ITC eChoupal case

Farmers in rural communities of India relied on Department of Agriculture, government, universities, insurance companies etc. for various inputs such as weather, new and scientific farming practices and insurance coverage. There was an indirect link between farmers and manufacturer via input retailers who source from wholesalers. During harvest, farmers bring these produce to Mandis bearing their own transportation cost; where beans are auctioned to the traders and agents of the processing companies in an open outcry method. This system was flawed and always leaves the farmers in a disadvantageous position. ITC, one of India’s leading private company saw the opportunity to develop the concept of eChoupal. Its main objective is to re-engineer the procurement process of the sale of the farmer’s produce.
ITC motivation to crating e Choupal is to revolutionize the agricultural sector and make it more technology driven. eChoupal (virtual market place) was introduced as an initiative to improve the supply chain by linking directly with farmers for procurement. It was also designed to play the role of a social gathering place, for the exchange of information as well as a place for e-commerce transactions. The eChoupals are operated by a sanchalak (operator), who also act as an ITC salesman. The process was simple as the farmer can take a sample to the kiosk, show the sanchalak who gives a quote. If the quote is deemed attractive by the farmer, he will accept and can receive payment within two hours. The eChoupal also provides other information to the farmer, including crop-prices, weather and knowledge on scientific farming techniques. This information is useful in aiding to make better decisions as to harvest period and when to apply fertilizers. ITC offers to buy the crop directly from any farmer at the previous day’s closing price; the farmer then transports his crop to an ITC processing center, where the crop is weighed electronically and assessed for quality. The farmer is then paid for the crop and a transport fee. In this way, the e-Choupal system bypasses the government-mandated trading mandis
The e-Choupal supply chain gives farmers more control over their choices, a higher profit margin on their crops, and access to information that improves their productivity. ITC provides transparency by empowering local people. The system was more on a level playing field which increase trust and fairness. The increased efficiencies and promising outlook for improving crop quality contribute to making Indian agriculture more competitive
Agriculture legislative in India lead to the creation of mandis to enable a more fair distribution of the gains from agriculture among producers, consumers, and traders. The mandi is central to the functioning of the marketing channel, and acts as delivery point where farmers bring produce for sale to traders. The physical supply chain flow within the mandi system involves the farmer transporting their crops to the local market yard. This is where quality inspection is done, it is auctioned, bagged, weighed and payment is done afterwards most of the time on credit. Transportation is normally done by carts drawn by animals or tractors. No formal method for grading the produce is established so it leaves room for uncertainty. Mandi trading is conducted by commission agents. The lack of professional competition combined with the collective control on rural trading has made commission agents extremely wealthy.
The Mandi system was not beneficial to the farmers it was plagued with inefficiencies based on numerous factors. The farmers bore the cost of transportation, bagging and weighing of their produce. Farmer’s goods were displayed in the open and were left to the mercy of the weather. The process was belittling to farmers. Their goods were under weighed so the Mandi system exploited them. They had to wait in an overcrowded market for their produce to be auctioned and then wait for extended period of time in the heat without provision of shelter to be partially paid. No toilet facilities were in place for the farmers. The agent has the capability to inflate prices, mixes the quality of the produce and charge a fixed price. ITC had no direct link with the famers therefore limiting their knowledge on suppliers, supply risk and crop information. This leaves a huge gap in the supply- chain. Information is only received when the farmers reach at the Mandi. e-Choupals is a model centered on networks, information centers equipped with a computer connected to the Internet, located in rural farming villages. eChoupals serve both as a social gathering place for exchange of information (choupal means traditional village gathering place in Hindi) and an ecommerce hub. The supply of information between farmers and manufactures was enhanced with the eChoupal. The sanchalak (coordinator) operates the village eChoupal, and the computer usually is located his home. Commission agents were converted to samyojak (collaborator), into the system as the provider of logistical support. “Samyojaks earn income from ITC by providing logistical services that substitute for the lack of rural infrastructure, by providing information and market signals on trading transactions to the eChoupal system. The eChoupal incorporated as many workers as possible from the Mandi system hence reducing job losses.”
