April 18, 2023

Developing Integrated Supply

Chains

Sanjeev Asthana

“ Better Returns for the Indian Farmer and producer by connecting them directly to

the Indian and global consumer, and lower prices and better product quality for consumer

Introduction

Reliance – Growth is Life

Retailing in India Integrated Supply Chain: ‘Farm to Fork”

Challenges

Market Driven Supply Chains Most Efficient

Agenda

“The fundamental belief for us is that growth is life and we have to continue to grow at all times”

- Mukesh D Ambani

Chairman & Managing Director

Revenues US$ 19.9 billion

Cash Profit US$ 2.9 billion

Net Profit US$ 2 billion

Total Assets of US$ 20.8 billion

India and Reliance

Revenues equivalent to 2.8% of India’s GDP

Over 8.2% of India’s total exports amounting to US$ 7.32 billion

Contributing 8% India’s indirect taxes

4.7% of the total market capitalization

11.5% weightage in Bombay Stock Exchange Sensex

9.3% weightage in National Stock Exchange Sensex

Reliance – Contribution to Indian Economy

With robust economy, sustained GDP growth and booming stock exchange, there are several emerging sectors in India waiting to be tapped . . .

Retailing in India

Organized Retail Is At The Forefront Of These Opportunities

Fastest growing retail segments in India

0 20 40 60 80 100

Food and grocery

Clothing

Furnitures and fixtures

Pharmacy

Durables

Footwear and leather

Jewelry

Retailing Segments

Source: National Center for Agriculture Economics and Policy Research

Growth Rate Agriculture

1% change in GDP of agriculture generates 0.24% overall GDP growth

Linkage effect: effect on industry: Elasticity of industrial output growth wrt growth rate

of agriculture is 0.38.

Agriculture contributes 24.2% to GDP, 15.2% of total exports and provides

employment to 58.4% of country’s work force

Processing

• How to build world scale processing facilities?

• How much of backward integration is necessary?

GAPS - Key areas

Retailing/ Wholesaling /

Export

• How to build scale?

• How to develop forward linkages?

• How to establish the food safety?

• Can the private label market be tapped?

Farming

• What to produce?

• How to create scale operations?

• How to control and buy effectively?

• Development & Absorption of technology

Handling & Logistics

• What are the infrastructure & technology requirements

• Where to set up this infrastructure

• What logistics constraints have to be overcome?

Lack of Awareness and Low Opportunity

Low Productivity

Poor Rural Economy

LowOpportunity

Lack of Awareness

• Access to capital• Access to market• Access to technology

• Quality• Efficiency• Cost effectiveness• Market Intelligence

Traditional Supply Chain

Status

5- 7 intermediaries.

Price spread:

– Wastage – 20-30%

– Cost of supply chain 10%

– Margin for inter 40%– Farmer realisation 20-30%

No grading, standardisation

Negligible food processing

Limited exports

Integrated Supply Chains

Reduce wastages

Preserve freshness

Reduce consumer prices

Improve farmer price

Improve farmer income

Improve exports

Farmer 15%

Consolidator 5%

Wholesaler 5%

Semi-wholesaler 5%

Retailer 8%

* Wastages in red

Produce Farmgate Price (Rs)

Retail Price (Rs)

Farm gate as % of retail

price

Wastages

Tomato 2 8.2 24% 40%

Potato 6.6 12 55% 24%

Banana 5 9 56% 30%

Cabbage 5.5 9.5 58% 36%

Cauliflower 4 12 33% 24%

Current Current Scenario

Source: IIM Bangalore Research

Wastages and Costs

How to make this Supply Chain Efficient

Strengthen Value Adding Activities

e.g. Primary Procurement Infrastructure, Cold Chain, Demand Driven Supply Chains, Food Processing, Exports of Excess Produce, Food Safety

Elimination of Non Value Adding Activities

e.g. Intermediaries

Focus on strengthening value adding activities will lead to sustainable advantages, and benefits across the value chain

Community Facilities

Food Processing & Export

Agri Infrastructure - The Missing Link

Warehousing & Storage Logistics

Technology Development

Retailing

Primary Processing

Improving Farm Productivity and Farm Incomes

Status of Indian Farms

Productivity can improve 3-4 times from current levels

Needs technology and quality inputs

No one-stop shop

Need to complement the government extension machinery

Market Need

Trained agronomists – visit farmer fields and provide advise – monitor progress

One stop shop for all agri inputs and finance

Enables right choice of crop and technology in line with the ecology and market demand.

Consumer price

anticipated price level

Markup

Farmer Price

original price level

Farm to Fork: Impact on Prices

Increase farmers’ realization and lower consumer prices

• At Right Place

• At Right Time

• In Adequate Quantity

• At Reasonable Price

• Financial Support

Rural Development 1.0

Rural Development 3.0

Rural Development 2.0

Availability of Quality Inputs and Daily Need Items

Agriculture Services

Global Linkages

• For High Value Crops

• Organic Farming

• Expert Advice

• Extension Services

• Vet. Services

• Promoting GAP:EurepGAP

• Domestic Distribution

• Export

• Value Addition

•High Return to Farmers

Waves of Change: Inclusive Growth

Inclusive Growth for All

• Increased revenues will come by the reduced wastages

• Farmer will gain with efficiency in supply chain

• Customer will pay less for the quality produce

• Information flow will lead to demand driven production

• Infrastructure development leading to growth of sector

• Food Processing and value addition will open new vistas

• Safe to Eat Food Products

• Exports will boost the price realizations of the produce

Globally Integrated Supply Chains-

Case of Cotton

Making cotton ‘fashionable’ again ...

Post access (today, 2005)

– Farmers shift back to cotton

– Acreages increase. Yields increase. Production increase

phenomenally

– Quantitative restrictions on textile exports abolished

– Indian textile industry extremely buoyant

– Textile machinery manufacturers see a 50% increase in

sale. Their order books filled up for two years !

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Cotton production and textile exports

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THANK YOU