1. Innovations in Fresh Vegetable Supply Chains : Risk Reduction as Driver of Innovations M.G Subramanian, D.N.Suresh, Janat Shah, Uma Kausik Supply Chain Management Centre IIM Bangalore

4. Producer Commission Agent Primary wholesale trader Retailer Local consumer Itinerant traders Shipper Secondary wholesale trader Outside consumer Cooperative/ Regulated Market I I II III IV V VI VII Fig. Market channels for vegetables in India Source: AVRDC (Sermadevi R. Subramanian, Sivam Varadarajan, and Muthiah Asokan)

6. Producers Physical Possession Ownership Promotion Wholesalers Retailers Consumers Industrial and Household Physical Physical Possession Ownership Possession Ownership Promotion Promotion Financing Risking Ordering Payment Financing Financing Risking Risking Ordering Ordering Payment Payment The arrows above show flows of activity in the channel (e.g: physical possession flows from producers to wholesalers to retailers to consumers). Each flow carries a cost. Some examples of costs of various flows are given below: Marketing Flow Cost Represented Physical Possession Storage and Delivery Cost Ownership Inventory Carrying Cost Promotion Personal selling, advertising ,sales promotion, publicity, public relations costs Negotiation Time and legal costs Financing Credit terms , terms and conditions of sale Risking Price guarantee, warranties, insurance, repair, and after sales service costs Ordering Order- Processing costs Payment Collections, bad debts cost Negotiation Negotiation Negotiation Marketing Channels, Anne Coughlan et al

9. * Information was obtained through personal discussions with scientists of IARI, New Delhi. Source: Vegetable Demand and Production in India: Long-term Perspective Praduman Kumar, Pramod Kumar and Surabhi Mittal, Indian Agricultural Research Institute, New Delhi.

10. Source: “Vegetable Demand and Production in India: Long-term Perspective” from Praduman kumar, Pramod Kumar and Surabhi Mittal, Indian Agricultural Research Institute, New Delhi.

11. Price & Wastage Flow Source :(5) From competition at home to competing abroad :World Bank H: Markups increase with risk assumed by the channel player ? Q: Is this risk/reward structure “desirable”? Perishability Source: S. Raghunath and D. Ashok; June 2004 (IIM- Bangalore) Producer / Farmer: Price Rs. 2.00; Wastage: 20% Consolidator: Price: Rs.2.20; Wastage: 8% Market Wholesaler: Price Rs. 2.50; Wastage: 5% Semi-Wholesaler: Price Rs. 3.33; Wastage: 5% Retailers: Price Rs. 8.20; Wastage: 10% Commodity- Tomato; State - Karnataka

12. Uncertainties compound! Physical Risks Financial risks Information risks Deming: Reducing variability is key to process control !

15. Optimal Risk Mitigation Total Expected Cost Investment in Mitigation (Physical, Informational,Financial) Expected opportunity loss because of residual risk Optimal investment level on risk mitigation Cost

16. Why is that view justified? Returns to other inputs Returns to risk reduction An example is the ratio of incremental return to incremental cost spent in cropcare - ICRIER study * (cauliflowers) Mitigation costs Reduced Risks * Impact of organised retail on the unorganised Sector: Mathew Joseph et al

17. Optimal Risk Mitigation: Impact of improvement in investment cost drivers Total Expected Cost Investment in Mitigation (Physical, Informational, Financial) Expected opportunity loss because of residual risk Optimal investment level on risk mitigation Cost

18. Customer Price, Risk Reduction and Farmer’s Share- Giving it to the farmer Farmer’s share Supply Chain Costs Ph. Fi. In

20. Customer Price, Risk Reduction and Farmer’s Share- Giving it to the customer Ph. Fi. In Farmer’s share Ph. Fi. In

23. Thank You Questions?