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Procurement Best Practices in the Rice Crop Market

Nov 27, 2017

Rice is the most widely consumed staple food in large parts of the world, especially in Asia. It is also the world’s third-largest produced agricultural commodity after sugarcane and maize. Cultivation of the rice crop is highly labor-intensive and requires ample amount of water. Although cultivated all across the world, the four commonly used ecosystems for rice cultivation are upland, irrigated, rainfed lowland, and flood-prone agroecological zone. The recent procurement market intelligence report from SpendEdge on the global rice market estimates the market to grow at a CAGR of 5.3% during the forecast period. The procurement report also identifies APAC region as the biggest market for the rice crop, accounting for 86% of the global consumption. The report also states that the per acre production rate of the rice crop has gone down in the recent years. Consequently, in order to be efficient and maintain profitability, rice manufacturers must follow procurement best practices in the market.

Request Free SampleProcurement Best Practices in the Global Rice Crop Market

Assessing Suppliers Ability to Provide Comprehensive Services

Buyer should evaluate suppliers based on a range of comprehensive services that make up the supplier’s portfolio. These services include:

  • Transportation, logistics, and storage services to minimize the risks and costs associated with transportation by land or sea
  • Expertise in hedging, risk and financial management to help buyer managing risks associated with crop failures, natural disaster, and economic shifts
  • Expertise in regional and international regulatory norms to ensure compliance and avoid hefty fines and penalties

These factors are essential for the buyers as they determine the overall procurement cost of the agricultural commodity.

Evaluating the Level of Technological Adoption in Rice Processing

Rice processing involves activities such as paddy cleaning, de-husking, polishing, and packaging. Advancements in each processing step will yield high-quality rice and optimize the increase in personnel costs. For instance, modern rice processing units compared with conventional units produces consistent quality with 3%–5% reduction in breakage of the kernel, power saving of 15%-20%, and almost negligible downtime.

Partnering with Suppliers that Avoid Intermediaries

The traditional supply chain of the rice crop has been largely inefficient due to the presence of multiple channel members across the supply chain. Apart from being inefficient, multiple intermediaries also bring in complexity in the supply chain and reduce the margins; thereby, increasing the overall costs. Additionally, it also leads to an increase in inventory costs due to overstocking.

Partner with Suppliers Providing Supply Chain Traceability

An important aspect of quality assurance and consumer acceptance is the seller’s ability to trace the product right back to its origin. As the rice crop grown in one part of the world is exported to different countries, it can be difficult to trace specific plant diseases. Supply chain traceability enables suppliers to trace the quality of grains and facilitate in gaining quality certifications such as NATA approval, GAFTA approved analysis schemes, Halal certification, and HACCP certification.

Assessing Supplier’s Role in the Procurement of Paddy

The final quality of rice is highly dependent on the quality of paddy procured by the paddy suppliers. As a result, producers of the rice crop usually conduct tests such as microbiological tests, residual tests, test for aflatoxin, and soil tests to ascertain the quality of paddy.

Read more about the procurement best practices in the rice crop market along with rice suppliers, rice export, sourcing strategies, pricing strategies, negotiation strategies, and procurement market intelligence in SpendEdge’s upcoming report on the global rice market.

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