ABS

TRA
CT
A
Case
Stud
y of
Supp
ly
Chai
n
Netw
ork
Mod
eling
for
high

BACKGROUND
Before proceeding to the actual case study its quite helpful to get a feel of the
company which initiated it so that actual intentions of this innovation can be
posturized. ITC Started as imperial tobacco company on August 24, 1910 and was
renamed ITC (Indian Tobacco Company) Limited in 1974. During its legacy ITC has
changed itself from time to time. Its no more just a tobacco company it has moved
from tobacco to hotels, food items, IT etc. one of the giant Indian conglomerate. It
made its way in Forbes 2000 list as only Indian FMCG and was ranked No 4 in India
listed private sector companies and no 1 in FMCG. ITC boasts of employing more
than 25000 employees. Overall it can be said that ITC has more than 100 years of
relationship with the life line of the country, farmers based on tobacco and other
agro based products.
ITC is the significant exporter of soya bean. It used to purchase soya bean
essentially from the nearby markets. This made the issue of low quality produce;
need to handle an extensive assortment and high cost of intermediation. Indian
market has insufficient physical, social and institutional base that is substituted by
delegates and they likewise include worth to the chain each step. ITC was searching
for an answer that doesn't dispense with the go-betweens totally however in the
meantime power their qualities.

Concept of Choupal
Choupal is a cemented podium usually beneath a tree in Indian villages. Usually on
the way to fields or to town where farmers gather to chat, gossip or share stories
from the day. ITC Limiteds International Business Development (IBD) in Hyderabad
with chief executive S. Sivakumar pondered upon it.

Traditional business model of Soybean

The reasons for the success of e choupal is that ITC was the first one to take
initiative to mould services industry in an effective business model successfully with
the help of technology & also the issues it was focussed upon were very important.
Some of the major issues that it pondered upon were Issues e chaupal handled. It
handled smaller fragmented farms (on an average 9 acres in case of MP soya) &
traditional unfriendly business model (Farmers had to wait for money). Information
Asymmetry (Farmers never got best possible rate) was oblivion. The legacy model
was not very friendly for the customers. The farmer used to carry soybean to Mandi
in tractors/bullock carts. There were Commission Agents (CA) used to decide the
price based on auction and set the initial prices & CA used to pay farmers on the
spot price. CA used to transport goods to the ITC depot. ITC paid back CA and CA
used to pay back farmers. In this process farmers had to wait a lot and most of the
times they returned empty handed home and the money used to come very late.
Also the lack of transparency used to create loop holes for the CAs who used to
stock around 0.5% of the original lot on an average, which was a loss for both
farmers and the company.

Evolution of e-chaupal
The program of e chaupal was started in 2000. The target area as of now 38000
villages across 9 states. ITC pondered upon this idea to help farmers and to increase
their market in the longer run. With the help of Information technology S. Sivakumar
cracked the idea of e-chaupal. With an average spending of $3762(Rs. 170000) ITC
started creating e chaupals with the minimum requirements like a pc with minimum
software, platform and multimedia kid, connection lines (either telephone or more
commonly VSAT, a power supply consisting of UPS & solar powered battery backup
because of the electricity problems in rural India, a dot matrix printer (for receipts),
and a training of the Sanchalak with Computers. They made the system so farmer
centric that farmers can understand the portal themselves as the regional language
(Hindi at that time) was used in the portal. E-choupal is accordingly, conveyed
exchange stage that unites venders, purchasers alongside data and administration
suppliers. E-choupal is a model with various non-traditional attributes specifically it
was completely client driven & fit for being utilized for some wares and different
exchanges effortlessly adaptable once it is checked. It utilized nearby ability and
nearby individuals and creates nearby pioneers. It can be stretched out to nearby
and additionally worldwide procurers which empowered nearby ambitious people to
amplify their imaginativeness utilizing all the current foundations and lawful
systems and numerous others can join the business as exchange time.
Moreover it helped farmers by providing them information of weather region wise.
Earlier Indian Meteorological Department used to give weather reports of complete
state which is a very vast area. Then after the negotiation with Indian
Meteorological Department, they started giving reports on region wise on its
weather page that increased the production.
Also, they created a forum called Best Practice page where the farmers can
discuss & compare the ideal and actual practices adopted in agriculture which
enhanced their agriculture. Even agro-expert advice was made available on this
part of the page. A new page called Crop Information Page was launched to
provide instruction and suggestions to the farmers. Market Information was also
conveyed to the farmers so that they may compare the prices for Mandi and make
the effective decisions and ITC made sure the farmers get the most effective deal
on the e-chaupal itself. Hence it provided higher profit to the farmers with the
transparency.
Q&A Forum was also launched for a casual discussion of the farmers. It actually
connected farmers from different regions. News section used to inform the farmers
of the global news and the news affecting the farmers on the ground basis were
usually highlighted. It removed the Mandi concept completely from the system and
replaced it effectively with the e-chaupal. It stopped the illegal stocking of soybeans
at the end of commission agent without taking them out of loop.

