Edited by John R. McIntyre, Silvester Ivanaj and Vera Ivanaj
Chapter 9: Setting a value chain through integrated supply chain in Indian agribusiness – the Indian Tobacco Company way
Food production and its efficient distribution is a critical issue the world over. There are a lot of changes happening in the global market, especially in the emerging markets compared to the western part of the globe in relation to food production and its supply. In recent years these markets have witnessed explosive growth of the middle class, driven by greater industrialization and urbanization. An emerging middle class creates changing dietary habits, such as consuming more carbohydrates, a more fibrous diet, and fresh organic food. This whole phenomenon is more resource intensive, which puts local supply chains under greater pressure. These factors, combined with climatic uncertainties in the regions, make the production and distribution of food a critical issue. However, the issue can be addressed if a viable value chain is established. A value chain denotes integration of different levels of production and distribution in a manner that adds value to the product and each step by attaining process specialization and quality improvement. The improvement in efficiency is derived from the factors related to production and carries importance for future competitiveness of the product. This paper is of qualitative type that aims to highlight the significant aspects of value chain building in the market of agriculture produce. It discusses the concept with the help of a case where an enterprise has created a system helping farmers to build capabilities in agriculture produce. It highlights key initiatives taken by an Indian enterprise, the Indian Tobacco Company, to establish a structured approach of value chain in agribusiness though collaboration. Collaboration among the various stakeholders along the food value chain is more important than ever. The interdependencies between stakeholders are no longer in silo, mainly because most functions are closely linked along the chain. This model also encompasses stakeholders anywhere in the network. It also maintains a regional balance by focusing on strategic alliances between big as well as small farmers, storing/processing units, and distribution and sales enterprises that seek to create more value of the front end (farmers) of the chain and operate efficiently with other farmers to create significant volume, which in turn creates economies of scale.
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