Farmer Value Creation vs Last Mile Delivery
Key Messages
The business models of companies that fully rely on their own staff appear to create significantly more value for farmers than those that fully or partially rely on intermediaries. There is a lot of nuance behind these findings. Our data suggests that there are challenges related to the quality of service delivery when intermediaries do not have the same capabilities as a company’s own staff. At the same time, our data also suggests that intermediaries can help create stronger and larger smallholder-inclusive business models.
Our full analysis explores the following aspects in more detail:
The Quality of Service Provision The Relationship between Farmers and Companies The Reach of Service Provision and Market Access
Keep reading to find out more.
Understanding the role of last mile delivery in value creation at farm-level
Does using your own staff to deliver services to farmers lead to better quality outcomes at farm-level? That is the key question for this analysis, and the answer is somewhat complex. Using your own staff for
At a first glance, our results seem to confirm the original hypothesis, which states that companies using their own staff are associated with creating 43% and 96% more value at farm-level when compared to companies that rely on intermediaries or a combination of both respectively. Furthermore, our modelling results, in which we control for the estimated relationships between farmer value created and all other drivers that we have analyzed, confirm this relationship. They do, however, highlight further nuances.
Link to other outcomes
Understanding the relationship between how services are delivered and how value is created at farm-level is particularly important in the context of a company’s investment in farmers, and the amount of revenue that it recoups. We discovered that:
- For
Service Delivery Cost per Farmer , using your own staff is (unsurprisingly) associated with a higher cost. Click here to read more about the analysis of last mile delivery versus investment per farmer. - For
Direct Cost Recovery , businesses that involve their own staff in last mile delivery, either as a standalone option or in combination with intermediaries, recoup more of their service costs through service payments compared with those business models that rely only on intermediaries. Click here to read more about the analysis of last mile delivery versus direct cost recovery.
Diving deeper: what do we think explains these results?
We see the Last Mile Delivery influencing Value Creation at farm-level in different ways, including:
The Quality of Service Provision – The efficacy of services can be lower when delivered by intermediaries who may not have the same capabilities as a company’s staff.The Relationship Between Farmer and a Company – Intermediaries can either support or hinder trust between a farmer and a company.The Reach of Service Provision and Market Access – Leveraging intermediaries to support last mile delivery allows companies to better ensure that services reach remote and underserved groups of people.
Of the three factors above, the first highlights how using intermediaries could lead to lower value creation, while the second and third factors cautiously indicate the positive impact that intermediaries could have. However, the way in which companies use intermediaries can help ensure getting the best of both worlds. Well-trained, properly-resourced and effectively-incentivized intermediaries can reduce risks around service quality, fraud, and theft. We are therefore confident that the key priority here is to continue finding ways of empowering community-based intermediaries, whether they be agents, lead farmers or farmer organizations, or even Small and medium-sized enterprises (SMEs), and micro-entrepreneurs playing similar roles, to be able to provide the same or better quality of goods and services as company-employed staff.
Given our current research, we have determined what can make a more effective agent model (several of these also apply to lead farmers and farmer groups):
For more insight on best practices for last mile delivery and agent models, click here to read an innovation guide on Commission-based agent models.
Implications: So what does this mean for you?
Based on our current findings, we see the following implications for different audiences:
- Take a look at this Commission-based agent innovation guide to see how you can implement or improve you model.
- Reach out to Farmfit Business Support so we can analyze your business and work with you to find opportunities to develop an LMD approach the suits the context and mitigates potential cost-quality trade-offs.
- If the quality of produce is highly sensitive to farming practices, consider using your own staff or a combination of your employees and an intermediated approach to mitigate the risks of relying on intermediaries.
- If you choose an intermediated approach or a combination with your own staff, set up appropriate incentive and accountability mechanisms to reduce the risk of fraud, misinformation and theft.
- If you are trying to better reach underserved groups, consider taking a combined approach. If you are trying to reach women in particular, include female agents, female lead farmers and women within the leadership of farmer groups.
