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Institute of Management, Christ

University

Main Campus, Bengaluru

Master of Business Administration: 2017-19

Supply Chain and Logistics management

CIA- II
Individual Research Based Assignment
On
Govt rules and regulations that govern the supply chain and logistics for FMCG
industries mainly food sector

Submitted To: -

Prof. Papri Ray

Submitted By

MALLADI KRISHNA SAI CHARAN

IV MBA L-2

1727924
Introduction
The fast moving consumer goods (FMCG) sector contributes more than Rs 500 billion to the
economy making it the fourth largest. This sector comprises of a wide variety of
frequently brought items such as dairy goods, toiletries, food items such as fruits and
vegetables ,confectionaries and other daily used items. these products generally are produced
in large volume but are low in per unit cost. The Top ten FMCG Firms in India and world
consist of players such as nestle, Cadbury, Unilever , Proctor & Gamble and Indian
companies such as Amul, Dabur etc. the supply chain of an FMCG firm plays a key role in
its performance. The FMCG industry main characteristics are its complex distribution
network and the intense competition among the firms which forces them to work
continously on innovating, improving and optimizing their supply chain network .
Companies who improve their supply chain system on a regular basis usually outperform
those who pay lesser attention to their supply chains and will find it difficult to cope up with
changing government regulations. These government costraints means company need to have
responsive supply chain in order to survive in this competitive market.
Literature review
In India’s context
Ketkar & Vaidya, wrote a paper in which they write about how developed while trying to
lessen their production costs are turning to developing countries.India is also such a country
with high level of skilled and economic labour.
They collected the responses from 121 responses mostly from the supply chain managers and
retrieved them in ms excel. The firms belonged to industry segments such as FMCG, Energy
automotive chemicals etc and majority of the firm were Large firms having a turnover of
more than 100 crores and as told majority of them belonged to operations planning and
supply chain domain.
Based on the analysis they found out that most forecasting accuracy played major role in
firms production planning and most of them paid lesser attention to government regulations
which results in penal action and hence hampring their operations.
They suggest that they should try to influence government authorities by collaborating and
forming cartels in order improve their documentation and henve avoid delays.
In another paper Sahay & Mohan, 2003 conducted a study covering 156 organisations carried
out by MDI and KPMG India. The four factors considered to be supply chain dimensions are
aligning supply chain strategy with business strategy, forming partnership for minimizing
inventory,streamlining process for supply chain integration and focusing on building an
infrastucture for an India specific supply chain.
In Africa’s FMCG context
Agigi, Niemann, & Kotzé, 2016 in their paper investigated the risk faced by supply chain of
grocery manufacturers of South African Fast moving consumer goods industry and new
approaches were made to enable supply chain resilience.
The research design used was qualitative research and then data was collected using semi
structured interviews who mainly consisted of senior supply chain managers inside the south
african consumer goods industry.
The major findings in the study were that manpower interest was the foremost risk which the
industry was facing. Supply chain mapping and strategic shocks were the most useful designs
to improve the supply chain resilience.
The study can help managers in gaining new insights and make supply chain decisions to
make supply chain more resilient. By identifying the risks appropriate solutions for creating a
resilint supply chain would come up.
Ogunlela, 2018 in a paper about how adopting new buisness strategies adoption due to global
competitiveness has put manufacturing sectors into trouble. One of the major strategies
employed by the companies is green supply chain management. But this strategy is difficult
to implement in developing countries like Indian and african countries.
An exploratory study was conducted on Green SC initiatives among nigerian FMCG
companies.A survey was conducted in which primry data was collected by 41 respondents in
the Lagos nigeria area through the adoption of quantitative methodology by distributing a
questionnaire. Most of the respondents agreed to the fact that implementation of green supply
chain would lead to an enhancement of organisational performance and agreed that
implementating a green supply chain management would involve great deal of collaboration
by the FMCG company than traditional supply chain.

