ADKN

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ADKN
Best Practice Marketing for Communities in
Mountainous and/or Drug-Crop Producing Regions
Final Project Workshop
The Alternative Development Knowledge Network
Project Output 3 Basic Business Process
Workshop Presentation
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DOCUMENT OVERVIEW
INTRODUCTION ON-FARM IMPROVEMENTS PROCUREMENT/SUPP
LIER MANAGEMENT POSTHARVEST PROCESS SALES GROUP
ACTIVITY
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INTRODUCTION

• A Development-Oriented Rural Enterprise has to be
  an Enterprise, i.e.
• It must sell something of value
• It must make a profit
• It must have a business process
• To start a Development Oriented Rural Enterprise
  you will normally need to
• Conduct on-farm improvements to raise quality of
  supply
• Purchase produce from farmer-suppliers (and make
  sure they dont sell to traders)
• Execute postharvest process (transport, pack,
  sort, grade, process, store, etc)
• Sell packed and/or processed produce to
  customers
• This is Basic Business Process

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DOCUMENT OVERVIEW
INTRODUCTION ON-FARM IMPROVEMENTS PROCUREMENT/SUPP
LIER MANAGEMENT POSTHARVEST PROCESS SALES GROUP
ACTIVITY
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ON-FARM IMPROVEMENTS I

• Standardizing varieties
• Improving planting material
• Improving cultural practices
• Improving harvesting practices
• Improving pest control
• Improving soil management
• Developing water resources
• Improving water management
• Installing on-farm and near-farm infrastructure
• Improving supply of credit and agricultural
  inputs
• Certification programmes
• Introducing and improving land use practices
• Improving cropping systems

Kinds of Activity
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ON-FARM IMPROVEMENTS II

• How do you prioritize on-farm improvements?
• What will make farmers accept and continue to
  use new technology?
• What learning/transfer methods will be used?
• How do we maximize the return on on-farm
  improvements?
• How do we ensure that technology and investments
  are properly adapted to local conditions?

Management Issues

• Use participatory methods to ensure uptake and
  adaptation to local conditions
• Make improved agricultural practices part of
  business process
• Provide continued support for farmers to adhere
  to new practices
• Mix traditional methods (study tours, workshops)
  with non-traditional methods (peer-to-peer
  extension, Farmer-Managed Service Groups)
• Make on-farm improvements that will increase
  organization value and/or increase ability to
  satisfy customer requirements

Best Practices
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CASE STUDY ON-FARM IMPROVEMENTS, MAE HAE

• Mae Hae is former opium-growing area in
  highlands
• Royal Project Development Centre established in
  1978
• Opium eliminated by mid-eighties, but
  improvements still needed

Background

• Extension of fruit and vegetable varieties from
  other countries capable of growing in highland
  conditions
• Training in record keeping and chemical
  management for GAP certification
• Promotion of Integrated Pest Management methods
• Promotion of soil conservation methods (e.g.
  Vetiver, row planting)

Improvements

• Quality improvements- Mae Hae became major
  producer of high quality vegetables and fruit for
  Royal Project and private sector
• Income improvements- average farmer earns
  THN120,000 p.a and wealthiest farmers earn
  THB400,000 p.a.

Impact
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DOCUMENT OVERVIEW
INTRODUCTION ON-FARM IMPROVEMENTS PROCUREMENT/SUPP
LIER MANAGEMENT POSTHARVEST PROCESS SALES GROUP
ACTIVITY
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SOURCING OF SUPPLY

• How to ensure consistency of supply?
• How to reduce/eliminate free riders who take
  benefits but dont sell to marketing organization?

Issues

• Create sense of ownership
• Create social censure/disapproval
• Get monopoly on distribution, processing
• Have unique/superior access to customers
• Maintain trust/communication with suppliers
• Reduce advance payment element of supply
  contract
• Consider possibility of legal action?
• Withdraw benefits from contract violators
• Create communal enforcement/incentives
• Retaliate against invasive/aggressive traders?

Best Practices
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DOCUMENT OVERVIEW
INTRODUCTION ON-FARM IMPROVEMENTS PROCUREMENT/SUPP
LIER MANAGEMENT POSTHARVEST PROCESS SALES GROUP
ACTIVITY
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STORAGE AND DISTRIBUTION

• Bring goods to market in merchantable condition
• Ensure rapid and timely order fulfillment
• Allow sales after immediate post-harvest period

Principles

• Have adequate storage capacity
• Maintain small storage equipment (crates, boxes,
  etc)
• Provide transportation (field to small storage,
  small storage to central)
• Keep central collection facilities
• Manage and reduce heat
• Maintain clean environment and labour
• Control atmospheric contamination

Best Practices
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ROYAL PROJECT STORAGE AND DISTRIBUTION
Delivered by Royal Project refrigerated trucks
3. Delivered to Chiang Mai Packing House
Delivered by farmer vehicles
2. Produce cleaned, sorted, pre-cooled and packed
1. Farmers collect produce in field
4. More grading, checking, packing, etc.
5. Produce available to channels
Delivered by Royal Project refrigerated trucks
Kept in storage
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SORTING, PACKING GRADING

• Transform produce into merchantable form so it
  can be sold in modern trade market
• Increase price from economic rents return on
  investment on packing facilities, labour, etc.

