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Smallholder farmers can keep pace with digitalization and go global.

As the digitalization of supply chains progresses, how can small, less technically-sophisticated enterprises leverage the technology? The challenge is especially apparent in the agricultural industry, where resource-poor, small-scale growers in emerging economies remain tied to traditional practices. Yet without their participation, the digitalization of agricultural supply chains can't reach its full potential.

The Center for Latin America Logistics Innovation (CLI), a member of the MIT Global SCALE (Supply Chain and Logistics Excellence) Network, is leading an initiative in Colombia that offers one approach to the challenge. In addition to helping smallholder farmers access world markets and improve their logistics skills, the project represents a first step in introducing these growers to more advanced supply chain and logistics practices.

Market connections

The CLI project is part of a broader pilot that also involves LOGYCA/ASOCIACION, the representative in Colombia of GS1 standards. Initially eight countries were involved in the pilot, including Colombia, the only country from Latin America, but the pilot is now open to all countries.

Smallholder farmers in developing countries are separated from end markets by long and complex supply chains. Moreover, a lack of education prevents them from adopting best practices that could help them sell their products in global agricultural markets. Another hurdle is that many farmers in countries such as Colombia have no or limited access to the Internet.

The effort to overcome these barriers began with a project launched in 2016 in Colombia in collaboration with the country's Ministry of Agriculture and Rural Development. Called Colombia a la Carta, the initiative encourages small and medium-sized farming operations to register with Sustainability Networks, an initiative created by LOGYCA and the International Trade Center (ITC)--a multilateral agency that supports the internationalization of small and medium-sized enterprises--to implement global sustainability and development goals.

Participant farmers also adopt the Sustainability Map. Unveiled in September 2017 by the ITC, the freely available Sustainability Map is an online gateway that connects businesses and producers.

Small-scale grower members become part of a global farm registry, and gain access to various analytical tools and information on sustainability initiatives and standards.

The platform enables these businesses to deploy better sustainability practices in international trade.

Growers are assigned a unique ID called a Global Location Number (GLN) that identifies them in the global system. Once registered, a farm can build a profile that includes information such as location, the product it grows, the farm's output and measures taken to support environmental sustainability.

By connecting farms to international buyers, the platform bypasses many of the intermediaries in the supply chain. Also, buyers who are interested in the sustainability record of growers can readily access this information. The platform also enables growers to compare their performance with other operations.

But improved market connectivity is not the only step that smallholders need to take to raise their competitiveness. Small-scale growers also have to become knowledgeable about the latest logistics practices and related technological developments. CLI's training program fills these knowledge gaps.

Barcoding program

The program spearheaded by CLI teaches farmers about agribusiness logistics, product identification technology and the role of standards. Most growers do not have a clear understanding of basic logistics concepts such as the types of vehicles that should be used to transport different types of produce and managing inventory and transportation costs. These concepts are especially important when growers want to expand beyond their locales and sell in national and international markets.

To participate in the training program, a region needs to guarantee that a minimum number of growers in the locale will join the classes.

The use of barcodes is a key part of the initiative. Affixing barcodes to products not only improves supply chain visibility and transparency, but the technology also improves growers' access to world markets. The ID system is relatively expensive, and many farmers turn to cooperatives for support. The cooperatives invest in the required equipment and provide the required labels.

More than 122,000 smallholders in Colombia have received a GLN for their crops. Approximately 7,000 farmers have accessed virtual training and 3,500 farmers have been trained around the country in best agricultural logistics practices.

Steady progress

It is hoped that the barcode initiative in combination with the training program will make Colombian smallholder farmers more competitive. The lessons learned so far are encouraging.

One of the most important benefits is improved supply chain transparency and visibility. This is critically important on both national and international levels.

Domestically, small-scale farmers in Colombia have little visibility into the first-mile supply chain. For example, there is sparse information on the transportation and storage services provided by middlemen, and smallholders are unable to track the flow of product from the farm to the distribution center or port. These blind spots make it difficult for growers to improve the efficiency of the first mile supply chain and reduce product spoilage.

On a broader market level, a lack of visibility into product demand can be a major handicap for small-scale farmers when planning which crops to grow. Misreading demand leads to product surpluses, lower profits and missed sales opportunities.

Moreover, large buyers such as retailers have invested in systems to improve supply chain transparency. Smallholders who are unable to connect with these systems are at a competitive disadvantage--and the gap is getting wider as digitalization enables buyers to trace product back to individual growers.

Increasing consumer demand for sustainably-grown food imposes similar pressures on smallholders. In response to these demands, large buyers expect suppliers to provide information on how they support sustainable farming practices and their compliance with certification programs. Growers that are unable to provide this data find it increasingly difficult to compete in global markets.

A tough challenge is how to ensure that small-scale farmers in remote locations input the right data into information systems when required. The CLI program addresses this issue by appointing "leaders" who are responsible for making sure that the information platform is updated. Leaders are affiliated with specific regions, and input data on the growers in their area at designated locations.

Wider lessons

The CLI program has educated small-scale farms in Colombia that grow various crops including bananas, cocoa, coffee and fruits, and the initiative is expanding to include producers of meat and dairy products. In addition to its educational role, the program is gathering valuable information on challenges such as legal constraints that the country's smallholders face.

From a supply chain perspective, the aim is to provide a foundation on which small-scale growing communities can build. First, the knowledge gained by CLI and the farmers is being used to increase the efficiency of agricultural supply chains that are largely invisible to downstream players.

In addition, LOGYCA provides networking platforms and opportunities to connect enterprises with the farmer directly through collaborative groups. Players from the agribusiness sector meet four or five times a year to build industry relationships, and develop innovative solutions to making value networks more competitive and sustainable. Events, practical workshops and visits are part of the agenda. An important aim is to measure the success of initiatives over the short-, medium-and long-terms.

Another goal is to enable growers to eventually adopt technologies such as Internet of Things sensing and blockchain-based information systems to further improve their profitability and market reach.

A problem that has to be addressed is inadequate access to wireless communications and the Internet. Many growers use smartphones, but the capabilities of these devices vary as does signal strength especially in remote areas. A 2017 survey by the Colombian Ministry of Telecommunications, MinTIC, suggests that 25.5% of farmers don't use available public Internet kiosks because these facilities are too far from their farms. Some 24.1% of respondents said they do not know how to use the kiosks to access the Internet.

Still, this picture is likely to change over the next few years as cell phone penetration increases in Colombia. A report by eMarketer titled "Mobile Colombia 2016: Updated Forecasts and Key Growth Trends" estimates that seven in 10 Colombian consumers had cell phones in what is described as a "flourishing mobile market."

Meanwhile, it is hoped that the dual approach of the CLI program--promoting connectivity to global agricultural markets while educating farmers on logistics best practices--will position smallholders to benefit from the digitalization of supply chains rather than being left behind by it.

The initiative could also provide some important lessons for small-scale agricultural communities in other countries. These businesses are a key part of emerging economies as well as the global trade in agricultural products.

Katherine Tabares is agribusiness manager at LOGYCA. She can be contacted at ktabares@ logyca.com. Vivian Rangel is the sustainability research leader at CLI. She can be contacted at vrangel@ logyca.org
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Title Annotation:INNoVATION STRATeGIES
Author:Tabares, Katherine; Rangel, Vivian
Publication:Supply Chain Management Review
Geographic Code:3COLO
Date:Sep 1, 2018
Words:1451
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