Designing Demand Driven Price Sensitive Supply Chain Model for Indian Farmers

Abstract

Small and marginal farmers (SMFs) in developing countries, perennially struggle with low marketable surplus, inadequate storage facilities, poor market access and logistical constraints that in turn leave them with distressed sales of their produce to exploitative middlemen in the agricultural supply chain. Addressing such pressing concerns, the present study aims at proposing a market-facilitating demand-centric agricultural supply chain model where the income of the farmers is directly linked with risk-adjusted actual market movement. The price-sensitive model, being a facilitator for direct marketing, makes farm produce marketable by designing a cost-effective and scientifically managed shared warehouse, and minimizing market volatility risk through diversification among a group of contributing farmers. Empirical validation of this simulation-based modelling was tested on three essential year-round food staples – Tomato, Onion and Potato (TOP) – against the prevailing market settings. Interestingly, instead of immediately selling agricultural produce to market intermediaries due to a lack of storage options, if farmers shared the associated storage cost among themselves and distributed the market returns by proportionate crop sales to fulfil the demand, they could not only realize better returns during the season but also could turn off-season market unpredictability into their favour. The model is focused on enhancing SMFs’ income in the emerging economy context, and its empirical approach for risk minimization strategy is indeed proposed for the first time in the available literature. The finding, demonstrably, substantiates that the policy implication of the proposed model for SMFs in the fruits and vegetables (F&V) segment could improve market access and derive fair returns.