According to reports, the agro-based products sector has a CAGR of 10.5%. While the sector holds great promise, the operational challenges create a gap between demand & supply and also impact the quality.
Introduction
The agro-based industry and business sector depend on a country’s agricultural produce for raw materials. These companies face a lot of operational difficulties as agricultural products depend on a string of variables and factors that are often non-negotiable.
This article deals with the 5 most common operational challenges that agro-based product companies suffer from.
1. Climate Variations
The foremost factor that dictates agricultural production is the weather and climate of a place. Unpredictable natural phenomena like drought, flood, etc., cause significant losses in agricultural produce.
Such losses, in turn, lead to the disruption in the supply chain. Even the slightest change in weather conditions leads to a disturbance in the production of raw materials for agro-based companies.
2. Availability of Raw Materials
Another significant operational challenge, that the agro-based product companies have to combat is the availability of raw materials.
Due to the increasing population and other related factors, the demand for agricultural products is on the rise. Whereas there are constraints like climate change, limited availability of lands and natural calamities that affect the supply chain of the agricultural produce.
Therefore, there is always a gap that exists between the demand and supply chain of the agro-based industries.
3. Supply Chain Management
Since agro-based companies deal with a lot of variables in terms of raw materials and the conditions under which they are produced, the management of their supply chain becomes an important step.
Not only logistical optimization of the perishable raw materials but also maintaining good relationships with the farmers and suppliers is essential for a stable supply chain.
4. Fluctuating Production Cost
The supply cost of agricultural raw materials is another significant operational challenge for agro-based industries. It also has an impact on the overall profitability of these companies.
Fluctuating market prices, uncertainties in crop production owing to weather changes or pests and transportation problems are some of the challenges that often lead to varying costs of production.
5. Regulatory Restraints
Companies dealing with agro-based products also need to keep in mind the various government regulations related to food safety, environmental protection and labour standards.
It is very important to stay updated with such regulations otherwise non-compliance can lead to legal issues, damage to the brand name and market access restrictions.
Conclusion
These operational challenges cannot be completely eradicated in agro-based companies, but their effect on production can be significantly reduced by implementing certain strategies like laying out a proper plan and employing risk management practices
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