Context

According to the latest Economic Survey (2017/2018), contribution of agriculture sector to the national GDP is less than 30%, when about 60% of the population are engaged in agriculture. It is an indication of inefficiency of our agriculture sector. At 60 % population participation, contribution of agriculture sector to GDP should be above 90%; or less than 10% population’s engagement in sector should be enough to produce 30% contribution to GDP.

Why is our agriculture sector so inefficient?

Unfortunately there is not a single answer. Inefficiency lies at every level of the value chain from production to retailing. Production is still largely traditional and sporadic. The yield is low and quality is highly inconsistent. The logistics system is fragmented, unreliable and expensive and wholesaling  operates as a cartel.

At such level of efficiency, there is large “waste” in the value chain. To make matter worse, farmers (producers) bare the “wastage” risk of the entire value chain, which is reflected on the discounted farmgate price of the products. Somethings that sells for 50 rupees in retail is generally picked up from the farms at 15 rupees at best. Asides of margin for each value adding activities, which is around 20-30, rest is to compensate for the risk of “wastage” at post-harvest activities. Producers are already bearing the risk of climate, access to quality seeds and fertilizers. When they are made to carry all other risks as well, it is not a wonder that farmers are not able to make a decent living from agriculture. Hence more and more farmers are giving up on agriculture. Which is turn is lowering our national production. With declining production, it is impossible build an industry.

In order to begin to improve our efficiency in agriculture sector, we need to: incorporate knowledge,  tools and technology at producers level to achieve high yield, quality and consistency; “lean” up logistics from farm to the table to reduce time and cost; and educate consumers on healthy eating to generate demand for fresh local products. Besides improving our core efficiencies, we must also incorporate complementary value adding activities such as processing and packaging, tourism, and education to our production.

PHILOSOPHY

Our activities are based on the theory of 6^th Industrialization of Agriculture. The theory has been adopted by Japan to promote its rural agriculture economy. The theory advocates for vertical integration primary, secondary and tertiary industries into a single total industry to achieve greater value of the product and services.

[1] Primary (Production)  X  [2] Secondary (Processing & Packaging)  X [3] Tertiary (Sales) = [6]

Primary industry in agriculture is production. Secondary industry is Processing and Packaging. Tertiary industry is sales. Traditionally, these three  functions have been operated separately. Farmer produce, sell their products to middlemen. Middlemen aggregates products from multiple producers and sells to distributers, who process and package the products. Wholesalers buy products from distributes and sell to retailer who then sell to customers.

Under this philosophy of agriculture management, we produce at farm, process and pack product on site and sale through farm restaurant, outlet or deliver directly to customers.

APPROACH

We have developed 4 pillars of operation in pursuit to creating a “lean” Farm. “Lean” is an operation management system applied at Toyota as “Toyota Production System (TPS)” to improve their operational efficiency and reduce cost.

Lean is founded on the concept of continuous and incremental improvements on product and process while eliminating redundant activities. It argues that the value of adding activities are simply only those things the customer is willing to pay for, everything else is waste, and should be eliminated, simplified, reduced, or integrated.

4 Pillar of Lean Management System in agriculture.

First step to eliminating waste is to produce only what customer want. We want to produce what sells rather than trying to sell what we can grow. With the knowledge and tools we have access to today, we can grow what we want. We want to develop a crop calendar based on demand data from our targeted customers.

Next, plant growth follows a standard.  Activities that help plant to grow should also follow  standards. Who does what and when should be always be planned ahead. We want to develop an activity calendar that corresponds to the crop calendar. Each farm worker should know what and where they should do and what tools they will need to complete their task on daily basis. This will help in labour time wastage.

We often talk about lack of incorporating technology in agriculture production in Nepal. However, we have failed to understand that adopting process is the pre-requisite to adopting technology for higher efficiency. Also, adopting standardization alone can help in reducing cost of production by improving the efficiency of operation. It will also help in attaining higher level on consistency of product.

Intuition is a good starting point, but it is through data that you verify, understand and quantify your decisions. Data collection is relatively cheaper now thanks to inexpensive devices and larger storage capacity.. We want to set objectives, measure them with data, analyze and understand the pattern and develop strategy based on data. We want to build a live dashboard that easily displays our objectives, our progress towards the objectives. 

Besides decision making, we also want our products to be transparent by capturing and providing data to customers so that they are able to trace what they consumer to where and how it was produced. Product transparency can help in building a brand. Operation transparency can help build a robust organization.    

Continuous process of designing, measuring and learning form it is the key to developing innovative solutions to problems. We will continuously strive to find ways to do more with less: produce higher quality products with better consistency at lower costs.