Need for High Velocity Supply Chains In INDIA

India is of the largest producer of fruits and vegetables but still there is huge mismatch in demand and supply. This mismatch can be attributed to the lack of proper cold chain infrastructure, climatic changes and improper packaging, etc. According to ASSOCHAM – MRSS India study, about 40 – 50 percent of the production valued about $440 billion gets wasted. The challenge for managing fresh produce is that product value deteriorates significantly over time in the supply chain at rates that are highly temperature and humidity dependent. For many products, a decision about supply chain strategy involves a choice between responsiveness and efficiency. The appropriate choice depends on how the product changes in value over the time interval between production and delivery to the customer.

The perishable supply chain in India typically consists of individuals such as farmers and businesses such as retailers and manufactures which are connected together by Logistics. Logistics is a specialized field of its own comprised of shipping, warehousing, and road/rail transport.

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In India perishable supply chain is facing following problems: –

1)Stakeholders working in isolation: -Indian food supply chains are complex and consist of numerous small players working in isolation with each other with very poor infrastructure. Due to failed cold chain transits, poor warehouse conditions and traffic delays India waste 40% of all harvested agricultural produce. Currently there is about 90% shortage of cold storages in India and most of the available cold storages are available in few states. A recently published government press release confirms that in 2013 about 60% of cold storages in India were concentrated only in 4 states – Uttar Pradesh, Gujarat, West Bengal and Punjab (Exhibit 1). Indian Government’s estimates suggest that about 80-90% of cold storages are used to store only potatoes leaving other fresh foods unguarded.  Between 2015-2016, India exported nearly $600 million in fresh fruits – a category that is most severely affected by poor cold chain logistics, losing 18% of all produce after harvest.

2)Lack of demand estimation: -Currently perishable supply chain operates in push-based system where farmers try to push whatever they produce. This creates gap in supply and demand.

3)Lack of technology applications: -Cold chain logistics in India don’t take advantage of data analytics, product tracking, live inventory data across channels and synchronised freight timings to match demand and supply.

4)Lack of centralised supply chain leadership: -An emerging trend in supply chain across globe is integrated supply chain to unify procurement, logistics, forecasting/demand planning which is missing in Indian cold chains.

This helps in facilitating effective decision making with a view spanning the en­tire supply chain.In-store product freshness positively influences customer demand. Estimates suggests that produce spends approximately 50% of its time between suppliers and retailers at different touch points. Handling at these touch points compromises with product quality and freshness due to wait and execution times at dock, malfunctioning of cooling systems, loading and unloading etc.

 

 

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Possible Remedies: –

In the perishables sector, providing the freshest products to customers remains a challenge, since doing so is not tied to a single business function. Developing a high-velocity supply chain is one of the most straightforward strategies for ensuring freshness, reducing shrink and realizing top-and bottom-line improvements. A high velocity supply chain can be effective in reducing the shrinkage and hence will increase shelf life of the produce which in turn will help in increasing of likelihood of being picked up from the shelf and reduce the likelihood of it being thrown away.

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The transition from Supply Chain 1 to Supply Chain 2 shows how a high-velocity supply chain can improve gross profit.

Possible areas where technology can be employed: –

1)Reducing Replenishment Lead Times: -By reducing the replenishment lead times, managers can decrease the uncertainty of demand during lead time. This is beneficial for seasonal produce which will enable us to place multiple orders hence reducing in-house inventory levels at a particular time. Reducing lead time can help in retaining freshness and shrinkage. This can be done by electronic data interchange(ENI) or Advanced Shipment notifications (ASN) .Cross docking can also be used to reduce lead time associated with moving the produce between stages in supply chain.

2)Demand forecasting at retailers: – Demand forecasting helps us in managing the inventory at optimum level to reduce the inventory carrying costs and ordering cost while ensuring that all the customer orders are fulfilled. Retailers should estimate the monthly demand and share this information across supply chain. Sharing customer demand data across supply chain helps in reducing the Bullwhip effect. Walmart has routinely shared its POS (Point of Sales) Data with its suppliers. Dell shares demand data as well as current inventory positions of components with many of its suppliers via internet thereby helping avoid unnecessary fluctuations in demand and supply hence reducing wastage.

3)Maintaining humidity and temperature for specific products to retain freshness and reduce shrinkage: – Most important factor for maintaining freshness of the fruits and vegetables is the temperature. Generally perishable commodities have an optimal shelf life approximately at Zero Degree Celsius and rate of deterioration of perishables increases two to three folds with every 10 degrees increase in temperature.

4)Multi Storage of produce in a single location: -Currently most of the cold storages are mostly used for single produce which can be extended to multi- produce warehouses by using specialised refrigerators for different crops with humidity and temperature controls. This will help in short term increase in capacity of existing warehouses and money invested will be comparatively lower.

5)Tracking of produce at collection point: -Constant tracking of farm produce at warehouses can help in matching supply and demand and a Pull type system can be established which will help in managing the inventory at optimum level.

6)Cross delivery of produce from warehouse by maintaining live inventory of nearby warehouse: – This will allow the tracking of inventory level of each product present in various warehouses across the region. This will help in scheduling the delivery of product to a retail store from a different warehouse (that is not its master warehouse) if the produce present in another store is older than that of master warehouse therefore helping in reducing the probability of produce getting wasted due to high lead time.

 

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