Supply Chain Management in Agro Industry

- Role of Information Systems

A perspective on Agro Industry Challenges and role of ERP, CRM and SCM solutions. This is a summary of presentation made by Gravitys SAP Materials Management Consultant Mukesh Shukla and Delihi College of Engineering Professor Dr. S. K Garg at GLOGIFT06 Bangkok

In the Agro Industry globalization of production and distribution activities has lead to competitive advantage moving from individual firms operating on spot markets towards supply chains and networks (Schiefer G 2004). Therefore, coordination between firms within the chain becomes more important. Topics like costs, efficiency, and risk and investment analysis have received little empirical attention within chain and network research. Nonetheless, these performance measures are of vital importance for continuity of individual companies, chains and networks. As the world economy is growing, competition is becoming tough; Globalization makes the situation worsen, when it comes to agriculture and agro industries. OECD countries giving very high domestic as well as export subsidies, makes their agro produce and agro product very cheap. Developing countries like India have to stand and survive against the pressure of developed countries. Developed countries have the very vast network of Information technology and Information system around the farmers, which keeps them informed and knowledged, so that they can make timely decision. If we quantify the agri food supply chain, there are five key issues

1. 2. 3. 4. 5.

Concepts of measuring performance Empirical research in measuring costs, benefits and risk Modeling Value of information Governance and performance

The key issue at which we shall be focusing here, is the Value of information

Fig 1: Information layers with enterprise (1, 2) and chain/sector focus

Traditionally, information management in enterprises builds on a number of information layers that correspond with the different levels of business management and decision support. They reach from transaction information at the lowest level to executive information at the highest level. These traditional layers are presently being complemented by two additional layers at the lower, transaction, level that incorporate information for tracking and tracing and for quality assurance and improvement activities (Figure 1). These new layers differ from traditional enterprise information layers by their focus. Their focus is not the individual enterprise but the vertical chain of production and trade. They are linked to the flow of goods and connect, in principle, the different stages of production and trade with each other and the consumer.

Information Organization
Organization level: tracking and tracing
The information for tracking and tracing involves an enterprise and a chain dimension. The information is linked to the flow of goods. Within agri-food enterprises, traditional ERP (Enterprise Resource Planning) solutions do not support the monitoring of individual product items or individual batches in commodities (Schiefer G 2004). The integration of this aspect into ERP solutions is a software development issue that does not require any chain- or sector-wide agreement initiatives. The major challenge is the monitoring of individual products or batches on their path through the vertical supply chain of trading partners. In trading environments with a well-defined and limited number of potential trading partners, as is the case with closed supply chains, the establishment of an appropriate information infrastructure could be built on agreements by the trading partner group (see Figure 3). However, in a net chain environment with continuously changing trading partners, the chain communication model (Figure 2) represents agreements within one of the communication clusters that need to build on a basic communication layer that extends the chain approach to the whole trading environment.

Fig 2: T&T information infrastructure for a chain-based tracking and tracing capability

Organization level: quality assurance

The quality information layer adds content to the tracking and tracing capability. Information for the support of quality assurance of products towards the consumer as the final customer builds on enterprise-internal requirements, the requirements of the direct customer, and the requirements of the consumer as the final customer. These quality systems could serve as a basic reference for different levels of quality communication within the quality information layer. First initiatives towards this end are under way. They include the organization of databases with enterprise information of groups of enterprises that participate in certain quality systems. The establishment of different levels of quality communication would separate the sectors food production into different segments with different quality guarantees

