Agriculture is the lifeblood of the Ethiopian economy. To keep the industry sustainable, the Ethiopia Commodity Exchange (ECX) set out to help farmers get a fair price for their produce.
Joining forces with IBM, the ECX pioneered a first-of-its-kind traceability solution that tracks coffee beans throughout the supply chain, and delivers game-changing analytical capabilities.
Enablesfarmers to boost profit margins and make a fair wage
Unearthsproblems such as supply-chain bottlenecks, optimizing coffee production
Buildsa foundation for sustainable economic growth in Ethiopia
Business challenge story
Fueling the nation’s economy
Agriculture is the heart and soul of Ethiopia. The nation is home to nearly 20 million small farms, most of which are owned and operated by traditional farming families. Of the country’s 100-million-strong population, around 80 percent live on a farm, and each plot of land has often been owned by the same family for generations.
To support its development, Ethiopia is in the midst of a transition to a more modern and efficient economic system. However, the government can only achieve real change if it involves all levels of society—which means that small-scale farming needs to play a leading role in transforming the country’s economy.
The Ethiopia Commodity Exchange (ECX) was established in 2008 to create greater prosperity in the country’s traditional agricultural industry. The entity is the first of its kind in Africa, and its model has been touted as a potential solution to improve quality of life for the continent’s farmers.
Ermias Eshetu, CEO of the ECX, takes up the story: “Tiny farms are scattered across all parts of Ethiopia. For many years, poor road quality, lack of funds to purchase suitable vehicles and long distances to the nearest settlements made it impossible for farmers to transport their produce.
“Instead, farmers were forced to sell their goods to middle-men who traveled to the farms to collect the harvest. Cut off from other potential buyers, they were forced to accept whatever price was offered, which was sometimes as little as 10 percent of the current market value. The middle-men sold the goods at a massive profit margin, and the farmers were trapped in a cycle of poverty.”
The ECX acts as a central marketplace that connects small-scale farmers to major international commodities buyers, with all parties assured of quality, delivery and payment for their goods. The vision is that by providing a valuable service to all market actors—farmers, processors, traders, exporters and consumers—the organization can boost Ethiopian exports and grow the national economy.
When Ethiopia was struck by the 2015 global decline in commodities prices, the ECX knew that it had to do more to secure the farmers’ wellbeing.
“Buyers of commodities have become more discerning in recent years,” continues Ermias Eshetu. “International firms increasingly demand full transparency and accountability within their supply chains, because it helps them ensure the quality of their products, meet Fair Trade guidelines and appeal to ethical consumers. Because we had been unable to keep up with these rising demands, national exports of coffee and other commodities fell by 25-30 percent, hitting our economy hard.
“However, the flip-side of the coin is that buyers are willing to pay more for high-quality, environmentally-friendly and origin-specific produce—and that presented us with a game-changing opportunity. Ethiopia already grows over 1,000 high-value varieties of coffee. If we could meet buyers’ demands for supply-chain visibility, farmers would be able to capture a share of the lucrative specialty-coffee market, where a single bag of coffee can fetch USD200. That market is booming thanks to new generations of coffee drinkers in China and India as well as North America and Europe.
“We set out to find a solution that could transform our vision into a reality.”
Building a trailblazing solutionTeaming up with IBM and IBM Business Partner Wavetec, the ECX built a pioneering coffee-traceability solution based on state-of-the-art analytics, mobile and Internet of Things (IoT) technology. The initiative was jointly funded by the ECX, USAID, Nestlé, Jacobs Douwe Egberts, Mother Parker's Tea & Coffee and The Sustainable Trade Initiative.
“We decided to partner with IBM because they had the right expertise, the right solution and a proven track record,” explains Ermias Eshetu. “IBM listened to our needs, and offered us a custom solution alongside access to a global team of industry and technology experts to help us meet our goals.
“For enhanced local support, we enlisted the help of Wavetec, who had accompanied us on several prior technology journeys, and always deliver outstanding support.”
The core engine of the solution is Frequentz IRIS, which captures data from tags on coffee bags using mobile devices. Once the data is captured, it is sent to an IBM® DB2® database for storage, and the two systems are integrated via IBM MQ. Business metrics can then be calculated and displayed back on the mobile devices via the IRIS application, which is supported by IBM WebSphere® Application Server.
Total visibilityToday, the cutting-edge IoT solution tracks coffee throughout every stage of the supply chain.
Once grown and harvested, the coffee is put into bags. Each bag is given a barcode for electronic scanning, and serialized using a unique identifier known as Electronic Product Code (EPC). With this identifier, the coffee’s origin can be traced down to the farms at which the beans were grown.
