E-choupal by Itc

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ITC E-CHOUPAL



ITC E-CHOUPAL FOOTPRINT



ITC e-Choupal : An Introduction

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ITC :AN OVERVIEW

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

Company

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 Tobaccoto Hospitality



ITC’S AGRI COMMODITY DIVISON

Farm linkages in 14 states covering Soya, Wheat, Marine products,

Coffee etc. Focus on value added agri-commodities.

Unique CRM program 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



Low Risk Appetite

Weak Market

Orientation

Low InvestmentLow Margins

Low ProductivityLow Value Addition

Caught in a viciouscycle of

underdevelopment

The predicament of Indian Farmers



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 anEffective Business Model successfully

Designed to address the issues such as:1.Fragmented farms

2.Weak institutions3.Involvement of intermediaries

4.Information Asymmetry



Analysis of Supply chain of e-Choupal Initiative

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Agri -InputCompanies

Dealer/Stockiest



WHY ITC THOUGHT OF E-CHOUPAL

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ITC’s Supply chain of Soya bean after e-ChoupalInitiative



SUPPLY CHAIN POST RE-ENGINEERING

• Pricing

• Previous day’s closing price used as benchmark price for nextday

• Mandi prices communicated to sanchalak through e-Choupalportal

• Sanchalak inspects the sample, assesses quality and givesfarmer a conditional quote and a note (name/village/qualitytests/approx. quantity/conditional price), if farmer decides tosell 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 purelywarehouse 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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• 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 givena 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, agriculturaltrading, 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

S C O COS C (



TRANSACTION COST IN MANDI CHAIN (AFTER E-CHOUPAL)




Synergies forITC

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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, e-Governance

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OTHER E-CHOUPAL INITIATIVE

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COMPANIES USING E-CHOUPALNETWORK




Critical Analysis of ITC’s Supply Chain

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STAKE HOLDER ANALYSISPrimary

Stakeholders

Interest

Farmer Community • Access to information – Empowered decisions – Improved agriculture

• Economic benefits through lower transaction costsand 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

• Gain access to global markets through ITC andcommission to compensate some of the lossrevenue



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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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



Future of e-Choupal

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VERSION 1.0 V/S VERSION 2.0

Parameters Version 1.0( the start) Version 2.0( the scale-up)

Idea The concept gave a power of scale tothe small farmers by aggregating them as

sellers ( of produce) and as buyers

(of farm inputs)

By 2006, 40,000 villages covering 4 millionpeople.

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



E-CHOUPAL 3.0.

The Deepening

NEW BUSINESSES:

1) Rural jobs and employability

2) Personalised agri services.

MORE INTERACTION: Through Choupal Saagarsand Haats and via mobile phones

NEW TECHNOLOGY: Use of especially enabledmobile phones, analytics, new partner

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E-choupal by Itc

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