Traditional supply chains mean business too

Global business is under pressure with sluggish growth or recession in the developed world and huge potential in emerging and developing markets demanding the infrastructure and skills to deliver sustainable growth. There are industries led by MNCs (Multi National Corporations) that straddle frontiers characterised by modern, high tech and consolidated operators and others that remain local, traditional, low tech and fragmented. And yet, there is more to be gained by seeing these extremes as part of a continuum and not as opposing forces to explore mutually beneficial initiatives that can enable us to understand better how supply chains function in all sorts of traditional, modern or hybrid contexts.

This story picks up momentum on a beach in Rushikonda, just 13 kms from Vishakhapatnam on one of the best rated beaches on the south east Indian coast. One morning Rob Bell was walking the beach and, having taken a photo of a fishing boat on its way back to the shore continued the sequence on to the beach; unloading the nets; sorting the species and sizes and then, as the women arrived to trade with agents, an idea took shape …

Off to market

Textbooks are full of supply chain examples and, sophisticated supply chain optimisation software can “map” a process from raw material to value addition and on to the consumer or end user on the screen. This summer, on a Logistics Course at GITAM International Business School, Rob Bell worked with an MBA class to map from end-to-end a number of supply chains such as Fish; Mango; Banana; Dairy; Bakery and Vegetables – starting on the beach or in the field and on to market by bullock cart or rickshaw; bike or light truck. The idea was to nurture the students interest in reality rather than simulation and, encourage them to learn from everyday business practice and process all about them. The developed world and high tech supply chains are not the only source of insight into supply chain techniques and hands on experience can improve the ability to read a supply chain and stimulate insight, analysis and innovation.

Nearly forty MBA students were split into groups to complete desk research on the product to generate basic background information on market size, scope and share. From this platform the teams worked in the field to map the supply chain from harvest to market. For example, one team focussed the fishing community at Rushikonda up the coast from Vizag in Andra Pradesh.*

The Indian Fishing industry is a INR 220 billion ($ ) industry generating 1 per cent of GDP having moved from 0.75 Million Tonnes (1950) rising to 7.2 MT (2009); exporting $1.9 billion with over 5 million employed. This Study focussed South East India, 34% of Indian coastline; 21% of landings and 663,790 MT (2008). This is a significant  industry and, despite the traditional tools of the trade merits closer investigation – over 50% of landings are generated by the non-mechanised sector typified by the community at Rushikonda.

The team worked hard and swiftly to map the process from end-to-end. On Saturday, we observed the community at work on the nets and on the engines themselves – maintenance. Each boat was made of wood; the crew was from 6 to 8 and on some boats oars were used and others a small engine to speed up moving away from the coastline. The team interviewed the fishermen to understand the economics – a typical boat costs 200,000 INRs; an engine about 100,000 INRs and, nets (with 30 kg capacity) 15,000 INGs. Each trip to sea needs 10 litres of fuel costing 450 INRs and so on. Working with the local community takes time and patience with a need to cross reference and check – all skills needed in mapping exercises in the field.

On week days, after the sail and harvest itself, we monitored sorting activities and then loading the thatta (a basket and unit of measure costing 15 INRs); analysed the species – Indian mackerel; sardines; croakers fish and threadfin. Then the team followed the thattas into the fish market at Vizag observing the random selection of rickshaws and, in the market itself, photographed fish transferred to polystyrene boxes.  The boxes with the Red Cross insignia on the side – they were leftovers from the Tsunami of 2005! A clear illustration of the type of chronic under investment the industry suffers from.

The team spent time interviewing the fishermen and, the womenfolk who played a key role in selling the fish to agents on the beach and down in the market itself. We noted the lack of insurance; seasonal peaks and the need for better distribution and cooling facilities. This was a preliminary study and working conclusions highlighted the need for greater investment; succession planning and, the potential to develop cooperatives out of these communities as a means to build investment capacity; improve local value addition; skill development and retention. Similar observations emerged from parallel studies by other teams on mango to vegetables – with a fascinating comparison between a farmers market and a modern trade vegetable outlet in another study. The farmers market was superior on price, quality and freshness.

