India's Suguna Poultry FarmLtd.: Can it Go Pan- India with its Current Business Model?

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By adopting the contract farming model, the company eliminated the role of intermediaries in its value chain to just three players - farmer, company and the retailer. Soundararajan, said, "Until then the middlemen took away around 10% as commission. As a result, costs increased by 25%."18 In the traditional farming model, there were 14 cost centres. Now, with Sugunamodel, they were reduced to four. This enabled Suguna to achieve economies of scale and cost efficiency in the procurement of raw materials, feed and medicines. It has further lowered production costs by setting up networks with farmers to directly procure maize and soya, the key ingredients of poultry feed. Presently, Suguna operates in 8,000 villages of 10 Indian states (Tamil Nadu, Andhra Pradesh, Karnataka, Maharashtra, Gujarat, Rajasthan, Punjab, Uttar Pradesh, West Bengal and Orissa) covering 15,000 farmers. It aims for further expansion across the country by 2013. Through contract farming, Suguna has built a bridge between organised and unorganised sectors of the poultry industry. Many state governments are inviting Suguna to set up contract farming in their states as well.

Quality and IT

Elements like Total Quality Management, continuous innovation, hygienic products and fulfilling customer requirements have helped the company grow. To attract potential customers and to deliver maximum satisfaction to the existing customers, Suguna benchmarked its products with international quality measurement standards like ISO: 9001¹⁹ and HACCP²⁰

To strengthen its backward integration system, it established a grandparent farm (parent birds are reared from the grandparents) in the year 2000. To run the grandparent farm smoothly, Suguna tied up with the Ross Breeders²¹ in UK. It utilises these breeders for delivering day-old grandparent and parent chicks (chicken that have the best genetic makeup for breeding broilers). Suguna signed a deal with Pas Reforms²² , for supply of its smart incubation system in 2005. The upgradation of technology in the hatchery segment resulted in increased hatchability and improvements in DOC uniformity

Suguna uses the latest technology to improve the efficiency on par with the market requirements. In 2005, it invested INR 8 crore (about $2 million) and signed a deal with IBM to incorporate Oracle E-Business Suite in its business operations. The company is the first in theAsian poultry industry to implement ERP in its system of operations. The modules of Oracle applications include ERP, Advanced Pricing, EnterpriseAsset Management, Self-service Work Request, IncentiveCompensation,Advanced SupplyChain Planning andConstraint BasedOptimisation. The application improved employee productivity and efficiency and is being implemented at nine divisions across seven states in India. Information regarding the mortality of the birds, feed intake, condition of each farm etc., is tracked down from 15,000 contract farms and processed by the ERP system every day. "As pioneers in integrated poultry farming in India with 10,000 farmers from 270 business locations from across India feeding into our supply chain, IT has always been an integral part of our growth plans.With the assistance of IBMand Oracle E-business suite, we will be better positioned to support our current and future growth,"²³ comments Soundararajan.

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18]"He Counts His Eggs Before They Hatch", op.cit.
19]ISO 9001:2000 specifies certain measures for a quality management system such as consistent product that meets customer and regulatory requirements
20]Hazard Analysis Critical Control Point (HACCP) is a systematic process control system used to identify and prevent microbial and other hazards in food production.
21]Aviagen is the world's leading poultry breeding company which has three chicken breeding brands-Arbor Acres, LIR, and Ross. Ross are used to deliver day old grandparent chicks
22]It is a Dutch company, which specialises in the development of innovative hatchery technology for the poultry industry
23]"Suguna PoultryChooses IBMto implementOracleApplications", http://www.oracle.com/global/in/pressroom/051114_India_Suguna_IBM_Oracle%20announcement_pre-final.html