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Transmittal Letter

10th April, 2012 Jannatul Assistant Professor, Department of Marketing Northern University Bangladesh

Subject: Request to accept the Report on Supply chain Process of Vegetables. Dear Sir: Most courteously to affirm that, here five (05) B.B.A students of your section (A), are suggesting their report on Supply chain Process of Vegetable. It gives enormous contentment to notify you that this group has accomplished its report under your kind hearted direct care. Now, they have positioned the report before you for your authorization. Both the members are hopeful that this report will convince you. Sincerely yours, Abdullahhel Kafi Id# 070202322

Page Number Transmittal letter Abstract Origin of the Report Report Objectives Restrictions of the Study Introduction SCM & its benefits Functions of intermediaries Dependency Supply chain process of vegetable Where vegetable value changes Problems occurred in process Termination 01 03 04 04 05 06 07 08 10 12 14 15 16

Supply chain management is a powerful tool to achieve this collaboration. Through supply chains, producers in developing countries and emerging economies can access market information and knowledge to work on their value-added activities. The advantages of supply chain management are numerous, like the reduction of product losses, increase in sales, reduction of transaction costs, a better control of product quality and safety and the distribution of technology, capital and knowledge among the chain partners. Supply chain management tools have been developed and implemented throughout the chain to guarantee optimal chain performance. Supply chain development not only benefits the private sector but also creates spin-offs that stimulate social, economical and environmental sustainable development in the region (employment generation, added value, decreases of product losses, etc.). Public support plays an important role to create an enabling environment for private sector development. Public support might take the form of a public private partnership in a supply chain to share experiences, risks and restricted access. In Bangladesh however, supply chain development is often hampered due to lack of governmental support. Institution building, raising awareness, pilot chain projects and the development of toolkit are important activities to foster supply chain development. This paper reviews issues of the development of supply chains for vegetables in Bangladesh.

Origin of the Report

This report has been prepared as the requirement of the Course curriculum, as a part of course code MKT- 4203. The report is titled as Supply
chain Process of Vegetables. The course Started on October 2 , 2011 and report

submitted on December 29th, 2011. Our honorable course teacher Muhammad Saad Imran Noor, Assistant Professor, Marketing Department, United International University assigned the project.

Report Objectives:
This learning titled as Supply chain Process of Vegetables meant at finding out the proper channel & value changing reasons of vegetables. Large Objectives: The wide principle is to find out the process & the reasons of value changing of vegetables in its sully chain management. Precise Objectives: The exact purpose of the report is mostly paying attention on the lessons whether the students are capable of making the ads effectively or not. Working capability To examine the real business sector Finding out the channel number & members Finding out value changing points

Restrictions of the Study

There were not too many difficulties in this particular study. But still for a formal presentation of a report we are just showing some in the following points: It was difficult to summarize such a big field into a term paper Obviously there is some sort of time constraints Nobody is egar to give the perfect data Sometimes it is difficult to point out each & every points of such a big field

1. Introduction
Efficient agriculture marketing is critically dependent on efficient transport system. Inefficient transport service coupled with poor storage, can lead to losses as certain crops (such as milk, vegetable, fish) deteriorate quickly over time. On the other hand many developing countries like Bangladesh suffer from monopolistic, low volume, syndicate, and high cost transport and marketing system. Weak transport and marketing system are hindering agriculture development means country development. On the other hand vegetable are generally more costly to produce per hector than traditional crop. The value or quality of vegetable will decrease rapidly once they are harvested and will keep decaying when being delivered. The revenue of food supplier will depend on the condition of the products when they are received. Thus timely production and delivery of perishable foods significantly affect the suppliers revenue. In this paper it is tried to address present supply chain system of perishable product (especially vegetable) implication, difficulties to change the present system and suggestion for improvement of supply chain.

