CONTENT

 STANDARDIZATION
 FINANCING
 STORAGE
 WAREHOUSING
 PROCESSING
 VALUE ADDITION
 RISK TAKING

GRADING AND STANDARDIZATION

 Grading and standardization is a marketing function which facilitates the movement of
produce. Without standardization the rule of caveat emptor (let the buyer beware) prevails; and
there is confusion and unfairness as well. Standardization is a term used in a broader sense.
Grade standards for commodities are laid down first and then the commodities are sorted out
according to the accepted standards.

Products are graded according to quality specifications. But if these quality specifications
vary from seller to seller, there would be a lot of confusion about its grade. The top grade of one
seller may be inferior to the second grade of another. This is why buyers lose confidence in
grading. To avoid this eventuality, it is necessary to have fixed grade standards which are
universally accepted and followed by all in the trade. Standardization means the determination of
the standards to be established for different commodities.

TYPES OF GRADING

Grading may be done on the basis of fixed standards or variable standards. It is of three
types:

1. Fixed Grading / Mandatory Grading: This means sorting out of goods according to the size,
quality and other characteristics which are of fixed standards. These do not vary over time and
space.

2. Permissive / Variable Grading: The goods are graded under this method according to
standards, which vary over time. The grade specifications in this case are fixed over time and
space, but changed every year according to the quality of the produce in that year.

3. Centralized / Decentralized Grading: Based on the degree of supervision exercised by the

government agencies on grading of various farm products, the programme can be categorized
into centralized and decentralized grading.

Under the centralized grading system, an authorized packer either sets up his own
laboratory manned by qualified chemists or seeks access to an approved grading laboratory set
up for the purpose by the state authorities / co-operatives / associations / private agencies.
 The decentralized grading system is implemented by State Marketing Authorities under
the overall supervision and guidance of the Directorate of Marketing and Inspection. This is
followed in those commodities which do not require elaborate testing arrangements for quality
assessment.

Advantages of Grading;

Grading offers the following advantages to different groups of persons:

1. Grading before sale enables farmers to get a higher price for their produce.

2. Grading facilitates marketing, for the size, color, qualities and other grade designations of the
product are well known to both the parties, and there is no need on the part of the seller to give
any assurance about the quality of the product.

3. Grading widens the market for the product.

4. Grading reduces the cost of marketing by minimizing the expenses on the physical inspection
of the produce, minimizing storage loses, reducing its bulk, minimizing advertisement expenses
and eliminating the cost of handling and weighing at every stage.

5. Grading helps consumers to get standard quality products at fair prices.

6. Grading contributes to market competition and pricing efficiency.

FINANCING:

No business is possible nowadays without the financial support of other agencies because
the owned funds available with the producers and market middlemen (such as wholesalers,
retailers and processors) are not sufficient. The financial requirements increase with the increase
in the price of the produce and the cost of performing various marketing services. In the words of
Pyle: “Money or credit is the lubricant that facilitates the marketing machine.”
 Nature and volume of business, necessity of carrying large stocks, continuity of business
during various seasons, time required between production and sale, terms of payment for
purchase and sale, fluctuations in prices, risk-taking capacity, general conditions in the economy
are the some of the factors affecting capital requirements of an agricultural marketing firm.

STORAGE:

Storage is an important marketing function, which involves holding and preserving goods
from the time they are produced until they are needed for consumption. The storage function,
therefore, adds the time utility to products.

The storage function is as old as man himself, and is performed at all levels in the trade.

Producers hold a part of their output on the farm. Traders store it to take price advantage.

The storage of agricultural products is necessary for the following reasons:

1. Agricultural products are seasonally produced, but are required for consumption throughout
the year.

2. Storage protects the quality of perishable and semi – perishable products from deterioration;

3. Some of the goods, e.g., woollen garments, have a seasonal demand.

4. It helps in the stabilization of prices by adjusting demand and supply.

5. Storage is necessary for some period for the performance of other marketing functions.

6. The storage of some farm commodities is necessary either for their ripening (e.g., banana,
mango, etc.) or for improvement in their quality (e.g., rice, pickles, cheese, tobacco, etc.); and

Risks in Storage:

The storage of agricultural commodities involves three major types of risks. These are:

1. Quantity Loss: The risks of loss in quantity may arise during storage as a result of the
presence of rodents, insects and pests, theft, fire, etc.
2. Quality Deterioration: The second important risk involved in the storage of farm products is
the deterioration in quality, which reduces the value of the stored products.

3. Price Risk: This, too, is an important risk involved in the storage of farm products. Prices do
not always rise enough during the storage period to cover the storage costs.

