9.1 Why sourcing dynamics are central to the business model

9.1.1 In agri business, sourcing is not an operational activity alone.

It is a business model decision.

9.1.2 A business that only buys from farmers and sells onward, no matter how efficiently, remains fragile in the long run.

9.1.3 This Article exists to ensure that sourcing:

• Is economically viable,

• Strengthens downstream operations, and

• Supports multiple value-creation pathways.

Without this discipline, even well-intentioned farmer engagement becomes unsustainable.

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9.2 Scale economics of sourcing

9.2.1 Farmer aggregation has a fixed coordination cost — regardless of volume.

9.2.2 For example: If a group of 100 farmers produces ginger worth ₹300 lakh in total, and the business spends ₹10 lakh on:

• Farmer coordination,

• Procurement management, and

• Primary handling,

Then sourcing cost is just over 3%, which is viable.

9.2.3 If the same effort results in procurement of only ₹100 lakh, the sourcing cost rises to 10% or more, which severely weakens margins.

9.2.4 Therefore, this business believes that:

• Farmer engagement must be volume-aware, and

• Sourcing scale must justify coordination effort.

9.2.5 Small volumes with large systems create inefficiency. Large volumes without systems create chaos. The balance between the two defines sourcing viability.

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9.3 Optimizing beyond procurement

9.3.1 Once sourcing scale is achieved, procurement alone does not ensure profitability.

9.3.2 All activities beyond farm-gate purchase must be optimized together, including:

• Storage,

• Transport,

• Handling losses,

• Processing efficiency, and

• Packing and inventory turns.

9.3.3 Increasing procurement without strengthening these areas only shifts losses from the farm to the warehouse.

9.3.4 Therefore, sourcing decisions must always be taken alongside downstream readiness, not in isolation.

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9.4 Utilization of sourced produce — the core decision matrix

9.4.1 Every unit of produce sourced must have a clear utilization pathway.

9.4.2 This business recognizes the following primary utilization routes:

• 9.4.2.1 Farm Produce – Farm Grade; Sold as-is, with minimal handling.

• 9.4.2.2 Segregated & Graded Produce; Sorted by size, quality, or specification to improve value.

• 9.4.2.3 Primary Processed; Cleaning, drying, slicing, or basic transformation.

• 9.4.2.4 Secondary Processed; Further processing such as powders, extracts, or semi-finished inputs.

• 9.4.2.5 Tertiary Processed / Multi-Ingredient Products; Blends, formulations, or value-added combinations.

9.4.3 Each step upward increases:

• Complexity,

• Capital requirement, and

• Capability needs —

But also increases value potential.

9.4.4 Choosing the right mix across these levels is a strategic business decision, not an afterthought.

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9.5 Avoiding forced value addition

9.5.1 This business does not believe that all produce must be highly processed.

9.5.2 Value addition is meaningful only when:

• Infrastructure supports it,

• Quality can be controlled, and

• Markets are ready.

9.5.3 Forced processing without readiness increases:

• Wastage,

• Working capital stress, and

• Rejection risk.

9.5.4 Therefore, sourcing volumes and utilization routes must evolve together, not independently.

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9.6 Linking sourcing decisions to infrastructure and markets

9.6.1 Sourcing scale, processing level, and market strategy are tightly linked.

9.6.2 This business will not:

• Source volumes that cannot be stored or processed properly, or

• Process volumes that cannot be sold responsibly.

9.6.3 Every sourcing decision must clearly state:

• Where the produce will go,

• In what form, and

• Through which capability.

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9.7 What this Article protects us from

9.7.1 This Article protects the business from:

• Uneconomic farmer engagement,

• Overbuying without utilization clarity,

• Underutilized infrastructure, and

• Margin erosion hidden behind volumes.

9.7.2 It also protects farmer relationships by ensuring that:

• Sourcing commitments are realistic, and

• Procurement is sustainable across seasons.

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9.8 In simple words

Buying from farmers is only the first step.

The real business lies in how intelligently we use what we buy.

Sourcing without a utilization plan is not strategy — it is risk.

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9.9 Why this Article comes before Market & Claims

Article 9 ensures the business earns the right to sell.

Only after sourcing and utilization are economically sound does marketing integrity have real meaning.