ITC – Agri Business Division Supply Chain

Supply Chain Management

Nishant Kumar u309034

Pratik Sukla u309036

Priya Darshini.H u309037

Purnima kumari u309038

Rahul u309039

Rajarshi Raj Varma u309040

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Contents

Introduction................................................................................................................ 2
Introduction to ITC’s Agri-business division................................................................4
Supply chain model of food grain particularly under the ABD of ITC from millers .....4
Dependant on Cigarette Business..............................................................................5
Drivers of supply chain...............................................................................................6
Facilities..................................................................................................................6
E-choupal facilities.................................................................................................6
Choupal Saagar:...................................................................................................... 7
Choupal Fresh:........................................................................................................ 7
Storage and warehousing units (other than e-choupal)...........................................7
Processing units......................................................................................................8
2. Information.......................................................................................................... 8
3. Inventory and Transportation..............................................................................9
Competitive strategy................................................................................................10
Macro processes.......................................................................................................10
Supplier relationship management:......................................................................10
ITC e- choupal:...............................................................................................10
Agents:............................................................................................................... 11
Customer relationship management.....................................................................12
ITC Promotional activities.........................................................................................12
ITC Distribution channel ..........................................................................................12
Annexure.................................................................................................................. 14

Introduction
ITC was incorporated on 24th august 1910 under the name of Imperial Tobacco Company of
India limited. The name of the Company was changed from Imperial Tobacco Company of India
Limited to India Tobacco Company Limited in 1970 and then to I.T.C. Limited in 1974.
Cigarettes & Tobacco, Hotels, Information Technology, Packaging, Paperboards & Specialty
Papers, Agri-business, Foods, Lifestyle Retailing, Education & Stationery and Personal Care -
the full stops in the Company's name were removed effective September 18, 2001. The Company
now stands rechristened 'ITC Limited'.

ITC’s one of the India’s foremost private sector companies with a market capitalization of nearly
US $ 15 billion and a turnover of over US $ 4.75 billion. Among FMCG segment ITC is market
leader in cigarettes in India. Some other brands like Sunfeast, Aashirvaad, Bingo and two other
Candy brands are one of the market leaders in India.

ITC entered in to branded and packaged foods business in

august 2001 with the launch of kitchens of India brand. To
add to the ambit of ITC it made an entry in 2022 with brands
launches in the confectionery, staples and snack foods
segments. It has also established a nationwide retailing
presence through its chain of branded garment stores like
wills life style, john players, and miss players. ITC's
Packaging & Printing Business is the country's largest
converter of paperboard into packaging.

ITC Ltd. completed yet another year of strong performance with Gross Turnover for the year
growing by 20.2% to Rs.19505 crores. Net Turnover at Rs.12369 crores grew by 26.3% driven
by the non-cigarette FMCG businesses, higher agri-business revenues and the continuing strong
performance by the Hotels business. The non- cigarette portfolio grew by 37.6% during the year
and now accounts for 52.3% of the Company's Net Turnover. Pre-tax profit increased by 20.1%
to Rs.3927 crores, while Post-tax profit at Rs.2700 crores registered a growth of 20.8%. Earnings
Per Share for the year stands at Rs. 7.19. ITC Infotech India Ltd., a global IT services company,
has established itself as a key player in the off-shoring arena, growing at a cumulative annual
growth rate (CAGR) of around 85%.
Introduction to ITC’s Agri-business division
Started in 1990, ITC- ABD today holds a prominent position in the exporting community and is
the second largest exporter of agri-products in the country. The company has leveraged its core
competencies in selected commodities. It has conceived e-Choupal as a more efficient supply
chain aimed at delivering value to its customers around the world on a sustainable basis.

Today, ABD continues to deliver the pick of India's agri commodities like Feed Ingredients -
Soyameal, Rapeseed Meal; Food grains - Rice (Basmati & Non Basmati), Pulses; Coffee, Black
Pepper; Edible Nuts - Sesame Seeds, HPS Groundnuts, Castor oil & Marine products like
Shrimps and Prawns, Processed Fruits - Mango, Papaya and Guava Products .