Pricing information on the previous day’s trading are communicated to the sanchalak via the eChoupal portal. The commission agents at the mandi are responsible for entering daily mandi prices into the e-Choupal. If and when the Internet connection fails, the sanchalak calls an ITC field representative. Within the eChoupal system physical flows to initiate sale begins with the farmer bringing a sample of his produce to the eChoupal. Inspection is done by the sanchalak and based on his valuation of the quality makes a price quotation to the farmer which is conditional to quality tests. The farmer then proceeds with his goods to the nearest ITC procurement hub. The farmer’s beans are weighed on an electronic weight bridge after inspection is completed. This weight bridge is far more accurate than the old scale used in the mandi. Upon completion of inspection and weighing, the farmer collects his payment in full at the payment counter. This is a huge difference in the informal credit system that farmers were previously faced with which caused them to be constantly poor. The farmer is also reimbursed for transporting his crop to the procurement hub. Every stage of the process is accompanied by appropriate documentation.
The ITC procurement center is a professionally operated; farmers were included in the system and treated with respect. They were also regarded as customers hence fulfilling some of their needs. The newly-fashioned supply chain enhances communication. It provides information which is integral for farmers to know when to harvest crops and apply fertilizers. eChoupal system bestowed dignity on farmers which promotes a positive attitudes in the farmers. They were treated as partners in the supply process and the level of respect paid to them was in keeping with the important role that they play in keeping this sector alive. Farmers can now sit in a shaded area while they wait on payment or paperwork to be completed is indicative of the respect shown by ITC to them. This may be considered as intangible but it creates trust and self-confidence. The information provided to the farmers through eChoupal can be used to improved yields, so the relationship is mutually beneficial, it can also lead to higher yields for the ITC since intermediaries are eliminated. “Risk is also managed in the e-Choupal system by a far stronger information infrastructure. Sanchalaks and samyojaks working on behalf of ITC provide excellent bottom-up information on cross checking pricing, product quality, soil conditions, and expected yields. This allows ITC to better plan future operations. eChoupal lead to numerous success factors, there were greater levels of understanding and knowledge in the market, the farmer and the end user benefits from this model, technology interfaced aids to make life easier and simpler for the farmers.”
The challenges that e-Choupal faced were many. They had to convince the Government that it was in the best interest of the farmer to utilize this system in order to change legislative barriers. Due to the fact that power is usually available for a few hours per day, this lead to availability issues. Power supply is unreliable. This leads to limitation on the usage of the computer to access the eChoupal system. Also access to information in a timely manner is critical to the success of the business model. There was poor road condition which limits vehicle access for transportation of goods and technical experts. The village telecommunication infrastructure is slow because it was designed to carry voice traffic only which renders Internet access impractical. The villagers are uneducated and lack computer knowledge hence consistent training has to be done to increase user interface.
Despite difficulties from undependable phone and electric power infrastructure that sometimes limit hours of use, the system provides links to farmers and their families to the world. Some Sanchalaks track futures prices on the Chicago Board of Trade as well as local mandi prices, and village children can use the computers for schoolwork, games, and to obtain and print out their academic test results. “The result is a significant step toward rural development. Creative use of information technology through eChoupal have strengthened the basic business by enabling reduction of costs in the supply chain and deliver superior products/services to the customers like real time information on monsoon, prices, better farming practices while it has facilitated the interaction between company and village community. Apart from this, IT also gave the opportunity to build a unique model of ‘rural distribution’ on the same platform”.

For the future ITC should place emphasis on certain factors for effectiveness. There should be Organization architecture this is supported by training, support, planning, people and processes. Educating the masses will be good so as not to heavily rely on one individual to relay information and use the system. All of the farmers should have a fair idea of how to access the system to get information needed. Information architecture should be embraced where data is gathered and managed. Applications infrastructure should be in place which handles applications, goals and resources occupied. Finally Technical Infrastructure is crucial which deals with the servers, clients, network and system software.

References http//pdf.wri.org/dd_echoupal.pdf http//imm-gsm.s3.amazonaws.com/docs/Assignment_Q_2012_1/... · PDF file