Procurement Landscape for Agriculture Commodities

Agriculture is a prominent industry that is considered one of the most fragmented as well but greatly valued for its ability to feed people. Efficient and effective procurement is always a challenge that directly affects production. The procurement companies in the agribusiness depend on high-volume, consistent deliveries for profitable operations. However, they have to deal with volatile operational costs due to the rapid deterioration of product quality of perishable foods. In addition, these businesses must also meet stringent safety and quality requirements to ensure that the customers get the best quality products. Unlike other industries, implementing a procurement solution is inherently complex, but using digital technologies is the best way to improve procurement practices.

Challenges in the Agriculture Supply Chain

In the agriculture industry, the supply chain has to deal with the transfer from farmers to intermediate silos, from these silos to manufacturing companies, and from the companies to customers. The industry has many fragmented networks, with dependencies between several materials. According to Mckinsey reports, more than 50% of the companies in the agriculture sector are interested in adopting digital technologies, but only about 30% of them were able to do so successfully.

Source: [https://www.mckinsey.com/~/media/mckinsey/industries/agriculture/our%20insights/agriculture%20supply%20chain%20optimization%20and%20value%20creation/svgz-supply-chain-optimization-ex1-new.svgz]

Following are some of the challenges that procurement companies face in the agriculture sector:

• The quality of products rapidly deteriorates with time.
• Farmers don’t have access to high-end tools to preserve product quality until procurement.
• No streamlined communication channels between farmers and procurement companies.
• Difficulty in ensuring product quality due to changing weather conditions.
• Adhering to strict food safety and security recommendations.
• Ensuring traceability of quality products.

How can a Procurement Solution Help Overcome Procurement Problems?

Procurement software provides a streamlined communication channel between farmers and procurement companies. Quick supplier onboarding also enables suppliers to collaborate to ensure that the agriculture products reach the processing companies without delay. The unified platform helps procurement companies to track and communicate with multiple suppliers for all the raw materials necessary for processing. Even in a small way, implementing digitization is guaranteed to bring down operational costs in the agriculture industry.

1. Improve Productivity To Limit Post-Harvest Loss

Procuring companies don’t always get the quality assured, because the quality of produce varies significantly from harvest time to delivery. Unfavorable weather, pest attacks, crop diseases, and changes in soil can vastly affect product quality and productivity. Digital technology in farming improves productivity to automate farm operations, so that the procurement companies get a precise estimate of the product quality they are about to receive.

2. Adhere To Quality Requirements For Export Products

Export products have to meet stringent food and safety requirements. These differ from one country to another, and procurement companies need quality assurance from farmers who are ultimately responsible for the produce. E-procurement empowers procurement companies to monitor crop cultivation for controlled farm management. Compliance requirements can be met right at the cultivation stage to expedite the export process.

3. Reduce Transit Time Of Perishable Products In The Supply Chain

According to the State of Food and Agriculture, more than 14% of the produce is lost between harvest and retail sales. Losing so much just because the produce sits in the supply chain is unacceptable, especially as the growing world population deserves quality food for survival. The main reason for this delay is the lack of communication between farmers and procurement companies. A digital procurement system establishes reliable communication channels with the farmers directly to avoid any middlemen.   

4. Improve Traceability Of Produce For Global Procurement

The food manufacturing companies assure quality based on the source of the raw materials. Fresh and highly valued produce is always preferred, and procurement companies are responsible for ensuring the traceability of products known for their country of origin. Big brands require farm-to-fork traceability to gain loyal customers, and procurement companies must ensure that the produce comes from the claimed sources. Traceability is also useful in product recalls should something go wrong with the food production companies. This is crucial to take immediate action to prevent further loss for the brand.

5. Encourage Local Sourcing

Many food production companies are dedicated to locally sourcing ingredients for better product quality. It also helps in farming sustainability, as the local farmers benefit from the support from large enterprises. The procurement companies act as a loyal middleman between local farmers and big brands, benefitting all the stakeholders involved. AI-based procurement solutions promote healthy competition among local farmers to improve produce quality and food safety compliance. It also empowers procurement companies to make informed decisions based on data insights.

6. E-Procurement Also Helps Food Processing Companies

Food processing companies also benefit from e-procurement to manage their assets while dealing with volatile produce. Equipment malfunctioning should be absolutely avoided to prevent losses. A procurement solution is helpful in asset prioritization when expensive equipment is involved. The data analytics provide insight into the consumption of such equipment, so that valuable spare parts are always readily available when needed. Ordering and receiving machinery at the right time to optimize operational costs is possible with an integrated procurement system that connects with vendors immediately at the time of need.

Conclusion

Procol is a complete procurement software suite that can be customized for multiple industries. The agriculture sector is ripe to reap benefits from digital technology. Contact us directly to schedule a demo, so that you can view realistically how digital procurement can enhance productivity and increase cost savings with respect to every agro activity.