Rise of Integrated Supply Chain

By looking at the organization structure of the supply chain, we can say that the players of the chain are not accountable to each other by rules. It is all ethics and trust which strengthen the supply chain. Ethics and trust not only depend on the players involved but also depends on the environment in which they are working. Uncertainty and unavailability of information induces the fear of happening something unknown. And to counter the situation of uncertainty the players try to partner other players around, making another supply chain. Lack of information and visibility of whats happening around in the supply chain makes the partners behave in isolation with mistrust. Integrated Supply Chain Management is needed to alleviate these roadblocks of development (Woods J. 2003). Rising interest in SCM has been strongly supported by the capabilities of new technologies. In particular the application of information systems can improve information flows and, with the addition of e-commerce facilities, can facilitate revenue flows. Satellite positioning system technologies are an example of technology can be used to monitor product flows. Conversely, well-developed SCM is contributing to the management of other frontier technologies. SCM enables management of supply chains where the products have embedded intellectual property (e.g. unique germplasm), through its potential to tightly control product flows and maintain clearly differentiated lines of product with unique and valuable characteristics.

Role of IT/IS in Agro SCM

Mr. R Kapoor (Agri Expo 2006), CEO -Agribusiness of Jubilant Organosys said that India is a world reservoir in the skills and knowledge of IT and agriculture, which need to be channelise for rural prosperity through agricultural diversification. Information Technology has grown to the point where every activity is getting automatic. In any business, project, work etc. need of timely information is so necessary that without it cannot compete in todays cut throat competition. Transfer of information from one department to another, from one region to another from one country to another requires very complex, sophisticated and very advanced hardwares and softwares. For decades companies are striving hard to meet these requirements of growing businesses across the world. Microsoft, Oracle and SAP AG are the best amongst the providers of Software Solutions. A new breed of software has come to cater the need of Enterprise Solutions i.e. Integrated Information Systems, commonly known as Enterprise Resource Solution, Supplier Relationship Management (SRM) and Customer Relationship Management (CRM). On step ahead are the SCM software packages, which have also come into the market (Worthern, http://www.cio.com/research/scm/edit/012202_scm.html).

Fig 3: Sector-wide communication and data pool (example: grain chain)

Figure 4: Supply Chain Management Framework

Component of Supply Chain Management Software

The components of SCM software are: Demand planning (forecasting) Demand collaboration (collaborative resolution process to determine consensus forecasts) Order promising (When one can promise a product to a customer taking into account lead times and constraints) Strategic network optimization (what plants and DC's should serve what markets for what products) (monthly - yearly) Production and distribution planning (Coordinate the actual production and distribution plans for a whole enterprise) (daily) Production scheduling (For a single location create a feasible production schedule) (minute by minute) Transportation planning (For multiple supply, manufacturer, distributor and warehousing points in a network) (Worthern, http://www.cio.com/research/scm/edit/012202_scm.html)

Role of Agro Industries

Agro Industries have major role to play in the pushing the technology downward to the farmers in terms of awareness and using them. Leading Agro players have gone for ERP software package like SAP, which has changed the way these agro industries used to work. Earlier totally fragmented, scattered, redundant and invisible business processes have become integrated, smooth, optimized and visible. This has given them major boost in improving their business and thinking strategically, as without visibility, management become more involve in operational level work rather than tactical and strategical level work.

As a result these industries are going for more advanced technology and process. For example Enterprise Portal (EP) application, this is extension of ERP from factory to the computers at the Mandi which facilitate the real time purchase entry as well as goods movement in the Mandi and from the Mandi. This real time transaction capturing gives the visibility to the purchaser at the Head Office of the actual purchase value and quantity.

Another application of IT/IS due to implementation of ERP is Auction Purchase Dash Board. Purchase in Mandies is auction process. Price moves as the roller coaster moves. As the purchase in agro industry is seasonal and very strategic since it is for whole year and purchasing at low price and quality produce give the edge over others. So purchasers require a screen which can show him the movement of price in all the Mandies, in the country of his purchase and if possible others purchases, so that he can make competitive purchase. This dash board is possible at the HO, if the real time purchase data is being captured at every Mandi.

