Cold Chain : Building Infrastructure, Service Capability & Profiting from it

Vishal Sharma VP – Operations RK Foodland Pvt Ltd

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Preview
• Overview of Food Supply Chain • Macroeconomic Situation

• Cold Chain Industry challenges – Is Infra a barrier ? • Growth drivers & Way forward
• Outsourcing & How Service Capability drives Profits?

97 mn sq. 180 mn hectares of arable land (one tenth of the world). 56 mn hectares irrigated .second largest food producer in the world and having potential to become first. • India -.Introduction • India -. .one of the biggest emerging markets. over 1.2 billion population & 300 million strong middle class. • India --land area 2. km..

85 Mn T) Goat & Sheep 182 million 4 .7 Mn T Inland : 3.India is the front ranking producer of many perishable commodities Milk Largest Producer 100 Mn T Cattle / buffaloes Largest in the world 283 million F&V #2 in the world 151 Mn T Fisheries Marine: 2.1 Mn T Food Grains #2 in the world (220 Mn T) Sugarcane # 2 in the world (245 Mn T) Tea Largest Producer (0.

increase in packaged food • Growth of beverages segment and on premise consumption gives opportunity to tap existing customers. • Changing and busy lifestyle. the industry will continue to grow • Projected contribution 30% of total trade by 2020. fast emerging middle class population and surging disposable income.Macroeconomic drivers in India Drivers ►GDP ►Population ►Per Capita Income Growth (2012 – 2020) • • • • 7% to 9% 1. single and independent store is possible • 2. currently at 10% • Currently Low but rising gradually Lifestyle changes Growth indicators in other segments Rapid Urbanization Growing Modern Trade Low labour cost . facilitates quick chat/meeting over food. • Convenience of walk-in. health consciousness.5% urbanization • Education and awareness.2% >15% growth (disposable income) Women’s participation 70% Entry level criterion • Entry player does not require large scale capital outlay and setting up of small.

largely unorganized. .. growth of QSR with shifting consumer practices. • Critical absence distribution network and cold chain.7 billion.modernized traditional (Thali system at restaurants) From globalize to ……………………Indianise (from hamburger to McAloo Tikki Burger) From value for money to……………value for time & convenience (home delivery of branded products) From conventional to………………. • • • • From traditional to …………………. • Food contributes to 70% of retail trade . • Growing urbanization will overload processed food industry.. equivalent to 40% of total production of fruits and vegetables.experimental (traditional to Chinese and Thai food) Continued…….fragile produce being easily damaged / loss • Untrained / Unskilled handling and subtropical temperature variation. Reason…… • Poor infrastructure .Distribution Network & Cold Chain in India • India wastes more fruit /vegetables than are consumed in whole of UK • Cumulative waste is more than $6.

Greater than 90% for potatoes Indian food mkt to grow from $182 bn to $344 Bn by 2025.Ice cream.processed meat/poultry. . Key Industries requiring cold chain—FFV.Cold Chain Landscape in india • • • • • 5300 cold storages Cold chain capacity 60000 MT – grossly inadquate. • Lack of trained manpower/expertise for robust/process driven cold chain service deliveries.marine products & pharma .

• Low Capacity utilization – Average 50-60% • Uneven distribution of capacity/regional approach(UP.Industry Challenges/Entry Barriers • High real estate costs.2010-3.2011-1) . • Low private investor’s interest(prominent deals through PE/M&A—2009-2.traditionally catering single commodities • Lack of logistics support—low cash strength to invest to cover entire value chain.Punjab).gujrat. • High energy costs(30% Vs 10% in west) with 17-18% peak power deficit & thus associated captive power costs. • FDI restrictions in retail.WB.MS.

and is growing at 20-25 per cent and is expected to touch Rs 40. 9 utdallas.edu/~metin 9 .YOY 2530% growth Organised Retail and Private Label Penetration Demand for Functional Foods Presently.000-15.000 crore.000 crore by 2015.Opportunities/Growth Drivers Increasing spends on health foods Govt Initiatives Increasing Nuclear Families and Working Women—rising disposable incomes Cold Chain Demand Drivers Rise of Pharma-vaccine mkt 1000 cr . the Indian cold chain industry is between Rs 10.