In China’s context
In their paper Cai, Jun, & Yang, 2009 wanted to study the effect of three institutional forces
on their supply chain namely legal protection government forces and guanxi(interpersonal
relationship or trusts) and decided whether a model can be made based on these factors.
In case of government support theu made the following hypothesis:
“Government support received by the chinese firm relates positvely to information sharing
and collabrative planning.” (Cai, Jun, & Yang, 2009)
They collected data from 398 responses which comprised of manufacturing sector elcetronic
components and equipments and chemichal industries.
After validating the data by running tests for multicollinearity they tested it for maximum
likelihood procedure and did chi square fit which suggested that the model was a good fit.
The result can be shown by the following figure
The main conclusions of the study was was that chinese firms did not trust the laws and
constitution and rather depended on reliable protection being offered by these coercive laws
and regulations from close relationships with authoritative government officials.
UK context
Jones & Boots, 2012 in their paper write about how sustainable supply chain is the growing
trend among the private sector companies as they try to lessen the derogatory impacts it has
on environment and society and economy while being in the regulations put up by the
government. The paper makes an effort to bring out out the differences between theory and
reality which the firms are often accused of doing by offering less initiatives to sustainable
supply chain management. The research tried to explore certain Sustainable supply chain
management issues which were recognised by the leaders of these companies among their
respective sectors and what factors would affect these sustainable supply chain and what
could be the future practises.
Practises in current supply chain scenarios and their predictions for their future were looked
into from these case studies of these seven firms by condusting semi structured interviews
with CSR practitioners as well as purchasers and then secondary data was was collected
through websites and companies report along with it which included sectors such as
aerospace fmcg\retail, food and beverages as well as pharma sector.
firms were then further categorized into a topology of methods followed in the sustainable
supply chain management based on external and internal factors and were further classified
into four categories “internal focusers, reserved players external responders and agenda
setters.” (Jones & Boots, 2012)
The future trends and steps taken by the company towards sustainable supply chain was also
explored
Food supply chain
Matopoulos, Vlachopoulou, Manthou, & Manos, 2007 wrote a paper in which they tried to
analyse and study the concept of supply chain collaboration an tried to come up with a
framework which can be ued as a benchmark for any of the further quantitative research.
Then similar concept is further explored in agricultre food industry context at the producer
processer interface and then further studied and applied to SME’s
Methodology followed was case study by conducting an In depth interview of two
companies personnels.
It was found that supply chain collaboration was very important in the agri food industry but
there are limitations that are found due to product types and the industry sector as well.
Mostly the supply chain collaboration is looked up as operational and logistics related
activities.
US Food supply Chain context
Maloni & Brown, 2006 wrote a paper on how food industry copes up with considerable risks
from people criticising it for corporate social responsibility issues in their supply chain.they
developed a comprehensive framework base on the previous researches and new emerging
trends in industry.the research came up with the framework that includes the application of
unique CSR activities such as animal welfare, environment, biotechnology, health and safety,
labor and human rights. IT also includes general CSR activities such as community and
procurement.Supply chain CSR research provided them a basis on which food companies
gained awareness of supply chain CSR issues.
These research can help them conduct a CSR audit and help them develop a risk minimising
CSR approach.
Government regulations impact on supply chain
Make in India was one of the first initiatives started by the Modi government the government
claimed that make in India will lead to India becoming a manufacturing hub.
The policy will improve the logistics and supply chain in the following ways-
 It will enable LSP’s to deliver efficiently and delievery will be optimized.
 The delievery expenses will be reduced by 12-15 % hence lowering the goods final
price
 The domestic goods price will fall and hence competitiveness of indian goods in the
market will increase
 Decrease in unethical practises by buisness enterprises and logistics providers like tax
evasion.
 Increase in third party logistics.
 Establishment of large warehouses at key strategic locations.
The above advantages are key to FMCG products as they have to be transported
quickly and are perishable and hence needed to have a proper supply chain.

While these advantages are good to hear these are all long term advantages wich can be
achieved only when make in India is achieved properly but given the current situation the
following factors need to be kept in mind especially for the FMCG industry
 India currently is 46th in global trade logistics rankings and is behind many
developing countries like mexico and turkey which are its biggest competitor for
foreign manufacturing investment.
 A lot of infrastructural improvement would be needed which will lead to higher
freights and tariffs at the start.
 Perishable and cold supply chain in India currently faces a 20% spoilage rates due to
India’s inefficient domestic freight infrastructure.
 Currently India is two weeks further from united states than China in Shipping Line.
 Most of the raw materials aare imported for production which means India lacks a
developed supply base
Wholesalers and retailers perspective
GST has had a major impacts on wholesaler and retailers from FMCG’s perspectives
 As the entire value chain will be tracked online the wholesaler and retailers will have
no chance of evading taxes like before.
 A step wise raise in demand because of restocking by wholesalers and retailers may
be observed.
Positive impacts
 Minimal disputes of goods and services
 Increased levy compensation
 Service tax and exise duty(credit)
 No disclosure of margin
Negative impacts
 No form “c”
 Increased complaints burden
Other government regulations in India impacting the FMCG supply chain and logistics:-
Diesel deregulation:
When we look at the current dependence of fuel in our country it is diesel and the dependence
is very high which is the biggest laggard for India in the past years.But after political
compulsions were kept aside it was decided to deregulate diesel and its benefits can be felt
now. After the fuel subsidy the indian logistics perspective changed and the threats of strikes
and bandhs have also reduced with ever 1 rupee change.