Fig 3: Enterprise Portal Application

Relationship between ERP and SCM

Many SCM applications are reliant upon the kind of information that is stored in the most quantity inside ERP software. Theoretically you could assemble the information you need to feed the SCM applications from legacy systems (for most companies this means Excel spreadsheets spread out all over the place), but it can be nightmarish to try to get that information flowing on a fast, reliable basis from all the areas of the company. ERP is the battering ram that integrates all that information together in a single application, and SCM applications benefit from having a single major source to go to for up-to-date information. Most who have tried to install SCM applications say they are glad they did ERP first. They call the ERP projects "putting your information house in order." Of course, ERP is expensive and difficult, so you may want to explore ways to feed your SCM applications the information they need without doing ERP first. These days, most ERP vendors have SCM modules so doing an ERP project may be a way to kill two birds with one stone. Companies will need to decide if these products meet their needs or if they need a more specialized system (Worthern, http://www.cio.com/research/scm/edit/012202_scm.html).

Applications that simply automate the logistics aspects of SCM are less dependent upon gathering information from around the company, so they tend to be independent of the ERP decision. But chances are, you'll need to have these applications communicate with ERP in some fashion. It's important to pay attention to the software's ability to integrate with the Internet and with ERP applications because the Internet will drive demand for integrated information. For example, if you want to build a private website for communicating with your customers and suppliers, you will want to pull information from ERP and supply chain applications together to present updated information about orders, payments, manufacturing status and delivery.

Supply Chain Management Software

Supply chain management software is possibly the most fractured group of software applications on the planet. Each of the five major supply chain steps previously outlined composes dozens of specific tasks, many of which have their own specific software. Some vendors have assembled many of these different chunks of software together under a single roof, but no one has a complete package that is right for every company. For example, most companies need to track demand, supply, manufacturing status, logistics (i.e. where things are in the supply chain), and distribution. They also need to share data with supply chain partners at an ever increasing rate. While products from large ERP vendors like SAPs Advanced Planner and Optimizer (APO) can perform many or all of these tasks, because each industrys supply chain has a unique set of challenges, many companies decide to go with targeted best of breed products instead, even if some integration is an inevitable consequence. Its worth mentioning that the old adage about systems only being as good as the information that they contain applies doubly to SCM. If the information entered into a demand forecasting application is not accurate then you will get an inaccurate forecast. Similarly, if employees bypass the supply chain systems and try to manage things manually, then even the most expensive systems will provide an incomplete picture of what is happening in a companys supply chain.

Goal of Installing Supply Chain Management Software

Before (Wheately C 2003) the Internet came along, the aspirations of supply chain software devotees were limited to improving their ability to predict demand from customers and make their own supply chains run more smoothly. But the cheap, ubiquitous nature of the Internet, along with its simple, universally accepted communication standards have thrown things wide open. Now, you can connect your supply chain with the supply chains of your suppliers and customers together in a single vast network that optimizes costs and opportunities for everyone involved. This was the reason for the B2B explosion; the idea that everyone you do business with could be connected together into one big happy, cooperative family.

Emerging Technologies That Will Affect the Supply Chain

The most notable is Radio Frequency Identification, or RFID. RFID tags are essentially barcodes on steroids. Whereas barcodes only identify the product, RFID tags can tell what the product is, where it has been, when it expires, whatever information someone wishes to program it with. RFID technology is going to generate mountains of data about the location of pallets, cases, cartons, totes and individual products in the supply chain. It's going to produce oceans of information about when and where merchandise is manufactured, picked, packed and shipped. It's going to create rivers of numbers telling retailers about the expiration dates of their perishable itemsnumbers that will have to be stored, transmitted in real-time and shared with warehouse management, inventory management, financial and other enterprise systems. (Worthern, http://www.cio.com/research/scm/edit/012202_scm.html).