When the coffee is sent for washing, hulling and cleaning, staff scan the bags to indicate when and at which of the 2,500 geo-referenced stations the processing took place. The mobile application enables users to scan tags offline, and automatically synchronizes the data once a connection is available.
Once processing is complete, the station hires a truck to deliver the coffee bags to the ECX. Upon arrival, the coffee’s humidity level is measured, and the beans are sampled and graded according to their appearance, size, color and taste. Next, the coffee is sent to a nearby warehouse, ready for sale.
After the coffee has been sold, the buyer sends a truck to collect the goods from the appropriate warehouse. At this point, the buyer receives a traceability report detailing the entire production cycle of the coffee they have purchased.
“The solution helps us tell our buyers the true story of each bag of coffee we produce,” comments Ermias Eshetu. “It also gives us a clear picture of which varieties of coffee we’re growing, in what quantities, and which markets we are selling it to. This can help our farmers make smarter decisions about what they grow in the future.
“Furthermore, we can take advantage of the solution’s powerful analytics capabilities to gain fresh insight into the production cycle. For example, we have a service-level agreement [SLA] with our processing stations that we will sample and grade incoming deliveries within three working days. We can now see how often we meet the SLA, and which delivery slots we should be offering to processing stations to avoid backlogs.
“What’s more, we can see how long coffee spends at each stage in the production process, and pinpoint bottlenecks. We can also predict the quality and flavor of coffee that we are likely to receive from each farm or processing station based on its track record.”
The solution is also designed to reduce the risk of counterfeit goods being traded on the ECX.
“In the past, we occasionally had incidents in which a truck of top-grade coffee was switched for a different vehicle containing much lower-quality coffee between grading and delivery to the warehouse,” recalls Ermias Eshetu. “Using the tags included in the new solution, and by taking photos of the driver, his license and the truck, we can avoid these kinds of problems and prevent counterfeit goods from tarnishing the reputation of Ethiopian coffee.”
The ECX is also harnessing the rich data to improve the quality of coffee traded on its marketplace.
“As we gather more data, we are gaining a better understanding of the type of quality of the coffee from each region,” comments Ermias Eshetu. “So, for example, if we see that one farm is producing a lower yield or worse-quality coffee than we would expect from that size of plantation in that area, we can send experts to educate them on better production methods. Similarly, if we see that a processing station located near very fertile land consistently sends us low-grade coffee, we can teach them about superior production methods.
“Likewise, processing stations sometimes send us wet coffee, meaning that we need to empty out every bag on the truck, and leave the contents to dry on a canvas sheet. That process can take up to two weeks, during which the beans start to ferment and deteriorate in quality, so they end up fetching a lower price. Whenever incidents like this occur, we can contact the processing station to stop the problem from reoccurring.
“Initiatives like these help farmers and processing stations get a better price for their goods. We are giving farmers an opportunity to increase their earnings and escape poverty without having to abandon their traditional ways of life. Because they can identify their goods on the international market, they take greater pride in the quality of their produce, and can start to build a strong reputation for their coffee.”
Full traceability is making Ethiopian coffee more appealing to consumers, and helps firms that buy the coffee obtain Fairtrade or organic certification for their products. Additionally, Ethiopian farmers are better-equipped to compete on the thriving specialty-coffee market. These factors are helping the nation boost exports.
The ECX currently uses the solution to track more than five million bags of coffee, and plans to extend it to support five million farmers. In future, the organization plans to expand the solution to deliver similar benefits for other commodities that Ethiopia produces, such as sesame and haricot beans.
Ermias Eshetu concludes: “Partnering with IBM, Wavetec and Frequentz, we have built an innovative solution that is delivering a game-changing contribution to the Ethiopian economy.”
About Ethiopia Commodity Exchange
The Ethiopia Commodity Exchange (ECX) offers a state-of-the-art marketplace for the nation’s traditional agricultural economy, bringing integrity, security, and efficiency to the market. The organization currently serves five million farmers and trades billions of dollars of goods each year.
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Wavetec specializes in delivering cutting-edge queue management, digital signage and customer feedback solutions. Founded in 1986, the company is headquartered in Dubai and serves customers in 70 countries across the globe. To find out more about products and services from Wavetec, please visit: www.wavetec.com. Based in the United States, Frequentz is a leader in traceability technologies that deliver better visibility of supply-chain processes. To find out more about products and services from Frequentz, please visit: www.frequentz.com. IBM Analytics offers one of the world's deepest and broadest analytics platform, domain and industry solutions that deliver new value to businesses, governments and individuals. For more information about how IBM Analytics helps to transform industries and professions with data, visit ibm.com/analytics. Follow us on Twitter at @IBMAnalytics, on our blog at ibmbigdatahub.com and join the conversation #IBMAnalytics.