards such as GLOBAL-GAP, EURO-GAP, ASEAN-GAP; In most of the developing countries in the region, the supply chains and supermarkets are emerging rapidly. But supply chains are still fragmented, indirect, and characterized by poor information flows from the market back to the producers; Building capacity of domestic producers in the region to match the products of producers from other regions aiming to market into this region is a necessity to help our farmers in developing countries of the region to take advantage of this growth opportunity to supply the growing consuming classes in the region; There is an opportunity for promoting agricultural development through supply chains in the region to ensure the future competitiveness by initiating capacity development to supply the retailers and consumers of the future
17 agricultural development promotion through supply chain management should have economic, environmental and social responsibilities - to be inclusive and sustainable
18 It will be farmers, not bankers, driving Ferraris in the coming decades Jim Rodgers *Successful Implementation of IPoA = farmers driving double-cap pick-ups; provided there are roads in all our villages by 2020 THANK YOU
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