Supply chain model of food grain particularly under the ABD of ITC from millers

ITC-ABD procures rice from the mills directly. The advantage ITC enjoys over others here is
that it has a wide procurement network of over 2000 mills. The product is tested by the ABD
team / the nominated surveyor at the mill point. Samples are drawn from the freshly milled
production at the first stage and after passing, the rice is packed which undergoes yet another
quality testing by the quality surveyor & then the product is taken out from the mill point under
the supervision of quality surveyor and ITC quality control team. The cargo on reaching the load
port is taken to the Godown and stacked lorry wise after weighbridge check - then it is
standardized, blended, sieved & packed. The surveyor again draws samples and tests the quality.
After passing at the Godown level, the payment is made to the millers. The cargo is then moved
to the berth / barge point / container yard in case of midstream loading - quality is checked at the
weighbridge point, boat / berth point & vessel intake stage to ensure 100% quality & weighment
as per buyer requirements. Thus cost effective logistics efficiency skills right from the buying
stage upcountry to vessel/container loading has given ABD a clear edge in providing right
quality at the best price.
Dependant on Cigarette Business

• Even though the various product

divisions appear totally diverse, they are
intricately connected to each other.
• ITC maintain minimal debt in its books
and yet set-up new areas of business.
• Diversification, which has been the
weakness of many businesses, has been
the strength of ITC
• ITC’s total debt as on 31/03/2006 was merely Rs.147 crores, while its total shareholders’
funds were Rs. 9221 crores.
 The main stay of the ITC business is the business of cigarette which over ther years has
remained Cash Cows for the company. Even though the company has diversified in many
sectors over the years ,yet the debt component of the overall business remained low
because of the heavy cash flow ferom the cigarette compensating for any losses from any
other sector.

Drivers of supply chain

Facilities
The main facilities of ITC ABD can be categorized into the following:

• E-choupal facilities

• Storage and warehousing units (other than those in e-choupal)

• Processing units

E-choupal facilities

ITC has made significant investments in information technology

under the e-choupal initiative. In this system, ITC's
empowerment plan for the farmer centres around providing
Internet kiosks in villages. Farmers use this technology
infrastructure to access on-line information from ITC's farmer-
friendly website www.echoupal.com. Data accessed by the
farmers relate to the weather, crop conditions, best practices in
farming, ruling international prices and a host of other relevant information.
E-Choupal today is the world's largest rural digital infrastructure. The unique e-choupal model
creates a significant two-way multi-dimensional channel which can efficiently carry products
and services into and out of rural India, while recovering the associated costs through agri-
sourcing led efficiencies. This initiative now comprises about 6500 installations covering
nearly 40,000 villages and serving over 4 million farmers. Currently, the 'e-Choupal' website
provides information to farmers across the 10 States of Madhya Pradesh, Haryana, Uttarakhand,
Uttar Pradesh, Rajasthan, Karnataka, Maharashtra, Andhra Pradesh, Kerala and Tamil Nadu.
Over the next 5 years it is ITC's Vision to create a network of 20,000 e-Choupals, thereby
extending coverage to 100,000 villages representing one sixth of rural India.

Choupal Saagar:

Following the success of the e-Choupal, ITC ABD launched Choupal

Saagar, a physical infrastructure hub that comprises collection and
storage facilities and a unique rural hypermarket that offers multiple
services under one roof. This landmark infrastructure, which has set new
benchmarks for rural consumers also incorporates farmer facilitation
centres with services such as sourcing, training, soil testing, health clinic, cafeteria, banking,
investment services, fuel station etc. 24 'Choupal Saagars' have commenced operations in the
states of Madhya Pradesh, Maharashtra and Uttar Pradesh. ITC is engaged in scaling up the rural
retailing initiative to establish a chain of 100 Choupal Saagars in the near future.

