Exim Bank Agricultural University, Bangladesh

Course Plan:
Supply chain management -AGM 367

An Assignment on
Supply chain management in agriculture

Submitted to: Submitted by:

Md. Ibrahim Kholilullah Chir0njit Ror
Faculty of Agriculture Economics & Rural
Development
Lecturer Reg:AGRW2017000491
Department of Agricultural Finance and Co-
operative

EXIM Bank Agricultural University Bangladesh House no. 69-69/1, BoroIndara Moor, Chapainawabganj, 6300
 INDEX

Serial no Name Page no

1 Introduction 1

2 7 Principles 1-1

3 Definition 2-3

4 A Graphical
Presentation of 3
Supply Chain
5 Agriculture Supply
Chain Networks 4-5

essential stages in
6 6
developing a
successful supply
chain
7 Conclusion 7
 Introduction :
Bangladeshi agriculture is dominated by innumerable small farms which are highly
dispersed and unorganized. Further, the nature of agricultural produce which are highly
perishable and supply is erratic owing to seasonality and biotic and abiotic stresses, calls
for innovative supply chain management which can address these issues and facilitates
higher value addition. Though, SCM is not a new concept, its application in different
sectors of agriculture throws innovative ideas to define the shape of future agriculture in
the country. In the recent times, several researchers under National Agricultural
Research System and CGIAR institutions implemented projects on supply chain
management as applied to different sectors in agriculture including crop science,
horticulture, fisheries, dairy, etc. These projects were mostly funded by National
Agriculture Innovation Project (NAIP) of Indian Council of Agricultural Research
(ICAR). In these projects, the supply chain of different agricultural produce was studied
in detail and identified the potential business opportunities along with the potential
strengths and threats of these businesses. Their findings in terms of developing a better
supply chain for major agricultural commodities are presented in the form of book
chapters. This book contains topics such as Supply chain management of crops such as
sorghum, sweet potato, pomegranates, custard apple, litchi, papaya, guar, floriculture
and sugarcane, supply chain management in high value crops and fisheries and supply
chain methodological issues which will serve as useful reference material for supply
chain managers, researchers, academicians, management students and policy makers.

What is supply chain management in agriculture?

Agribusiness, supply chain management (SCM) implies managing the relationships between the
businesses responsible for the efficient production and supply of products from the farm level to the
consumers to meet consumers' requirements reliably in terms of quantity, quality and price.

7 Principles of Supply Chain Management

 Adapt Supply Chain to Customer's Needs. ...
 Customize Logistics Network. ...
 Align Demand Planning Across Supply Chain. ...
 Differentiate Products Close to Customer. ...
 Outsource Strategically. ...
 Develop IT that Support Multilevel Decision Making. ...
 Adopt Both Service and Financial Metrics.

Definition:

“Supply chain means flow & movement of goods from the

producers to the final consumers”.
Supply Chain is a sequence of flows that aim to meet final customer
requirements, that take place within and between different stages along a
continuum, from production to final consumption.

The Supply Chain not only includes the producer and its suppliers, but also,
depending on the logistic flows, transporters, warehouses, retailers, and
consumers themselves. In a broader sense, supply chains also includes, new
product development, marketing, operations, distribution, finance and
customer service.

A Graphical Presentation of Supply Chain

 Supply Chain Management: The term ‘Supply Chain Management’ is
relatively new. It first appeared in logistics literature in the 1980s, as an
inventory management approach with emphasis on the supply of raw
materials. Logistics managers in retail, grocery, and other high inventory
industries began to realize that a significant competitive advantage could be
derived through the management of materials that flow in their ‘inbound’ and
‘outbound’ channels.

Supply Chain Management involves following processes:

 Integrated Planning
 Implementation
 Coordination
 Control

Therefore, SCM is the integrated planning, implementation, coordination and

control of all Agri-business processes and activities necessary to produce and
deliver, as efficiently as possible, products that satisfies consumer preferences
and requirements.

Contrasting Supply Chain Management with Traditional

Management Chain

Traditional Supply Chain

Element
Management Management
Inventory
Joint reduction in channel
management Independent Efforts.
inventories.
approach
Total cost Channel-wide cost
Minimize firm costs
approach efficiencies
Time horizon Short-term Long-term
Amount of
information Limited to needs of own As required for planning and
sharing and current transactions monitoring purposes
monitoring
Amount of Single contact for the Multiple contacts between
coordination of transaction between levels in firms and levels of
multiple levels in
the channel channel pairs channel
Joint planning Transaction-based On-going
Large to increase
Breadth of Small to increase
competition and spread
supplier base coordination
risk
Channel Needed for coordination
Not needed
leadership focus
‘Distribution Centre’
‘Warehouse’ orientation
Speed of orientation (focus on
(storage, safety stock).
operations, turnover speed).
Interrupted by barriers to
information and Interconnecting flows; JIT,
flows. Localized to
inventory flows Quick Response across the
channel pairs
channel
Agriculture Supply Chain Networks

An agriculture supply chain system comprises organizations/cooperatives that

are responsible for the production and distribution of
 vegetable/Fruits/Cereals/Pulses or animal-based products. In general, we
distinguish two main types:

 ‘Agriculture food supply chains for fresh agricultural products’ (such as

fresh vegetables, flowers, fruit). In general, these chains may comprise
growers, auctions, wholesalers, importers and exporters, retailers and
speciality shops and their input and service suppliers. Basically, all of these
stages leave the intrinsic characteristics of the product grown or produced
untouched. The main processes are the handling, conditioned storing,
packing, transportation and especially trading of these goods.
 ‘Agriculture food supply chains for processed food products’ (such as
portioned meats, snacks, juices, desserts, canned food products). In these
chains, agricultural products are used as raw materials for producing
consumer products with higher added value. In most cases, conservation
and conditioning processes extend the shelf-life of the products.

