In the post below, Bidowra and Mark provide an interesting example of how to support a single firm as they adapt and grow their online delivery business model. The case raises important and often ignored elements of good systems thinking, including systemic resilience. It highlights important insights and guidance on how to engage with a firm, which is certainly necessary, but not sufficient. Good systems thinking needs to also include how an initial interaction with a firm catalyzes other firms to see such behaviors as attractive, as well as how the system becomes more diverse. While Chaldal is demonstrating good behaviors, systemically, the online delivery market segment can only adapt and grow over time if it includes a diverse set of lead firms that invest in developing competing supply chains. Additionally, from a systemic resilience stand point, there would be concern from focusing too much on a single lead firm to gain scale as that would likely increase fragility, as structures that rely on a single node can easily fail if that node/firm stumbles. A real challenge when applying systems thinking is the importance of maintaining multiple perspectives using different analytical lenses so the project can catalyze ongoing improvements in and alignment of the competitiveness, inclusiveness and resilience of the market system.
Based in Dhaka, a densely populated city of nearly 22 million, Chaldal is the largest online platform for grocery delivery in Bangladesh, capturing roughly 80 percent of the country’s market shares of online grocery and retail sales. When the COVID-19 crisis hit Dhaka in March, more households relied on grocery delivery services to social distance and prevent the spread of the virus. Chaldal’s average deliveries rose from 3,000 to 15,000 per day.
This growth opportunity also presented a dilemma. While the company already sourced rice and grain products from wholesale markets, the fivefold increase in demand for their products from urban customers meant they needed to significantly grow their supply without sacrificing quality. They did this by sourcing aromatic rice, pulses, and oilseeds from aggregators who procure from farmers supported by Feed the Future. New warehouses, an expanded workforce, and additional motorcycles for deliveries boosted their operational capacity, but this alone wasn’t enough.
Technical support from the Feed the Future Bangladesh Rice and Diversified Crops (RDC) Activity aided Chaldal in developing a more agile supply chain and new products. Recognizing the market opportunity, Chaldal developed a “know your rice” campaign to highlight the benefits of locally produced premium rice varieties. The campaign allowed Chaldal to market its products sourced from rural Feed the Future areas to urban areas. It also allowed Chaldal to expand its supply chain portfolio, ensuring food availability for the urban poor, with a focus on marketing nutritional products, such as zinc rice, to women and children. Existing customer databases allowed the company to target these market segments with promotional campaigns through bundling fast-moving consumer goods and promotional packets of nutritional products.
The RDC Activity, which is funded by USAID and implemented by ACDI/VOCA, helped the company fast-track their hiring process using virtual trainings for new delivery employees. The RDC Activity also helped Chaldal develop a network of procurement agents and millers, set up stricter hygiene protocols, supply employees with face masks and soap, and impose regular cleanings of its vegetable sourcing, processing, and packaging facility. As a result, Chaldal is on track to meet delivery demands. The company plans to use this supply chain infrastructure to create trade efficiencies and expand its sale of fresh vegetables and perishables. Although Chaldal had the resources to make this transition on its own, the RDC Activity’s support redirected the management of these resources and made them a priority for the business to adapt and respond to COVID-19.
The successful shift in business operations shined a light on how global development entities should engage with the private sector. To increase the agility of enterprises to adapt to market shocks, development organizations must understand the context of the problem, co-create a solution with the company, adapt to rapid changes, and use data to inform responses for both the donor and the enterprise.
Adjusting how we think about partnerships requires major behavioral shifts and acceptance of that fact that there will be failures. In 2019, USAID launched a policy that began the process of institutionalizing private sector engagement as a core part of its operating model. ACDI/VOCA’s own private sector engagement approach explores how to incentivize the right enterprises in the right ways to weather a storm — not only for their own gain, but also to strengthen the broader market systems.
Understanding the Problem
Understanding how and why businesses behave the way they do is the first step toward engaging the right partners to strengthen local economies and contribute to development objectives. It is an approach that begins with analyzing the market to discover the root causes of poorly performing sectors. Better understanding can come through identifying business and decision-making norms, highlighting gaps in financing, defining problems or opportunities rooted in gender and social inequalities, or gauging openness to inclusive business methods.
The RDC Activity drew upon its previous Chaldal partnership, which focused on marketing, as well as its COVID-19 analysis to identify ways in which the company was already resilient and to determine the new challenges it faced. This created an opportunity to develop a mutually beneficial partnership focusing on expanding opportunities targeting the urban poor with nutritional products. Through this process, the RDC Activity also helped Chaldal identify promotional campaigns at schools where mothers pick up their children. This proved to be a very effective channel for push marketing.
Co-Creating the Solution with the Private Sector
When a development organization approaches a company with a predetermined plan for how to partner, the company can only accept or reject it. By shifting the conversation to say “Here is what we are seeing on the ground. What are you seeing?” we open up the terms of engagement and increase the likelihood of partnership. Through this process, there is an opportunity to collaborate and co-create with the private sector.