Choupal Fresh:

Choupal Fresh, ITC's fresh food wholesale and retail initiative, leverages its
extensive backward linkages with farmers and supply chain efficiencies. It
focuses on stocking fresh horticulture produce like fresh fruits and vegetables.
Five Choupal Fresh retail stores are currently operational at Hyderabad. The company has also
set up a complete cold chain for ensuring the availability of fresh products in the market, besides
directly sourcing farm fresh produce from the farmers.

Storage and warehousing units (other than e-choupal)

ITC ABD has storage and warehousing units apart from Choupal Saagars for storing food grains
procured through traders / commission agents or directly from millers in different states. These
storage houses are mainly situated in the northern states since a major part of the food grains is
obtained from the northern side.
 Also, ITC ABD outsources warehousing related work to National
Warehousing Corporation. However, even after outsourcing, ITC
ensures that quality of food grains is not compromised and high
hygienic standards are maintained in the warehousing units.

Processing units

A substantial part of the total procurement is in the form of processed food grains directly from
millers while for unprocessed
food grains, ITC has its own
state of the art processing
units. ITC ABD has
established 2000 mills in the
8 'rice surplus' producing
states of India to ensure that it
procures and processes right
variety of food grains, at the
right cost.

2. Information

A strong information flow concerning the suppliers, customers, inventory and prices is one of the
biggest strengths of ITC ABD supply chain, making it more efficient and responsive vis-à-vis its
competitors.

The information flow between the company and suppliers, who are the farmers in this case, is
taken care by the e-choupal system in place, which enables real time flow of information for the
farmers free of cost. The e-choupal website has opened up ITES (information technology
enabled services) business opportunities and offers the followinh benefits to the farmers:

• Web-enabled, real-time data on crop prices

 • Facilitates participation of agricultural supplies companies in e-commerce
• Transactions are done closer to home
• Information related to commodity prices, local weather, news etc.
• Customised knowledge related to farm management and risk management

The information flow within the company is handled by the in house IT division- ITC Infotech.

No sophisticated software is used for this purpose apart from ERP (enterprise resource planning)

Also, ITC ABD has a streamlined flow of information with its customers. It believes in
providing value to the customers by delivering as per their needs and requirements which
becomes possible through appropriate communication enabled by a strong information flow
system.

3. Inventory and Transportation

Most of the products of ITC ABD such as food grains are seasonal in nature and their production
depends on a number of exogenous factors. Hence the supply is quite erratic.

Also, being export oriented, there are huge fluctuations from the demand side.

In such a scenario, proper inventory management becomes imperative to reduce costs and
enhance efficiency. To deal with this predicament, ITC ABD uses advanced demand forecasting
techniques to assess the domestic and international demand and procures accordingly to reduce
inventory.

As mentioned earlier also, inventory is maintained either in National Warehousing Corporation

or in the storage units owned by ITC ABD.

As far as transportation is concerned, the export items are transported through shipments while
for domestic consumption, food grains are transported either through road or rails.
Competitive strategy

Unlike other trade players, ITC is focused on transforming commodity export business from
being a price sensitive & cash leveraged trading operation to a knowledge based & customer
focused enterprise.

Thus, ITC (ABD)’s competitive strategy is to provide value to the customers, suppliers and
employees alike, by focusing on quality and proper information flow across the supply chain.

It might be argued that ITC ABD can afford to have such a competitive strategy due to brand
ITC and the fact that there are other lucrative and large scale divisions of ITC to support ABD
such as the tobacco, hotel etc.

Macro processes
There are three macro processes in supply chain management. They are the supplier relationship
management (SRM), internal supply chain management (ISM) and customer relationship
management (CRM).

Supplier relationship management:

ITC had a very good supplier relationship management. The major suppliers to ITC are:

• ITC e-choupal

• Agents

• ITC directly procure from Mandi

ITC e- choupal:
With a judicious blend of click & mortar capabilities, village internet kiosks managed by e-
Choupal enable the agricultural community access ready information in their local language
on the weather & market prices, disseminate knowledge on scientific farm practices & risk
management, facilitate the sale of farm inputs (now with embedded knowledge) and purchase
farm produce from the farmers’ doorsteps (decision making is now information-based).

