Supply ChainManagement

8/11/2019 Supply ChainManagement

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APPLICATION OF SUPPLY CHAIN MANAGEMENT IN

AGRICULTURE OF SAARC NATIONS

Dr . Swati Chakraborty, Somnath Chaudhur i

Introduction

The predominant sector of the SAARC countries is agriculture. The prime source of income for the

entire region comes from this sector, as majority of the population lives in the rural sector and

depends upon agriculture for their livelihood. To be more specific, agriculture in this entire region

provides livelihood to 70%-80% of the population, employing about 60%-70% of the work force, and

contributing 24%-50% to GDP.

Currently, this sector is facing several challenges in the entire region, threatening its growth and

sustainability. Different physical as well as economic factors are negatively affecting the agricultural

activities. The major challenges for the agriculture in the region are: (a) raising and sustaining

agricultural growth; (b) ensuring food and nutritional security; (c) facing impact of climate change;

(d) adjusting to changes in energy scenario; (e) maintaining biosafety and bio-security; (f) make

sustainable use of natural resources; and (g) protecting biodiversity.1Hence, if the policy-makers need

to improve the economic conditions of the nations, then the only way to do that is to improve the

agricultural sectors of this region. One possible way by which this can be achieved is the successful

implementation of Supply Chain Management.

Objective

The objective of this paper is thus concerned with the concept of Supply Chain Management (SCM),

its effective implementation through SAP ERP and how effectively it can play a vital role in

developing the agricultural sectors in the SAARC countries.

Agricultural Scenario

The main occupation for the major section of the population, as already discussed is agriculture. Due

to increasing growth in population on one hand and a fixed land base on the other, the small farms are

becoming smaller. In fact, they are too small to be productive and hence unable to support the

livelihood for the families sufficiently. It is thus unable to compete in the global market 2(See Table

1).

1Chand, R. (2010)

2FAO (2002)


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Table 1: Structure of Landholdings and Status of Irrigation in SAARC Countries

Country Average Landholding Size (ha) Holdings Below 1 ha (%) Irrigated Area: % of

Arable Land

Afghanistan - - -

Bangladesh 0.46 86.46 56.1

Bhutan - - 31.2

India 1.41 61.58 32.9

Maldives - - -

Nepal 0.79 74.15 47.0

Pakistan 3.09 36.09 90.6

Sri Lanka 0.83 71.23 38.8

Source: 1.www.adb.org for farm size and holdings

2. The State of Food and Agriculture (2005), FAO, Rome

Since the productivity of agriculture is low, per worker income in agriculture is also low and hencehigh proportion of population living under poverty.3This is reflected in Table 2.

Table 2: Important Socio-economic Characteristics of SAARC Countries

Characteristics Period Afghanistan Bangladesh Bhutan India Maldives Nepal Pakistan Sri

Lanka

Per capita income

(US$)

2006-

07

345 462 1951 971 3277 361 1019 1658

Rural population

(%)

2005-

06

78.7 76.6 69.1 71.1 67.7 86.1 65.7 84.8

Share of

agriculture in

GDP (%)

2005-

07

39.5 18.7 22.4 17.5 - 38.2 19.4 16.5

Share of

agriculture in

workforce (%)

2006 69.6 51.7 - 56.14 3.84 76.0 43.4 32.19

Hunger

(Undernourished

population) (%)

2001-

03

30 20 17 23 22

Poverty (%) Latest 53 (2003) 40 (2005) 31.7

(2003)

27.5

(2004)

21 (2004) 30.9

(2004)

23.4

(2004)

22.7

(2002)

Note: Per Capita income refers to per capita gross national income.

Source: 1. Key Indicators, Asian Development Bank.

