[Model Answer] UPSC GSM3-2018/Q4: Food-Processing: How Supermarket supply chain management (SCM) eliminates intermediaries?

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  1. Question for UPSC Mains-GS3
  2. Introduction (Define / Origin)
  3. Conclusion (Link with SDG)
  4. Afterthoughts / Mistakes / Pitfalls

Question for UPSC Mains-GS3

Q. Examine the role of supermarkets in supply chain management (SCM) of fruits, vegetables and food items. How do they eliminate number of intermediaries? (150 words, 10 marks, asked in GSM3-2018)

फलो सब्जियों और खाध पदार्थो के आपूर्ति श्रुंखला प्रबंध में सुपरबाजारों की भूमिका की जांच कीजिए । ये बिचौलियों की संख्या को किस प्रकार खत्म कर देते है ?

Relevance to Syllabus of UPSC GSM3: Food processing and related industries in India- scope’ and significance, location, upstream and downstream requirements, supply chain management.

Introduction (Define / Origin)

  • (Define) A supermarket is a self-service retail shop offering a wide variety of food and household products. Examples include Reliance Retail, Big Bazaar, ITC-Choupal fresh stores.
  • (Origin of the problem) Under the state APMC acts, farmers can sell their produce at regulated APMC mandis only. To bring his produce to the mandi, a farmer has to bear the transportation cost, unloading cost. No guarantee that his produce will be purchased at the Mandi. Farmer is exploited through improper weighing, unnecessary deduction, excess commissions and delayed payments.

If you don’t have enough content for body, you can give both the definition and the origin of the issue to pad your answer.

Body#1: SCM through traditional Mandi-channel

It consists of following individuals, each getting a cut or payment before the produce reaches the retail consumers:

  1. Village merchants / Itinerant Traders: They purchase from farmers who’ve either taken advance / loans or unable to goto market due to small quantity vs transportation cost.
  2. Transporters
  3. Hamals or laborers
  4. Weighman
  5. Graders
  6. Actioners
  7. Commission agents / Arhatias.
    1. Kachha Arhatias: who act on behalf of sellers / farmers.
    2. Pacca Arhatias: who act on behalf of buyer i.e. wholesalers.
  8. Brokers: They act neither on behalf of buyer or seller but just help them meet.
  9. Speculative middlemen: They buy produce at a low price during supply glut, and sell it in off-season when price get high.

You may make flowcharts to present this information in fewer words, like below:

Examine the role of supermarkets in supply chain management (SCM) of fruits, vegetables and food items

Body#2: SCM of Supermarkets

  • Supermarkets directly procure from the farmers near the urban areas.
  • For the farmers living faraway from urban areas, the supermarkets usually tie up with “aggregators” (such as farmers’ cooperatives and private logistics companies) to obtain the cereals, pulses, fresh fruits & vegetables.
  • In either case, procurement is done at the farmgate, saving farmers from the aforementioned intermediaries of a traditional-Mandi.
  • This is not to say that supermarket SCM doesn’t require Hamals, transporters, weighmen and graders but variety of agents, brokers and middlemen are eliminated.
  • As a result, even if supermarket doesn’t offer the farmer prices higher than Mandi, still his transportation & unloading costs are saved.
  • Supermarkets usually work on “low-margin-high-volume” business strategy, as a result the end-consumer may get the said items at a reasonable price.
  • Thus, supermarkets’ supply chain management (SCM) of fruits, vegetables and food items benefit both farmers and the consumers.

Conclusion (Link with SDG)

  • Sustainable Development Goal (SDG) #12 requires countries to halve per capita global food waste and reduce post-harvest losses along supply chains, by 2030.
  • Elimination of excessive number of intermediaries in the agri-market is therefore need of the hour.

Afterthoughts / Mistakes / Pitfalls

  • Excessive praise of supermarket should be avoided e.g. “for SDG the supermarkets are essential”. Middlemen are necessary evils until 100% financial inclusion is achieved, because they also provide timely credit (loan) to the farmer to buy next cycle’s inputs.
  • Spotlight should be on ‘supermarket SCM’ and not on excessive criticism of the APMC-middlemen. Because question is not ‘how middlemen exploit the farmers?’
  • Question is not about “explain how inefficient APMC leads to wastage of food and results in food inflation due to excessive number of intermediaries.” If you try to explain that line of arguments you’ll run out of 150 words limit.

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4 Comments on “[Model Answer] UPSC GSM3-2018/Q4: Food-Processing: How Supermarket supply chain management (SCM) eliminates intermediaries?”

  1. Really i m very thankful to mrunal sir n his team as their effort to help all aspirants from all possible resources is unexplainable. plz be conitnue with it

  2. This is a general question and not necessarily asking india specific scenario. We also need to produce international experience on this.

  3. Sir iam completed second pu hw will I will study for upsc exm so plz help me sir

  4. Helpful site

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