ECommerce and Agriculture: Where is There Value to Create

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E-Commerce and AgricultureWhere is There
Valueto Create?
Steve Sonka National Soybean Research Lab
University of Illinois
Wheres the beef ????
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Agenda

• E-Commerce and information technology (IT) coming
  to ag
• IT implementation and industry redefinition
• Where are the IT gaps?
• Implications

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Agenda

• E-Commerce and information technology (IT) coming
  to ag
• IT implementation and industry redefinition
• Where are the IT gaps?
• Implications

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Forces Pushing and PullingTowards Redefinition
e-Commerce
Food safety traceback
Biotechnology
Precision ag
Environmental responsibilities
Consumer segments that desire differentiated
farm output
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E-Commerce

• Encompasses all electronically facilitated
  business processes, including data transfer among
  buyers, sellers and various supply chain
  entities.
• Has three primary components
• Supporting infrastructure,
• Processes supporting how business is conducted,
  and
• Commercial transactions.

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Agenda

• E-Commerce and information technology (IT) coming
  to ag
• IT implementation and industry redefinition
• Where are the IT gaps?
• Implications

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What is Industry Redefinition ?

• Redefinition When profound change occurs in the
  rules of competition
• Between suppliers and customers
• With consumers
• Among competitors

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Knowledge Creation

• Stories of Competitive Dynamics
• American Airlines and Sabre
• American Hospital Supply
• Frito Lay
• Broiler industry

Common Feature
Hallucination
Vision
Aggressively used data from their own operations
to gain competitive advantage
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Information TechnologyAnd Strategic Change

• Jeffrey Sampler How information technology
  redefines industries.
• ... Look at individual transactions
• (1) Separabilty
• (2) Aggregation potential

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Transaction Characteristics (1)

• Separability extent to which information can be
  separated from the associated transactions

• Amount of information
• CAPTURED as transactions occur

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Transaction Characteristics (1)

• Separability extent to which information can be
  separated from the associated transactions

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Today 011010100 110111000
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Transaction Characteristics (2)

• Aggregation potential extent to which the
  informations value is leverageable beyond the
  original transaction

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The Sector Today
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Separability
Potash and Phosphate Institute
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The Dot.Coms Come to AgA Two Day Sample
Aggregation potential

• J.R. Simplot Company Aspen Technology
  e-business solutions
• Rooster.com -- Cargill, DuPont and Cenex Web site
  to sell inputs
• www.farms.com -- new CEO CTO
• Cargill Ariba B2B exchange for food mfgrs and
  suppliers
• Ocean Spray Symbol -- warehouse productivity

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Two IT-DrivenChange Factors
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Agenda

• E-Commerce and information technology (IT) coming
  to ag
• IT implementation and industry redefinition
• Where are the IT gaps?
• Implications

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The Generic Value Chain
Firm infrastructure
Human resource management
Support activities
Technology development
Procurement
Inbound logistics
Operations
Outbound logistics
Marketing sales
Services
---------- Primary activities ----------
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Food and AgA Series of Value Chains
Input mfgrs
Input retailers
Farming
First handlers
Food mfgrs
Retail
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Bar Coding andManufacturer / Retail Power
Food mfgrs
Retail
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Bar Coding andManufacturer / Retail Power
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Where ITs Being EmployedToday
Input mfgrs
Input retailers
Farming
First handlers
Food mfgrs
Retail
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IT Within the Farming Sector
Fixed asset utilization
Precision ag as we thought it would be
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From JIC to JWN
Just In Case
Input retailers
Farming

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From JIC to JWN
Just Whats Needed For Production
Input retailers
Farming

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From Commodity toSupply Chains
Farming
First handlers
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Tomorrows Consumer Driven System
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Agenda

• E-Commerce and information technology (IT) coming
  to ag
• IT implementation and industry redefinition
• Where are the IT gaps?
• Implications

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Managerial Implications

• Anticipate interactions
• Concentrate on timing and sources of value
• Manage (create) intangibles

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Assets Today !!!

• What earns high value ?

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In Conclusion.

• E-Commerce, application of IT, is a feature of
  tomorrows ag system
• IT redefines industries, predictably
• IT gaps exist at and around the producer level
• Intangible assets with demonstrable value are the
  key