Raw Material Bank’s write-up

Table of content

Table of content

Raw Material Bank model

SWOT analysis

SWOT analysis

SWOT: strategies matrix

Roles description

Purchasing unit

Description

Responsibilities

Forming process

Purchasing committee

Description

Responsibilities

Forming process

RMB Committee

Description

Responsibilities

Forming process

Processes

Marketing

Promotion

Assortment

Costing and pricing

Supply chain planning

Demand forecast

Physical execution

Transportation

Warehouse management

Insurance

Transactions

Purchase order

Customer order

Credit management

Inventory management

Financial transactions

Raw Material Bank model

Raw Material Bank operates in two-tier model. At the district level, there are purchasing unit, which is run by SAATH, and purchasing committee. And at the village level, there are Raw Material Bank Committees, which consist of SHG representatives.

Purchasing unit is one point of contact to suppliers and RMB committees. Purchasing unit purchases raw material from suppliers, based on RMB committees demand forecast. In addition, manager supervises and assists RMB committees in the villages. It does not deal with physical raw material.

Purchasing committee acts as supervisor and provides various kind of expertise (like technical). It consists of representatives from SUVASA federation, SAATH and NIFT.

RMB committees act as distribution and storage network of raw material, collect money from artisans, manage credits and demand at local level. In addition RMB committee can handle issues at village level. RMB committees are legal branches of SUVAS. Village committees consist of representatives of artisans SHG groups.

SWOT analysis

SWOT analysis

Strengths
  • SAATH is already working with 1799 artisans for 2 years
  • SUVAS Federation of artisans is established
  • Artisans were trained by NIFT and SAATH
  • Pilot raw material bank of silk yarn is already operating for 1 year
/ Opportunities
  • Establish Micro Finance institution
  • Expand to new villages
  • Add wool and cotton to Raw Material Bank’s assortment
  • Micro-planning
  • Long-term relationships with suppliers

Weakness
  • Operations are mostly manual
  • Do not have robust IT system
  • NIFT partnership only for 2 years
  • Care partnership is finished
/ Threats
  • Artisans can not repay the credits
  • Prices for raw material will be increased
  • Quality of raw materials will be insufficient

SWOT: strategies matrix

Strength / Weakness
Opportunities /
  • RMB should increase turnover by including other raw materials – wool, cotton
  • Use RMB as a platform for other artisans
  • Provide loans via local MFI
/
  • Minimize manual transactions by using sufficient IT system
  • Ensure delivery time by working with local suppliers

Threats /
  • Establish long-term contracts with suppliers
  • Maintain quality control scheme
/
  • Use micro-planning
  • Quality control

Roles description

Purchasing unit

Description

Purchasing unit is established to organize aggregate procurement of raw material for RMB committees. PU acts as broker and takes fixed commission for it.

PU is run by SAATH.

Responsibilities

Manager is responsible for:

  • Purchase raw material from suppliers
  • Ensure delivery to RMB committees
  • Promote RMB services for other artisans
  • Assist RMB committees
  • Supervise and audit RMB committees
  • Accounting
  • Documentation

Forming process

Manager is hired by SAATH.

Purchasing committee

Description

Purchasing committee is established to provide expertise and external monitoring for SUVASA. A Purchase Committee consists of four persons from SUVASA (one artisan’s representative per craft + 1 from SUVAS), one from SAATH and one from NIFT. Purchasing Committee approve pool of suppliers based on price, quality and delivery.

Also, purchasing committee acts as a mediator in case of any issues with suppliers.

Responsibilities

Purchasing unit manager

  • Provide list of suppliers with proposed price, quality (sample) and delivery time

SUVASA representatives

  • Express artisans perspective
  • Participate in process of approving pool of suppliers

SAATH representative

  • Monitoring the process
  • Participating in process of approving pool of suppliers

NIFT representatives

  • Ensure quality
  • Participating in process of approving pool of suppliers

Forming process

Purchasing committee is operating on voluntary basis. Each stakeholder appoints its representatives. Purchasing committee is gathered on demand, but at least once per 6 months.

RMB Committee

Description

RMB committee is community-based organization. RMB committee is part of SUVAS federation. It is consist of Committee President and Committee members. It is used for managing local demand, and encourages cooperation between artisans.

Responsibilities

President

  • Representative of RMB committee

RMB Committee

  • Plan local demand
  • Distribute raw material to the artisans
  • Manage credits
  • Store raw material
  • Quality control
  • Manage stock

Forming process

RMB are organized on craft basis. RMB committee is formed from artisans on voluntary basis. Each SHG nominate a representative. President is selected by voting of committee members.

Processes

Marketing

Promotion

Promotion plays an important role in project sustainability. Revenue generation is based on commission. Therefore, we should aim to increase outreach, and consequently turnover.