WAREHOUSING

Warehouses are scientific storage structures especially constructed for the protection of
the quantity and quality of stored products.

Importance

 Scientific storage

The product is protected against quantitative and qualitative losses by the use of such methods of
preservation as are necessary.

 Financing

Warehouses meet the financial needs of the person who stores the product. Nationalized banks
advance credit on the security of the warehouse receipt issued for the stored products to the
extent of 75 to 80% of their value.

 Price Stabilization

Warehouses help in price stabilization of agricultural commodities by checking the tendency to

making post-harvest sales among the farmers.

 Market Intelligence

Warehouses also offer the facility of market information to persons who hold their
produce in them.

Types of warehouse

1. On the basis of Ownership

 a. Private warehouses: These are owned by individuals, large business houses or
wholesalers for the storage of their own stocks. They also store the products of others.
b. Public warehouses: These are the warehouses, which are owned by the govt. and are
meant for the storage of goods.
c. Bonded warehouses: These warehouses are specially constructed at a seaport or an
airport and accept imported goods for storage till the payment of customs by the importer
of goods. These warehouses are licensed by the govt. for this purpose. The goods stored
in this warehouse are bonded goods. Following services are rendered by bonded
warehouses:
i. The importer of goods is saved from the botheration of paying customs duty all at one
time because he can take delivery of the goods in parts.
ii. The operation necessary for the maintenance of the quality of goods - spraying and
dusting, are done regularly.
iii. Entrepot trade (re-export of imported goods) becomes possible.
2.On the basis of Type of Commodities Stored
A. General Warehouses: These are ordinary warehouses used for storage of most of
foodgrains, fertilizers, etc.
B. Special Commodity Warehouses: These are warehouses, which are specially constructed
for the storage of specific commodities like cotton, tobacco, wool and petroleum
products.
C. Refrigerated Warehouses: These are warehouses in which temperature is maintained as
per requirements and are meant for such perishable commodities as vegetables, fruits,
fish, eggs and meat.

VALUE ADDITION:

 Purpose: Enhancing the perceived value of a product through features, services, or

branding.
 Benefits: Increases product demand, justifies higher prices, and differentiates the product
from competitors.
 Example: Offering personalized engraving on a piece of jewelry.
Value addition can be achieved in a variety of ways, such as:

 Features: Adding new or improved features to a product that make it more appealing to
customers. For example, a smartphone manufacturer could add a new camera feature or a
larger battery.
 Services: Providing additional services that complement the product. For example, a car
manufacturer could offer a free maintenance package or roadside assistance.
 Branding: Creating a strong brand identity that associates the product with positive
attributes. For example, a luxury brand could create an image of exclusivity and
sophistication.

Value addition is essential for businesses to compete in today's marketplace. By offering

products that are perceived to be of higher value, businesses can charge higher prices and build
customer loyalty.

RISK TAKING:

Risk taking is an essential but often overlooked aspect of supply chain management. It
involves identifying, assessing, and managing potential risks that could disrupt the supply chain.
These risks can be internal or external, and they can have a significant impact on a business's
profitability and reputation.

Internal risks include things like:

 Quality control issues: If a business produces low-quality products, it can lead to

customer dissatisfaction and returns.
 Inventory management problems: If a business has too much or too little inventory, it
can lead to increased costs and lost sales.
 Production delays: If a business cannot produce products on time, it can lead to
customer dissatisfaction and lost sales.
 Financial problems: If a business does not have enough cash flow to meet its
obligations, it can lead to financial difficulties.
External risks include things like:

 Natural disasters: Hurricanes, earthquakes, and other natural disasters can disrupt the
supply chain.
 Political instability: Political unrest can lead to disruptions in the supply chain.
 Economic downturns: Recessions can lead to decreased demand for products and
services.
 Supplier disruptions: If a supplier goes out of business or is unable to meet its
obligations, it can disrupt the supply chain.

Businesses can take a number of steps to manage risk. These steps include:

 Developing a risk management plan: A risk management plan should identify potential
risks, assess the likelihood and impact of each risk, and develop strategies for mitigating
or avoiding them.
 Implementing risk mitigation strategies: Risk mitigation strategies can include things
like purchasing insurance, diversifying suppliers, and developing contingency plans.
 Monitoring and evaluating risk: Businesses should regularly monitor and evaluate their
risk management efforts to ensure that they are effective.

REFERENCE
http://ecoursesonline.iasri.res.in/mod/page/view.php?id=743
http://www.agritech.tnau.ac.in/agricultural_marketing/agrimark_Tamilnadu%201.html