Digital Transformation and the Optimization of the Agri-Supply Chain
As we look back on the penultimate month of the year, one cannot help but start to prepare an early wish list of what they want for Christmas. If I were to imagine what others in the office might be wishing for, I think I can guess what it would be. A new “grandiose” espresso machine for Sven (the man loves his coffee). For Kangwa I would imagine it would be a lifetime subscription to Netflix so she can watch all the J.R.R. Tolkien material she can get. That coupled with all the greatest hits of Korean pop music produced since, well, Korean pop music ever existed. I for one, am more practical. And in the spirit of generosity, I would like a wish granted on behalf of the agri-supply chain industry in Zambia.
The digital transformation movement has of late caused a lot of noise across a myriad of industries. From finance, to logistics, to manufacturing, to processing and agriculture. The Agri-supply chain is where Father Christmas needs to deliver for Zambia. Digital transformation strategies can offer a great deal to the agri-supply chain by way of optimizing each level of the chain from “fork to mouth”. Going digital will help reduce overall costs, improve efficiencies, and enhance the various operational functions of the chain. I have come across a few business models as an analyst, and I must add that the application of data analytics to most of these operating models would serve all stakeholders well in their ecosystem. There are high level initiatives on the way, for example the UN World Food Programme (WFP) has an Innovation Accelerator which sources, supports and scales innovation to achieve a world without hunger[i].
The digital transformation space has a concept known as Digital Twin technology. “Quite simply, a Digital Twin is a virtual model of a process, product or service. This pairing of the virtual and physical worlds allows analysis of data and monitoring of systems to head off problems before they even occur, prevent downtime, develop new opportunities and even plan for the future by using simulations”[ii]. The quote highlighted above was part of an article in which Thomas Kaiser, who was Senior Vice President of IoT (internet of things) at SAP SE, said it best. Mr Kaiser mentioned that the concept of Digital Twins was becoming a business imperative and that companies that failed to respond would be left behind.
This is a concept that I feel, would be massively beneficial to the agri-supply chain in Zambia and would optimize its individual functions. For farmers, the process would begin prior to the planting season. Digital Twin capabilities would feed the farmer with valuable information concerning soil groups and weather patterns in order to plant the right crop at the right time with the optimal irrigation and fertilizer requirements. The simulation will predict with moderate accuracy, the harvest times as well as potential yield per crop. In most instances, the information will be used to inform management actions of any shortfalls in production, over- or under-production and crop rotation plans. Companies such as AgriPredict offer some of these functionalities to the farmer by analysing weather patterns and indicating when to apply pesticides and fertilizers to produce in readiness for harvest.
Now I know they say to never count your eggs before they hatch, but with quality and yield predictors, the farmer will be able to predict the price of their product and hence project their financials and capital needs for future harvests. This becomes even more beneficial the more connected the chain becomes. Moving further down the supply-chain, a farmer would be able to sort through their phone App and given parameters that have been pre-set, they would be able to identify logistics providers that would give them the best prices based on their location, type of crop, weight, and distance to delivery etc. Lima Links is another company operating in Zambia that offers similar solutions.
Manufacturers and Processors
Manufacturers will be linked to the retailer through its inventory management system through cognitive application technology by way of an IaaS (infrastructure as a service) provider. The processor of a food product or any product manufacturer within the retailer’s inventory system will have access to the retailer’s product platform and SKUs (Stock Keeping Units) and thus will be able to have real time updates of the store’s stock. When a product has fewer items on the shelf, the manufacturer’s app will be alerted and automatically notified as to how many items are needed on the store’s shelf for restocking. The manufacturer will be able to mobilize the items in a timely fashion and avoid lag times in delivery. This process I would imagine would be linked to the retailer’s inventory management system. It will reduce the retailer’s overall costs and improve its efficiency of acquiring inventory. This will lead to better customer satisfaction and enhance company brand equity.
My dream scenario of a Zambian digitized agri supply chain, would add value to all stakeholders in the chain, and as mentioned above, this value would come in the form of enhanced efficiency, the reduction of costs and customer satisfaction. The process would resemble something similar to the following. A digital platform akin to AgriChain in Australia would link all the players in the chain. From being able to identify logistics players accessible to commodity traders and farmers, to retailers and distributors depending on the ecosystem. Such a platform would provide much needed market data to growers in the rural area and enable farmers to plan accordingly. This will give them a ‘heads-up’ on what crops to plant for the upcoming season and with the help of Digital Twin technology, they will be able to assess and project time factors from plant to harvest.
Your local grocer would be able to benefit from such a technological infrastructure as well. A consumer can access a store app that would be connected to the digital platform. Consumers would be able to access the grocer’s “store shelf” and check what is available in a store before they even leave their place of convenience. Once the item is purchased and checked out of the store the SKUs aligned to the inventory management system will automatically notify the product’s particular store distributor of the reduction in quantity of the product in store. The distributor, once notified, will then begin the process of restocking the grocer’s shelf. This will entail the notification of the manufacturer of the product, who, whilst on the platform too, would be alerted to the level of inventory of the distributor. The manufacturer then can mobilize based on their forecasting methods either through Regression analysis or Historical Trend Smoothing (or indeed with the aid of the digital platform itself through data analytics). Given a market prediction of the level of output needed the digital platform would predict the amount of input product needed to be bought in. Zpos is a Zambian company that helps a few hundred small-scale merchants and vendors with inventory management tasks allowing them to track sales and keep up with accounting and reporting. With the right growth trajectory, these start-ups could one day offer full-on IaaS platforms tailormade for the Zambian agri-supply chain.
This chain of notification is perpetuated further up the association, as the commodity broker or trader will know how much commodity the manufacturer will need for the upcoming quarter. The broker then will be able to engage the farmer and have them deliver up the quantity needed by the manufacturer in order to produce the retail product for the retailer.
This entire function would work to create a powerful technological infrastructure that will greatly enhance the Agri supply chain in Zambia. However, one significant detriment I can foresee is the rate of smart phone penetration in the rural areas. Sure, there might be some difficulty introducing the technology to farmers, but some of these applications and systems can be engineered to work on less sophisticated platforms. This would particularly be beneficial to farmers operating within an out-grower scheme, where the lead farmer conducts the distribution to and training of the out-growers in the program. There are a few outfits on the Zambian market in the start-up environment that offer at least one or two of these functions.
Digital Twin technological capability would enable systems to be managed more effectively: saving time, costs, improving sustainability and attracting higher premiums for produce[iii]. These factors will all combine to give the farmer the best necessary inputs to produce the best possible quality of crop which kicks-off the process of an optimized supply chain. This will, further down the line, enable the farmer to get the best price for their product on the market. The concept can be adopted by other players in the chain, and some agri supply chain PaaS (Platform as a Service) providers offer these types of services. Farmers, commodity traders, distributors, retailers and even consumers would be able to gain access to digital analytical capabilities that will help them make more effective decisions all under one roof.
And so, with Christmas around the corner, my wish list will definitely take a more digital inclination as I put myself forward as a firm believer in the bountiful opportunities brought forth by the digital transformation age. Merry Xmas and a happy new year to you all!
[i] https://www.weforum.org/agenda/2020/11/food-innovation-hubs-scale-technology-transform-global-food-system-farmers-agtech/?utm_source=sfmc&utm_medium=email&utm_campaign=2737270_Agenda_weekly-27November2020&utm_term=&emailType=Newsletter [ii] https://www.forbes.com/sites/bernardmarr/2017/03/06/what-is-digital-twin-technology-and-why-is-it-so-important/?sh=554dc3c52e2a [iii] https://agrichain.com/about-the-platform/