This rule has resulted in logistics becoming more accurate and being globally competitive

Growing focus on Building up highways


Highways and infrastructure have become the focus sectors in the first decade of this century.
As most of the FMCG goods are still transported by roads Highways were the backbone to it
and got major boost. After considerable improvements in the sector the connectivity from
major production to consumption sector has improved drastically and is on the road to
become world class.
According to the data road freight carries 60% of the total goods in India. With the increase
in number of highways this got a major boost up.Turn around times for trucks have improved
upgradation in transit time reduced vehicle down time and improved productivity of vehicle
have all had positive impacts on the FMCG supply chain mainly reduced amount of inventory
costs such as transit claims, inventory on roads cost reduction etc.
The government has turned its focus back on the highway sector from which more benefits
can be expected.
Carriage of Goods by road act,2007
The new carriage acts also bring with it some long term benefits.It is improving the
governance by bringing organisation which is a desperate need for India.By registering
transport service providers it will bring order to largely scattered sectored sector having
thousands of operators.
Dedicated freight corridors
Freight can be recognized as a crucial and indispensable component of India’s economic
activity. If implemented these freight corridoors will bring an ecologically and economical
edge in the freight sector today.In some high intensity corridoors the rail road transitio can
also be made possible by means of a dedicated freight corridor.
Warehouse development
Currently india is allowing a 100 percent FDI for maintaining and development of warehouse
and storage facilities. A new scheme namely Free trade warehousingzone scheme has come
up under which several designated zones in places such as panvel near mumbai,siri city in
chennai, Khurja near delhi which are designated FTWZ’s. These areas have good
connectivity with major railways roads and ports.
Last year a 100 acre FTWZ in Tamil Nadu also started its operations.
Improvement in ports connectivity
Currently Indian ports co ntribute to 95 percent of the total country’s trade by volume
especially in FMCG sector and international supply chains.The government allows 100
percent FDI’s for mintainance and construction of ports.The government provides 50%
financial aid subject to a maximum amount of US $3.88 million for companies which are
investing and tax holiday of upto 10 years.
Sagarmala project is one of the leading government initiative in this sector which aims at
modernizing the existing ports and developing new ports at paradeep outer harbour(orissa),
sirkazhi/cuddalore In Tamil nadu state vizhinam in kerela, belikeri in karnataka amd enayam
in tamil nadu.
Recently DP world owned by Dubai signed a US $3 billion joint investment platform to
construct river as well as sea ports among many other logistics projects with India’s National
Investment and Infrastructure Fund.
Conclusion
With all the rules and regulation put up by the government schemes like make in India and
other like Sagarmala projects aimed at improving at ports and roads might give FMCG firm a
chance to improve their supply chain but these are difficult to implement with the current
infrastructure in India.

References
Agigi, A., Niemann, W., & Kotzé, T. (2016). Supply chain design approaches for supply chain
resilience: A qualitative study of South African fastmoving consumer goods grocery
manufacturers. Journal of Transport and Supply Chain Management .

Cai, S., Jun, M., & Yang, Z. (2009). Implementing supply chain information integration in China: The
role of institutional forces and trust. Journal of Operations Management.

Jones, N., & Boots, A. (2012). Sustainable supply chain management across the UK private sector.
Supply Chain Management: An International Journal.

Ketkar, M., & Vaidya, O. (2012). Study of emerging issues in supply risk management in India .
International Conference of Emerging Economies – Prospects and Challenges .

Maloni, M. J., & Brown, M. E. (2006). Corporate Social Responsibility in the Supply Chain: An
Application in the Food Industry. Journal of Business Ethics.

Matopoulos, A., Vlachopoulou, M., Manthou, V., & Manos, B. (2007). conceptual framework for
supply chain collaboration: empirical evidence from the agri-food industry. Supply Chain
Management: An International Journal.

Ogunlela, G. O. (2018 ). Green supply chain management as a competitive tool in the fast-moving
consumer goods manufacturing industry . Journal of Business and Retail Management
Research .

Sahay, B. S., & Mohan, R. (2003). supply chain management practises in Indian industry.
International Journal of Physical Distribution & Logistics Management.