Individual Assignment submission form
ISB PGPMAX: 2019
Capstone Project Individual Exercise - National Commodity
Management Services Limited Transcend from Mid-stream supply chain player
to Market place
Course Name: Business Model Innovation
Faculty: Prof. Srivastava, Rajendra
Submitted by: Sri Rama Murthy Battula
PG ID: 81920030
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National Commodity Management Services Limited Transcend from Mid-
stream supply chain player to Market place
Relevant recent trends in the market served by NCML
The Post-harvest Agri value chain starts with the Primary Mandi or Agriculture Produce Market
Committee (APMC), which acts as a platform for efficient price realisation by farmers and
aggregation centres of the produce for stockiest, traders, processors, and other value chain
participants.
There are three megatrends seen in the Agri-Value chain ecosystem.
1. The current pandemic has distorted the food supply chains with restricted movement of goods
from origins to destinations.
2. To strengthen infrastructure in agriculture, the Government of India also allocated Rs
1,00,000 crores to create "Farm to Fork" infrastructure
3. Measures announced to unlock the agri-business space's potential also include doing away
with the stringent positioning of APMCs or designated mandis with proposed farm laws.
Impact on market-facing business processes (product innovation, value-chain and customer
[market-based assets] management)
Altogether from 2 decades, the company NCML was established through an asset-heavy infrastructure
model of warehouses, Agri-testing labs, and a pan-India network for serving the clients with bundled
services.
With the change in the operating environment and a significant push to the agriculture sector, future
growth will be determined by how effectively the industry's organisation adds new asset Light models
by collapsing organisational boundaries and cost portfolio diversification.
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Major thrust shall be into delinking from commodity value-based thinking (to space-based thinking)
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to Integrate to differentiate the way for private entities to set up their markets for the paradigm shift of
1. APMC to see substitution 2. Corporates to buy directly from FPO/ farmer
3.Retailers to require backward integration services 4.3 PL outsourcing for large processors
5.Tech-enabled inbound and outbound supply chain 6. Marketplace like E-NAM
3.What are your company's business assets? Labilities?
Large-scale aggregator for many commodities; a more formidable player in the middle stream
of the value chain," NCML's new transformation mantra rooted in active participation in the
facelift of India's Agri-infrastructure, with its physical assets presence in around 15 states
with
Integrated trading and supply chain services and comprehensive and effective commodity risk
management services
linkages for growers & traders with spot and futures markets
Accurate and incisive market intelligence and advisory services
Credible and low-cost testing and certification services
Safe and liquid warehouse receipts market and promote commodity financing
Strengths
The company strengths are pan-India presence in 400 districts of India with one or other
service offering. Backed by long-term investor Fairfax and demonstrated the services to large
client-centric Supply chain solutions with Integrate procurement, e-trading, transportation,
warehousing, and processing tie-ups.
Weaknesses
1.More into transactional relationships with low cross-business synergies 2. Price
sensitivity and exposure to unorganised competition from new entrants
3.Adaptation in low demand growth commodity service market 4.Changing technology
landscape
Business model (CV-SHV Matrix) for your most crucial CUSTOMER?
Components of Value Product (Service) Supply-Chain Customer Management
Innovation (Service
Delivery)
Enhance Cash Flows Solution
(Profitability) Non-core services customised as Single touch point or key vendor
through reliable third- per the company
party service provider norms and
SOP’s.
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Accelerate Cash Flows Standardised as per
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Invest to Enhance) internal SOP’s and pre- Can push the Regular MIS and research
(Growth) decided deliverables ultimate user analysis for planning
requirements to
service provider
Reduce Volatility and Accountability for
Vulnerability of Cash charged fee Accredited Repeatability of outcome and
Flows channel partner traceability increase the customer
as a mid-stream credibility.
service partner
Invest / Enhance Long- Collaboration for developmental
term Value of Business Asset light business Lean supply work of product
model because of Vendor chain Investment in relationship and
managed services collaboration
NCML facilitate the customer’s business performance as a mid-stream supply chain partner taking
care of the customers operational risk whereas the customer focuses on financial risk and business risk
with concentration on up-stream of supply chain.
NCML business model (Customer Value-Shareholder Value [CV-SHV] matrix).
