Successful supply chain management can be summed in one phrase; detail, detail and detail. Karthik Jayaraman and Sanjay Dasari, the founders of Chennai-based agritech startup WayCool, certainly believe that mantra as they disrupt the traditional agriculture supply chain from farm to fork.
Essentially an omni-channel food produce distribution platform, WayCool is leveraging innovative technology to scale up and operate a complex supply chain. “Our country doesn’t suffer from hunger issues due to food scarcity, but largely due to inefficiencies in food distribution that lead to high wastage levels across the industry,” says Dasari about the state of the Indian food supply ecosystem.
He believes that a large part of this wastage is due to repeated handling and transport of sensitive and perishable food products. This is where WayCool is using apps and technology to truly transform how farmers harvest the produce and how much is actually shipped to reduce wastage. It also uses IoT devices with these apps to track quality of food as it passes through the various links.
Key Gaps In The Indian Agriculture Supply Chain
- Small average farm size (typically 2 hectares), which is much lower than 400 gectares in the US, making sourcing difficult
- Usually, fresh produce change hands as many as five times between farmer and a hotel or retail outlet
- The information gap between the consumer and the farmer is massive leading to incorrect crop planning
- Limited understanding of demand elasticity, resulting in high volatility in supply and pricing
- Highly variable cultivation practices, poor harvest timing and limited post-harvest management
“WayCool aims to bridge this gap and offer a cost-effective distribution solution to minimise food wastage. Reduction in wastage would lead to higher savings that could be passed along the supply chain,” he added.
And if we check the facts, it seems to be working as well.
While the traditional supply chain processes were leading to a 40% food wastage, WayCool claims to have a wastage margin of less than 1%. And that’s despite handling over 3,000 SKUs in multiple categories like fresh produce, staples, dairy and packaged products, delivering to over 8K customers in 130+ towns across southern India, while sourcing more than 50% of its raw produce directly from small-hold farmers, boosting their farm incomes.
Bridging The Supply Chain Gap: The Farmer’s End
A typical supply chain cycle is represented in the below image:
However, WayCool’s supply chain is a singular pipeline, and avoids multiple steps as shown below:
We can broadly look at it as a two-way process on the farmer’s end that includes a:
Pre-Harvest Check: By precisely sharing information about the daily demand with its farmers, WayCool helps farmers have greater control over the harvesting and reduce wastage due to excess harvest. Through its MyPrice app, farmers get information on the demand from the company side before harvest. Farmers can bid against this requirement, and receive purchase orders against their bids, even before they begin the harvest. The company’s Outgrow programme helps farmers provide input and offers advisory services based on soil health and agro-climatic conditions, recommending practices for safe use of fertilizers and pesticides to ensure that the end product is up to WayCool standards of food safety.
Post-Harvest Check: The produce is taken directly to its automated distribution centres, sorted and allocated to clients. If the raw products require processing, they are routed through processing units such as pulping units, or mills, and then brought to the distribution centres.
“At our DCs, the system-generated picklists ensure that customers are allocated exactly what they ordered. A complex forecasting and planning algorithm back this process to ensure that fill rates are maintained at high levels,” added Dasari.
Bridging The Supply Chain Gap: The Customer’s End
Once the sourcing is done, it’s important to ensure the products remain fresh till it reaches the customers. “Our inbound logistics is carefully planned, and the arrival times of our GPS enabled trucks into our 7 distribution centres are forecast so that the distribution centres can operate in sync,” said Dasari.
Most products flow through the distribution centres and are not stored — the distribution centre operates as a cross-dock. Small transit storage spaces are used for products that are less perishable.
Unbroken cold chains are used for products that require temperature control, and the temperatures on each step are logged digitally on to its quality testing platform. Similarly, greens are transported using FreshLoc, a high humidity storage unit, designed by the Indian Institute of Horticultural Research and licensed by WayCool.
Not only this, the WayCool team measures several parameters ranging from residue levels, nitrate levels and acidity in fresh produce to things like how the staples perform in cooking tests.
“We also have a large number of food safety and hygiene audits conducted across our source points, DCs and trucks, which limit exposure to external elements that can destroy freshness. All these metrics are captured in our digital quality platform, which has over 18 apps. This ensures that the produce remains fresh until it reaches the customer,” added Sanjay.
Overcoming Risks To Build A Sustainable Supply Chain
For any business, two things are most important: monetisation and a healthy risk appetite.
At present, WayCool’s monetisation model is straightforward: they buy, handle, process and sell food i.e. from the material. However, a supply chain comprises three flows — material, money and information. In the long run, it is possible to monetise all three.
Dasari told us that the entire supply chain is finance-starved as individual operators do not have the asset base to secure borrowings to the extent they need. Since they have adequate visibility into the behaviours of players in this supply chain, it will become a large opportunity as cash flow-based financing models mature.
“The information base that is being built offers granular details of buying behavior, that can be leveraged to help food producers and brands target their sales and marketing efforts better.” – Sanjay Dasari
Talking about the risks, Dasari explained that the food supply chain business has stable demand at the macro level, but still suffers from extreme volatility due to information opacity. Businesses that make up the food supply chain face margin pressures every time there is a cost spike, as the clients, particularly enterprise clients, must manage their food costs.
In order to hedge this, they encourage farmers to adopt staggered planting to get output in the phased manner. “However, the market is so vast that our influence will address only select pockets. We offer our clients products such as pastes and purees, when raw product prices grow rapidly,” he added.
Further, insufficient scale to engage meaningfully with farmers, unpredictability of demand and friction in operations that prevented scaling have been the primary challenges. While the first two were addressed with scale, the third required significant investments.
“Moving further, information technology plays a large role in scalability, but this industry requires physical operations automation as well,” Dasari added.
His experience in the automation segment came in handy here. The automated warehouses now operate on the principle of a moving assembly line. First-in-first-out is part of the design of the warehouse, while poka-yoke or error-proofing measures are put in place to ensure fewer gaffes.
“Many of these include automation of key processes. For example, in our Bengaluru warehouse, fresh produce self-checks in – the produce is automatically weighed and GRNed without human intervention, thus minimising errors due to incorrect entry,” he added.
The Road Ahead For WayCool
With $540 Bn contributed to India’s overall $880 Bn retail market in 2018, food and grocery is the single largest consumption category in India. WayCool will look to harness this opportunity with expansion in southern and western India, capitalising on the USP to offer a curated portfolio rather than full bouquet. Also, it looks to focus on produce and products that help small retailers differentiate themselves, rather than on commodities with low rupee margins.
Being part of the burgeoning agritech startup ecosystem, with players such as Ninjacart, Vegfru, Lemon Leaf, DayBox, Crofarm, CropIn, Gold Farm, WayCool will definitely have to look out for the competition. However Sanjay defines this more as a phase of “co-opetition” where many players who started off as competitors are discovering that they are better off collaborating and owning different segments of this supply chain, or even merging.
But, as they scale the business, these existing systems will be put to test. Startups will also face challenges in logistics as they scale as increasingly larger number of customers expect deliveries at the same time. This will lead to a need for network optimisation and trade-offs as well.
Well, Dasari seems determined enough. “Overcoming these operational challenges using technology will determine the difference between success and failure, and our team is heavily weighted towards deep operations experts primarily to address this challenge.”