Dated : October 3, 2018
In September 2016, we were at Chagantipadu village, about 30 miles from the city of Vijayawada in Krishna District of Andhra Pradesh in India. It was about noon and we were noticing farmers lining up cartloads of banana bunches at the local auction market. There were bananas of different varieties, Grand Naine, Chakrakeli, Amruthapani being brought. The staff at the auction yard were grading the bananas at the auction gate and writing down details like which farmer brought in this produce, how many bunches were there of which variety and their respective grades. These bunches were then lined up on the yard for auction. When the clock struck one in the afternoon, the auction yard was almost full with bananas and beginning to buzz with local banana traders who came to the market to buy bananas. There were about ten thousand bunches to be auctioned and we were wondering how long it might take to auction so many bunches.
To our surprise, when the auction actually started, we noticed the speed at which the bids were made, finalized and recorded on paper. It was hardly 40 minutes before the auction was over! Now came the time to reconcile the transactions for each trader and farmer, calculate the payables and receivables, issue receipts and settle cash. Unlike the super quick auction, this process looked painfully slow and often chaotic. Traders lined up for settlements often were disputing the transactions and calculations, farmers coming and asking about what was the value of their sales and the managers of the auction market having a very difficult time to manage all this activity. It was about 9 PM in the evening when the last truck carrying bananas left the auction yard, leaving behind the auction market managers tired and hungry.
Chandra Mohan Reddy, who is a progressive farmer and the main man behind this auction market told us later that though it was a good feeling that farmers were benefited from the auction market since they were getting better prices for their produces, it was challenging for him to sustain the Farmer Producer Organization (FPO) that ran this auction market. The workload was hectic and the profits did not seem to come by. He said, “we know something is not right, we must be earning higher profits from the volumes we see but somehow the money is not realized and we don’t know what is going wrong”. Being an educated farmer and very foresighted, he was open to our proposal to study his auction market and deploy our digital platform for his business.
After two weeks of intense groundwork, Keansa implemented Farmore, a digital solution for Farmer Producer Organizations at the auction yard. We traveled several times to set up their internet and computer systems, digitize all existing data, and then prepared them to have their first digital auction. Truth be told, it was not an easy exercise. The auction process was very quick and the user interface of the solution was not coping too well. We had to redesign the User Interface next week. Despite this hiccup, the benefits were seen. The computerized auction made calculations and receipts very simple and quick. Four weeks later, when the system was totally fine-tuned, the auction manager was able to operate the system on a tablet PC and keep up the pace with the auction process. The reconciliation, billing and printing process was super quick and painless. By 4 PM in the evening, the last truckload carrying the fruits left the auction yard. Chandra Mohan Reddy and his staff were happy that it saved them so much effort and about 5 hours of the day. They were looking forward to the next auction. The results of the first day were evidently positive but the real benefits could only be seen when we tracked progress over time for a year. After a year, when we compared business data, there were remarkable improvements in the key performance metrics of this auction yard.
The FPO managers told them they believed there used to be financial leakages, untracked receivables, missing payments data which affected the financial performance of the FPO. These were prevented when data was digitized, organized and reported. The FPO had far more visibility of their business data and thus greater control over their business. With the data issues sorted out, they could spend their time and energy to service the farmers and traders better. During September 2017, a year after digitization, the market had 6 times more farmers registered with the FPO and 3 times more traders participating in the auctions. Data also showed that the Average Sales Volumes on auction days went up from INR 60,000 to INR 160,000. Units traded touched a peak of 14 thousand bunches a day and has been consistently above 10 thousand bunches a day. Average prices earned by farmers increased by 38%. The FPO was also able to use their time better and grow beyond auction sales of bananas and move into retail sales of vegetables and input marketing.
To summarize, faster auctions, accurate and prompt settlement of payments, availability of good quality and higher volume of stock, instant SMS messages to farmers on transactions, healthy accounting practices made a very significant difference in this business. And, not to forget that the FPO is able to use the software solution independently with minimal support from the Keansa team, was a welcome change.
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