In the “ITC E-CHOUPAL: CORPORATE SOCIAL RESPONSIBILITY IN RURAL INDIA” case by Ali Farhoomand; Saurabh Bhatnagar we take a closer look at the poor supply chain management that exists in India and how ITC try to mitigate the constraints of the agrarian supply chain by implementing “e-Choupal”; transforming the life of the Indian farmer from under served and over-exploited to being fairly treated and giving them more power and control.
Who/What it ITC?
India’s private sector company, considered to be “Top 10 most valuable (company) brands in India” by Brand Finance. It has interests in tobacco, hotels, agri-business, packaged foods, retail, information technology and many others.
Why is Supply Chain Management Important to them?
ITC was part of the agrarian supply chain that was regulated by the government regulation of Agriculture Produce Marketing Committee (APMC), which made their supply chain operations very slow and inefficient. APMC mandated that agri-companies must buy produce through designated market (called mandi’s) and through registered commission agencies. Since this was the only means of farmers to sell their produce and being a far distance from them, they would often be pressured to sell their produce at whatever price the agents wanted to pay which was usually very low.
Why was the Supply Chain slow and inefficient?
The farmers must drive a distance to auction their produce to the agents, then the middle man would have to transport to the factory which resulted in costly delays, high procurement costs for the company and low pay for the farmers. Sometimes they would not break even. Under this system, the middle man would pocket the gains. Although there was an established price set, the middle men would force farmers to sell their produce at a much lower cost.
They created “e-Choupal” to improve supply chain management and stop the abuse of farmers by agents.
What did they do?
ITC set up small internet kiosks in the villages which allowed the farmers to directly sell their produce to ITC which: (1) eliminated the middle man (2) ensured that the farmers were paid accurately (more) unlike in the traditional government-designated marketplace.
How does e-Choupal actually work?
e-Choupal was a website that delivered relevant and timely information to farmers from what fertilizers, seeds and pesticides to use to relevant prices and weather forecasts.
What challenges did ITC face?
There was a lack of infrastructure in rural India. There was no access to telecommunications, no power supply and low literary rates. Since there was a lack of knowledge in using the sophisticated equipment, ITC had to train farmers on the benefits of the kiosks and how it would add value in their everyday life’s.
There was also opposition from the traders’ lobby who tried to lobby against it because “e-Choupal” challenged their trade monopolies.
It was costly to develop 20,000 “e-Choupal” kiosks by 2012 and ITC encountered problems in developing the virtual and physical infrastructure.
Another big challenge was to recruit, train, nurture and maintain talent that would continue to grow over time.
What results and benefits did “e-Choupal” have?
ITC improved supply chain management by dealing directly with farmers and farmers standard of living rose due to getting paid more for their products. It eliminated wasted time and effort as well as handling costs.
Farmers finally had an alternative in which they received more for their grain than with the traditional market and were fairly compensated for it, making them wealthier. It gave more information to farmers as to the market price of their grains for the day, making them more confident of not getting ripped off.
What other problems did ITC solve through “e-Choupal” for the poor rural Indian community?
(1) Provided means of digital content and virtual training sessions for weaker students who needed additional tutoring, in hopes to lower the dropout rates.
(2) Empowered woman who lived in the shadows of their husbands by providing jobs and information though the “e-Choupal” network, thus giving woman economic independence.
(3) The cost of healthcare in India can be very costly, especially for poor families. ITC expanded it “e-Choupal” network to provide inexpensive and accessible healthcare to the villagers by establishing “Choupal Health Care Model”
Source: ITC e-Choupal: Corporate Social Responsibility in Rural India, Case: HKU765-PDF-ENG, 2008.
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