Situation Analysis :

The case in hand refers to the current situation faced by the chairman of UCF (Uttrakhand
State Cooperative Federation). The horticulture farmers of the state sell their off - season fruits
and vegetable product in the local market, but are not able to get good margins despite bearing
the maximum risk as most of the margin is taken away by intermediaries like traders,
commission agents and retailers in the supply chain. The problem is aggravated further by poor
marketing infrastructure , fluctuating market prices, strong lobby of intermediaries and
information asymmetry between the intermediaries and farmers.
To improve the condition of farmers, the chairman has came up with three alternatives and has
to choose one of them to ensure the long-term benefit of the farmers and ensuring them better
margins.
Problem Statement- How to intervene in the supply chain so as to increase the profit margin of
the Farmer?.
Decision Criteria- Farmer’s Profit Margin
Alternatives :
Alternative 1: UCF can take up the role of the village aggregator with some additional value
addition to the produce in the supply chain for increasing the returns for the farmers. It can then
sell the produce directly to the mandis or to any institutional buyers like Reliance or Mother
Dairy, similar to what Mabarahi Swayath Sahakaritha Mahasangh Limited (MSSML), a cluster of
cooperatives, is doing.
Alternative 2: Since retailers take up the maximum margins from the sale of the produce, the
federation can enter the supply chain as the retailer. It can maintain the entire supply chain of
fruits and vegetables and give farmers their due share from the profits
Alternative 3- The UCF can set up agri-processing plants for processing and value addition of
the seasonal produce to fetch higher returns and transfer the benefits to the farmers. It can
utilise the excess manpower it has towards this objective and can explore export opportunities
for higher profit margins.

Evaluation Alternatives-
Alternative 1: Playing the role of an aggregator
Pros:
• Reduced transaction cost, improved margins and increased bargaining power due to
economies of scale.
• Selling to mandis like MSSML or institutional buyers like reliance and mother dairy would
help fetch better prices and provide a consistent market.
Challenges:
• The federation would require a standardised instrument that can instantly and objectively
measure the quality of produce for gradation.
• With elimination of village traders and middlemen farmers will now rely on federation for
their credit needs, which will have to be fulfilled timely.
• The federation would require to build a trust with farmers and only then the latter would
trust them with their harvest.
• The long-term sustainability of the alternative depends heavily on continuous
coordinated efforts of farmers and federation for mutual benefits. To ensure this the federation
would require an effective incentive program that is feasible in the long run.
Alternative 2: Selling fruits and vegetables by straddling the entire supply chain from farmers to
consumers
Pros:
• Since the entire value chain will now be controlled by federation, entire net margins can
be given to farmers improving their income.
• Most of the infrastructure required for this solution like storage facilities at a number of
places are owned by the federation which can be utilised to create the supply chain and hence it
is a feasible alternative for federation.
Challenges:
• The federation will have to compete with private players in the organised retailing sector.
Alternative 3: To take up higher value addition activities of processing fruits and vegetables
Pros:
• This will provide the federation access to higher margins in urban markets and solve the
problem of severe changes in prices due to seasonality.
• Export market of processed fruits and vegetables will be an avenue now expanding our
market.
• The Federation already has the required human and financial resources to enter into
high grade processing.
Challenges:
• This is an ambitious option and would require a lot of operational technical competency.
• Huge financial and managerial resources would be required for this alternative and
hence a thorough strategy has to be devised for this alternative.

Choice of Alternatives: