ISSUES IN SUPPLY CHAIN MANAGEMENT OF FRESH FRUITS & VEGETABLES IN INDIA

Submitted To: Mr.P.K.De Ex. Directive Directive ISB&M

Submitted By:

Index Page

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Abstract

As the Indian population is increasing, the demand for fresh fruits and vegetables is also increasing. Owing to the perishable nature and very short shelf life, these items require proper storage and transportation facilities in order to reach to the customer in fresh state. This requires a considerable amount of effort from the involved parties. The entire chain is fraught with issues like lack of transparency in pricing (at the farmers end), dominance of traders, weak links in supply chain, etc. This leads to loss of revenue to the farmer and increased additional costs to the other supply chain partners, which ultimately enforces the final consumer to bear extra burden on his pocket. Since organized retail has started showing interest in fresh fruit and vegetable markets and has already entered into the market with huge investments, the issues involved in this supply chain have changed dramatically and are influencing not only the supply chain partners but also the whole agriculture sector in India. This reports also finds out the difference between the traditional supply chain and the retail chain if fresh fruits and vegetables. The complete study of reliance fresh retail model has also been covered in this report. The reports shows that the main problems of the Indian Supply Chain of fresh fruits and vegetables is the higher no of intermediaries, the poor infrastructure, the poor handling and packaging and improper information flow between the stakeholders. Both the primary and secondary studied have been carried to find out the practical issues involved. The report concludes that there are many loop wholes available in the supply chain which required to be corrected. The poor handling packaging techniques , the poor infrastructure, the poor sorting and grading technology, the unskilled labor etc. are

affecting the supply chain and thus making it inefficient recommend to improve the same. The aim of this report is to examine the Issues faced in the supply chain of fresh fruits & vegetables in Indian Market. This research is exploratory and includes research instruments like interviews and survey through questionnaire with players(Reliance Fresh) in the vegetable supply chain. The study also undertakes a thorough review of basic and contemporary literature and also tries to explain the factors influencing Indian fruit and vegetable markets and their effects on the supply chain partners. It also brings out relevant research gaps and overlooked problems in the supply chain. An exploratory study has been carried out to understand the issues faced in the supply chain management of fresh fruits & vegetables in India. The area of study was limited to the vegetable Retailing (Organized) in the Pashan area of Pune City.

INTRODUCTION: In India, about 60 percent of food quality is lost in the supply chain from the farm to the final consumer. Consumer actually end up paying approximately about 35 percent more than what they could be paying if the supply chain was improved, because of wastage as well as multiple margins in the current supply structure. The farmers in India get around 30 percent of what the consumer pays at the retail store. Compare this with the situation obtaining in the USA, where farmers can receive up to 70 percent of the final retail price & wastage levels are as low as 4 to 6 percent. One can easily understand the benefits that could be generated from emulating those practices and tapping that expertise for the supply chain in India.

As Supply Chain Management involves procuring the right inputs (raw materials, components and capital equipments): converting them into finished products & dispatching them to the final destinations; there is a need to study as to how the companys supplier obtain their inputs. The supply chain perspective can help the retailers identify superior suppliers and distributors and help them improve productivity which ultimately brings down the customer costs. At the same time Market logistics help planning the infrastructure to meet demand, then implementing and controlling the physical flows of material and final goods from point of origin to point of use to meet customer requirements at a profit.

Till now most retailers in India have invested majorly into the front end. But relatively little on the back end and supply chain. Even in counties like the USA, Germany and England, where organized retail is highly developed, supply chain efficiency is a major concern. The nature of retail sector in India is different from other countries around the world. The organized sector in India is highly fragmented and there are huge efficiencies in the supply chain.

The most important part of retailing business is to find a balance between investing in front end and back-end operations. The channel dynamics is going to change over next couple of years as the retailers start growing in size and their bargaining power is likely to increase. Probably that would bring some kind of mutual understanding between manufactures and retailers to develop strong supply chain network. In such scenario, both the existing operators and new operators must put collaborative efforts to phase out inefficiencies in the supply chain network. Supply Chain Management: Supply Chain Management (SCM) plays an important role in marketing of goods and services. It is the supply chains that compete, and not individual businessesis an accepted axiom. Every business plans to cut costs, which do not add value to goods or services. SCM not only helps to cut costs, but also adds to maintain and improve the quality of goods and services delivered. In this direction, Supply Chain (SC) has played a major role across the world in varied sectors. In marketing fruits and vegetables (F&V), which are perishable in nature, SC plays a crucial role. The very nature of land holding by the farmers, varied climatic conditions, and production spread over wide geographical area, Mainly in remote villages, diversified consumption patterns and poor SC infrastructure makes SCM for F&V more complicated, in India. As a result, SCM throws both challenges and opportunities in marketing of F&V. Efficient SCM in marketing, not only increase the profitability and efficiency of retailers, but also add value to different stakeholders like cultivators (farmers), consolidators and consumers. SCM is the coordination of material flows, information flows and financial flows among all the participating organizations so as to ensure that the right product in the right place, at the right price, at the right time, and in the right condition.

One of the weaknesses of the supply chain is that it is a multi-layered marketing channel lacking in infrastructure. Efficient supply chain requires strengthening all the levels of infrastructure such as the inputs delivery, credit, irrigation, improved procurement, minimizing post harvest loses, cold storage chains, better and efficient processing and marketing techniques, efficient storage, warehouse and also efficient and competitive retailing. The infrastructure to improve efficiency and the linkages of the supply chain is very poor, which is affecting the growth potential of the horticulture sector. Timely availability of inputs, development of organized input market and infrastructure for its storage and distribution will add to the productivity of the sector. Development of cold chain network will help in reducing the post-harvest losses of fruits and vegetables. Improving the post-harvest management means an overall improvement in the per unit productivity. Cold chain infrastructure will require a huge sum of Rs. 18,000 crore to Rs. 20,000 crore investment in the next five years.7Investment is required to build the cold storage chain from the refrigerated trucks which procure the produce from the farm gate, then pre-cooling chambers, cooled area for sorting and grading the produce, refrigerated trucks for transferring the produce to the market of distribution or part of delivery. The development of this chain requires huge investment in technology, infrastructure and maintenance. A study by Raghunath et. has estimated that with strengthening the supply chain the benefits to consumers and producers can increase by 20-25 per cent in the most perishable commodity like tomato. Due to inefficiency in the supply chain the price received by the farmers is only about 24 to 58 per cent of the retail price the Consumer pays. Introduction: India is one country where the agriculture contributes a hugely in its GDP.India is the second largest producer of vegetables in the world and also the exports of

vegetables are high too from India. Indian Agriculture sector produce 64% employment and 18 % of countrys export. India 2nd largest producers of fruits and vegetables in the world, India are the 2nd largest vegetables exporter. Indias share is only 1% of world trade. India has a huge opportunity to become a leading global food supplier if only it has the right marketing strategies and of course agile, adaptive and efficient supply chain. India has diversity in terms of its population with several religious groups with different food habits and culture. This diversity should be used as the advantage to become the Halal Food Hub, the Organic food hub, the Vegetarian food hub the sea food hub among others. The food supply chain is complex with perishable goods and numerous small stake holders. In India, the infrastructure connecting these partners is very weak. Each stake holder: farmers ,wholesaler, food manufacturers, retailers all work in silos.Also,demand forecasting is totally absent and the farmers try to push what they produce into the market. Data integration, financial flow management ,supply demand matching,collaboratve forecasting, information sharing, goods movement synchronization through efficient transport scheduling, are very well practiced in high technology industries with immense benefits. These best practices should find their way into food supply chains. Cold chain logistics supply chains should take advantage of technology improvements in the data capture and processing, product tracking and tracing, synchronized freight transport transit time s for time compression along the supply chain and supply- demand matching.Also,the supply chain need to be designed and built as a whole in an integrated manner with the processes of new product development. Procurement and order to delivery process well designed and well supported using IT tools and software.

The food supply chain can be subdivided into a number of sectors.Agriculture, horticulture, fisheries and aquaculture are the primary producers, the manufacturers who process the food for ready to eat or cook format together with the packaging companies are in the intermediate stage and the, retailers, wholesaler and caterers are in the 1st stage of supply chain. At each stage value is added by the new ownership such as processors, distributors, packers, etc. and the cost and profits are the part of business. The food items can go to the final consumers from any of the three stages: from farmers in the form of fresh produce, to the caterers directly from the manufacturer, and finally from the retailer (small or big) to the consumer. The movement of goods from one stakeholder to another is facilitated by the in house or third party logistics service provider. The information management is done by all the stake holders and their information system are all the interconnected seamlessly. What we described above is the state of food chain in the advanced countries. In India and other developing countries the state of food chain is more fragmented and primitive we have dealt with it in the earlier sections. FOOD SUPPLY CHAIN CLUSTER Food chain clusters (See Figure1) are formed with the participation of all stake holders such as farmers, seed growers, merchants, transporters, wholesalers, retailers, financial institutions, and insurance companies. Information sharing is essential for generating the efficiencies. The Internet and mobile communications are used to enable information and financial transfer between the stake holders. Also, recent advances in RFID technology will have tremendous impact in the management of the food chain particularly for source identification and tracking and also in providing supply chain visibility.

Figure 1: The Food Supply chain cluster In advanced countries, the retailers (Wal-Mart, Tesco, etc) have become the Channel Masters of food supply chain taking over from the food manufacturers. In India, with no superstores, no economies of scale, too many intermediaries, there is a vacuum, meaning there is no real channel master managing the supply demand situation and coordinating the supply chain and managing the logistical activities. This provides a tremendous opportunity for smart players to enter a growing market with a high potential of retail FDI. But one needs to remember that the infrastructure capital outlays are high and the returns are long term. Also there are various risks associated with owning a cold chain. some of these include country risk, monsoon risk, crop or raw material supply failures due to pests, diseases, etc., partner risk, and numerous others.

In India, there are very few large food manufacturers. Amul, Ruchi Soya, Nestle, MTR, ITC, Dabur, Britannia, HLLs food and beverages section, beverage companies such as Coke and Pepsi are some of the big names. In poultry Godrej Agrovet, Suguna, Pioneer and Venkateswara hatcheries are some of the companies integrating operation s end to end from breeding to ready to eat chicken foods. High taxes on processed food, high import duties, nascent contract forming, make the profitability a big issue in India. There are several regulatory changes that need to be made all along the supply chain so that they are consistent and mutually reinforcing.

The Cold Chain Cold chain is a logistic system that provides a series of facilities for maintaining ideal storage conditions for perishables from the point of origin to the point of consumption in the food supply chain. The chain needs to start at the farm level (e.g. harvest methods, pre-cooling) and cover up to the consumer level or at least to the retail level. A well organized cold chain reduces spoilage, retains the quality of the harvested products and guarantees a cost efficient delivery to the consumer given adequate attention for customer service. The main feature of the chain is that if any of the links is missing or is weak, the whole system fails. The Cold chain logistics infrastructure generally consists of Pre-cooling facilities Packaging Cold Storages Refrigerated Carriers Warehouse and Information Management systems Traceability Financial and Insurance Institutions

The temperature controlled supply chains or cold chains are a significant proportion of the retail food market. Fast foods, ready meals and frozen products have increased market share in recent years. There are several food temperature levels to suit different types of products. Frozen, cold chill, medium chill, and exotic chill are some of the frequently nomenclatures with identified temperature ranges. The range of temperatures is dependent on the products whether it is meat or ice cream or potatoes or bananas. Failure to maintain appropriate temperature regimes throughout the product life cycle may shorten the product life or adversely affect its fitness for consumption. Cold chain management involves maintaining appropriate temperature regime when the product travels from the farm in Himachal Pradesh to the consumer in London or New York City. That is why the logistics challenge is formidable in food chains, which is cost conscious industry. There are several governmental regulations in all countries and the responsibility to maintain hygiene and standards falls on the food retailer or manufacturer. The recent developments in electronic tagging could be useful for monitoring the temperatures and also the shelf life of the product.

Post-harvest Management Another issue in the supply chain is the inefficient post-harvest management. The proper integration of post-harvest technology into marketing supply-chain is crucial. Cultivable waste of about 24-40 per cent is reported because of the inefficiency. Post-harvest management does not only mean reducing waste but also maintaining the quality. The post-harvest technologies aim to address some of these issues by optimizing quality, safety and by reducing waste. Poor handling of produce lowers market quality and can substantially reduce producer returns. Our

difference in prices between the farm and the retail is highest in the world. Improved handling methods and the resolution of regulatory requirements allow access to more distant domestic markets and also international markets. Appropriate production practices, careful harvesting, and proper packaging, storage, and transport contribute to good produce quality. Post-harvest management needs to focus on enhancing value through the application of costefficient and environmentally sound post-harvest techniques, to reduce losses and increase efficiency. Changes in production methods can also affect post-harvest product quality. Post-harvest technology of fresh fruits and vegetables in recent years gained enormous momentum to save losses during harvesting, handling, storage and transpiration quality and quantity. The extent of losses of fruits and vegetables in India is estimated at about Rs. 10,000 crore to 12,000 crore per annum, and the loss of quantity ranges between 10 per cent and 80 per cent in the most perishable fruits and vegetables. The major causes of loss are improper handling, poor packing, improper storage, uncontrolled temperature, etc. Thirty per cent of India's fruit and vegetable produce goes waste because of the lack of cold storage chains. Presently, there are about 1,300 cold storage facilities in India, of which 50 per cent is used only for potatoes and a large percentage of these are either underutilized or non-utilized for most of the year. A huge investment is required to meet the gap in the cold chains. There is the need to manage the available resources efficiently and minimize the quality and quantity losses. Proper post-harvest handling requires proper cooling and packing facility, clean and fast transportation, careful handling, and proper management of environment -temperature, relative humidity, ventilation and sanitation. Value can be added to the produce by improving the product presentation through grading, packaging and labelling. Farmers should be encouraged to adopt the Good Agricultural Practice (GAP) Scheme to improve quality.

Supply chain expertise There is a need to embrace the concept of Efficient Consumer Response (ECR) which was introduced in the United States in the 1990s and is now followed worldwide in grocery supply chains. ECR refers to a set of strategies that aims to get companies across a supply chain to work closely to serve their customers better and at lower cost. Consumers benefit from improved product availability and choice, while distributors and suppliers derive better efficiency and cost savings. Also collaborative planning forecasting and replenishment is another area that has yielded substantial savings for retailers. Relationship between the stake holders in the supply chain is of paramount importance for ECR, CPFR and other relationship paradigms to work. Food Packaging Dairy products, edible oils, farm products, sugar, fruit juices, concentrates, preserves, hot and cold beverages, breakfast foods, biscuits and confectionery, Atta, are some major foods of daily necessities where packaging will have excellent potential and growth areas. Package has become the competitive tool to reach the consumer and the task assumes increasing responsibility with more and more of competitive and substitute products being introduced. This has opened the sector for introduction of modern technology for processing and packaging and entry of host of new organizations from all sectors of the economy both domestic and overseas. Cost of packaging ranges anywhere from 10 to 64% of production costs and efforts should be made to reduce these costs through use of manufacturing automation and economies of scale. Business model: retail, e-retail, local use, export The food processing industry supply chain starts at the farm and ends with the consumer. The local consumer could be served though home delivery or through a retailer or a neighbourhood kirana store. An international consumer could be

served through food malls. Thus the products need to be manufactured for local as well for export. It is important to forecast the demand for each of the channels and serve the customer within the expected lead time. The service levels and the pricing will determine if the customer returns for his or her next purchase.

Literature Review: The manual, Improving Your Supply Chain published by Federal Governments Industry, Science and Technology Department, defines a supply chain as an organization that covers the full range of activities from the earliest level of input through the internal processes in the host organization and on to the output distribution system. The input elements cover the supply of raw materials, components, assemblies and packaging. The internal elements cover goods inwards receipt, warehousing, movement to line operations, work in progress storage and movement, finished goods inventory, picking, palletizing and dispatch. The output end of the chain covers wholesale distribution, external warehousing retail distribution, returns and service and anything necessary to get the product to the client in the most satisfactory way. The supply represents the physical value chain of the host organization. Indian scenario of fresh fruits and vegetables Market: If we see the Indian scenario of fresh fruits and vegetables market then it will be seen that the apple producing area has been increased with a CAGR of 5% over last five years. But at the same time apple production has increased with a CAGR of 3.5% over the same period of time. Following is the table which shows the apple production in India over last five years in some of the major producing states. In the table it is given that Jammu & Kashmir is the state which produces the maximum apple in India, followed by Himachal Pradesh and Uttarakhand.

Year

Arunachal Pradesh

Himachal Pradesh

Jammu & Uttarakhand Kashmir

Nagaland

Others

India

198788 199192 199697 199798 199899 199900 200001 200102 200203 200304 200405 200506 200607

4.8

259

427

170

0.6

861.4

9.3

301.7

624.5

212

0.2

1147.7

15.2

288.6

815.7

188.7

0.2

1308.4

15.2

234.3

894.5

176.4

0.2

1320.6

16

393.6

791.6

178.9

0.3

1380.4

8.5

49.1

929

60.5

0.3

1047.4

8.5

376.7

751.3

89.7

0.4

1226.6

8.5

180.6

909.6

59.3

0.3

1158.3

8.8

348.3

953.9

37.2

0.1

1348.4

9.3

495.5

1041.5

11.3

1521.6

9.5

527.6

1093.3

108.5

0.1

1739

9.6

540.4

1151.7

112.3

1814

9.8

268.4

1222.2

123.3

1623.7

200708 200809 200910

9.8

592.6

1268.5

130.5

2001.5

9.8

510.2

1332.8

132.3

0.1

1985.1

9.8

510.2

1341.6

0.05

1993.9

Production in thousand MT,Source: indiastat.com

Similarly if we see the other fruits and vegetables then we can find out that the fresh fruits and vegetables industry has grown at rate of 1% and around in India over last few years. and also we can see from the above analysis area under production has grown at higher rate than the production grown rate in case of apple.Sois the case for most of the others fruits & vegetables. The main problem with India is this that the productivity of this sector is very less. At the same time the wastage rate is also very high. The wastage rate is as high as 35%-40% in some cases in this section. So its very important to reduce wastage in the system and to improve the productivity. In this project the study of different existing supply chains has been carried out to understand where we Indian are lagging behind in this sector when compared with developed countries. In the following some sections different Indian Supply Chains has been described. Indian Fresh Fruits and vegetables supply chain: Indias Agriculture sector account for only a minuscule of GDP and growth, however most of Indias population continues to depend on it. Despite rapid growth of the service and industries sector as globalization lends to assimilation of foreign technology and practices, agriculture continues to live in medieval times,

Indias food supply chain leads to massive wastage and inefficiency with 30% of Indias vegetable and fruit produce being wasted. This is criminal in a country where most of the children go hungry. However corporatization has been repelled by vested interested leading to a sorry situation. Food inflation has been double digit since last year and despite a better harvest year. Some food prices are touching the stratosphere. The inadequate supply chain leads to periodic shortages of key food items used by Indians as part of the daily diet. Onion prices have hit around Rs 70-80/kg which is equal to the average wage of $2 for 80% of the Indians. This has surprisingly caused consternation among the political classes who have clamped down on exports. Around 10% of Indias 12 million ton onion production is exported and has seen exports growing to around $500 million in 2010up by almost 5x in the 1st five years. Cant understand why a nation which sees so much hunger and starvation needs to exports so much. The Indian government food policy is mostly adhoc and driven more by vested interested rather than any strategic long term policy. Out of 5400 cold storages in the country almost 90% are owned by private investors which indicate the governments lack of investment. Indias nodal agency for distribution of agriculture FCI is known for its endemic corruption and massive ongoing scams. The Indian growth story keeps being celebrated in popular media even as crushing income disparity becomes wider and wider. If we see the Indian market, mainly two different kind of supply chain exists in the fresh fruits & vegetables market. One is traditional supply chain and the other one is retail market or organized market supply chain. The main difference between the two supply chains is this that the number of intermediaries in the traditional supply chain is high and thus the amount of wastage is high and transaction cost is also

high in the traditional supply chain. In the following Paragraphs all the different kind of supply chain which exists in this sector in India has been explained. Traditional Fruits Supply Chain of India: Following is a simple schematic diagram of the fresh fruits supply chain of India. It shows the minimum no of intermediaries who are in the traditional supply chain of fresh fruit and vegetables in India.

Growers

Local Middleman

Commission Agent/ Trader

Retailer Consumer

Wholesaler

Schematic diagram of Traditional supply chain of fruits and vegetables

In India the majority of the trade happens through traditional path. Generally the growers sale fruits to the local middleman who collects mangoes from different adjacent areas and sales to the commission agent or trader. The commission agents are the middleman who find out buyers for the local middleman and take some commission against the sales made. They generally find out the bigger player or trader who buys fruits in large quantity. Commission agents collect some money/commission from the trader too. The traders are the kind of consolidators who take all small quantities and then consolidate the fruits to bigger quantities of

larger varieties and sale those to the wholesales or the big farms or companies for processing it further. Then the fresh fruits get distributed through retailer to the consumers. The main problem in the supply chain is this that the transaction cost is too high due to more no of intermediaries in the value chain. Only 30-35% of the end price reaches to the mango growers and other part goes to different intermediaries. Indias Retail Revolution: In above paragraphs the Traditional supply chain of Indian fresh Fruits and vegetables has been explained. But from last one decade the retail revolution in India is taking shape and India is showing tremendous improvement in its retail market development. Conglomerate like Reliance, Future group, Spencers, ITC etc have developed a very good supply chain in the Indian Market. Also MNCs like metro (cash & carry), Shoprite etc.have also entered Indian market. In the following paragraph the retail revolution in India and the different supply chain involved in the retail markets of vegetables has been explained. Vegetables Supply Chain: Retail sector in India is at the crossroads today. A shift between organized and unorganized retail sector is apparent, especially in the vegetable retailing zone This shift is a call for transfer of consumerism towards organized retailing. The penetration of organized retailing in the field of vegetable retailing will face fierce resistance from traditional retailers with their existing strong foothold. This resistance from the traditional vegetable retail cannot be ignored. The most important things to note is that the traditional retail format supports a larger population and provides direct employments. So, there is no way that government or anyone can discount these foundations stones of Indian economy. The role of

government and its policy are vital in supporting, improving and developing traditional vegetable retailers. Vegetables, fruits and grocery play a vital role for the existence of people and also a very influencing role in the economy. Though fresh fruits, vegetables and grocery retail have been considered as a very low margin business, the market potential has attracted Indian business houses and corporate, driving the foray through different models like single-format, multi-format or integrated urban-rural models. To attract the global leaders in vegetables retailing, the government allows foreign direct investment in cash and carry type business model to the tune of 100 percent. The joint ventures of domestic Indian companies with the global players are allowed to operate in India. However, the domestic companies have controlling stake in the vegetable grocery retail. Currently, organized retailers are anchoring the metropolitan cities and urban markets. In the near future, corporate retailers will concentrate on the rural markets, which have been uncovered and have untapped potential. The traditional retailers are unorganized small shopkeepers, kirana (mom and pop) stores managed by families or individuals. There are two classification of their formats-stores and non stores. Store formats include store with permanent and semi permanent building, ranging around 50 square feet or more in size. corner store, and paper and cigarette shops. Non-store format covers streets vendors, pavement vendors, cart vendors, mobile vendors (head carrying), and vendors at daily or weekly farmers markets. Vegetable retail scenario: Traditional Indian retailers accounts for 12 million retail outlets all over India more than 40% of them sell vegetables and grocery. Indian food retail consists of staple commodities comprising grains, pulses and vegetables. The Indian food

retail business, especially vegetable retailing is witnessing a rapid growth in Indias organized retail sector. The traditional retailing of vegetables is not very much organized, amounts to 975 of the total market, is extremely localized and highly fragmented with large number of intermediaries. The intermediaries between the customer and farmers are traditional retailer with different outlets formats-mom and pop shops, non permanent shops in the market, pavement vendors, roadside vendors and push cart vegetable sellers, wholesale traders, commission agents and auctioneers. Background of the Study: The marketing of F&V in India is changing dramatically Change from the traditional markets to modern formats Entry of big retail names Reliance, ITC, Aditya Birla Group, Godrej, Bharti Airtel, Adani Group Initiation of organized retailing and wholesaling of F&V: Reliance Fresh, Cho pal Fresh, Namdharis Fresh India is the second largest producer of fruits and vegetables in the world after China. Since the 1980s the international trade in fruits and vegetables has expanded rapidly. The number of commodities as well as the number of varieties produced and traded has drastically increased during the past 25 years. There is an overall increase in the demand of fruits and vegetables for consumption both in fresh and the processed form. Also there is a wide diversification in production pattern globally. Income in this sector is increasing which is driving the supply. In spite of being one of the largest producers of fruits and vegetables in the world, the export competitiveness among the Indian producers remains low. But with new marketing initiatives, the post-harvest losses and wastage due to poor infrastructure

facilities such as storage and transportation are reduced to a considerable extent, yet a lot needs to be done in this sector. Supply constraints, yield gaps and huge logistic costs affect our competitive and comparative advantage in world trade market. Rs 50,000 crore worth of produce gets wasted every year in the absence of a proper value chain for food processing. The government is working on 30 cold chain routes countrywide to enable integration of the sector from farm-gate to the retail outlet. Apart from these many private sector companies have taken initiative to bridge this gap, many among them are Safal, Pepsi, Bharti, Reliance, Bayer and etc.

India is the second largest producer of fruits & vegetables in the world, but 30% of the produce is wasted due to lost due to supply chain inefficiencies. Is that a problem? Considering the fact that approx 40% of the Population is below the poverty line, earning less than $1/day with no food, efforts must be taken to reduce and improve the yield/productivity. The factors contributing to these losses: 1. Fragmented/Low technology farming 2. Presence of Middle men 3. Supply Chain Inefficiencies/Lack of Cold Storage Facilities.

a) The losses can happen at any stage of the supply chain i.e. during transportation, at the warehouse/retail store or at the cold storage. b) The seasonality of the products further contributes to the inconsistencies in the demand forecasting.

c) With the phenomenal growth of the retail, things are getting better. Players are collaborating with farmers to ensure good quality of produce and encouraging contract farming. d) Cold Storage Solution Providers are mushrooming in different parts of the country to deliver the right product at the right place at the right time. e) All these will contribute to increasing the productivity of the industry as a whole in the long run, and presents a great opportunity for supply chain Supply Chain Associations (APICS, CSCMP) & Professionals to find out cost effective solutions to the problems and address the concerns. Current Situation of F&V Marketing Typical of a developing country environment Non-existent infrastructure at the wholesale markets packing, grading, sorting, cold storage Large amount of wastage (20-40%) Fragmented production, leading to fragmented chains No rewards for quality Traders dominate the chain No transparency in pricing (farmer end) Consumer end: vegetables sold on small stores on the road side weighing, bargaining, quality issues

Traditional Wholesale Market Cleanliness/Congestion

Traditional Wholesale Market Loading:

Traditional Wholesale Market Unloading:

Traditional Wholesale Market Grading and Sorting:

Traditional Wholesale Market Auction:

Current Factors Influencing Agri-Supply Chains in India Natural Resources for Agro-Based Industry India is a developing country and the economic growth of the country is mainly dependent on agriculture for the past several decades. Unlike many nations, India has a large pool of natural resources, which can flourish into a large resource of food products for the ever-growing population. It is a known fact that, in India, almost half of the total land is cultivable. The plains of the Ganges are one of the most fertile plains in the world. India has more than 40 varieties of soil and a regular system of rainfallthe monsoon phenomenon. The irrigation projects, which have come up over a period of several decades, now ensure regular supply of water for irrigation in states like Rajasthan. States like Punjab and Haryana are pioneers in

achieving one of highest per hectare production records. According to the FICCI report of October 2004, India is the: Second largest fruit and vegetable producer in the world (approximately 135 Million tonnes); Second largest producer of milk; Fifth largest producer of eggs; and Sixth largest producer of fish with harvesting volumes of 5.2 million tonnes.

Population and Demographic Changes Indian middle and upper middle class population is growing rapidly with an increase in number of young working couples, owing to the increase in consumption of fast foods, packed foods, ready-to-make foods. Change in tastes and change in consumption patterns of basic foods, longer working hours, increase in double income families, increased exposure to advertising, etc., are leading to a dramatic change in agri-supply chains. More and more career-minded working couples are looking for comfort and convenience and are also becoming more and more health and hygiene conscious. In place of conventional wet markets, they prefer to buy vegetables, fruits and other agri-products from the super markets and modern retail stores, and this leads to the entry of more and more corporate into the agri-based business market.

Integration in Agri-Sector

Agri-food sectors of many developing countries are undergoing changes leading to closer vertical coordination. However, it is a relatively recent phenomenon (Hobbs and Young, 2000). One of the reasons that can be cited for the phenomenon is the transaction cost economics. According to the theory, economic transactions form a considerable part of transactions in an open market wherein buyer and seller incur costs in conducting a transaction. These costs arise specially when there are a large number of small players resulting in information asymmetry, bounded rationality and opportunism (Williamson, 1986; and Eggertsson, 1990). However, these costs tend to be low when carried out in an environment of a strategic alliance through contracting, or within a vertically integrated firm. For many agricultural commodities in the US, the trend has been away from spot market transactions and towards closer vertical coordination along the supply chain (Hobbs and Young, 2000). In India, setup of retail chains like Reliance Fresh or Food World has low overall transaction costs for a given volume of transactions when compared to the same volume traded by a large number of small players. Regulatory changes also play an important role in changing transaction characteristics. For example, the apparent negative consumer reaction in Europe to products containing genetically modified organisms may lead to regulatory requirements concerning traceability of these products throughout the food chain. Inevitably, this will lead to closer supply chain relationships (Hobbs and Young, 2000). Some of the examples in India are Reliance Fresh, Spencers, which depict the phenomenon.

Emergence of Organized Retail The emergence of organized retail, which presents superstore as the primary outlet, goes together with new retail strategies demanding emphasis on the establishing retail brand as a source of competitive advantage (Hughes, 1994; and Leahy,

1994). The scale and complexity of the retail store operation, along with these retail branding strategies, requires highly refined operating and control procedures and centralized management structures (Smith and Sparks, 1993). From a supply chain perspective, the more important aspects of emergence of organized retail have resulted in a close focus on identification and exploitation of hidden supply chain costs and efficiencies. In India Reliance Fresh and Spencers are the pioneers in the organized retail sector. Emergence of organized retail is leading to direct benefits to the farmer, and low cost and better quality to the end consumer. Local companies like Dabur, MTR, ITC, Godrej, and Amul are aggressive across the value chain. Multiple restaurant chains such as McDonalds, Pizza Hut, Dominos, Coffee day, Qwikys and Saravana Bhavan, and Sagar Chains are growing rapidly.

Emergence of Technologies One of the major benefits of Electronic Point of Sale (EPOS) technology is that, in concurrence with delivery information and frequent stock counts, the sales data collected presents a very clear picture of market demand patterns. Along with EPOS, sales-based ordering systems are becoming popular which enable orders to be generated automatically in response to customer demand. This provides retailers an opportunity to develop a seamless information flow, from the checkout to retail stock control and replenishment functions (Soars, 1995; and Collins et al., 1999). EPOS and Enterprise Resource Planning (ERP) are the technologies popular with Indian food retailers like Spencers and Reliance Fresh. From the economics point of view, the costs associated with these technologies can be justified only in case of large organized and integrated players. In the US, the availability of EPOS data enhanced the attractiveness of centralized distribution (McKinnon, 1990), which was rapidly embraced by the major grocery retailers during the late 1980s and early 1990s through the establishment of composite distribution centres. Efficient

centralized distribution is dependent on flexible and advanced information systems (Collins et al., 1999). In India, several companies like Reliance Fresh, Spencers, and McDonalds are utilizing IT for their benefit. Sachin and Kuttayan (2003) conducted a descriptive case study on ITCs (Indian Tobacco Corporation) echoupal initiative. The study is an example which clearly delineates the effect of emerging technologies on Indian food supply chain. The case gives a description of the benefits of information technology to the supply chain partners (ITC and farmers). The authors found that farmers get the benefits like faster processing time, prompt payment and access to a wide range of information, including accurate market price knowledge, and market trends, which help them to make efficient selling decisions. Also, farmers selling directly to ITC through an echoupal receive a higher price for their crops than they would receive through the mandi (traditional) system, on an average of about 2.5% higher. The overall benefits to farmers include lower prices for inputs and other goods, higher yields, and a sense of empowerment. E-choupal saves farmers from the dreaded agents, time wasting mandi system and transportation costs. At the same time, ITC also gets the benefits like lowering of procurement costs (it saves the commission fee and part of the transport costs it would otherwise pay to traders who serve as its buying agents at the mandi). ITC recovers its equipment costs from an e-choupal in the first year of operation and the venture as a whole becomes profitable. The system also provides direct access to information about conditions on the ground and weather which helps farmers in planning for the next crop. According to the authors, ITCs IT initiative is also paving ways to educate and update the Indian farmers with the latest happenings in the commodities world and other agricultural products.

Entry of Organized Retailers Retail is one of the fastest growing sectors in the world. The retail business in India is estimated to grow at 13% per annum from US$ 322 billion in 2006-07 to US$ 590 billion in 2011-12. While the unorganized sector is expected to grow at about 10% per annum, the organized retail is estimated to grow at 45-50% per annum during the same period (ICRIER, 2008). However, organized retail constitutes only around 4% of the total retail sales in India, compared to 75-80% in developed countries such as USA, Japan and UK. The Indian retail market is mainly dominated by unorganized retailers. The unorganized retailers are not a homogeneous group. Generally, these retailers operate on a small scale. Recent developments in retailing are the entry of large number of organized retailers. There are arguments both for and against allowing foreign Direct Investment in retailing in India. In this scenario, the country is going to witness rapid developments in retailing. Indian middle and upper middle class population is growing rapidly with an increase in the number of young working couples. Consumption of fast foods, packed foods and ready to make foods is rapidly increasing. Change in tastes and consumption patterns of basic foods, longer working hours, increase in double income families, increased exposure to advertising etc., are leading to dramatic change in agri supply chains. More and more career minded working couples are looking for comfort and convenience and are also becoming more and more health and hygiene conscious. In place of conventional wet markets, they prefer to buy vegetables, fruits and other agriproducts from the super markets and modern retail stores, and this leads to the entry of more and more corporate into the agri-based business market. The tendency that more and more supermarkets are selling fresh produce is determined by the changes in consumers demand. Markets with poor environment and no

guarantee of quality cannot satisfy the demands of consumers pursuing high quality life. They want to buy desirable food in a comfortable environment. Fruit and vegetables currently account for 3-4% of total supermarket sales for the group, which expects to end the fiscal in June with retail sales of 9,200 crore. The organised retail trade relies heavily on APMC 'mandis' and agents to source the bulk of its stock of fruits and vegetables. Among the large ones, Reliance Retail procures the most from farmers about 50% of its daily need of 700 tones. A team headed by S Radhakrishnan, a 15-year veteran of the retail trade, will manage the new company and own an equity stake in it. Mr Radhakrishnan helped set up the Food World chain for RPG Group's Spencer Retail and was head of Reliance Retail's value format businesses until the beginning of this year. The Future Group now outsources retailing of fruits and vegetables to vendors, who are allowed to use space in its shops in exchange for a share of their revenue. The major Segments in Indian retail are food (77%), clothing (7%), consumer Durables (4%) and Books and Music (1%). However, organized retail penetration shows a different trends with current shares of these segments in the organized sectors as follows- food (20%), clothing (28%), consumer Durables (10%), and Books and Music (4%). The Major foreign players too are biding their time and testing the waters through JVs, Cash and Carry formats market Research and Sourcing operations.

Fresh produce (F&V) Supply Chain Fresh produce is mostly procured at various collection centers located close to the farms in the producing regions. Most of the procurements done locally i.e. close to the city being services both to minimize transit time in order to preserve freshness as well as reduce cost. However, some commodities need to be procured in relatively far off places (i.e. regionally e.g. potatoes, or nationally e.g. apples or even imported e.g. exotic fruits and vegetables) due to availability / seasonal constraints. Hence, these could be sourced at Mandis (wholesale markets), from traders / agents (cold stores) or bulk importers. From the sourcing point the material is moved to Central Processing Center (CPC) in normal (ambient) or reefer vehicles. Depending on the type of produce and the ambient temperatures.

 The perception of retail chains being a phenomena of the developed countries has changed significantly What does retail chains have to do with development? Development perspective: farmers involved in modern value chains earn much higher by bypassing the traders Large and medium farmers have the resources to meet the requirements of the chains, easier to co-ordinate Development efforts: linking small farmers to these chains

Emerging Models: Co-operative (HOPCOMS, Karnataka; Mother Dairy, Delhi) Exports with EUREPGAP Certification (Namdhari Fresh, Bharti Airtel) Farm to Fork -- Complete Chain (Godrej, Reliance, ITC) Wholesaling (Adani Fresh, Metro) Front end Convenience Stores (Food Bazaar, 3Cs) Economy Stores (Subhiksha)

Requirement for setting up chain: Infrastructure (Back end to front end) Collection center Soil-testing Laboratory Packing House/Distribution Center Packing infrastructure tables Cold-Storages Transportation Refer trucks Retail outlets Real estate Investment in refrigeration facilities at the stores Knowledge Inputs Extension advice to farmers: use of different varieties production techniques harvesting (time of harvesting, harvesting techniques) grading/sorting, packaging Setting up Grades and Standards for purchase by the company Training staff at packing centers (grading, sorting, packing) Post-harvest experts (handling and storing needs of different F&V) Cold Storage Technology (?) Packaging Technology for Fresh Co-ordination Developing linkages with farmers Inputs for farmers (Credit, seed, fertilizers, pesticides, harvesting tools, packaging materials)

Information flow Communication regarding the quantity and quality needs in the company Communicating the requirements to the farmers Issues in setting up chains: Developing linkages with farmers Post-harvest manpower Commitment from farmers Infrastructure (level of operation, not everyone needs to invest or can invest in packing house) APMC Act (paper work, operational hindrance, time involved, grading, sorting, packaging) Farmers training in pre-cooling, storing, grading, sorting, packaging Packaging technology for fresh

Challenges Though India is the second highest fruit and vegetable producer in the world (134.5 million tonnes), cold storage facilities are available only for 10% of the produce. In spite of abundant agricultural produce, India ranks below 10 in the export of food products with processing levels in fruit and vegetable sectors at around 2% only. The food supply chain is complex with perishable goods and numerous small stakeholders. In India, infrastructure connecting numerous small stakeholders like farmers, wholesalers, food manufacturers, retailers is very weak. Farmers bring whatever they produced to the market without any knowledge about the demand in the market. Inadequate usage/improper management of cold chains is leading to loss in quality of the vegetables and fruits which in turn is leading to loss of profits and business opportunity. Lot of investments need to made in cold chains in India. Week alignment of supply chain strategy with business strategy is also another major problem with the Indian vegetable and fruit sector. Rapid entry of corporate into vegetables and fruit sectors is helping farmers as many corporate are going for direct tie-ups with farmers eliminating the middle men. The current challenge is to adopt best practices in supply chain like collaborative forecasting, data integration, increased usage of IT, demand-based production, incorporating a pull system for fruit and vegetable production rather than a push system sharing risk and rewards by the supply chain partners, etc. In India, major partners still operate in silos which unnecessarily lead to information distortion and supply chain inefficiencies. Another challenge is to keep abreast of globalization by constantly upgrading competencies which will ultimately lead to better supply chain practices in Indian food industry. When compared to China or Philippines, India lags far behind in terms of exporting food items. Similarly, many Asian countries like

China have better storage capacities and well-coordinated supply chains in the food sector. Issues in Developing Supply Chains for Fresh Fruits and Vegetables: Agriculture is a state subject in India, thus policy of the state is very important Real estate and APMC Act APMC Act (Agriculture Produce Marketing Committee) Restrictions on who can conduct market transactions (licensed) Restrictions on exchange outside the market-yard Paper work Wastage of time and handling of produce (loading, unloading and reloading Implications Minor frustrations to actually stopping companies from conducting transaction in specific states Issues in Developing Supply Chains: Step 1: Developing linkages with farmers Investment in visiting the areas they want to procure from Developing relationship with farmers Easier for companies involved in input supply for years USAID has been involved with ITC to develop linkages with farmers Step 2: Providing extension advice through agri-graduates Soil testing Use of Inputs Production Technology Information on harvesting (time and method) Post harvest management pre-cooling, grading, sorting, packaging, storing on farm Step 3: Procuring from farmers

 Farmer loyalty Jack pot mentality Some mushroom buyers emerge overnight and buy the entire crop Buy only graded produce from the farmers hence farmers have to continue dealing with traders. They also get a lower than average price for the produce not purchased by the companies. Still at the mercy of the traditional markets Step 4: Post Harvest Issues: Technology, Infrastructure, and Manpower Lack of common grades and standards in the country companies specifying grades and standards for various crops Lack of post harvest technology for specific crops Post Harvest Man-power shortages: High turnover of manpower Post Harvest Infrastructure Setting up Distribution Centers (Packing, grading, sorting and cold storages) Step 5: Ensuring quantity and quality of supply at the stores Estimating demand at the retail stores too early to estimate demand Procurement from several sources including traditional wholesale markets How to maintain quality when sources of supply are different Logistics limitations Investment in Infrastructure through the chain

Low Investment Chain Packing House Packing House

High Investment Chain

Low Investment Chain Retail Outlet Retail Outlet

High Investment Chain

Fruit and Vegetables - Current Scenario India is the fruit and vegetable basket of the world. India being a home of wide variety of fruits and vegetables holds a unique position in production figures among other countries. Over 90% of India's exports in fresh products go to west Asia and East European markets. However, it needs to augment its food and processing industry at a mega scale, according to an agriculture consultant. The covered area under the fresh fruits in India was 5510000 Ha with the production of

58740000 MT in 2005-06. The major fruits grown in India are Mangos, Grapes, Apple, Apricots, Orange, Banana Fresh, Avocados, Guava, Lichi, Papaya, Sapota and Water Melons. This is due to its potential in different agro climatic zones India's Export of Fresh Fruits has increased from Rs. 225.67 Crores (USD Million 50.98) in 2005-06 to 256.43 Crores (USD Million 56.88) in 2006-07. The Major countries which import Fresh fruits from India are U.K, Netherlands, U.A.E, Russia, Bahrain, Qatar, Kuwait, Saudi Arabia, Bangladesh, and Nepal. Total vegetable production in India before independence was 15 million MT and since Independence for decades the growth rate was stabilized around 0.5%. The impetus on vegetable research and policy intervention to promote vegetable crops witnessed a sudden spurt in growth rate of 2.5%, a hike of five times during the last decade. Major vegetables grown in India are Potato, Onion, Tomato, Cauliflower, Cabbage, Bean, Egg Plants, Cucumber and Garkin, Frozen Peas, Garlic and okra. India's exports of Fresh Fruit and Vegetable has increased from Rs. 1658.72 Crores (USD Million 374.68) in 2005-06 to Rs. 2411.66 Crores (USD Million 534.97) in 2006-07. India ranks fifth in the world in cropped area under cultivation and production of potatoes. India produces 41% of world's mangoes, 23%bananas, 24% cashew nuts, 36 % green peas and 10% onion the total export value of the main exporting fruit crop from India is mango. Exports of mangoes, grapes, mushrooms have started going to the United Kingdom, Middle East, Singapore and Hong Kong. And among vegetable, onion occupies first position Potatoes and green vegetables like okra, bitter gourd, green chilies have good export potential. India is 2nd largest onion growing country in the world. Indian onions are famous worldwide for their pungency. The Gulf countries are the main importers of the

onion bulb, and neighboring Pakistan and China are India's main competitors in the global market. India's Export of Onion has increased from Rs. 708.15 Crores (USD Million 159.96) in 2005-06 to Rs. 1163.30 Crores (USD Million 258.05) in 200607. Bangladesh, Malaysia, Sri Lanka, U.A.E, Pakistan and Nepal are the Major market of Indian Onion.

Mango, called the king of fruits in India, accounts for 40 percent of the national fruit production of 22.168 million tons a year. It occupies 42 percent of the country's 24.87 million hectares land under fruit cultivation. India exported 79,060.88 MT of fresh mangoes with the value of Rs. 141.93 Crores (USD Million 31.48) in 2006-07. India is estimated to account for about 60 percent (9.5 million tones) of the world's mango production of 15.7 million tones. The major production areas in the country are in the States of Andhra Pradesh, Uttar Pradesh, Karnataka, Bihar, Gujarat and Maharashtra.

F&V Production and Consumption Scenario: F&V play a vital role in human diet as fresh food sources of calories, vitamins, dietary fiber and special nutrients. Indias vast geographical area coupled with varied climatic conditions facilitates to grow a variety of F&V. If concerted effort is made by all the stakeholders, there is every possibility that India emerges as the leading horticultural crops producing, processing, exporting and consuming country in the world. India produces 129 million tons of vegetables (NHB, 2009) and the total area under vegetable cultivation is around 7.9 million ha. Among vegetables, potato, tomato, onion, cabbage and cauliflower account for around 60% of the total vegetable production in terms of quantity (www.agriculture-industry-india.com). India ranks first in fruit production in the world with an annual output of 68 million tons (NHB, 2009). There are almost 180 families of fruits that are grown all over the world. The major Indian fruits are mango, banana, citrus fruits, apple, guava, papaya, pineapple and grapes (www.fruitvegetables.com). The per capita consumption of both F&V in India is far below the World Health Organization (WHO) recommendations. For example, the current production of 129 million tons of vegetables is sufficient to provide only a per capita availability of 210 g of vegetables a day (for population as per 2001 census) as against the balanced diet requirement of 400 g as per WHO recommendations. The per capita availability could be even lower when one takes into account the very high spoilage levels in F&V in the Country in the absence of modern post-harvest handling, storage and retailing facilities. Large number of farmers depending on monsoon, small land holdings, low yield, negligible investment and poor maintenance of cold storages, markets, all

weather roads and transportation facilities are the major hurdles for the growth of horticultural sector in India. In India just about 2% of F&V grown goes for processing, while over 25% is spoiled due to improper handling and storage, and the rest is consumed in fresh form. Keeping in mind the importance of horticultural products and the challenges faced by this sector, the National Horticulture Mission was launched in 2005-06 by the Government of India with a mandate to promote integrated development in horticulture, to help in coordinating, stimulating and sustaining the production and processing of F&V, and to establish a sound infrastructure with a focus on post-harvest management to reduce losses. F&V Marketing Scenario Marketing of agricultural produce is different and more challenging than many of the industrial products. The marketing of horticultural products, that too of the F&V, is more challenging because of the perishability, seasonality and bulkiness and consumption habits of the Indian consumers. Indian consumer demands fresh F&V. The main stakeholders in marketing chain from growers to consumers are wholesalers, retailers and other middlemen. It is necessary to focus on marketing of F&V from the point of all the stakeholders from growers to consumers. Marketing efficiency not only helps in increased production and per capita consumption, but also contributes to economic development of the country. F&V marketing deals with all the activities, agencies and policies involved in the procurement of F&V inputs by the farmers and the movement of F&V from the farm to the consumers. The F&V marketing system is a link between the farm and consumers. It involves all the functional aspects of market namely, pre- and postharvest operations, assembling, sorting, grading, storage, transportation and distribution. There has been concern in recent years regarding the efficiency of marketing of F&V. High and fluctuating prices and availability of quality produce

are matters of concern from the point of consumers. Only a small share of consumer rupee reaching the farmer is another major concern in marketing of F&V. India has a huge opportunity to become a leading global food supplier, if only it has the right marketing strategies and, of course, agile, adaptive and efficient SC (Viswanadham, 2007). India has a vast diversity in population, with several religious and sub-cultural groups, different food habits and culture. As a result, it has huge and vibrant domestic market, too. While China is currently the largest F&V producer with 34% of global production, Indias share in the global exports of vegetables is only 1.7%, and in fruits a meagre 0.5%. Despite strong domestic demand, China is among the four top developing countries exporters of fresh vegetables. China, Thailand, Chile and Turkey account for 58% of developing countries exports of processed F&V, though the share of developing countries as a whole in the export of processed products is low (36% in 2001) (World Bank Report, 2007). Fruit & Vegetable Production Scenario: Production of Major Fruits and Vegetables: India's Position in the World, 1996 Indias Share Fruits 1 2 3 4 5 6 Mango Banana Apple Pineapple Papaya Orange 10000 15073 1200 820 490 2000 19215 55787 53672 11757 5867 59558 52.0 27.0 2.2 7.0 8.4 3.4 1 1 10 5 4 6 Indias Rank

Sr.No.

Fruits/Vegetables Production (000MT)

7 8

Grapes Lime

1083 1700

5004 9104

21.6 18.7

8 1

Sr.No.

Fruits/Vegetables Production (000MT)

Indias Share

Indias Rank

Vegetables 1 2 3 4 5 6 7 8 Tomato Onion Brinjal Potato Green Peas Cabbage Cauliflower Garlic 4800 4058 8026 17942 270 3300 4800 350 84873 36544 11981 294834 5214 46656 12725 10401 5.7 11.1 67.0 6.1 5.2 7.1 37.7 3.4 6 2 1 6 5 3 1 3

STUDY OF RELIANCE FRESH Introduction

With a vision to generate inclusive growth and prosperity for farmers, vendor partners, small shopkeepers and consumers, Reliance Retail Limited (RRL), a subsidiary of RIL, was set up to lead Reliance Groups foray into organized retail. Since its inception in 2006, Reliance Retail Limited (RRL) has grown into an organization that caters to millions of customers, thousands of farmers and vendors. Based on its core growth strategy of backward integration, RRL has made rapid progress toward building an entire value chain starting from the farmers to the end consumers. Reliance Fresh is the convenience store format which forms part of the retail business of Reliance Industries of India. Reliance plans to invest in excess of Rs 25000crores in the next 4 years in their retail division. The company already has in excess of 730 reliance fresh outlets across the country and 68 reliance fresh outlets in Gujarat. These stores sell fresh fruits and vegetables, staples, groceries, fresh juice, bars and dairy products. A typical Reliance Fresh store is approximately 3000-4000 square feet and caters to a catchment area of 23 km. Stores main focus would be fresh produce like fruits and vegetables at a much lower price. The main idea of the company was to source from farmers and sell directly to the consumer, removing middlemen out of the way.

Preferred supplier arrangements involve higher (fixed and variable) production and handling costs but save on governance costs and reduce exposure to risks from substandard quality and out-of-time delivery.

Collection Centre: It is the place where vegetables and fruits received from farmers and from other sources are stored for a while and then goes through processing process. Processing of fruits and vegetables means their cleaning; separating rotten ones and their packaging. Usually fruits and vegetables maximum storing duration in collection centre is one day, means in one day the complete recycling of fruits and vegetables does complete. It is easily understandable because in case of vegetables they start to rot after two or three days under normal condition. Objective of Collection Centre is to buy fresh and good quality of fruits and Vegetables from farmers directly. Also company can save the vendor and mundi charge through these practices. In Gujarat they have three different collection centres for buying Fruits and Vegetables like Nenpur, Padra and Majra. Now company is trying to establish more number of collection centers in Gujarat. It is obvious they prefer to plant their collection center at that place which is more market potent means reducing transportation cost and they can buy the fresh produce in bulk at suitable prices. Also other alternative of purchasing channels were used by Reliance Fresh. 1. They also buy Fruits and Vegetables from wholesale Market directly. 2. Wholesaler linked to farmers that deliver products under contract.

Supply Chain operations in reliance fresh.

Visual quality inspection of bulk produces Sorting Crating of acceptable bulk produce Weighting Payment to Farmer Storage it under cooler environment. Loaded it in air Conditioning vehicle and sealed it.

Operation perform at Nenpur Collection Center Crated material is transferred through air Conditioning vehicle. Distance is 31 kms.

Weight of arrived material and confirm with weight which is taken at collection centre. Visual quality recheck of received bulk. Dump wastage or sell in market Stored(cooler or normal environment) it if required. Crating of material according to requirement of stores and dispatch it to different stores.

Central Processing Centre Naroda

4 km distance. Transferred material through referred vehicle.

Received at Store. Keep it for sale. Payment receive from people who buy that material. Wastage meterial dumps.

Naroda Reliance Fresh Store

2. Objectives I track the route of different vegetables so we can decide how fresh produce is provided by reliance fresh to consumer. 1) To track vegetables from collection centre to store.

Extra added costs play an important role in the organization of procurement regimes. While most attention is usually given to transport costs and labor cost, other aspects related to information exchange and trust relationships between producers and supermarkets in fact deserve far more attention. 2) To study cost estimation of supply chain of reliance fresh.

3. Research Methodology This is a kind of descriptive research study because it describes what is going on or what exists at collection centre. Description of Study Area Kheda district lies in middle of Gujarat state. Kheda is situated between 72.32 to 73.37 East (Longitude) and 22.30 to 23.18 North (Latitude). Major part of this district is covers by villages. Monsoon begins in July and carries till September. The average annual rain fall of this region is 723 mm. The average minimum and maximum temperature of this region is 14 to 41C. Kheda District is located on Bank of river Vatrak and 35 kms from Ahmedabad. It has 13 Talukas with Nadiyad, Mahemdabad, kheda, Matar and kapadvanj. This district covers 23 % of Aonla production of Gujarat. It also covers 7 % to total production of Vegetables in Gujarat. Mahemdabad taluka is our focus area. In this taluka study covers different villages namely Nenpur, Ghodali, Makva, Modaj, Sansoli, Sojali, Dajipura, Sadra, Vadadala, Jalampura, Lakshmipura, Amasaran and Malataj. Major Vegetables and fruits crop includes Spinach, tomato, Bottle Gourd, Sponge Gourd, Methi Big, Bitter Gourd, Okra, Drumstick, Sugar baby melon, Cabbage, Aonla, Corriander, Cocciniea, Amaranthus, Raddish White, Brinjal Black Big etc. I also collected some data or take some observation from naroda fruit market, Naroda central processing centre, ripening chamber and some store of reliance fresh. Sampling Technique As per objectives of the study; purposive and random sampling technique were adopted. Here Nenpur collection centre of Mahemdabad Taluka is our focus area. Also some observation was taken in Naroda fruit market, Naroda central

processing centre and Mother Ripening centre to study the component of supply chain. Type of data For 1st Objective Here Primary data was collected through observation of tomato crate. Nishant record time and place at Nenpur collection centre and put notebook in a crate after recording time of dispatch. Vishal collect it at naroda CPC and note time and place in it. According to routine that crate was move to a bunch of crates which was gone to outlet store. Then vishal gave it to supervisor who was present in night duty. Supervisor recorded time when crate send to store and put that notebook in that crate. According to bunch of crates we could know that in which outlet store crates it will go. From that information we contact store manager of that store. Store manager record time and place in that. When it reaches to final point we collected it. For 2nd Objective Here primary data was collected through observation of operation at Naroda fruit market, Mother ripening chamber and central processing centre Naroda. Here all data was collected by vishal. Secondary data was collected from company database, web portals and literature available from other sources. Sample size For 1st Objective Ten different days was selected to observe movement of tomato.

Day

Collecting Truck at Centre load

Truck

Truck

Send it Received Open RF Store

send to received to Store at CPC at CPC store

11:00

15:30

16:00

17:25

4:00

4:30

7:00

11:30

15:15

16

17:38

21:00

5:25

7:05

10:15

16:35

17:00

18:22

4:05

5:35

7:00

11:30

15:30

15:50

7:15

4:35

5:30

7:00

11:15

15:25

15:50

17:20

4:00

5:45

7:00

11:27

16:10

16:35

18:05

5:10

6:30

7:00

10:35

15:00

15:25

18:38

4:48

6:12

7:15

11:25

15:45

16:10

17:33

4:15

6:06

7:00

10:10

15:12

15:40

17:00

6:00

7:50

7:00

10

11:28

15:30

15:55

16:24

4:15

5:20

7:10

Tracking time of Tomato from Nenpur Collection Centre to outlet store. 2rd objective

Five different observations were taken for Mango. Here I tried to work out all charges on mango which was paid by company from source to customer hand

Vari ety

Crat Quant Purchas Amo es ity (kg) e Rate(rs/ kg) unt

Crati Loadi Transp ng Char ge ng

Vendo

ort to APMC(0 r of Charg e %) (6

Charg ripenin .8% e g total

chamb amount) er

Safe da Man go

79

1521. 5

46

6998 9

237

118.5 350

577.59

4317.5 1

Safe da Man go

62

1240

45

5580 0

186

93

280

460.41

3441.0 6

Safe da Man go

100

1980. 5

48

9506 4

300

150

430

783.95

5852.6 4

Safe da Man go

60

1200

45

5400 0

180

90

350

447.44

3334.8 0

Safe da Man go

189

3617

45

1627 65

567

283.5 530

1340.96

10030. 17

Different charges on mango from Naroda fruit market to ripening chamber

Sr. No.

Ripening Charges

Labour Charges

Transport to Weight Naroda CPC CPC

at Weight loss during ripening (%)

1 2 3 4 5

948 744 1200 720 2268

316 248 400 240 756

240 200 450 350 450

1437.7 1180 1887 1146 3450.5

5.51 4.84 4.72 4.50 4.60

Different charges on mango from ripening chamber to Naroda central processing centre

Sr. No.

Labour cost

Final at weight

Cost

of Labour

Final at Amount

Final rate

Transportation cost to store store

CPC(0.50 after rs/kg) sorting

(0.30 rs/ kg)

718.85

1399

251.82

419.70

78483.97

56.10

590

1154

207.72

346.20

62596.39

54.24

943.5 1839

331.02

551.70

106456.81 57.89

573

1120

201.6

336.00

60822.84

54.31

1725.25

3317.5

597.15

995.25

182308.28 54.95

Different charges on mango from Naroda central processing centre to outlet store. Analytical tools and techniques employed Detailed description of the analytical tools employed in the study is given below. Simple conventional method of tabular analysis was used to study the different cost and time in supply chain of fruits and vegetables in field. Average and percentage were also worked out to analysis different cost added on mango

Data Analysis For 1st Objective Day Total Time 1 2 3 4 5 6 7 8 9 10 20:00 19:30 20:45 19:30 19:45 19:33 20:40 19:35 21:40 19:42

Table 4.1:- Total time to reach tomato from collection centre to outlet store. Companys main objective is to provide fruits and vegetables to outlet store before 6AM. We analyze crate tracking of tomato and see that company provide different vegetable within 19 to 20 hours period to outlet store. On an average it takes 19.82 hours from collection centre to outlet store.

For 2rd Objective

Different added Cost on mango per kg from

Different

added

Cost on mango (%)

mundi to store

10.10 9.24 9.89 9.31 9.95

21.96 20.54 20.60 20.68 22.12

Different added Cost on mango

From this table we can say that average 21.18 % cost occurs for mango from Market to outlet store. SR. No. Different charges from Market to mother Extra APMC charge (0.8%) Extra APMC charge per kg Extra Vendor Charges Extra Vendor charges per kg

1 2

2209.5 1751

17.676 14.008

0.012 0.011

132.57 105.06

0.09 0.08

2930

23.44

0.012

175.8

0.09

1930

15.44

0.013

115.8

0.10

4854.5

38.836

0.011

291.27

0.08

APMC charge and Vendor charges on mango.

Company gives 0.01rs/kg extra APMC charge and 0.09rs/kg vendor charges. Actually APMC charge and vendor charges was paid on only actual rate which was given by vendor. But company have not any separate facility for direct payment to labour in market and other charges between market to ripening centre and ripening charge. So these costs add in vendor bill and APMC charges and vendor charges pay on vendor bill.

5. Conclusion For objective 1:- We can say that reliance fresh ltd provide fresh product to consumer within 24 hours period and during this period all the product keep in proper room and temperature also try to maintain. For objective:-2 In market company have any separate facility of payment to labor and company have to arrange their own vehicle for transport in market or company have to direct payment facility for vehicle which arrange from market. So company can save extra charges.