Research Progress ReportOnValue Chain Analysis of Micro and Small Enterprises

Faculty of Management StudiesBanaras Hindu UniversityVaranasi 221005

Submitted By:Ms. Swati Srivastava Research Scholar Faculty of Management Studies B.H.U, Varanasi

Value Chain Analysis of Micro & Small EnterprisesModel for Sustainable smallholder inclusion in value chain

Smallholders Competitiveness bottlenecks(Productivity, quality, standard compliance, economies of scale, lack of networks, etc)Access to MarketAccess to TrainingCoordination & Collaboration BuildingAccess to Finance Holistic Approach with exit strategySustainable Inclusion into the Value ChainProblems

Recommended Instruments to address the problem

OutcomeSimplified Existing Tomato Value ChainThe simplified tomato value chain diagram is referred to as a simplified model because numerous interconnections were omitted and the size, levels of control and importance of each of the links and flows could not possibly be shown in a single diagram. Also of note is that horticultural produce value chains have a similar structure. The following discussion will focus on the main segments of the tomato value chain, wholesale, wholesale-retail, retail, processing and intermediaries.

Tomato FarmersLarge Scale Farmers 2. Small Scale FarmersProducersWholesaleOther IntermediariesWholesale RetailRetailFurther ProcessingConsumersProduce MarketNational Fresh Produce MarketProcessorsPasteSaucesPreparationsCanningFreezingExportersDirect SalesExport AgentsDistribution CentresSatellite Produce MarketsChains e.g. fruits & vegetable cityFormal & Informal RetailersSupermarkets2. HawkersTuck shops4. GreengrocersFinal ConsumersLocal ConsumptionCateringRestaurantsFast- foodFunctions & eventsHospitalityHotelsLodgesInstitutionCorporateGovernmentHospitalprisonTomato Value Chain

Tomato Processed by Micro Enterprises

On farm sortingDelivery to factorySorting at the factoryWashingPulpingSeedsPulpHeating/SterilizationHeating/SterilizationSeedsSauce , juice/squash, ketchup, puree, chutney, chilli , etc.Packaging

Tomato Production ProcessOperations Main Functions Specific Functions Support Services

HARVESTINGANDPOSTHARVESTWEEDING /STAKINGTRANSPLANTINGLANDPREPARATIONPrimary ProcessingLabour/SelfPickingFertilizer and Pesticide ApplicationLabour/SelfIrrigationTransplantingFERTILIZERSANDPESTICIDESLabour/SelfBed PreparationPloughingSeedlingPackagingPump rent (inTerai only)Tractor rent (inTerai only)

Pickin

SEEDLINGPREPARATION

Typical Market Linkage for Tomato

Process flow of operations in Tomato value chain

FarmersFarmersFarmersFarmersCollection OfficerFirst GradingCollection HubSecond Grading & PackagingVendorsVendorsVendorsVendors

The Fruit & Vegetale Industry Differentiated Product Flow Chain

Input SupplierGrowerShipper/PackerPostharvest Handling*ProcessingWholesale & ImportRetailOpen Market, Mobile StallsChain Retailer/ SupermarketCorner ShopSpecialised F&V Retailer/ GreengrocerFood service/ Catering**Consumer

Fresh Produce Fruit & Vegetable Supply Chain

Traditional Vegetable Supply Chain (Source: KGPL)

ProducerLocal Level MandiCity MandiAgentsWholesalerEnd ConsumerLack of Options at Farm GateRudimentary Farming PracticesDelayed Price DiscoveryDistress SellingNo Value AdditionChannel FinancingRisk Free IncomeMultiple Handling leads to wastage & Quality DeteriorationPrice & Income Risk30% wastage of vegetable & fruitsLeftover Unsold Vegetables & fruitsEconomy of Scale (Poor)14-16 hours of working timeQuality & Quantity of Vegetables & fruits (Low)Hygiene of the Vegetable& fruits (Mandi) (Low)Fluctuations in PricesTransaction Time (High)

Retailer

Traditional and Modern Retailing Chains in Tomato Traditional Value ChainModern Value Chain