Principles

• Execute as much of the sorting, packing and
  grading (SPG) as possible given
• - Available investment funds for infrastructure
• - Likely capacity utilization
• - Ability to manage organization/process
  complexity
• Study market/customers carefully to find
  requirements for SPG
• Build strong systems and human resources to
  ensure consistency

Best Practices
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SORTING, PACKING GRADING CASE STUDY
Development Centre Collection Area
Chiang Mai Packing House
Location
On-farm
Loose, unclean, mixed grade vegetables
Partially graded and cleaned vegetables
Graded and cleaned vegetables
Checked, graded, cleaned and packed vegetables
Produce Form
Produce Value
4 baht/kilo
5 baht/kilo
6 baht/kilo
8 baht/kilo
Small working area, sorting and grading tools,
storage containers, cleaning facilities
Large packing house, sorting and grading tools,
storage containers, packing materials and
equipment, storage rooms
(Farm), Harvesting Tools, Storage
Invested Capital
Farmer
Workers at collection centre
Workers at Packing House
Implementer
INCREASING COST, BREAK-EVEN VOLUME AND COMPLEXITY
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PROCESSING

• Two varieties
• - Processing that turns produce into niche
  produce with better economics, e.g. turn herb
  into beauty product
• - Processing that is necessary to make produce
  saleable, e.g. extraction of oil from oil palm,
  drying of maize
• Captures economic return on investment
• Usually improves distribution characteristics
  (but not always)

Principles

• Carry out processing as much as possible given
• - Available investment funds for infrastructure
• - Likely capacity utilization
• - Ability to manage organization/process
  complexity
• Study market/customers carefully to find
  requirements for processing
• Build strong systems and human resources to
  ensure consistency

Best Practices
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PROCESSING COFFEE CASE STUDY
Packing Centre
On-farm
Collection Centre
Location
Roasted, ground and quality-tested beans
Packed, roasted, ground and quality tested beans
Produce Form
Dried, fermented and graded beans
Loose beans
Produce Value
30/tonne
100/tonne
1000/tonne
500/tonne
(Farm), Harvesting Tools, Storage
Drying Equipment, Fermenting Equipment
Storage, Roasters, Grinders, Q.C. Labs
Storage, Vacuum-packing, Labeling material and
equipment
Invested Capital
Royal Project Coffee Processing Facility
Implementer
Farmer
INCREASING COST, BREAK-EVEN VOLUME AND COMPLEXITY
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DOCUMENT OVERVIEW
INTRODUCTION ON-FARM IMPROVEMENTS PROCUREMENT/SUPP
LIER MANAGEMENT POSTHARVEST PROCESS SALES GROUP
ACTIVITY
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SALES

• Commercialized production (commercial varieties)
• Continuity of supply
• Adequate processing, packing, sorting, grading
  capacity
• Alignment of product attributes with customer
  needs
• Adequate storage and distribution network for
  order fulfillment
• Adequate working capital

Enabling Factors

• Build and maintain customer relationships
• Get regular customer feedback
• Participate in trade associations, fares,
  exhibitions, etc
• Exploit sales promotions schemes of government,
  etc
• Maintain price and discount structure
• Conduct traditional participatory market chain
  research

Best Practices
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DOCUMENT OVERVIEW
INTRODUCTION ON-FARM IMPROVEMENTS PROCUREMENT/SUPP
LIER MANAGEMENT POSTHARVEST PROCESS SALES GROUP
ACTIVITY
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BREAKOUT GROUP ACTIVITY
Group
Activity

• Develop outline answers to the questions about
  prioritization, farmer acceptance, learning
  methods, maximizing return and adapting to local
  needs

1. On-farm Improvements

• Make a list of strategies for reducing farmer
  contract-breaking/sales to 3rd parties
• Identify strengths, weaknesses and overall
  attractiveness of each strategy

2. Procurement
3. Post-Harvest Process

• Identify worst practices in the main areas of
  postharvest process

• Identify the main kinds of customers that DOREs
  can serve
• Identify the method of contact and
  organizational requirements needed to make a sale
  to each kind of customer

4. Sales
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EXAMPLE BREAKOUT GROUP OUTPUT
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Thank You
ADKN