E-Agriculture

Overview: Logistics and Transportation costs

Overview: Logistics and Transportation costs

Driving down transaction costs in the supply chain delivers very clear public goods. It can create benefits, especially for poorer urban consumers, by lowering the costs of food. Lower transaction costs also offer the prospects of higher net returns for producers.

An ICT-enabled logistics system can help in:

• Collection - by setting out well-organized collection routes.
• Aggregation - by assembling markets with sufficient critical mass to attract large-scale traders. Traders use the quantity and variety of products and the mobile phone network to conduct real-time research and identify arbitrage and market opportunities for the products they buy directly in rural areas.
 Delivery - by coordinating directly with other farmers or truckers to organize times, dates, volumes, and so forth.

Figure 9.6: Transport Costs for Different Vehicles in Developing Countries (US$ per Ton-Kilometer)

 

 

 

Currently, ICTs mainly benefit those who can afford the technology—mostly the traders. The logistics system will not be fully transformed and smallholders will not fully benefit from the ICTs described here until the technology is ubiquitous and market information is less asymmetrical. At that point, prices and the returns realized by farmers are likely to improve, as well as the downstream positive effects on consumer food prices.

Yet a vicious circle is often observed in the field: Even with a new road, truckers will not invest in additional vehicles until they see a substantial increase in the volume of agricultural produce that needs to be transported; at the same time, farmers are wary of expanding production without evidence that the necessary transport services will be in place to deliver their surplus to external markets. One solution to this conundrum is to aggregate product into sensible critical masses at particular times and places. For example, a 10-ton (medium) load would need to be made up of product from 150 to 200 smaller-scale farmers, a process that is being greatly facilitated by the use of ICT, especially mobile phones.

Also read Topic Note 9.2