Conclusion
The need for new management approaches in food supply chains, especially regarding food safety guarantees and quality assurance activities, requires new initiatives in information

management. At the core of interest is the need for new information layers that utilize enterprise information but focus on the communication between chains for quality assurance towards the consumer as the final customer and for improvements in risk management and tracking or tracing capability in case of problems in food safety or quality. As some of these aspects have become legal requirements, the sector is forced to act. However, as the balance of costs and benefits for individual enterprises regarding general sector solutions might be low or even negative, it is suspected that solutions will have to build on a network of enterprise clusters of limited size that are easier to coordinate for utilizing some of the potential benefits of the new information layers that reach beyond basic legal requirements and might involve improvements in food quality, in tracking and tracing, and in chain efficiency. Several projects not yet published in literature are under way. They might serve as a basis for a sector-wide network of clusters, a semi-optimal but feasible solution for meeting the sectors information management needs in the future.

References
1. 2. 3. 4. 5. Agri Expo 2006 Garai A and Ahadrach B. 2006 March, New Delhi, http://www.digitalopportunity.org/article/view/131359 http://www.verisign.com/epc 2005 Schiefer G, 2004, Information Management in Agri-Food Chains Wheatley Chris, 2003, The Benefits of Supply-Chain Practice in Developing CountriesConclusion from an International workshop, Proceedings of a workshop Agriproduct Supply-Chain Management in Developing Countries held in Bali, Indonesia, 1922 August 2003 Woods J. Elizabeth, Supply Chain Management: understanding the Concept and Its Implications in Developing Countries, 18-26 Proceedings of a workshop Agriproduct Supply-Chain Management in Developing Countries held in Bali, Indonesia, 1922 August 2003 Workshop on Knowledge Centre Initiatives in Rajasthan, April 19, 2006, Organised by Mission 2007 and DoIT, Rajasthan at HCM-RIPA, JLN Marg, Jaipur Worthen Ben, The ABCs of Supply http://www.cio.com/research/scm/edit/012202_scm.html Chain Management,

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Authors
1. Prof. S.K. Garg,
B Tech, M Tech, PhD (IIT Delhi, India): Professor of Industrial Engineering and Operations Research, Mechanical and Industrial Engineering Department, Delhi College of Engineering, Bawana Road, Delhi-110042 E-mail: skgarg63@yahoo.co.in Professor S K Garg, has published more than 50 papers in international journals and conferences. His area of interest includes supply chain Management, Just in time manufacturing, total quality management, Operation research. He has also worked in Hero Honda as an engineer in his initial days of career. This paper has been written under his guidance and inputs.

2. Mukesh Shukla,
BE, ME (Delhi College of Engineering, India) SAP Consultant in Materials Management Module with Gravity Microsystem. New Delhi, India E-mail: mukesh@gravitymicrosystem.com / info@gravitymicrosystem.com After post graduation, Mukesh Shukla chose ERP, as a career. His first SAP implementation project was in worlds largest Basmati Rice Exporter in India. While working on this project he got the in depth insight into Agro Industry. He has also done his post graduation project in supply chain management in agro industry and ERP Implementation in Agro Industry. He has done graduation in Mechanical Engineering and Post graduation in Production Engineering. Before post graduation, he worked in Tata Motors Ltd., Leading automobile manufacturer in India

3. Roma Bhatkoti,
B Tech, ME (Delhi College of Engineering, India) Process Engineer for Lean Manufacturing, with Shriram Pistons and Rings Ltd. Ghaziabad, UP, India, and Now with Pentair Water as a Lead of Implementation of Lean Concept E-mail: romabhatkoti@yahoo.com Roma Bhatkoti is also a Mechanical Engineering graduate and Production engineering post graduate. As a process engineer, she has vast knowledge of processes and principles of Lean manufacturing. She has done her post graduation project in Application of Lean manufacturing principles in process industries. She has also published her paper on Advances in Agile Manufacturing in 14th International conference of Indian Society of Mechanical Engineers, in Delhi College of engineering She has given inputs in terms of analysis and approach in this paper.