Real-time information and customised knowledge provided by e-Choupal enhance the ability
of farmers to take decisions and align their farm output with market demand and secure
quality & productivity. The aggregation of the demand for farm inputs from individual
farmers gives them access to high quality inputs from established and reputed manufacturers
at fair prices. As a direct marketing channel, virtually linked to the ‘mandi’ system for price
discovery, E-Choupal eliminate wasteful intermediation and multiple handling. Thereby it
significantly reduces transaction costs.

Thus it is a two way benefit both for the farmers and the ITC as it reduces cost of both of
them. Thus ITC does effective supplier relationship management by providing inputs to the
farmers and at the same time deriving benefits from them.

Agents:
ITC hires agents and they help ITC in procuring from the mandi. But with the upcoming of
ITC e-choupal the role of the agents have gone down. But still ITC maintains a good
relationship with them also.

Expressing concern and desire to help, is the spirit of ITC’s rural development initiatives. A
social mission reaching out to join hands, convert old relationships into new partnerships, put on
the ground solutions that bring lasting benefits to society.

Thus ITC’s unique strength in this business is the extensive backward linkages it has established
with the farmers. This networking with the farming community has enabled ITC to build a highly
cost effective procurement system.

Internal supply chain management:

ITC has a very good ISM. There are quality checks done at each level and very good
warehousing done by ITC but after warehousing the other activities are out sourced by ITC.

Supporting the e-Choupal network are ITC's procurement teams, handling agents and
contemporary warehousing facilities across India, enabling its Agri Business to source
identity-preserved merchandise even at short notice.

ITC's processors are handpicked, reliable high quality outfits who ensure hygienic processing
and modern packaging. Strict quality control is exercised at each stage to preserve the natural
flavour, taste and aroma of the various agriculture products.
Customer relationship management
ITC has maintained a very good CRM from the very beginning. ITC has positioned itself as
ITC Touching your life. Core Values of ITC are aimed at developing a customer-
focused, high-performance organization. ITC delivers what the customer needs in terms of
value, quality and satisfaction.

ITC also has a good pricing strategy, promotional strategy and a good distribution channel.

ITC pricing strategy:

• The pricing of the ITC food division depends upon the Customers’ demand schedule,
the cost function and the competitors’ price.

• The pricing of the company is such that it caters to the need of all income groups of
people but special provision has been kept for Low and middle income group, and their
pricing are competitive with respect to other players like Britannia, Parle and Brisk farm.

• The company follows the Going rate pricing that is the price of the product depends
upon

• The competitor’s price. The firm chooses pricing more or less the same as Market
leader.

ITC Promotional activities

A particular budget is allocated for the promotion of the products, the local promotion scheme
is decided by the Area Sales Manager, it give its suggestion to the District office and that is
forwarded to the Head Quarter in Kolkata.

ITC Distribution channel

ITC also has a strong distribution channel.
 Dis
Thus ITC is able to reach its customers in a very effective manner. So ITC has a good CRM.

Learning &Recommendations:

ITC has remained one of the pioneer of the inclusive value chain for the Indian farmers. Its e-
choupal model has remained masterpiece over the years and won many accolades for the
services rendered therein. The mix of technology and human factor has made sure that the
model sustains. Yet the company has not come up with any new model for the last many
years. The inherited lack in the e-choupal puts question mark on the scalalbility of the model
beyond a certain level. The ITC should move from the sameand experiment new ways to
improve the value chain of its products and maintain its competitive strategy. For this ITC can
tie up with the Government to bring the required expertise and help in various schemes of the
government like National Food Security Mission. The main contention is to design a
profitable model to get it done.
Annexure
ITC Agri Business Division world and Indian Main Markets