2. SCM & its Benefits:

Managing supply chains requires an integral approach in which chain partners jointly plan and Control the flow of goods, information, technology and capital from farm to fork, meaning from the suppliers of raw materials to the final consumers. In order to react effectively and quick to consumers demand, supply chain management is consumer-oriented. It aims at coordination of production processes. Supply chain management results in lower transaction costs and increased margins. Because of the many activities and aspects involved it demands a multidisciplinary approach and sustainable trade relations. Supply chain partnerships are based on interdependence, trust, open communication and mutual benefits. The advantages of the supply chain management approach are numerous. Some important Advantages are: Reduction of product losses in transportation and storage. Increasing of sales. Distribution of technology, advanced techniques, capital and knowledge among the chain partners. Better information about the flow of products, markets and technologies. Transparency of the supply chain. Tracking & tracing to the source. Better control of product safety and quality. Large investments and risks are shared among partners in the chain

3. Function of Intermediaries
The important components of marketing functions at the intermediary level are transportation, storage, grading, financing, market information, pricing etc. the functions of the intermediaries in context of vegetables supply chain in Bangladesh.

Intermediaries make connection between consumer and producer. They provide transport to carry locally produced vegetables to distant market. They do the all activities involved in preparation for consignment such as crating and loading. Transportation cost by road is high in Bangladesh. Intermediaries use different types of mode depend on the availability.

The storage function is primarily concerned with making goods available at the desired time. It creates time utility. Storage requirement is crop specific. Potato and paddy can be stored for many days. But vegetable need immediate transport to market. As vegetable and fruits are perishable, they need proper post harvesting treatment before reaching market. If seller cannot sell their product in same day, they need to storage these products for the following day.

Grading is one of the basic functions of intermediaries and it is defined as the classification of product according to some standard on measure. Grading is a determining factor of buying and selling price. Quality is determined by eye estimation. For vegetables grading is done by bairal.

Packaging is an important job of intermediaries. Wastage largely depends on packaging. Packaging materials depends on type of crops. Vegetables are generally packed in bamboo baskets, plastic crates, plastic bags, or nylon sacks for transportation, in Bangladesh. Sometime, they are transported in an unpackaged form. Binding and packaging is mostly done by bairal and in some case it is also done by bepari.

Financing is of crucial important for agro-product marketing like any type of product. The intermediaries face of lacking of sufficient finance. Sometimes intermediaries buy product from farmer on credit. 60% of intermediaries do operate their business by their self finRisk Bearing

Risk Bearing:
Risk bearing facilities are essential in any marketing activities. Insurance policy system has not been developed yet in Bangladesh. It has found that many farmers sell their vegetable field to bairal to shift risk and bairal bear all risk of the orchard. Intermediaries bear the risk of price variation.

4. Dependency on intermediaries
Intermediaries are essential part of vegetable supply chain in Bangladesh. They share profit with producer. But farmer in Bangladesh cannot avoid intermediaries for shifting their product to market. The reasons of dependency on Intermediaries are as follows.

Small Scale Farm:

Small scale farming is better stewards of natural resource and contributes more to local community and economic development. The cultivation practice in Bangladesh is more or less small scale farming. The average size of land ownership is 0.6 ha and produce small amount of production. Intermediaries involvement can be attributed to the fact that average farmers marketable quantity is often small. It is not always economic to employ some shipping mode to transport for such small quantity to the marketplace.

Lack of Education:
It is observed that education has negative impact on agriculture income. But education effect on nonfarm income (wage, trade etc) significantly in Bangladesh. Education is required to raise total income of farmer. Most of the villagers in Bangladesh are illiterate and they are not getting update information. Again also farmer have fear of marketing risk. They rely on intermediaries to send their product to market.

Lack of Information Flow:

For efficient marketing system, information of current situation in market is a vital ingredient. Agro business is not out of this group. Marketing information helps producer to make rational decision. Producer can make decision on the basis of information on forecast of market demand and information on sales timing. This information can help not to market glut again it enables the producer about the harvest time. Again understanding consumer need help to improve harvesting method or produce desire type of crops. The most important information is price information which enables fair price of produced crop. The literacy level of farmer is very poor in Bangladesh. They cant read price in newspaper. Again most of the farmer cant afford television. Farmer gets information from trader or truck driver who come to buy crop which may be depend on traders benefit. Most intermediaries get market information through market visits, personal observations and from fellow traders. Although Directorate Agricultural marketing, Government of Bangladesh is engaged in the task of price is available in their website. Presently FM radio, coverage is limited, broadcast daily market price.


Limited Super Market

The development of supermarkets is a recent addition in the domestic retail section of Bangladesh. To date, there are about 30 supermarket stores operating in the country as a whole, of which 22 are located in Dhaka. Although the coverage of supermarket chains is still very low, not even 1% of the retail sector, one major example is SHOPNO. Since supermarkets continue to play a minor role in Bangladesh, most vegetable produce are sold either in the local markets, or to wholesalers who then transport the produce to the city markets, i.e., Dhaka. Consequently, production is little organized, and none of the farmers in our sample admitted participating in contract growing arrangements. Wholesalers and small traders are the major players in vegetable trade, capturing 96% of the market.


