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:

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




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


Read below more Articles on Supply Chain Topics......


Supply Chain Technology: What's Next?
Supply Chain Management BEST practices : Outsourcing

Supply Chain Management : Multi Stage Dynamics

The Basics of RFID Technology

Common problems with Cost Savings Reports

Dynamic Business environment
Supply Chain Strategies

Benefits of preparedness in Negotiation

Seven Principles of Supply Chain Management
10 necessary Strategies for Supply Chain Management
Inclusive growth by realigning Supply Chain

Your FREE Magazine subscription below. Click and get now




:Recommended for further readings on Supply Chain Management :


Check the following links too:



| Sitemap | Copyright | Disclaimer | Privacy Policy | About us | Link with us | Contact us | Advertise |


Click here to Bookmark this site | Contact here for Business collaborations |

No part of this web site may be reproduced or transmitted in any form by any means graphic, electronic, or mechanical without permission in writing from the publisher