Analyzing India's supply line crisis is needless to say are complex. The most common misconception is that underinvestment in roads, rail and infrastructure are the cause of the problem. This is of course partially true, but the ground reality illuminates that plenty of basic infrastructure exists; it is in fact an issue of strategic metrics preventing development. This is demonstrated in its most extreme form regarding the precarious nature of India's food security and mass need to provide humane amenities to rural communities. It is not so much that India's supply processes are 'archaic' as they are often described, but moreover disjointed, discriminatory and prone to derailment.
Let's take crops as an example. Supply lines from field to market exist. However, the economics of middle traders upset the flow through the well known practice of hoarding. The farmer who uses hard earned rupee to gather his crop into a bull cart, tractor wagon or rented lorry often travels a far distance to the wholesaler 'go-down'. The farmer usually has some speculative second or third hand information on what his goods will fetch on the spot market. Most rely on the wholesale buyer for the current rate. The wholesaler is part of a network of wholesalers that move goods from one hub to another, and each wholesaler in the chain is of course interested in achieving the highest profit for the goods in his go-down. As such, applying elementary supply and demand strategy, he hoards the goods he has until the price rises to a level that satisfies his desired margin. The problem is that each of a dozen wholesalers in the chain are doing the same thing. To worsen the situation, when the farmer arrives at the wholesaler go-down he is met with the sight of the hoarded stock that the wholesaler insists is because there is currently no demand. The farmer is then offered a below market price sum for his goods, which he must take to recoup the costs he has already come out of pocket to bring the goods to the wholesaler. (In some situations, the wholesaler takes the goods from the farmer at the farm and again the farmer is out-of-the-loop of the market price for his goods and will accept a depressed price for the goods as a convenience factor for not having to himself assume the cost of transporting his goods. (The realities are also often complicated by tenant farmer dynamics which charges farmers for not meeting crop quotas, which creates a downward economic cycle leading to inescapable bonded labor. http://bit.ly/etz0ct)
The inflationary issues are created by the wholesalers and futures brokers who hoard the perishable goods until the price rises as high as the market will handle. This 'hold-out' hoarding results in food inflation and the often publicized rotting of food in go-downs. It is not that the goods rot because they cannot reach the marketplace, it is that they are systematically prevented from reaching the market by agri-profiteers.
So what's the solution? As this example demonstrates is that no matter how many roads are paved and rails laid will the supply line issue be resolved. The weakest link in the supply chain, and the link that bears the greatest stress is the farmer. The annual rash of farmer suicides during harvest time is evidence of the fact that farmers, even with a healthy harvest, are victimized by a system that makes farming an unsustainable profession. The problem rests with the lack of farmer empowerment. Recent trials of farmer networks and 'knowledge centers' have put key business data like weather, harvest scheduling and market rates in the hands of farmers through the humble cell phone. (The pioneering for such endeavors goes without doubt to the M.S. Swaminathan Research Foundation. http://www.sciencemag.org/content/327/5967/808.full http://www.mssrf.org/ 'E farming' is key to empowering and modernizing the business side of farming and assuring the farmer is equipped with the basic data sets needed to be a competitive and successful player and self sufficient professional. (A great example is PGI's good friend Venkat of eFarm, Chennai http://www.efarm.in/ ) This is new but welcome technology that is changing the lives of many farmers. Not so long ago farmers produced goods only for their village and surrounding taluk. However with the massive swell of urban population, (who rely on millions of rural micro farmers for food security) requires that the farmer is brought into the supply chain as an equal participant. Failure to do so is a human rights issue that has already claimed the life of too many a farmer at their own hand. The aftermath are widowed mothers of small children who often are ostracized and become destitute migrant field workers. Their children robbed of opportunity for a sustainable home and education. During one of PGI's internal CSR initiatives, PGI learned first hand of this dilemma when it volunteered professional services to My School Satya Surabhi free primary school. http://satyasurabhi.com/ This amazing school for nearly a decade has provided free high quality education to the children of single working mothers and underprivledged in the rural backlands of the Palani Hills. It is a replicable model that can resolve the pitiful situation of the over stressed and broken rural education system.
Whether it be farmer empowerment, dismantling of the go-down profiteers structure or development of free schools for the children of migrant workers, the key supply line issue is one of networks. So, why don't these networks already exist? One need only skim the surface to find that plenty of data exists on these problems but little initiative exists on the ground. Any initiatives that do exist are micro pilot scale and lack traction to become a movement. Why? The answer can be found in the lack of connection between the scores of 'clubs' that analyze and apply solutions.