2. Country documents and databases available online at www.adb.org

3Paroda, R.S. etal (2000)
http://www.adb.org/http://www.adb.org/


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Looking Ahead

SAARC Agriculture Vision 2020 should aim at evolving a strategy to achieve stable and efficientoutput growth necessary for eliminating poverty and hunger, improving food and nutritional securityand income of farmers, and meeting other societal requirements, by making sustainable use of natural

resources and availing new opportunities and challenges. It should provide a road map to adapt toclimate change and prepare for facing challenges

of escalating energy prices, diseases and pests outbreaks, bio-security, bio-safety, biodiversity andIPRs.

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In other words, it implies that SAARC Agriculture Vision must analyze to what extent agriculture canhelp in future to eliminate poverty, improve in nutrition and supply safe food. Production activity ofany kind cannot be sustained in the long-run by overlooking the production base and the producers5.

Possible Solution

One possible way to achieve the above mentioned objectives is the successful application ofappropriate technology. One such technology is SCM, which basically deals with the flow of products

as well as information between different supply chain members organizations. A large set of diverseactivities like purchasing, quality control, demand and supply planning, material or inventory control,production planning, scheduling, control and many more are part of supply chain management; but allunder the same network with two main objectives: timeliness and quality, so that the organizationscan avail correct and valid information easily and at the earliest in their premises

6.

Technical Aspects:

SCM can be effectively implemented in agriculture by using a fully integrated software package likeSAP ERP. By the application of this technical tool, SCM can be made more efficient, inventoryreduction and lead to time reduction.

Now, if we discuss about the development and maintenance of Supply chains information systems

then both the hardware and software play a vital role.The hardware is basically related to the data storage i.e. different sorts of advanced storage media andthe computers input and output devices.On the other hand, software includes all the application software that help in proper storage of relateddata using minimum memory space, quick and efficient retrieval of data from the database, processingtransactions management control, strategic and reliable planning and decision-making. There areincreasing numbers of software packages that are quiet reliable and can be effectively utilized to helpthe companies in maximizing efficiencies in their supply chain.

In this paper well concentrate on a specific application software that helps in proper functioning ofthe supply chain management in the field of agriculture, which is SAP ERP. The SAP ERP is acomplete automated integrated system; it provides real time information available to SCM for quickand pro-active decision making and no duplication of manual efforts. SAP ERP helps in inputmanagement, HR management, and production, financial and marketing management of any

4Chand, R (2010)

5IPCC (2007)

6Wikipedia, The Free Encyclopedia


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Implementation of SAP ERP with SCM in the Agro field:

The basic concept of SCM is the flow of products as well as information between different supplychain members organizations. Nowwith the help of this application software we can maintain theinformation of all the sectors in a relational database.

Another feature of SAP ERP that helps in effective implementation of SCM in different agro sectors

is the centralized control in all respects. Beforehand, the application software in this field weredecentralized one, not tightly integrated and required significant manual intervention for integratingwith the different systems. But by careful and efficient implementation of SAP ERP we can accelerate

SCM by improving logistics, keeping relevant information of demand and supply for differentproducts in different locality and with varying period of time in order to reduce product losses,identify and correct process inefficiencies, and increase profitability.

With the help of SAP ERP we can keep track of all the relevant past and present data in the data base.

It is easy to retrieve and process those stored data; As a result, it becomes easy for the people in theagro sectors to get a quantitative as well as qualitative comparative-analysis of the present productionand the demand supply. At the same time, as this package can maintain historical trends of the supplychain in the agro sector for any farms it helps in decision making and to determine what should be the

quantity of production, how much is to supplied to local retailers and how much to be supplied tothose retailers where demand is 0opopkeep in stock or design a better supply chain managementsystem.

To discuss about the effective application of SAP ERP in the SCM for overall development ofagriculture we can site the example of Reliance Retail Limited(RRL) in India. This organization has

started its operation in the year 2006. Within this short time span it has grown into an organizationthat caters to millions of customers, thousands of farmers and vendors. Though till now SCM has a

low value-add activity in India (as supply-chain costs in India is placed approximately 12-50% acrossproduct categories), butReliance Retail Limitedserves over 2.5 million customers every week and hasthe patronage of more than 6.75 million customers related to the agricultural and business related to

agro products8.