5. Supply Chain process of vegetable

Intermediaries make link between farmer and consumer. Number of intermediaries in the supply chain is a function of product type, accessibility of market, etc. this group has made a survey on one of the busiest vegetable market in Dhaka city for finding out the supply chain system for vegetables, or to know how the vegetables are coming from the point of origin to the point of consumption. After making the interview session we can know that there are five sorts of intermediaries between the faria or farmer and the consumers of vegetables. There are five intermediaries in the major distribution channel. Short description is as follows. Farmers: farmers are those persons who basically grow the core products and sell it to the next chain that is local mohajon against a price set by negotiations. Local Mohajon: local mohajons are those categories of people who buy products from farmers. They not only buy products from one farmer. They buy from number of farmers who are interested to sell their products. They purchase product from farmer and sold that product either to the beparies or to the local retailers. Local Retailer: these are the persons whom basically buy products from local mohajon and sell those products into the local market in the retail price. Outdoor Beparies: Beparies are professional traders who purchase agricultural product form the farmers or farias in the local market or in the village. They handled larger volume of product than Faria. Bepari sells their product to Arathdar. Arathdar/ Whole-seller 1: Arathdar serve as a fixed commission agent who have fixed establishment and operate between Bepari & wholesaler and charge a fixed commission by providing storage facilities. Whole-seller 2: These are the persons whom are doing business in one type of contracting with wholesaler 1. That means they are selling their products to retailers and buying from arathdar. Retailers: Retailers are the last link in the marketing channel before consumers. They buy product from wholesaler 1 or 2 and sell them to the consumer. Consumers: Consumers are the ultimate destination of the supply chain process. To reach the products to consumers hand this process is taking place each & every day.


Farmer Local Retailer Local mohajon

Outdoor Baperies

Local Consumer

Wholesaler 1

Wholesaler 2



Figure 1: the process of SCM in context of vegetables


6. Where vegetable value changes?

14 -- 15 /17//2 -- 3 /-

Local mohajon
1 -- 1.5 /16 -- 16.5 /-

Faria or Local retailers are selling 7/- per kg

Outdoor baperies
1 -- 1.10 /19 -- 19.5 /-

Wholesaler 1
.50 -- 1 /20 /-

Coolie cost = .30/Transportation = 1.20/Police charge = .20/Local Haat charge = .20/Karon Bazar space fee= 50/TOTAL COST = 2.40/Profit approx = 1.10

Wholesaler 2
.50 -- 2 /20.5 -- 22 /-

6 -- 8 /28 -- 30 /-

Intercity transportation cost


Figure 2: The process of value changing in vegetables supply chain


7. Problems occurred in the process

In Bangladesh vegetables businessmen face many sorts of problem. When we talk to them they told us about some problems. These problems are There dont have any sorts of credit facilities for the vegetable business person Transportation cost is getting high day by day. Their profit margin is very low. They have limited amount of cash, so they cant buy vegetables as they required. There is a word Police Tax while transporting the vegetables from one place to another. Sometimes they not get appropriate price as they deserved. Many times the vegetables got damage then they have to count a huge loss. All times vegetables are not available in the markets. Price change of vegetables in hour to hour basis so they cant set the fixed price of vegetables. Different vegetables retailer buy vegetables in different price from different, so they face problem when they going to sell into same market. Huge price gap between the point of origin & point of consumption. Farmers dont get the right price as the consumers are paying. Political factors are partially responsible for fluctuating the vegetable price in the markets.


8. Termination
Supply Chain system is not sound in Bangladesh. Growers are not getting full benefit of high vegetable price due to deficient access to market information, illegal activities & practices and undeveloped infrastructure. There are insufficient well equipped wholesale market and many intermediaries between producer and consumer. Inferior communication and transport condition and inadequate financial and information service also contribute to frustrated distribution of perishable food. Direct intervention of government involvement in vegetable marketing is minimal. Price is determined by open bargaining by number of buyer attending in the market. Improving transport system and minimizing the number of intermediaries in supply chain can increase the profit margin of farmer.