Issues Related to Agriculture Supply Chains

Participants in Agriculture supply chains, e.g. farmers, traders, processors,

retailers, etc, understand that original good quality products can be subject to
quality decay because of an inadequate action of another participant.

For example, when a farm leaves a can of milk for pick-up on a roadside,
under the sun, without any cover, there will be a loss of quality that may even
render the raw material unfit for processing.

Similarly, if processors, on the other hand, use packaging items and/or

technologies that do not maintain freshness and nutritional characteristics of
their products as much as possible, retailers will be likely to face customer
complaints.

Characteristics of Agriculture Supply Chains and its impact on Logistics

Supply Chain Issues with Product & Process Impact on Logistic/Flow

Stage Characteristics of goods.
Overall Shelf-life constraints for raw • Timing constraints
materials, intermediates and (goods have to be
finished products and changes in supplied quickly to avoid
product quality level while decay).
progressing the supply chain
 • Information
(decay). requirements (correct
Recycling of Materials Required. information of goods is
essential).

• Long production times

(producing new or additional agro-
• Responsiveness
Growers / products takes a lot of time)
Producers • Flexibility in process
• Seasonality in production •
and planning
Variability of quality and quantity
of supply

Food processing • High volume, low variety • Importance of

industry (although the variety is increasing) production planning and
production systems scheduling focusing on
high capacity utilization
• Highly sophisticated capital-
intensive machinery leading to the • Flexibility of recipes
need to maintain capacity
utilization • Timing constraints, ICT
possibility to confine
• Variable process yield in quantity products
and quality due to biological
variations, seasonality, random • Flexible production
factors connected with weather, planning that can handle
pests, other biological hazards this complexity

• A possible necessity to wait for • Need for configurations

the results of quality tests that facilitate tracking
and tracing
• Alternative installations,
alternative recipes, product-
dependent cleaning and processing
times, carry over of raw materials
between successive product lots,
etc.

• Storage buffer capacity is

restricted, when material,
intermediates or finished products
 can only be kept in special tanks or
containers

• Necessity to value all parts

because of the complementary
nature of agricultural inputs (for
example, beef cannot be produced
without the co-product hides)

• Necessity for lot traceability of

work in process due to quality and
environmental requirements and
product responsibility

• Variability of quality and quantity

of supply of farm-based inputs • Pricing issues

• Seasonal supply of products • Timing constraints

Auctions /
Wholesalers/ requires global (year-round) • Need for conditioning
Retailers sourcing
• Pre-information on
• Requirements for conditioned quality status of products
transportation and storage means

The 5 essential stages in developing a successful supply chain

The SCOR model runs through five supply chain stages: Plan, Source,
Make, Deliver, Return
Stage 1: Plan
Planning involves a wide range of activities. Companies must first decide on
their operations strategy. Whether to manufacture a product or component or
buy it from a supplier is a major decision.

Options include:

 Manufacturing a product component domestically

 Manufacturing a component in a foreign market by setting up
international production facilities
 Buying a component from a foreign supplier
 Buying a component from a domestic supplier
If companies are manufacturing products, they must decide how they will
be produced.

Goods can be:

 Make to stock (produced and stored, awaiting customer orders);

 Make to order (constructed in response to a customer order);
 Configure to order (partially manufactured the product and completed it
after a firm customer order is received); or
 Engineer to order (manufactured a product to unique specifications
provided by a customer).

Stage 2: Source
This aspect of supply chain management involves organizing the procurement
of raw materials and components.

When sources have been selected and vetted, companies must negotiate
contracts and schedule deliveries.

Supplier performance must be assessed and payments to the suppliers made

when appropriate. In some cases, companies will be working with a network of
suppliers. This will involve working with this network, managing inventory
and company assets and ensuring that export and import requirements are
met.

Stage 3: Make
This stage is concerned with scheduling of production activities, testing of
products, packing and release. Companies must also manage rules for
performance, data that must be stored, facilities and regulatory compliance.
Stage 4: Deliver
The delivery stage encompasses all the steps from processing customer
inquiries to selecting distribution strategies and transportation options.
Companies must also manage warehousing and inventory or pay for a service
provider to manage these tasks for them.

The delivery stage includes any trial period or warranty period, customers or
retail sites must be invoiced and payments received, and companies must
manage import and export requirements for the finished product.
Stage 5: Return
Return is associated with managing all returns of defective products, including
identifying the product condition, authorizing returns, scheduling product
shipments, replacing defective products and providing refunds.

Returns also include “end-of-life” products (those that are in the end of their
product lifetime and a vendor will no longer be marketing, selling, or
promoting a particular product and may also be limiting or ending support for
the product).

Companies must establish rules for the following:

 Product returns
 Monitoring performance and costs
 Managing inventory of returned product

Conclusion: Since a large number of players are involved in the

supply chain, the amount of integration of services depends on
the degree of trust and information sharing among players. It is
often the case that in their efforts for vertical / horizontal
integration, the big players have noticed that various activities
push the weak ones.