The RDC Activity started working with Chaldal in 2019 to promote fine and aromatic rice varieties through innovative marketing. This involved facilitating meetings to introduce Chaldal to millers and procurers of rice. Based on this previous experience, it was clear to Chaldal that the opportunity to source its products from the Feed the Future zone would add value to their market in Dhaka. The RDC Activity brainstormed with Chaldal’s CEO on how to respond to the increasing demand, while also meeting the mandatory safety protocols of warehouse and delivery systems. Based on this discussion, Chaldal co-created the proposal with technical assistance from the RDC Activity.
Responding to Rapid Changes through Adaptive Management
Investing time, energy, and trust-building resources into partnerships with the private sector allows for more flexibility when changing circumstances, such as COVID-19, disrupt supply chains and business models.
Since the COVID-19 crisis began, ACDI/VOCA programs around the world have been helping enterprises pivot through adaptive management. As was the case in Bangladesh, sometimes that means lowering the barriers and simplifying the process for engaging with enterprises to become more agile.
In an article published by USAID, Anar Khalil, the RDC Activity’s agreement officer’s representative at USAID’s Bangladesh Mission said, “We looked at past programs and realized that the traditional design process — from the moment we put together a concept idea to procurement — takes 18 months to two years. So, by the time the project is awarded, these ideas are old.”
For the RDC Activity, adaptive management meant quickly moving forward with applications that had the most potential to create both immediate and long-term solutions resulting in more resilient systems that are better equipped to cope with shocks. This flexible approach allowed Chaldal to address self-recognized pain points and make a quick pivot to its business model. It also allowed the company to expand its capacity to increase sourcing and offer farmers market opportunities in the middle of unprecedented shocks in demand for their products. The RDC Activity’s streamlined grants process identified key evaluation criteria and removed barriers to participation. Recognizing the urgency of addressing COVID-19 constraints, USAID waived its one-to-one fund matching requirement for sub-grants related to COVID-19 responses. This allowed the RDC Activity to pivot its approach and turn applications around much faster. The RDC Activity co-created their final agreement with Chaldal to ensure any proposed solutions were realistic and could address the challenges the company faced.
Measuring and Learning from Results
Data informs both companies and programmatic decision making. Based on their learning from annual performance surveys and rapid situational analysis, the RDC Activity was able to better understand which business models and interventions could lead to systemic changes in the agriculture market system. This informed how the RDC Activity worked with Chaldal, especially supporting the company’s ability to decide where to expand and to focus on the investments needed to meet demand. Mutually beneficial data increased the capacity of Chaldal to identify, prioritize, and allocate resources more broadly into their supply chain operations.
Agile Responses Lead to Systemic Change
ACDI/VOCA’s portfolio approach to private sector engagement recognizes the needs to shift thinking beyond firm-level investments and, instead, to look at the broader group of firms supported and their contribution to a stronger system. The RDC Activity’s systems approach is predicated on collaboration within the market system through facilitating connections between enterprises and creating incentives for multiple firms addressing a common challenge. Its partnerships are also linked to the activity’s systemic change objectives.
This has resulted in a stronger supply chain and distribution model that is improving the competitiveness and resilience of the agricultural market system. For example, the RDC Activity facilitated connections between agriculture mechanization providers and rice companies to develop branded “franchise service operators” who provide services to thousands of farmers in their network. That led to continuous maintenance support, established farmer databases, and scheduling and training programs for equipment operators with new companies entering the market.
Chaldal’s aggregators target these farmers as part of their increased sourcing from the Feed the Future zone. The company intends to increase rice procurement from rice mills that are dependent on a pool of farmers, including female farmers, who produce single variety rice. This will happen once they establish quality and pricing standards and develop partnerships with regional seed input providers.
The RDC Activity is making the inclusive business case for Chaldal to invest in women both as producers and consumers. To date, the RDC Activity has invested in 37 enterprises with 54 unique interventions, resulting in $3,182,462 in sales and procurement to 344,654 farmers who have accessed improved services.
From the private sector perspective, having the ability to adapt and innovate during challenging times leads to more inclusive, sustainable, and agile responses.
“When the COVID-19 crisis hit, we were flooded with orders,” Chaldal CEO Waseem Alim said in an interview. “USAID and RDC came in with COVID-19 emergency support, which was used to help adapt and expand our business operations while ensuring continued safety of our employees.”
Adaptive approaches lead to increased sales and a strengthened ability of firms and the broader system to not only increase food security but also respond to future crises. The result is more sustainable and scalable opportunities benefitting farmers.
About The Authors:
Bidowra Khan, Market Systems and Social Inclusion Specialist for the Feed the Future Bangladesh Rice and Diversified Crops Activity
Mark Sevier, Technical Director of Market Systems and Partnerships for ACDI/VOCA