by Daniel Benz and Samer Ijaz, Junior and Senior in Supply Chain Management at the University of Illinois at Urbana-Champaign
The following post was written by students on an ADM Institute-sponsored observation study tour through India.
Storage is an important facet of supply chain management, as it deals with issues related to pricing, inventory management, and forecasting. During one or our last days in India, we had the opportunity to study the storage stage of wheat and rice supply chains, crops we had focused on throughout the trip. The facility we visited in Moga, Punjab, explained to us as “the future of Indian storage”, is operated by the Adani Logistics Limited (ALL), and was constructed as a result of a public-private partnership with the Indian government. After a thorough introduction to the mission of the facility, the staff gave us an inside look at how it all works.
The first step we looked at is how inventory is checked upon arrival to the facility. There are four key parameters that are checked before grain is accepted. First, moisture levels must be below 12%, or they are rejected. ALL provides free sample checks for farmers who want to check their grain before bringing it to the facility. Next, they check for grain damaged by weevils and other pests. Any samples with these issues present will also be rejected. Finally, ALL checks for foreign matter present within the grain, and allows up to 0.75% to be present. Any percentage higher than 0.75% will be taken off the final buying price. For example, if a sample has 2% foreign matter present, ALL would lower their buying price by 1.25%. These parameters helped us understand what factors are most important in terms of grain quality.
As we learned more about India’s agriculture system through the eyes of the ALL facility, one thing became apparent—there was a lack of resource utilization in the new storage facility. As business students, we are always weighing costs and benefits. This facility required significant start-up and operating costs, which is one reason why there are not many throughout India despite the need for this type of storage. Despite the fact that postharvest losses do occur, many supply chain actors still view losses as “just the way business goes”. Because the issue is not recognized as significant, there is low incentive or justification for government and private businesses to bring more facilities like ALL’s to India. Through observations and conversations on our trip, we saw that postharvest loss is a serious problem, further complicated by the fact that no one is willing to take responsibility for it.
As supply chain management students, we recognized the tremendous efficiency and environmental advantages of a facility such as ALL. As compared to the traditional open and closed storage facilities that the government employs, there is tremendous potential for this to be the new way of the future for India’s agricultural system. How quickly this becomes mainstream is still yet to be seen. We can only hope that it is sooner rather than later.
Daniel and Samer are participants in the 2014 Supply Chain Management India study abroad trip organized by the program director in the College of Business at the University of Illinois at Urbana-Champaign, Professor Udatta Palekar. Throughout the 10-day trip, students observe how agricultural products in India move through supply chains from farm to consumer with a special focus on postharvest losses.
More about the trip:
- Illinois Students Gear up to Impact Global Food Security
- Following the Flowers: A First Look at Indian Supply Chains
- Losses Along the Way
- Taste of India
- Southern Indian Hospitality
- For Field and Family: A Woman’s Life Farming in Rural India
Edited by: K. Wozniak/G. Kenney