Another relevant example that can be sited in this respect is the Florida Dairy Case. Though it isnot directly related to the agriculture, but dairy items can be considered as agro products. With thehelp of this case study we can state that technological innovation and competition have led toimprovements in supply chain management for food products. Supply chain improvements reduceinventories, waste, and costs, and thus increase efficiency within the firm and the market channel9.

The basic features that help in efficient implementation of SCM in the agro sector by using SAP ERPcan be pointed out as:

it is easyto-use, user-friendly compliant computer software system, it is suited for any sort of agro farm with the facility to manage multiple farms at multiple

locations,

maintain and manage the stock and inventory, production, demand-supply, marketing every details for regular interval of time in different

locations is properly maintained in a central database, financial transactions, assets, liabilities, income, expenses details can be stored to

get various financial reports

8http://www.ril.com/html/business/

9Glenn, S. J., etal (2001)
http://www.ril.com/html/business/http://www.ril.com/html/business/http://www.ril.com/html/business/


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Thus, this software package plays a vital role in decision making and proper implementation andfunctioning of SCM in agriculture which will help in fostering the growth of the SAARC nations

through overall development in the agro sector10

.

Conclusion:

SCM is concerned with the monitoring, co-ordination and integration of the movement of materials,

information and finances in a sequence right from the supplier to the customer via manufacturer,wholesaler and retailer. The ultimate goal of an effective SCM is to reduce inventory, assuming the

fact that products are available when needed.

Technological innovation and competition have led to improvements in supply chain management foragricultural products. In this paper we have focussed on a complete, automated integrated applicationsoftware SAP ERP, which helps in effective implementation of SCM in agro sectors. We have pointedout that this technical tool helps us to keep records of the details of the production, the demand andsupply records of different agro items in different locations in a relational database and under acentralized control, which helps in quick and pro-active decision making and no duplication ofmanual efforts. This application of SCM in agriculture using SAP ERP package would help in

fostering the growth of the SAARC nations. But this is just an opening in the application of IT andSCM in theagricultural sector. It is possible to develop this kind of combined tools which helpin development of the agricultural sectors and finally led to the overall development of agro nations.

10http://www.softaiminnovations.com/web/index.php?option=com_content&view=article&id=36&Itemid=58
http://www.softaiminnovations.com/web/index.php?option=com_content&view=article&id=36&Itemid=58http://www.softaiminnovations.com/web/index.php?option=com_content&view=article&id=36&Itemid=58http://www.softaiminnovations.com/web/index.php?option=com_content&view=article&id=36&Itemid=58


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References

1. Chand, R (2010) SAARC Agricultural Vision 2020,Agricultural Economics Research

Review, Vol. 23, pp 197-208 (July-December)

2. FAO (2002) Reducing Poverty and Hunger: The Critical Role of Financing for Food,

Agriculture and Rural Development, Food and Agriculture Organization, Rome, February,Paper prepared for the International Conference on Financing for Development, Monterrey,Mexico, 18-22 March 2002.

3. Glenn, S.J., Kilmer, R.L., Stevens, T. J. (2001) Supply Chain Management & Production

Agriculture: A Florida Dairy Case, Choices, Vol 16 (4): pp 24-25

4. IPCC (Intergovernmental Panel on Climate Change) (2007) Climate Change 2007: Impacts,Adaptation and Vulnerability. Contribution of Working Group II to the Fourth AssessmentReport of the Intergovernmental Panel on Climate Change, Cambridge University Press,

Cambridge, UK. pp. 273-313.

5.

Paroda, R.S. and Kumar, Praduman (2000) Food production and demand in South Asia,Agricultural Economics Research Review, 13(1): 1-24

6. Mishra, R.K. (2004) Role of Information Technology in Supply Chain Management,Department of Business Administration, Sambalpur University.

Web Sites

1. http://www.softaiminnovations.com/web/index.php?option=com_content&view=article&id=36&Itemid=58

2. http://www.ril.com/html/business/

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