Supply Chain Management in Agriculture: 7 Importance

Supply Chain Management in agriculture is defined as “The management of the movement of agricultural commodities from the farm through the rural and urban markets to reach the doorsteps of end consumers both household and industrial consumers.”

Agricultural Supply Chain Management consists of many players, starting from:

  • Agricultural producers.
  • The middlemen
  • Commission agents and traders
  • The bulk purchaser or procurers, millers, or intermediary processors.
  • Warehousing agents or cold storage space providers.
  • Transporters.
  • Retail distributors etc.

What is supply chain management in agriculture?

Supply chain management integrates the activities that procure materials and services, transform them into intermediate goods and final products, and deliver them to customers.

A supply chain consists of all parties directly or indirectly in fulfilling a customer request. The supply chain includes suppliers, manufacturers, distributors, retailers and customers. The customers are the chain’s main focus because the supply chain’s main purpose is to satisfy customer’s needs.

Definition of supply chain management: 

1. According to the Council of Supply Chain Management Professionals: 

The planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. More important, it also includes coordination and collaboration with channel partners. In essence, supply chain management integrates supply and demand management within and across companies.

2. According to Gartner:

It refers to the processes of creating and fulfilling demands for goods and services. It encompasses a trading partner community engaged in the common goal of satisfying end customers.

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Objectives of supply chain management:

There are five primary objectives that supply chain management can help a company or organization accomplish.

1. Add value for customers and stakeholders: 

Value is the worth of an item, good, or service. SCM aims to create value for the supply chain stakeholders and end customers.

2. Improve Customer Service:

Customer service is the ability of a company or organization to address the needs, inquiries, and requests of customers. It is also a measure of the delivery of a product to the customer at the time specified. The important attributes of customer service are:

  • Availability of the product by a customer
  • Operational performance in delivering a customer order
  • Giving customers satisfaction

3. Effectively Use System-Wide Resources: 

Being effective means that the supply chain gets the right product at the right amount to the right customer at the right time. Resources can be in the form of employees, raw materials, equipment, etc.

4. Efficiently Use System-Wide Resources: 

Efficiency is a measurement (usually expressed in percentage) of the actual output compared to the standard output expected. Efficiency is inward-focused which determines how a supply chain process can be done less expensively, in less time, and with fewer resources.

When a supply chain is operating at a high. efficiency, which means that it is utilizing its resources well to produce the level of output in a production plan within the time allowed.

5. Leverage (advantage gained) partner strengths:

 A partnership in the supply chain is a relationship based on trust, shared risk, and rewards aimed towards achieving competitive advantage.

A strong and useful partnership performs the following.

  • Add value to products, such as shorter time to market.
  • Improve market access, such as providing new market channel
  • Build financial strength
  • Add technological strength
  • Improve organizational skills
  • Reduce (lower) system costs and cycle times etc.

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Importance of supply chain management in agriculture:

1. SCM develops better customer relationships and service.

2. It improves productivity and business functions.

3. It can minimize direct and indirect costs.

4. It can reduce product losses in transportation and storage.

5. It provides better information about the flow of products, markets, and technologies.

6. Better control of product safety and quality is possible.

7. Assists companies in minimizing waste, and achieving efficiencies throughout the supply chain process.

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Advantages for Agril, Supply chain members

Individual suppliers, producers, and marketers who are associated with a supply chain coordinate their activities and can create greater value in the supply process. This is not possible if they operate independently.

The Supply Chain provides the following benefits to the members

1. It expands traditional markets beyond their original boundaries and increases sales,

2. It reduces the delivery cost of products and thus increases the gross margin for the working capital committed by the members of the chain.

3. The supply chain can differentiate the service, product quality, or brand reputation of the products. It increases the consumer perception of the product and allows chain members to charge higher prices

Factor Determine the nature of the supply chain in Agriculture

Six main factors influence the type and nature of the supply chain in the agricultural sector.

1. Quality: The end consumers expect a good quality product at an affordable price. Retailers demand consistent quality from the manufacturers. The manufacturers also depend upon the producers and processors for good quality.

2. Technology: Technological innovations in post-harvest, processing, transportation, etc. determine the length of the supply chain

3. Logistics: The efficiency of procuring, movement, and storage of raw materials and finished goods is crucial to supply chain efficiency.

4. Information Technology: IT applications support the movement of products and information in the supply chain.

5. Government regulation: As agricultural products are perishable, stringent norms regarding quality and safety parameters are in existence in several countries. The supply chain has to function within this regulatory framework.

6. Consumers: Supply chains are oriented to fulfil the consumer’s expectations. Supply chains have to be developed based on consumer preferences.

Levels of supply chain management

There are three levels of Supply Chain Management:

1. Strategic SCM: 

It deals with future planning, new products, technology changes, capacity, issues, etc. This is accomplished at the executive management level. It is long-term planning.

2. Tactical SCM: 

It is more concerned with demand planning, inventory, and supply planning. This is determined at a less senior level and it is a shorter planning cycle.

3. Operational SCM: 

It includes the majority of the operations viz. demand fulfillment, production, transport, monitoring, etc. It is very short-term planning (weekly daily).

Key components or Processes of supply chain management

A supply chain is the collection of steps that a company takes to transform raw components into the final product.

The five basic components or processes of SCM are:

1. Plan: The first stage in supply chain management is known as plan. A plan or strategy must be developed to address how a given good or service will meet the needs of the customers.

2. Develop (Source): It is the next stage in SCM. It involves not only identifying reliable suppliers of raw materials but also planning methods for shipping, delivery, and payment

3. Produce: In the third stage, the product is manufactured, tested, packaged, and scheduled for delivery. It is a manufacturing step.

4. Deliver: At the logistic phase, customer orders are received and delivery of the goods is planned.

5. Return: It is the final stage of SCM. As the name suggests, during this stage, customers may return defective products. The company will also address customer questions at this stage.

Disadvantages of supply chain management

The biggest disadvantage of global supply chain management is the heavy investment of time, money, and resources needed to implement and supervise the supply chain.

Supply Chain Management Practices

Important practices of SCM are presented following Talib and others (2011):

1. Customer relationship:

It includes complaints handling, customer satisfaction and long-term relationship establishment, customer needs, and increased customer responsiveness.

2. Material management:

It includes management of material flows, reducing Inventory, elimination of waste, just-in-time (JIT) delivery, etc.

3. Strategic supplier partnership:

It includes many supplier relationships, supplier involvement, supplier quality management, and collaboration.

4. Information and communication technologies:

These include information technology sharing/communication, and information systems.

5. Changing corporate culture:

It includes management support and commitment, leadership, participative management, cooperation, and top management leadership.

6. Close partnership with suppliers:

It includes long-term relationships and partnerships. reliable suppliers.


In summary, Supply Chain Management (SCM) in agriculture plays a crucial role in ensuring the efficient flow of agricultural products from farm to consumer. Defined by coordinated activities involving various stakeholders, SCM aims to add value, enhance customer service, and optimize resource utilization. Its significance lies in improving customer relationships, minimizing costs, reducing losses, and fostering partnerships for mutual benefits.

Adopting SCM practices can lead to increased sales, expanded markets, and differentiated product offerings. Six key factors, including quality, technology, logistics, information technology, government regulations, and consumer preferences, influence the nature of agricultural supply chains. Overall, SCM in agriculture is pivotal for enhancing productivity, minimizing costs, and meeting consumer expectations.

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