Agri-Sourcing and Procurement Decisions Made Intelligent: How AI is Powering Productivity and Profitability

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Till recently, an inability to trace where your food comes from was one of the biggest challenges of the food industry. As improved preservation techniques and better transport made it easier to purchase and consume food from any corner of the globe, it became crucial to understand the why, where, and how of food production.

Today’s consumer is well-informed and doesn’t shy away from questioning a brand about their food production and procurement processes. As a result, brands are going the extra mile to source high-quality raw materials and produce goods that adhere to high safety standards. PepsiCo is one such brand that has refined its procurement model to achieve better quality control for the raw materials it uses in the products and to encourage sustainable farming practices. They source some of their key crops – unprocessed oats for its Quaker brand, oranges for Tropicana juice, and potatoes for their famous Lays and Walker crisps – directly from farmers engaged in sustainable farming. In fact, 79% of these directly sourced crops are grown by farmers engaged in PepsiCo’s Sustainable Agriculture Program.

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How Technology Makes It Happen

The use of technology in agriculture has changed how crops are being cultivated, but it has also rewritten the rules of procurement in agriculture. Remote sensing technology allows agribusinesses to understand the land under cultivation or perform acreage analysis better and helps food processing companies to understand where to source the best raw materials for their products.

Since a majority of cultivation, especially in developing countries, is undertaken by smallholder farmers, the biggest impact of technology is how it enables collectivisation. The collectivisation of farmers through technology not only opens up their produce to a bigger audience, eliminating the need for a middleman, but it also helps farmers improve crop yield and increase their profitability.

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Crop Acreage detection:

With the help of AI and remote sensing technology, businesses looking to source raw materials can detect which regions are cultivating the crops they need and accurately assess the health of these crops. It also provides valuable information about other relevant parameters, such as the historical performance of the plots, water density, and soil properties of the land under cultivation. These data points offer predictive insights about the regions that can provide a consistent supply of quality raw materials. The use of technology in agriculture also allows businesses to monitor these fields on a continuous basis to ensure that the crops are cultivated as per the quality standards specified by the brand.

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Monitoring crop health:

Farming businesses and large food corporations often procure raw materials from a huge network of farmers with small disparate farms located over a large area, notably in developing countries, where a majority of arable land is cultivated by smallholder farmers. Often, farming companies have to invest a large amount of time and money in sending field agents to monitor the health of the crop. Digitisation of farms through farm management software like CropIn’s SmartFarm eliminates the need for manual checks and intervention and enables 360-degree monitoring of farms on a real-time basis. Data-driven insights passed on to the farmers throughout cultivation ensure that the produce is of the highest quality. It also protects against diseases and pests that could otherwise damage the crop. The use of technology in agriculture facilitates real-time monitoring of plots under cultivation, thereby allowing farmers to spot any anomalies right at the beginning so that corrective measures can be taken before it spreads to the entire field.

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Traceability Builds Trust

Farm-to-fork traceability is no longer a luxury. According to a 2018 study, about 93% of consumers care about where their food comes from, want to know about the hands that make them, and understand whether it is sustainably produced. Brands that offer a sense of transparency about their sourcing and production methods are able to connect better with their consumers, which translates to improved overall sales. Ensuring complete honesty and transparency can help brands even during adverse events that can potentially weaken the brand image.
For instance, a leading supplier of fresh vegetables in the US recalled baby spinach in ten states in the country after a sample tested positive for salmonella. Complete end-to-end traceability ensured that the company could accurately identify the contaminated products before it could cause any casualties. While such incidents do leave a bitter taste in the minds of consumers, the brand’s quick action to recall the tainted products, and the ability to do so, is definitely a positive sign.

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Promoting A Digital Strategy For Local Sourcing

Several agri-food businesses, in the recent past, have announced their commitment to sourcing a significant portion of their raw ingredients locally, to not only provide a sustainable livelihood for the local farming community but also to ensure that the business capitalises on quality raw materials while making operations cost-effective. When tailored to local complexities, it enables these organisations to obtain vital intelligence that facilitates better sourcing decisions for the company and allows them to procure adequate quantities of the agri-commodity for their needs.

One such company to do so was one of the world’s largest brewing companies that made a public commitment in 2011 to locally source 60% of their raw materials used in its African brands by 2020. The company partnered with CropIn to leverage the AI-led predictive solution SmartRisk® to analyse

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