FarmerVillage MerchantMiddlemenWholesalerCommission agentMandi / Local BazaarRetailerConsumerFarmerVendor/ Wholesale SupplierCollection CentreDistribution CentreRetailerConsumer

Tomato Value Chain Map

Input SupplyProductionWholesale/ RetailProcessing/ PackingBulking/ TransportingCo - OperativesDevelopment InstitutionsFormal/ Informal Agro DealersSmallholder producersCommercial producersPrimary TradersSecondary TradersTertiary TradersHotel /LodgesRestaurantsImportsMarkets / SupermarketsSupport ServicesFinancial Business development Market Information Extension

Established Linkages Weak Linkages

The strongest linkages in the tomato supply chain are those orientated around the trader system. Traders buy from smallholders and transport through several individuals until the produce is sold to the market.In extremely few cases do smallholders sell further up the chain than the primary /secondary trader level.The lack of supporting services to both smallholders and traders means that the efficiency of routes up the value chain and the flow of information down the chain is limited.

Food Distribution System

Food processorsSales Agents orBrokersWholesalersRetailersCaterersConsumers

Summary of Business Relationships in Tomato Value ChainFunctionsServicesParticipantLinkage between actors

ResearchinstitutionsResearch,multiplication of seedsResearchersPersistent network relations exist between Researcher and Input suppliers.

Input supplyAgrochemicals,equipmentssupplyInput supplier(stockiest)Spot market relationships the relations are created on the sport (including negations on price).

ProductionInputpurchase,ploughing,ridging, plantingweedingTransporters,Farmers.Labourers(casual)Spot market relationships (the relations are created on the spot (including negotiations on price).

HarvestingLabour forharvestingLabourersSpot market relationships (the relation are created on the spot (including negotiations on price) between farmer and labour

Loading atfarm / localcollectionplaceTransport,loading,unloadingTransportersand labourersSpot market relationships (the relation are created on the spot (including negotiations on wage) between farmer and labour

Trading(primary)Movetomatoes tomarkets,load/unloading,transportTransporters,urban trader selltomatoes toretailerSpot market relationships (the relation are created on the spot (including negotiations on price, volume, type) between local trader and urban trader

Trading( secondary)Unloading,packing,transport,loadingWholesaler andretailerSpot market relationships (the relation are created on the spot (including negotiations on price, volume, type) between urban trader & retailers

RetailingTransporting, SellingShopkeepers /stallSpot market relationships (The relationare created on the spot (includingnegotiations on price, volume) betweenRetailer & consumers

Exporting /importingGradingandpacking,loadingExporter /importerPersistent network relations exist between exporters and importers, prearrangements on volume but prices determined by market forces

Cost Component in Tomato Production

Profit Margins of Tomato

Value Chain Analysis of Tomato(On the basis of cash payment for labour)FARMER/GR0WERSLOCAL TRADERWHOLESALERRETAILER

ItemCostItemCostItemCostItemCost

Production CostsAssemblingCostsAssembly costRetailingCost

SeedSorting,gradingTrucking CostSorting,Grading

Manuring /Fertilizer/chemicalpackagingtaxlocaltransportation

LaborOthers tax

Others

Total Production Costs

Post Production

TransportationAcquisitionCostAcquisition CostAcquisition Cost

Total TruckingCosts

TotalAssemblingCostsWholesalingCostTotalRetailingCosts

Total Post Production Costs

TotalWholesalingCosts

TOTAL FARM LEVEL COSTSTOTALLOCALTRADERLEVELCOSTSTOTALWHOLESALELEVEL COSTSTOTALRETAILLEVELCOSTS

LossesLossesLossesLosses

MarginMarginMarginMargin

Farm gate PriceAssemblerlevel priceWholesale levelpriceRetail levelPrice

Chapter Plan for Value Chain Analysis of Tomato 1. Description of the Tomato Industry. Production areas Production Employment Consumption2. Market Structure Domestic market and prices Share analysis Processing3. Market Intelligence Competitiveness of U. P tomato market4. Market Access Tariff, Quotas & Price entry system5. Distribution Channels6. Logistics Mode of transport Cold chain management Packaging7. Simplified Tomato Value Chain Wholesalers Wholesale-retailers Retailers Processors Intermediaries8. Strategic Challenges9. Conclusion