National Commodities Management Services Limited (NCML) is the country's largest and integrated
post-harvest solution provider offering a bouquet of services along the entire supply chain in the
commodity space. NCML provides Commodity Management Services in Procurement, Storage,
Transportation, Inspection, Testing, Electronic Trading, Crop, Weather, Price information, Training,
and consultancy for various agricultural, food and other commodities through the PAN India network
of Service Centres. In addition, NCML has a Department of Science and Technology recognised
R&D centre working in Weather and Crop monitoring, Yield Guidance, and various aspects of food
safety.
Components of Value Product (Service) Supply-Chain (Service Customer
Innovation Delivery) Management
Enhance Cash Flows Enhance turnover and
(Profitability) Post-harvest integrated margins through incisive Bundled price
services information and
handling physical
commodities
Accelerate Cash Flows one stop shop for Accelerate growth by
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Invest to Enhance) services providing third party Annual contracts
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(Growth) services of managing
operational risk to make
customers focus on
business risk and
financial risk
Reduce Volatility and Forecasting and De-risk and enhance
Vulnerability of Cash partnering in demand resilience to self and the Manage the compliance
Flows estimation ( S & D) customer by being and regulatory
through market research innovative and trusted requirements pertaining
support and entry barrier commodity risk- to supply chain.
for others to replicate manager taking care of
Quality, Quantity, Price,
and liquidation risks
related to commodity
business
Invest / Enhance Long- Heavy investment in Providing end-to-end Presence in all
term Value of Business infrastructure and huge solutions from raw production centers and
network of presence materials to foods consumption centers
through heavy
investment tangible and
intangible resources
.
The green highlighted are the strengths and the red highlighted are weaknesses.
Competitor’s Business Model
Components of Value Product (Service) Operational excellence Customer
Innovation Management
Enhance Cash Flows Easy payment solutions
(Profitability) Specialised services as - Wallet Key account manager
per need model
Accelerate Cash Flows Charge on usage basis No developmental
Invest to Enhance) and no annual contracts services and only Heavy Discounts
(Growth) transactional
Reduce Volatility and Positioned as mid Customized product and
Vulnerability of Cash -sized entities service solutions for processors Works on penalty
Flows provider clauses and reinforce the
confidence in customer
Invest / Enhance Long- Buy – resell of services
term Value of Business No annual contracts with operational Investment in marketing
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and services on usage excellence and technology
basis
Weaknesses Frauds denting credibility • Collections weak resulting in ballooning receivables –
greater issue with Government clients
key differences between NCML and competitors’ business model -to serve customers
Focus initial sales efforts on existing customer base/relations, availability of
0wn infrastructure in key states/regions and network of partner
1.Network effect for supply chain coverage and economies 2. Integration
solutions for large customers- farm to fork
Strategy to improve your value proposition and competitive positioning
Proposition is pan-India buyer network, price transparency, faster payment collections but
customers have long standing relationships and manage quality/ quantity related disputes
Integrate warehouse management systems with transportation management
system for order, dispatch, tracing, KPI reporting and sending auto mailers etc.
Two key initiatives can you undertake to improve your customer’s business performance while
enhancing NCML performance
NCML initiated the program Surakshit Mandi to help farmers in selling their crops through its
warehouses, which provides a direct platform to farmers to get the right price, timely & affordable
credit and has also ensured a safe and easy transaction. It further uses the latest RBI-approved escrow
accounts, provides an e-wallets payment gateway.
The company is an agile player in the new operative environment, which entails unlocking the vast
potential of an integrated Agri-supply chain. The company initiated an online marketplace called
MktYard.com, which acts as the online intermediary between the buyers and sellers of most of the
major commodities—acting as vital cog, NCML marketplace operations are likely to be bolstered
with the addition of services by dedicated and trusted transport and logistics partners.
Strong value proposition of integrated supply chain solutions for large customer groups to
include single window offering, organized play, cost savings and outsourcing of non-core
activities
Given what you have learned from 1 -4 (earlier), how can you leverage technology and/or
invest in human capital to improve your company’s Market -Facing Processes while
enhancing growth potential and/or de -risking (increasing resilience) your company’s
business model?