SAATH already has worked with 2000 artisans. So, the first stage is to work with these artisans. From the other hand, we have successful pilot project, therefore experience sharing will be useful.

SHG / Village meetings

  • Advantages of RMBC
  • Experience sharing

Assortment

Currently, we are working with:

  • Mulberry silk
  • Acrylic wool
  • Natural wool

The model could be used for other commodities. The main criteria are:

  • Commodity should be standard
  • High volumes
  • Needed by community

The assortment extension should be based on artisans needs.

SAATH or SUVAS should conduct a survey. Then discuss with RMBC.

Costing and pricing

Cost structure

Purchasing price is the supplier’s price.

Delivery charges include packaging, transportation and insurance.

Insurance of raw material which is stored in warehouses also included in cost in order to mitigate the risk of raw material loss.

Purchasing price
+
Delivery charges
Insurance
Transportation
Packaging
+
Insurance
= Cost

Price

Purchasing unit adds fixed commission, 5-8%, to the product cost.

In case of deferred payment, the following conditions should be applied.

Payment after / Condition
0 days / Price - 1,5%
15 days / Price
30 days / Price + 1,5%

Supply chain planning

Demand forecast

Demand forecast should be based on artisan’s inputs. From the others hand, we should take into account market trends. We have to develop seasonal profiles based on sales data and artisan’s inputs.

Output: demand forecast report – quarterly.

  1. SHG representatives provide inputs to RMB committee
  2. RMB committees send their forecast to the RMB manager
  3. RMB manager plans demand, taking into account sales data and RMBC inputs.
  4. RMB manager issue demand forecast report

Physical execution

Transportation

Transportation scheme

PU store raw material in warehouses, which are situated in the villages. Currently, we have 7 shipping points, to each warehouse.

Delivery to the Warehouses is managed by supplier.

Transportation routes

There are 7 routes to each RMBC’s village. RMB PU manager specify Route and amount of raw material in purchase order.

Warehouse management

Each RMB should organize raw material storage in WH. WH should be audited by technical expert. WH is run and owned by RMB committee.

PU and RMBC sign a contract for raw material storage in WH. PU owns the material, until the actual sale to the artisan.

WH establishing

  1. RMB committee allocates the place for WH.
  2. Technical expert from purchasing committee audit the WH
  3. RMB committee register WH
  4. RMB committee define person, who is responsible for WH
  5. RMB committee and Purchasing unit sign up the agreement

Inbound

  1. PU manager inform RMBC about delivery date
  2. Responsible member of RMBC check and weight raw material
  3. Then he signed
  4. Update stock inventory
  5. Inform PU manager about stock update
  6. PU manager put data into inventory database

Outbound

  1. Responsible member of RMBC check customer order from artisan
  2. Accordingly, he weight and give required raw material to the artisan
  3. Update stock inventory
  4. Inform PU manager about stock update
  5. PU manager put data into inventory database

Insurance

Insurance is important part to mitigate the risk of loss of the raw material. The insurance coverage includes loss of raw material in case of fire, robbery and etc.

Transactions

Purchase order

  1. PU manager quote suppliers from Pool of suppliers
  2. PU manager check inventory and collect inputs from RMBCs
  3. PU manager form the order (volume per each RMBC)
  4. Fill in purchase order
  5. Submit purchase order to the supplier
  6. Payment DD to the supplier

Customer order

  1. An artisan will approach her / his Producer Group President and place a request to buy the raw material.
  2. The President / Secretary of the group sales raw material to the artisan or review credit option
  3. The raw material is given at the sales price (set by PU), if the money is paid within 15 days of purchase, 1,5% if the money is paid back after 30 days, and -1,5 % if the money is paid up cash front.
  4. Raw material is weighed and checked by the purchasing artisan.
  5. The purchase is recorded in terms of the name of the purchasers, date of purchase, kilograms purchased, rate at which purchased, 1% option or the 3 % option, amount due (date)

Credit management

Credit could be provisioned for the period of 15 or 30 days. RMBC makes a decision on the credit. RMBCs manage credits. The credit is provisioned to the SHG.

  1. Artisan ask for a credit
  2. The President / Secretary of the group would look at the saving balance and then make a recommendation.
  3. The request then comes to the Committee.
  4. The committee based on the recommendation provisions the credit
  5. After chosen period artisan pay back the credit
  6. If artisan does not pay back the credit, than SHG should pay back
  7. RMBC collects the money and transfer to PU.

Inventory management

Inventory management is done by RMBCs. Also, it is done by PU manager in database.

There are two documents: In each RMBC, the stock registry is updated by responsible for WH.

Also, PU manager updates aggregated database, based on the weekly inventory updates by RMBCs.

Financial transactions

Financial transactions (GL, AP, AR) are maintained by PU manager and RMBC presidents.