REALIGNING SUPPLY CHAINS -
Direct Procurement from Producers / Primary Suppliers
 

There is a sound business case for securing and enhancing small-scale producers, primary supplier inclusion, which can bring both economic as well as wider development gains.
 

Two big challenges are evident when seeking to apply inclusive models to developing country economies dominated by small-scale producers, either for domestic retailing and processing, or for exporting.

* The first is organizing and upgrading supply from a dispersed producer base.

* The second is traceability and quality assurance.

This can be seen in the case of M/s Marico

Limited a leading Indian firm in consumer products and services in the global beauty and wellness space.

Coconut oil is an important product for the company. It has widespread distribution network both for procurement of raw material and distribution, the major producing states are Tamil Nadu, Kerala, Andhra Pradesh, and Karnataka.

Copra (dried kernel of coconut) procurement was a critical activity. Marico Limited procured copra from Mumbai based traders (little control over costs and quality). The supply chain for copra consisted of farmers, who either converted coconut to copra or sold it to Copra Converters.
The Copra Converters, in turn, sold it to a broker, who coordinated the supply across several Copra Converters to arrange for transportation and helped them to sell in the terminal markets to traders.
 

The broker got a commission both from the Copra Converters and the traders. It gave boost to its supply chain by opening buying offices in Kerala, started Direct Procurement from vendors by supplying them copra drying machines. Established linkages with traders in terminal markets where traders brought full truckloads to factories (Eliminated the transaction fee, reduced multiple loading and unloading costs).

Companies also set up their own Collection Centers (CC). This has resulted Procurement Quantity Assurance and better prices to farmers. This has reduced management’s time for purchasing, vendor development (by allowing it to develop profiles of suppliers), ensured

 

quality assurance and deepen its reach to traders, copra converters and farmers.
In other words, traders/Copra Converters/farmers could directly deal with Marico Limited, the end customer.

In India retailers can now buy direct from farmers rather than operate through the government-controlled APMC wholesale markets. New models of rural retail are emerging, such as the Hariyali Kisaan Bazaar, which combines a “bottom of the pyramid” approach to both the input and output sides of the farm-to-consumer value chain. Corporations are making considerable profits by designing new supply chain business models and products.

 

Click these links to read in details:

Introduction
Inclusivity Measurement
Present Scenario
Supply Chain

Realigning Supply Chain through :

Direct Procurement from Producers/Primary Suppliers
Use of Information & Technology
Vendor Development
Open Tendering
Ancillary Development
Targeted Procurement
Unbundling of Contract

Discussion
 
 

 

 


By
Digvijay Singh, Dy. Manager (Materials Management)
Research & Development Center for Iron & Steel (RDCIS)
Steel Authority of India Ltd. (Ranchi)

 

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