The New Supply Chain Model

With the advent of e-choupal and the establishment of kiosk in every village the
farmers were provided with many options. Trading outside the mandi was very
difficult and the government did not allowed for this. The open auction process at5
the mandi was considered to be the safest mode of selling the produce for the
farmers. But ITC managed to convince the government to allow the sale of beans
and other commodities outside the mandi as it propagated a fair system and the
government can keep an eye on what the e-choupal is offering. This allowed the
farmers with many options:
1. The use of web based technology enabled the farmers to have a real time
check on the prices both at the mandi and the ITC hubs. This enabled them to
make an informed choice as to where they wanted to sell the produce taking
their transportation costs into consideration.
2. The farmer got a choice to decide when to sell. He could verify prices at the
mandi and if not happy with it he could go to the ITC hubs and sell the
produce.
3. The fact that prices were displayed on screens instilled a trust among the
farmers about the transparency of the system. This price could have been
conveyed to the farmers over phone or other means but by seeing them on
computer screens enabled them to believe the system.

ITC Hubs:
ITC had 5 processing units and 39 warehouses making at total of 44 points to which
the farmer could bring his beans. The process that took place at the hubs was that
when the farmer arrived his produce would have been weighed and the weight was
multiplied with the ITC price. The farmer received the cash there and then. At the
hubs there we additional benefits provided to the farmers too. The soil testing lab
enabled the farmers to have their sample checked and get recommendations on the
kind of fertilizers to use and the better ploughing techniques. The ITC paid the
Sanchalak 0.5% commission on the sale of soybeans and a commission of 2-3% for
the sale of input products such as herbicides, sowing seeds, fertilizers etc.
Role of Samyojak:
The CA of the mandis was given a new name in the e-choupal system of the
Samyojak. The role of the Samyojak was:
a) Setting up e-choupal.
b) Facilitating ITCs purchasing transactions.
c) Helping with ITCs selling transactions.
The e-choupal leveraged the assets in the form of middle man or the CA by
retaining them as Samyojak. They had good terrain knowledge and long standing
relationship with the villagers which ITC hoped to leverage.

Principle of E-choupal
The inherent principle of e-choupal was the trust it bestowed on the farmers. It
believed that it was essential to develop a trust worthy relationship with the farmers

because that was the only way the farmers could start to associate with this new
system. The trust building exercise had some risks for ITC as the farmers were free
to leverage information from the ITC hubs and e-choupal and us them by selling
products at the mandis. But in spite of this, ITC believed that transparency can
empower the farmers to take better decisions. They would eventually know that ITC
offered them better services and prices.

Growth Options:
After the success of e-choupal in MP with beans, ITC decided it to extend to other
villages in india in three major crop segments- coffee In Karnataka, seafood in AP
and wheat in UP. They started the project on pilot basis and waited for the results to
show up to scale at national level. ITC called the approach of pilot projects as Roll
Out, Fix it, Scale up.

E-Choupal as a Marketing Tool for ITC:

ITC marketed e-choupal in three distinctive ways:
a) Superior product and distinctive functional benefits.
b) Process benefits: simplified transactions between buyers and sellers.
c) Relationship benefits: farmers willingness to identify themselves and reveal
their purchasing behavior.
ITC had conceived the Idea for various inputs the framework of which can be
developed through e-choupal. These products can be made available to
farmers at cheap prices and this would increase the value of farmers products
bringing additional revenue to ITC.