Fishermen in Kerala have used the mobile phone to communicate with the shore and then to the markets as a means to maximise income; secure orders; reduce waste AND reduce dependency on rapacious agents. The results are impressive: profits for fishermen up by 8%; consumer prices dropped by 8% and waste has fallen to zero from 8%. This is a compelling illustration of how we can develop these studies to open up other traditional – but no less important – industries to greater productivity without abdicating all initiative and innovation to MNC and the barons of the modern trade. A focus on the “black box” of the informal economy is a useful learning experience as well as being fertile ground for product development. Many developed world companies could AND SHOULD use this approach to grow business in quite different markets. Above all, this is the route to inclusive and sustainable growth.

The teams then pulled together all their desk research; photo sequences; observations and informal interviews to prepare a formal presentation reviewed by Faculty and their peers. Following this initiative, Rob Bell and the T L team are engaged in a number of discussions with businesses in India; Kurdistan; Africa; South America and Asia to open up these studies and extend them into a wide range of research projects leading to improved commercial performance. For example, in October, a team will be mapping the traditional carpet industry in Kurdistan and, another team will be studying where best to deploy or develop mobile technologies to aggregate demand and, operate more effectively and efficiently. Process mapping and value chain analysis tends to focus the physical movement of goods; we need to balance this with clear insights into cash flow and working capital management. This dimension will lead us to mobile solutions. Elsewhere, we are looking at garlic in Nashik and, we plan to extend these studies into Argentina; Colombia and elsewhere in South America. There is much to explore and even more to learn. We’d be keen to hear from anyone who would like to work with us in this exciting endeavour. See comments below.

There are many learnings from these explorations of essentially traditional “supply chain” contexts; most of which operate informally – are unregulated, not licensed and don’t pay taxes. However, according to the OECD, by 2020 these informal markets will generate two thirds of the global workforce and almost half of the world’s economic growth over the next 15 years will come from the top 400 cities in which this majority will live. Bluntly, no government, no multinational, no global non-profit or social enterprise can claim seriously to replace an estimated 1.8 billion jobs worldwide created in what we all too easily dismiss as the shadow economy.

The Transformational agenda advocates greater emphasis on understanding these supply chains that start out and often remain in an informal context. And yet, these are the supply chains that DO plug into more sophisticated environments further down the line such as Future Groups Supply Chain Solutions ever expanding and sophisticated warehouse network in India. As CEO Anshuman Singh puts it, not everything needs to be – or even can be – state-of-the-art. Many supply chains will combine traditional and manual handling techniques with high tech and capital intensive materials handling and warehousing equipment.  The point is this – you can learn much from the grassroots and the experience can strengthen your use of more sophisticated techniques at a later stage. As Frank Zappa, the experimental musician, once said of the computer – it lacks eyebrows. We need to understand reality on the ground and educating logistics professionals of the future from the grassroots as with Rushikonda can produce surprising results. Lest we forget, this is the majority world.

  • Rob Bell would like to thank G Sanjusha; Praveen Kumar Naidu; G.V.K Sandeep; Priyaparna Majumdar and M.S.P.Rani for all their enthusiasm and commitment to this work and throughout the Advanced Logistics Course. This was an exemplary team. More examples from other teams to follow.
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5 Responses to Traditional supply chains mean business too

  1. Its interesting and hugely important to analyse the traditional scm to main stream scm. This can lead to significant improvements for all. Keep this up!

  2. Mike Cavendish says:

    Given the scarey period we are in at the moment and the hits in the developed world economy there will be a major shift to emerging and developing markets. It will be a HUGE mistake for developed world MNCs to just look to plug and play in these growth markets. More needs to be done to understand these supply chains. And in many cases your ideas can work. You speak of figuring out the gaps in the process and using all sorts of adaptable and affordable solutions. This is a BIG BIG deal.

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  4. Several years ago as part of a documentary I filmed an artist who had travelled the world’s shipping lanes and brought back items from places I hadn`t heard of. Even now the names escape me. He then placed these in the gallery to a bemused reception. This was 1990 I think. Ever since I have respected and believed in the freedom and potential of world trade. Thanks for reminding me of this. The world is gonna be OK! Ha!

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