Written by: (Ee Hui Phoa, Johnson Hwang, Sadaf Sultan, Anson Wong, Mumu Yu)
Context:
The backdrop of this business innovation stemmed from information asymmetry between farmers and the end customers. Agriculture is an industry that requires significant lead time to harvest its products. Imagine growing spinach in anticipation of a sales transaction six months into the future. Uncertaintymainly arises in the growing of the produce and the sales of the produce.
Precision farming, harnessing Internet of Things technology, aims to minimize the impact of external factors such as changing climate, pest, diseases to increase crop yields. However, without further breakthroughs in the way that crops are grown, long lead time in the growing of crops remains a key issue that farmers face everyday.
Without accurate demand forecasting, farmers may over or underproduce crops leading to waste in the form of crops being thrown away or lost economic profits to farmers. This issue is especially prevalent to small-scale farmers in developing countries who often have very limited access to market demand information, have unsophisticated farming techniques, and whom, in terms of financials, are significantly affected by the outcome of their yearly crop harvest. For example, farmers may leave plants in the field that are never harvested because market prices are too low, which would result in loss in income for farmers. Alternatively, farmers may over produce plants in anticipation of losses in the harvesting process or trying to match demand with supply, which results in environmental wastage. According to a research conducted by Natural Resources Defense Council (NRDC), depending on the crop type, approximately 7% to 50% of crops, amounting to more than 6 billion pounds of fresh produce that go unsold year to year (D. Gunder, 2012).
In this paper, we are going to focus on a startup called Ninjacart and its innovative business model around matching customers with farmers in India.
Traditional way (or lack of way) of addressing this issue
Traditionally, small scale farmers in India made money by growing and selling crops and vegetables they know how to best produce. However, without knowing what type of vegetable is popular and in demand, farmers run the risk of growing crops that are in low demand. For example, a farmer from Indian, during its interview with Tech in Asia said: “the eggplants we grow aren’t worth anything because they’re not popular this year, or less lumpy potatoes have become the fad – how would we know that? Is there any way we can speak with these customers directly? (Tech in Asia, 2016)”Traditionally, farmers would speak to buyers or end customers during regular basis to find out what is going to be in season or “popular” and to align their crops accordingly.
Further, besides determining popular crop types, small farmers also wants to know what other farmers in the same region are growing, and if the current yields are poor, what type of in demand-crops should they switch to? It is also useful to find out which crops are over-supplied to ensure that the farmers do not continue to grow a crop that is not in demand. All these questions are addressed through word of mouth with no accountability on the end of the buyer and in most situations, the farmers have no visibility into the demand of their end customers, such as the restaurants that eventually buys the crops.
New way of addressing the issue
To improve data visibility of consumers to the farmer, Ninjacart is set up to build next generation online market for fruits, vegetables, pulses and staples (Crunchbase, 2017). Specifically, Ninjacart enables farmers and producers to sell directly to retail stores by providing a selling platform and assisting in warehousing and fulfilment. Simply, Ninjacart is equipping farmers and their customers with data that will allow them to make better farming decisions. For smaller farmers, data provided by Ninjacart helps them figure out how to fine-tune their offerings to fit the market. By creating a customer profile of each store or restaurant within just two days of onboarding, Ninjacart tracks consumption patterns and what type of cropsconsumers are or are not ordering, and for high-demand crops, Ninjacart will find the farmers who are selling those things(Tech in Asia, 2016)”. Besides data for consumption demand, Ninjacart also provides logistics and shipping data to streamling shipping operations to ensure that trucks do not make unnecessary trips and are always around when service are needed for deliveries (Tech in Asia, 2016).
Go to beyond helping the operational matters of farmers and buyers, Ninjacart’s data also helps with the strategic decisions for the future by identifying trends through data analysis. For example, data has revealed the fact that non-perishables are still cheapest when bought from those places that specialize in selling those goods(Tech in Asia, 2016). Thus, Ninjacart will recommend farmers and buyers to act accordingly by providing recommendations that is support by most recent data collected.
So, how does this address a social and environmental need?
The matching platform aims to address two key areas:
- Smarter supply chain: Information barriers and distribution inefficiency. It is important to note that 58% of Indian rural households depend on agriculture as their main means of income (A. Dongray, 2016). By harnessing data to predict demand and to create better route planning, this reduces wastage of crops in distribution by ensuring fresh crops are delivered in a timely, cost-efficient manner.
- Lower waste: With demand-based harvesting, this ensures the livelihood of farmers (akin to a forward contract), brings transparency to market demand, and ultimately reduces wastage of crops being thrown away due to overproduction or too little crops being grown resulting in loss income.
Do financial growth and social/environmental impact form a feedback loop (i.e. the faster the growth, the larger the impact and vice-versa)?
Given Ninjacart’s business model, the financial growth of the company and its social/environmental impact does form a positive feedback circle.
Faster financial growth stimulates larger social /environmental impact
Ninjacart’s business goals are:
- Reduce wastage in vegetables consumption due to inaccurate demand and supply match forecast.
