VIABLE AGRO-INDUSTRY

MODELS FOR SME’S AND

SUPPLY RELATIONSHIPS IN
THE INDIAN CONTEXT.
Presentation by
Amarnath Govindarajan
Sandwalk Consultancy
UEL.
PROBLEM STATEMENT
 Indian agro-industrial SME’s have been
finding it difficult to source products that
meet international standards.
 Seasonal variations, fluctuating demand
issues are not suitably addressed at the
supply side.

 Lack of communication channels, information

exchange between stakeholders. One end
does not know the other!

(Rao, 2007)
ACTION PLAN
 Study prevalent models and identify a model
appropriate for an SME.

 Identify factors/components on the supply

side of the model that need to be
customized.

 Address academic issues involved with

customization.

 Identify tools and methodologies that can

help the process.
EXISTING MODELS
 Co-operative, government organization,
private MNC contracting and VAC models are
prevalent.

 The co-operative and government

organization models are ruled out.

 Both are top-heavy, very large scale models.

Difficult to emulate at SME level.

(Gandhi, Kumar, & Marsh, 2001)

THE MNC PARTNERING MODEL
 PepsiCo introduced
contract farming in
the Indian state of
Punjab.

 Used ‘informal
contracts’ to buy back
products from
farmers.

 Company invest in
building relationships
with
suppliers.(producers)
PEPSICO PARTNERING MODEL
 Capable of absorbing losses for three years
before profitable operations. ( Rs.40 million
per year). Mostly uni-product.

 Heavy industrial backing, and marketing

infrastructure has been seen as important
factors that led to success.

 Ruled out for SME’s.

 Adapted from (Gandhi, Kumar, & Marsh, 2001)

ITC E-CHOUPAL OR VAC MODEL

VAC MODEL KEY ENABLERS
 Implementing agency
access to Information-
Communication
technologies, and
infrastructure set-up
at every village level.

 Financial viability for

large scale
procurement – money
saved on intermediary
expenses.
ISSUES IN ADOPTING THE VAC MODEL
FOR SME’S
 Problems
 Costs incurred on setting up ICT infrastructure
is prohibitive at SME levels.

 Intensiveorganizational skills and resources

need to be deployed to assure last mile
connectivity and mass-reach out.

 Lead-in
time before profitable operations is
minimum 3 years.
PROPOSED SOLUTION FOR
ADOPTING THE VAC MODEL FOR SME’S

 Substitute market intermediaries for ICT. Deploy

limited ICT for educating/informing the
intermediaries.

 The SME’s will begin working within the existing

system and incrementally improve services.

 Resource requirements are much lesser.

THE CHALLENGE
 Getting the intermediaries/suppliers to work on
company requirements while a ready made
market is available.

 Appropriate Service System Design for suppliers and

Supplier Development.

 Evolving a framework/model that will assist

substituting mass ICT presence with intermediaries.
ACADEMIC ISSUES
 Adopting a two-level bi-directional supply chain.

Adapted from (Sampson, 2000)

 ACADEMIC ISSUES

 Supply Relationships
 Supply base issues
 Supply chain
integration
 Partnering and
Vendor Development
 Supply Chain
Approach to
Service Design
 Service blueprinting
(Sampson, 2000)
PROJECT DELIVERABLES
 Overview of present models in Indian agro-
industry and positioning VAC model as apt for
SME’s with required changes. (750 words)

 A brief review of academic issues involved

(1500 words)

 Methodology & Findings (1250 words)

 SupplyChain Management Tools
 Appropriate Service System Design
REFERENCES
 Gandhi, V., Kumar, G., & Marsh, R. (2001).
Agroindustry for Rural and Small Farmer
Development : Issues and Lessons from india.
International Food and Agribusiness Management
Review , 331-344.
 Rao, N. (2007). A framework for implementing
information and communication technologies in
agricultural development in India. Technological
Forecasting & Social Change , 491-518.
 Sampson, S. E. (2000). Customer-Supplier Duality
And bi-directional supply chains in service
organizations. International Journal of Service
THANK YOU
Suggestions/Questions/Comments.