100% FDI & 25% subsidy in project costs. Duty free import of reefer units for vehicles. utdallas.refrigeration panels & conveyor belts. Access to external commercial borrowings. 5% concessional import duty with full exemption of service tax.Key Govt Initiatives to Promote Cold chain        Cold chain given ‘Infrastructure’ status in 2011-12 budget. Tax benefits on investments.edu/~metin 10 . Exemption of excise duty for AC equipment.

Helping in a equitable distribution of cost of a strong cold chain infrastructure.FDI in retail. Flow of investments. utdallas.GST).edu/~metin 11 .Way Forward     Measures by Govt--(Land. Willingness of customers to pay a premium for higher quality food products & Thus.

edu/~metin 12 .Outsourcing & How Service Capability drives Profits? 12 utdallas.

SCM Generates Value Invest in efficient. This is how SCM contributes to the bottom line SCM is not strictly a cost reduction paradigm but an INVESTMENT ! utdallas. etc.edu/~metin 13 .effective & realiable supply chains while keeping a reasonable service level customer satisfaction/quality/on time delivery.

profitably for products and services SUPPLY SIDE .aims to Match Supply and Demand.achieves DEMAND SIDE The right Product utdallas.A supply chain consists of Supplier Manufacturer Distributor Retailer Customer Upstream Downstream .A picture is better than 1000 words! How many words would be better than 3 pictures? .edu/~metin + + + + + The right The right The right The right The right Price Store Quantity Customer Time = Higher Profits 14 .

Skills & Capabilities Information Management Systems utdallas.edu/~metin Asset and Capital Management 15 Value Enabling Value Creating 15 Direction Setting . Social Accountability Organization. responsive logistics network that enables restaurant simplification Plan • Demand Planning • Supply Planning (Upstream / Supplier) • Supply Planning (Replenishment) • Supply Chain network Design Deliver • Inbound Freight • Transport Optimization • Warehouse Optimization • DC Procurement • Risk Management Simplify • Inventory management • Receiving & delivery • LP managed inventory • Reverse Logistics Quality Assurance.Scope of activities as Supply Chain Partners Strategies Requiring Logistics Support SCM / Menu Operations IT Marketing Simplification Lean Responsive Supply Chain Competitive Standardization – Quality assured Sustainable ` predictable supply Logistics Business Driven Pricing efficiencies Model End-to-End Supply Chain Management ( Plan Source Make Deliver) Creating a lean. Governance.

and develop a positioning in the supply chain High The uniqueness of the capability M&A Develop with outside consultant Selfestablished Outsourcing Low Can consider outsourcing Low High The enterprise’s capability .Focus on one’s core competency and outsource non-core activities.

Drivers of Supply Chain Capability/Performance Competitive Strategy Supply Chain Strategy Efficiency Responsiveness Supply Chain Structure Inventory Transportation Facilities Information Drivers utdallas.edu/~metin 17 17 .

Considerations for Supply Chain Drivers Driver Efficiency Responsiveness Inventory Cost of holding Availability Transportation Consolidation Speed Facilities Consolidation/Dedicated Proximity/Flexibility Information What information is best suited for each objective utdallas.edu/~metin 18 18 .

Costs Source: McKinney & Institute for supply chain management utdallas.edu/~metin 19 19 .Supply Chain Champions: Service vs.

edu/~metin 20 20 .Supply Chain Champions: Service Capabilty will drive Profits Source: McKinney & Institute for supply chain management utdallas.

Total Cost of Ownership Impact on Profitability if a service provider fails to deliver  ON TIME Loss of sale for material not reaching on time Additional overtime of crew waiting to unloading the material Stock out at stores Loss of sale and drop in foot fall Loss of opportunity to delight customer and impact on brand image Drop in yield of the product.edu/~metin . more wastages at stores Chances of stock getting HOLD at stores leading to loss of sale Drop in gross margin at store and loss of incentive for teams Could delay time bound promotions planned at stores Opportunity loss to generate high sales during festivals Loss of sale and impact due to inventory carrying costs 21 21  IN FULL  Quality of product  Promotions utdallas.

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