- Improve hygiene and quality of vegetable product to thus improve food quality for Indian consumers.
- Enhance profit and life quality for entire India farmers’ community by reducing overage/underage costs.
Ninjacart will achieve financial growth by creating demand and supply match between more buyers and farmers in its network. The more matches they create, the more waste they will be able to avoid. Research shows that India’s vegetable consumption waste is around 45%, this means that the more financial growth they have through the matches, the more portion of the 45% of waste it an eliminate thus brings bigger social and environmental impact. By eliminating the waste, it reduces the cost for farmers, and thus leaves them a bigger profit from their harvest. Farmers can then increase productivity, be more efficient with their time, and focus on improving agriculture techniques, caring for their land and spend more time with their families. The more financial growth they have, means that the more farmers they have helped improve life quality for. Likewise, the more customers they have, the more people can enjoy better hygiene and quality vegetables fresh from farm field every day. In summary, faster financial growth will result in better social and environment situation in regards of less waste, happier labor force and better rested and reenergized land.
Better social/environmental situation enables faster financial growth
For Ninjacart’s customers, they care the most about quality and availability of vegetables and the friendliness of using the platform. The farmers in this network care the most about accurate and adequate demand and friendliness to use the system of Ninjacart as well. So to maximize financial growth, Ninjacart should satisfy these above needs. As mentioned above, faster financial growth will result in less waste, happier labor force and better rested and reenergized land. Better rested and reenergized land will produce better products, which satisfies needs from customers, and thus brings more demands to the farmer, which satisfies the needs of the farmers. In summary, better social and economic situation will bring better products, happier customers, and happier suppliers, which results in faster financial growth.
Other companies implementing this
Chinese startup Mei Cai (meaning “buy vegetables” in Mandarin) launched an app in June 2014 to connect farmers to restaurants using low cost smartphones. The company aims to close the gap between fields and dinner plates by aggregating supply and demand, buying in bulk and distributing field-fresh food so that it reaches diners’ plates within 12-18 hours.
Mei Cai liberates agricultural farmers from the early morning trek to their local market and gives restaurants and chefs certainty about their days’ supplies. By cutting out the market vendors, farmers get higher wages and restaurants cut their costs. Similarly to Ninjacart, Mei Cai uses data analytics to predict demand to inform the farms how much to grow. In addition, Mei Cai outsources the transportation of produce to 4000 cars and minivans from 7am to 10am every morning – the drivers are mostly from rural areas, and they get stable wages.
In August 2014, Mei Cai had penetrated 18 cities in China, and monthly turnover was 80,000 RMB. By December 2015, with smartphone penetration at almost 50%, turnover was a staggering 400 million RMB a month, and Mei Cai was employing 5000 full-time staff and 4000 freelance drivers.
Another company iGrow has a slightly different model in the smart agriculture scene. iGrow, an Indonesian startup that helps ordinary citizens fund local farmers, is a “Farmville for real life”. Investors get a return on their investment, without having to get their hands dirty nor know anything about farming. Investors register on iGrow’s online platform, decide how much to invest, the amount of seeds to be planted and wait for their money to bear fruit. An independent supervisor will verify the work of the farmers, and investors have access to iGrow’s dashboard that shows real-time information about the trees’ latest condition, where plants are located and how much carbon dioxide the plants have absorbed. iGrow brings together farmers, landowners with unutilized land and local investors, creating an efficient farming ecosystem.
References:
- NRDC Issue Paper. D., Gunders 2012. Retrieved from: https://www.nrdc.org/sites/default/files/wasted-food-IP.pdf
- com. A., Dongray 2016. Retrieved from:
https://yourstory.com/2016/06/ninjacart/
- com. M. Rao, 2016. Retrieved from:
https://www.techinasia.com/ninjacart-data-tech-farms
- co.uk. David Rowan, 2016. Retrieved from:
http://www.wired.co.uk/article/meicai-china-startup-connects-farmers-restaurants-food
- com, Federico Guerrini, 2015. Retrieved from:
https://www.forbes.com/sites/federicoguerrini/2015/10/30/indonesian-farmville-for-real-life-startup-igrow-wants-to-go-global/#67e19bab548c
Very interesting !!! Infact this is a major problem in developing countries and farmers get a lower price for their produce as they produce the crop with low demand or many farmers produce it so practically we have a supply overflow. Interested to see this shaping up.
great example of the use of technology & data to increase efficiency in the supply chain… and to reduce food waste, one of the (many) important challenges of the next 50 years!
I really like the idea of this startup which can be scaled up in a lot of the emerging markets. Matching the supply and demand, by “resequencing” and splitting the demand bets is pretty cool. I strongly believe that the main challenge is not as much as food waste as it is the exploding population and how to find ways to feed the world, eradicate hunger, and reduce diseases. It is a huge problem and a challenge that most governments of the developed world are and will be facing in the future to ensure their national security is maintained.