- There are limits to how many farmers an individual agent can serve. Beyond these limits, there is a risk of creating less value for farmers, which in turn can make it less likely that farmers are willing to pay for the services you provide (reducing your direct cost recovery). Ensure the ratio of farmers to agents in your business model is at a level that allows you to offer high quality services to farmers.
- Support your portfolio of investees by identifying potential improvements to intermediated last mile strategies to mitigate key risks and leverage opportunities in their supply chain. For example, evaluate what accountability mechanisms are in place to reduce the chance of theft and fraud.
- Be aware that when you incentivize your investees to scale, this does not come at the expense of the quality of service delivery, for instance by reducing the number of touchpoints with farmers. Mitigate this risk by considering technological solutions (for instance to provide agronomic training to farmers on-demand) or by ensuring that your staff- or agent-to-farmer ratios are adequate to provide sufficient attention to individual farmers.
- Intermediaries such as farmer groups and agents can be vital in supporting the uptake of technologies and the transmission of knowledge. When designing new interventions, evaluate how supportive a last mile delivery model may be in driving adoption.
- To avoid duplication of efforts, coordinate private sector investments into agent models and farmer organizations so that they can be more effective. For instance, consider where agents should be exclusive to a single company or whether it may be preferable for them to be supported to serve multiple companies.
- We see that many organizations are either supporting companies to implement agent models or are investing in agent models directly. We invite knowledge exchange on best practices around how agent models can be well-structured and incentivized.
- Scaling is a key challenge. Invest in research to learn and understand how intermediated and agent-based models can help to reach scale without compromising farmer value created.
- Assess the legal framework to determine whether relationships between intermediaries and companies protect their respective rights.Better coordinate public extension services with last mile delivery networks set up be companies or support organizations.
Reflections on data limitations and further research
The Insights Hub is a living document which we are constantly updating with new data, new analysis, validation by our partners, etc. For the results on this page, we would like to emphasize the following:
Major caveats and limitations of our current approach
Although we believe our analyses and insights offer a solid set of insights that can already be used to inform decision-making, there are a number of caveats that we wish to be open about.
1. Focusing on $ value creation per farmer alone can give a narrow view on impact 2. Our data looks at value creation for the average farmer 3. Our quantitative analyses are only capturing the presence of last mile delivery options
How we plan to update these findings in the near future
1. Incorporation of other indicators to look at value creation 2. Investigation into how equal income improvements are within a model 3. Consideration of the means by which value has been created
Suggestions for additional research by our peers and partners
Incentive structures for agents and other intermediaries Comparative assessment of value created for intermediaries Research on the enabling environment conditions that are needed for agents to flourish
- 60 Decibels. (2022). Syngenta Foundation India - Agri-Entrepreneur Insights.http://60decibels.com/wp-content/uploads/2023/05/Syngenta-Foundation-India_Agrientrepreneurs_Extrernal_60dB.pdf
- Kansiime, Monica K., James Watiti, Abigael Mchana, Raymond Jumah, Richard Musebe and Harrison Rware. 2018. Achieving Scale of Farmer Reach with Improved Common Bean Technologies: The Role of Village-Based Advisors, The Journal of Agricultural Education and Extension
- Mercy Corps Agrifin Accelerator. (2020). Field Force Models for Agriculture – Key Learnings and Insights. Nairobi. https://www.mercycorpsagrifin.org/wp-content/uploads/2020/09/Digital-Field-Force-Case-Study_FNL.pdf
- Palladium. (2018). The Village Agent Model Under NU-TEC MD.https://beamexchange.org/uploads/filer_public/aa/11/aa11ec1c-38f3-49b5-a2a0-d0b3ca9b544b/village-agent-model-nu-tec-md.pdf
- USAID. (2016). Brief Intermediary Business Models for Improved Market System Processes and Relationships. Uganda. www.feedthefuture.gov
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Strength of Relationship 3/5
- Moderate relationship between driver and outcome variables
- Results are consistent across analytical models used
- Several limitations regarding sample or indicator
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