Another example, will help explain. When PGI was developing the Surabhi Bamboo company http://www.surabhibamboo.com/, its intent was to design a best of breed vertically integrated enterprise that included everything from the harvest of bamboo, its propagation and even the adoption of villages where workers and their families reside. The efficiencies continued through the treatment of the bamboo, the processing, the bringing to market and the marketing of the goods where they could receive the highest value addition. What resulted is an elegant model of closed loop network supply lines that demonstrate exactly how efficient India can be if processes are properly planned, implemented and socially fair. However, during the research phase for Surabhi Bamboo, PGI learned something very interesting that became an initial challenge for feasibility. PGI's research and countless meetings with all horizontals along the vertical demonstrated that invisible barriers exist that prevent a natural network to emerge which would allow supply line facility. PGI deemed this the 'club factor'. In short, the scientist club enjoyed their own company, the applied science club enjoyed their own company, the engineer processing club enjoyed their own company. At each of the meetings they shared with PGI their frustration that the bamboo industry is not taking off in India despite massive inventories and incentives. It was true that missions such as the National Bamboo Mission, Labor Department and CIBART had ample facilities for the setting up of a bamboo enterprise. However these could be categorized as in-the-box and out-of-the-box. The 'box' being the process machine line. Outside the box were the elements necessary to create a sustainable business. These include foremost raw material and marketing. Failure to create the connection between the innovative propagation clubs and introduction to private marketing platforms prevented any of the bamboo boxes to achieve the presumed level of output and success.
The best example was at the recent National Seminar on Bamboo technology and propagation last month in Bangalore. The room was full of scientists, a few representatives of bamboo business, the mandatory government guest of honor and interestingly, a contingent of farmers. After one very well rehearsed power point presentation by a senior member of the propagation club, a farmer raised his hand and asked the $50k question...'so, if I plant this variety of bamboo in my field, how much will I get per pole.' The speaker without a straightforward answer, looked to the distinguished club panel, who looked equally puzzled. The eventual response was very nebulous and never involved a rupee amount. The obvious reality of any industry is that unless someone needs the good, its impossible to know what to pay for the good. The trouble is that the processing club seldom connects with the propagation club despite the natural relationship they share, viz. The development of a bamboo industry in India. This is not to discount the clubs' good work and sincerity, it is the plain fact that most scientists are not comfortable with the 'business-side' and most processing centers are so focused on making sure their machines are able to process that there is little business analysis 'outside the box.'
A sound network such as the one designed into the Surabhi Bamboo enterprise would have made answering the farmer's question easy. The integration of science and propagation as an input factor of the processing costs and the market price would have made quoting the farmer a price per pole an easy analysis. A quick calculation of the three year input costs of propagation necessary to bring the bamboo clump and the quality of the bamboo that builds value addition to the market for the consumable results in a fixed number that can be quoted the farmer. With that knowledge the farmer (whose quantum of land is his means of revenue) can determine whether it makes sense to reserve boarder areas to the inter-cropping of bamboo. Issues of soil preservation, carbon credits and micro-climate considerations are other factors that can be included in the price per pole as a value addition that farmers appreciate and in sum, empowered. The farmer knows what he getting at market, the processor has the peace of mind of secure raw material at a fixed cost, and the supply line is established.
This same logic can be applied to any commodity but frankly it requires a broad focused plan analyzed through a business and economic lens through professionals accustom to setting up turnkey businesses. PGI has further found that the mere collection of data into a detailed plan report is often enough to generate private capital investment interest in agri-business, social corporations and supply line solutions. http://www.slideshare.net/ecologicalfox/elf-pgi-report-final1 It is therefore PGI's opinion that India supply line crisis cannot be legislated away, regulated away or paved over with new roads. The solution exists in the entrepreneurial and CSR private sector through efficiency process development that is a natural part of modern business practice.
In the next installment of CSR: The India Perspective: PGI will provide COP regarding the need and benefits of integrating technology with traditional and cultural processes that provide best entry potential for successful enterprises that are mindful of the indigenous CSR embedded in India's traditional culture. This combination makes India a uniquely equipped platform to become the most sustainable nation on Earth.
First, of course, is the network of those you and your group need to do your day-to-day work. These are people in other units of the company, and outside, on whom and on whose work you depend to do your work. This is your operational network. Those in it don't work for you but your success depends on them. It also includes those who depend on you and your group to do their work. Though you may not need them, their demands on you can have a big impact on how you spend your time and attention.
Your developmental network is the collection of individuals whom you trust and to whom you can turn for a sympathetic ear, advice (depending on their experience), and a place to discuss and explore professional options. One way or another, these are people who help you grow as a manager and leader.
You create both operational and developmental networks naturally. The people in your operational network are those you must work with every day. And most of us naturally turn to knowledgeable friends and acquaintances for personal help with professional dilemmas. You may not have thought about these two collections as networks, but they are. In our experience, most managers spend too little time and care on building and maintaining them. They're mostly forged by immediate need and happenstance, and they often lack key people. But most managers create them, if only in rudimentary form.
The third network you need — your strategic network — is the one many managers don't create at all because it doesn't happen in the everyday course of work and life. A strategic network is about tomorrow. It comprises those who can help you do two critical tasks: first, define what the future will bring and second, prepare for and succeed in that future. There will be some overlap between this network and your operational network, but the differences are likely to be significant, too.
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