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Abstract : This conceptual paper brings forth the analysis of supply chain in medicinal plant sector, taking Kerala as a case. Rising demand for Ayurveda has paved the way for numerous manufacturing units in Kerala, and medicinal plants form the significant raw material used in these ayurvedic industries. The medicinal plants are mostly cultivated by rural farmers, and it is a vital source of livelihood for many farmers in Kerala. The supply chain of medicinal plants often consists of multiple levels with many players including primary collectors, private traders, agents, wholesalers and final consumers. The collectors (rural farmers) in the medicinal plant supply chain are in a vulnerable position. As it is difficult for collectors to sell the plants directly to the ayurvedic industries, they usually depend upon other players in the supply chain, and this puts collectors in a weak bargaining position. It finally results in collectors receiving prices lower than those prevailing in the wholesale market. The illegality and exploitation of collectors in medicinal plant sectors can be minimised through the restructuring of the supply chain by contract farming agreement. Contractual agreement helps in traceability of medicinal plants within the supply chain which is an important criterion to ensure its quality in exports. However, despite the importance and size of supply chain in medicinal plant trade, very few studies have been conducted in this area. The objective of this paper is to analyze the concepts of supply chain management and traceability of medicinal plants through contract farming agreement.