We finally come up with a supply chain framework suitable and optimal to farmers and supply chain actors alike. I was still aware the one that are true on theory and mathematical precision should fit to the reality to have chances of success. Thus, determining the one that had the best chance of implementation has not been an easy task. We made observations into century-old market practices among Ethiopia’s small farmers, a country still synonymous with hunger and poverty.
We separately tested every component of our system on the ground using questionnaires and interviews with cooperative leaders, distributors. The response was astounding and here I stand proudly looking for like-minded persons.
Dear Chioma, Thank you and I feel it is important to explain this question further. Our supply chain is available as a Software simulation with clear parameters for all individual components and predefined but flexible business process. It is better to consider Azmera project as a simulation of a whole system than a prototype of a single product. The following points illustrate the objective, competitive strategy and important yardsticks of our supply chain.
With an objective to become a reliable, low-cost retailer for a wide variety of food goods in Ethiopia, Our competitive strategy is by attaining supply chain performance. Because, supply chain performance accounts to over 60% of financial well-being of both farmers and consumers. What our completive strategy dictates? Our supply chain emphasizes achieving highest responsiveness to buyers and sellers at a cost as minimum as possible. In doing so, we consider the following six drivers to achieve the right balance between supply and demand.
1. Inventory driver: we keep low levels of inventory by using cross-docking: for larger supplying farmers products are directly shipped to Azmera retail shops in cities. For smaller supplies, products are transferred from inbound trucks from farmers to outbound trucks to the retail store from the farm with a brief stop at our rural collection agents. This significantly lowers inventory costs at final prices down by 5%. Importantly, it reduces postharvest loss contributing to a minimum of 20% food surplus. 2. Transportation driver: we subscribe transporters with promise to permanent work. Transporters negotiate for a decreased price and encourage them to bring safe vehicles, providing quality transportation service responsive to consumer demands. Our supply chain lowers transportation costs by at least 10% and improves food safety and freight convenience. 3. Distribution Driver: Food shops currently available in Addis Ababa sell everything from tomato to perfume in one place. Our distributors will instead be a network of retailers (currently agreed with 120) that are centrally located and demand is sufficient to run specialty food products distribution center. This increases efficiency because of specialization. 4. Information technology driver: we invests heavily on it because it is a key driver to improve responsiveness allowing us to feed demand information across the supply chain to farmers to produce only what is being demanded. i.e. demand and finance flows from Azmera retailers to Azmera collectors and from collectors to transporters while products vice-versa. 5. Sourcing driver: we identify efficient sources for each product we sell. We feed these farmers large orders, allowing them to be efficient by exploiting economies of scale. 6. Pricing driver: due to increases in the supply chain performance, we have product surplus. Thus, our retailers could price products low. Thus, customer demand stays steady and does not fluctuate with price variations. The entire supply chain then focuses on meeting this demand in an efficient manner.
To add more points: Thinking about ICT on agriculture, we have been previously working on ecommerce, mobile app and other applications. It was in fact easier for us and seem easy to use and convenient to deploy.
We later found out that mere applications and their impact on agricultural markets and specifically small farmers is limited unless the whole market framework is in place. The reason is what is failing for African small farmers is still a full-fledged MARKET, MARKET again MARKET, not a technical product or knowledge. And, market is a system to be made from many components. This requires something more than manufacturing a fancy product or programming an amazing software.
It is from this point of view, we start thinking about using ICT to revolutionize the whole system than changing individual components. After all, despite centuries of growth and modernity, no matter how convenient the likes of Amazon seem to be, most of the world’s sellers and consumers still prefer to buy at brick and mortar stores that are reliable, convenient and less costly. Thus, it is better to modernize existing structures than trying to bring things wholly new and change our habits overnight.
That is why I prefer to study state of the art supply chain structures of the world’s retail and manufacturing giants from fashion to electronics such as Toyota, Wal-Mart and Apple. The second step was to test existing supply chain frameworks on farmers using software simulation, each of them with different level of supply chain performance, responsiveness, efficiency.
Dear Chioma, Thank you and here is the answer to the Expert comments: The target is urban market, Addis Ababa, Ethiopia. Suppliers are small farmers in six major food producing rural districts that had an estimated population of 6.5 million. Current competitors in the market are a number of unregistered informal brokers that do sourcing to brick and mortar strores located in Addis Ababa. The farmers will be mobilized through independent youth entrepreneurs that we are going to train and assign for each locality. We also use farmer cooperatives and their leaders to mobilize farmers into our supply chain. We promise better market information, convinient sales, dependable payments as an incentive for subscription.