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Transcending to asset -heavy to asset-light opportunities through 1. Marketplace venture
and 2. Cloud trucking 3. Trainings 4. Research and development 5.Stock auditing services
Collaborate with FPO and Cooperatives, digital trading platform/ e-Mandi
Supply chain technology- stock/ supply chain monitoring solutions
Agri-value consulting firms, Ag-tech platforms, to build the private electronic
mandi platform
Data & Analytics start-ups
Supply chain solution firms/ Alliance/ Technology collaboration
Resources needed to implement –
Acquisition of talent
Investment for surge pricing,
Marketing,
Technology
Performance metrics – NCML reinforce to enhance growth and resilience
Value of market-based intangible assets
1.Brands
2. channels
3. customers
4. intellectual property
5.Management of growth and risk
6. Shareholder value improvement
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Government of India (GOI) Ordinances Annexure
GOI announced 3 ordinances that give farmers a new approach to sell their produce, likely to improve
private participation in the agri value chain over the next decade
Ordinance Context Announcement Potential
► ECA mainly puts a limit in ECA will be amended
Amendment of ►
1 purchase and storage of agri- ► Agri-commodities including
Essential commodities commodities ► Aid entry of private groups for purchase in bulk,
cereals, edible oils, oilseeds,
Act (ECA) ► Aim was to reduce chances of pulses, onion and potato to and hence increase processing levels
► Illegal hoarding be deregulated ► Farmers to have access to a broader market
► Artificial ► Stock limit to be ► Reduced influence of middlemen resulting
price imposed under in higher price realization
escalations exceptional
► Aim of the act was to secure circumstances
nutritional needs of the citizen
► Removal of requirement of APMC issued licenses for
► Agriculture marketing under purchasing produce directly from the farm
► Central law will be ► Proposed e-trading system will enable interstate trade
Agricultural marketing state list-mainly regulated by formulated to provide:
APMC act with ease-specifically beneficial to state border areas
reforms to provide ► Barrier free Inter state
Act essentially brings in rules ► APMC reforms to also allow interstate movement of
2 marketing choice to the
► trade
for licensing and participation ► Framework for e-trading
produce
farmers in selling and purchase of of agriculture produce ► Higher price realization due to multiple potential buyers
agi- commodities
► Farmers lack an enforceable ► Risk mitigation for farmers, assured returns and
► Facilitative legal framework
standard mechanism for will be created to enable quality standardization
predictable prices of crops at farmers for engaging with ► Legal framework enabling farmers to engage with other
Framework for produce the time of sowing processors, aggregators, parties in the value chain and carry out transactions in a
price and quality ► Also, private sector investment large retailers, exporters in fair manner
in provision of inputs and ► Strengthening the contract farming framework
assurance fair and transparent manner
knowhow in the agriculture ► Risk mitigation for farmers,
sector hindered assured returns and quality ► Transfer the risk of market unpredictability from the
standardization form farmer to the sponsor
integral part of framework ► Enable the farmers to access modern technology and
better inputs
► Attract private sector investment for building supply
chains for supply of Indian farm produce to global
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Setting up digital Data Platforms around ► Penetration of farm Setting up digital platforms and providing data to
platforms weather, insurance, insurance- improved farmers on Weather/ Pest outbreak forecast, Mandi
satellite analytics : ₹ underwriting Prices and farm advisory
7000 Cr
Data / Digital / ► Farm credit
Traceability & ► Yield improvement
Value-added services
Food Testing Lab Current Market ~ ₹ 4000
Cr Setting up quality food testing labs for Agri-input testing,
► Supply chain quality farm produce testing, final products and exports testing
► Export readiness
► FSSAI compliance
Food parks Market size =₹ 9 K Cr (@ ► Higher processing and Setting up food parks for secondary and tertiary
500 cr per MFP) value addition processing of F&Vs and pulses
► Rural employment
Distribution & Farm to fork models ► Supply chain development
Direct to consumer : ₹
Retail 20000 Cr ► Modernization of urban Setting up the distribution network and strengthening
wet markets the existing hyper retail outlets (if any)
Exploring Exports in ► Developing competitive Export opportunities
Export markets Agriculture/Diary=₹2.7 advantage ( much like
for food L Cr Shrimps) across multiple
business categories
Fresh Agri-Exports~₹65
K Cr
Processed Agri
Exports~₹20 K
Cr
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Addressable pool of ₹ 8 L Cr: 12% of marketable value of produce
CML- Growth strategy document
