Global Supply Chain Management

Ecosystem Aware

The Food Supply Chain In India

Untapped Comparative Advantage

N. Viswanadham
Global Supply Chain Management
Contents
l  The Ecosystem Review
l  Agri-Service Ecosystem in India
Ecosystem Aware

–  The Food Supply Chain

–  Institutions: Regulatory & Social Factors
–  Resources & Management
–  Delivery Service Infrastructure
l  GRIP Framework
–  Performance
–  Innovation
–  Risk
–  Governance
l  Conclusions

N.Viswanadham
 Ecosystem Aware
Global Supply Chain Management

The Ecosystem Review

 The Basic Ecosystem
Global Supply Chain Management

Institutions
Ecosystem Aware

Delivery Services
Infrastructure

Resources
Supply Chain

Investment Climate
Co-Evolution, Conflict, Risk Propagation
 Global Supply Institutions
Global Supply Chain Management Chain Networks
Local Manufacturing &
Controlled Export
Ecosystem Aware

Delivery Service Mechanisms

Free Trade

Resources
Vertically
Enabled Globally Integrated
Global markets Distributed Localized
Networks Enterprises
GSN
Paper Communications Internet enabled
& Truck Transport 3 PLs Serving Modular Global
serving Local markets Global markets Production
Networks

Products Produced &

Integrated Locally

Supply Chain
Global Supply Chain Management SES Framework Can Help To Study

l  Governance
Ecosystem Aware

l  Risk
l  Innovation
l  Performance

02032008 N.Viswanadham
Global Supply Chain Management
Supply Chain Redesign
l  High Performance Supply Chains: Efforts of
Stake holders for last two decades are highly
Ecosystem Aware

risk prone.
l  Tension between Weak and Strong Ties
among Supply Chain partners
l  New technologies are creating disruptive
innovations
l  Globalization has created long supply chain
which are fragile and need monitoring
l  Governance which involves partner selection,
coordination and execution takes center stage
N.Viswanadham
Global Supply Chain Management
Our Agenda

l We study the Food Supply Chain

Ecosystem Aware

in India, model it using SES

framework, conduct the GRIP
Analysis and finally present the
design of Food Security Network

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 Ecosystem Aware
Global Supply Chain Management

Agri-Service Ecosystem in India

 Food and Groceries account for the
Global Supply Chain Management largest share in Retail
l  In 2011, ‘Food and
Grocery’ accounted for
Ecosystem Aware

nearly 59.5 % of total

revenues in the retail
sector in India;
l  ‘Clothing and Fashion’
followed with a share of
9.9 percent
l  In 2011, 48 % of total
household income in
India was spent on food
and groceries

N.Viswanadham
 Ecosystem Aware
Global Supply Chain Management
Food Supply Chain Ecosystem
 Food Supply Chains are Complex Systems
Global Supply Chain Management
l  Food Supply chains are highly complex interacting
networks linking millions of small players such as
Ecosystem Aware

Farmers, Kirana Shops, Hawkers , Industries,

Governments and other organizations affecting the
Political and Economic Climate
l  We should recognize
–  The complexity of social, political and operational issues
–  The domain knowledge to be acquired
–  The analytics needed to build excellence in strategy and
execution and mitigate the risks
–  The appropriate Governance Structure needed to fulfill
the promised deliveries
 Ecosystem Aware
Global Supply Chain Management

N.Viswanadham
The Food Supply Chain
Global Supply Chain Management The Plough-Plate Food Supply Chain
Ecosystem Aware

•  The supply chain involves farmers, seed producers,

fertilizer factories, financial institutions, millers,
government, warehouses, fair price shops, retail shops,
railways, truck transport companies, etc.
•  Does anyone orchestrate the relationship among
all the actors
Global Supply Chain Management
Supply Chain Inefficiencies
l  106 M small farmers
l  400 M agri workers
l  12 M Kirana shops
Ecosystem Aware

l  1.5 Million Hawkers

l  Too many intermediaries
l  Manual handling
l  Improper packaging
l  Standards for Hygiene
l  Not demand driven: No contract farming
l  Subsidized pricing
l  Public distribution inefficient
l  Reach to customers is difficult
N.Viswanadham
Global Supply Chain Management Food Manufacturing
l  Only a small percentage of fresh produce or meat
are processed.
Ecosystem Aware

l  Post harvest research and food product testing are

at a very nascent stage
l  Negatives on Food manufacturing in India
–  Food Packaging is expensive
–  High import duties on Processing and Packaging
machinery
–  High sales tax on packaged foods.
–  High protein food not available
Processed Food more expensive than
freshly cooked food
Global Supply Chain Management
Ecosystem Aware

Institutions: Regulatory & Social

Factors

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 Agricultural Produce Marketing Committee
Global Supply Chain Management (APMC) Act
l  The APMC Act in each state of India requires all
agricultural products to be sold only in government
regulated markets called Mandis.
Ecosystem Aware

l  These markets impose substantial taxes on buyers,

in addition to commissions and fees taken by
middlemen
l  Under the present Act, the processing industry
cannot buy directly from farmers and the farmer is
also restricted from entering into direct contract
with any manufacturer
l  Result: Disintegrated Supply Chains

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Global Supply Chain Management
Mandi: Farmer’s Market
l  The APMC Act, which regulates Mandis, was
amended in many states.
Ecosystem Aware

l  Companies still cannot buy but only can lease fertile
land from the farmer.
l  They can buy waste land or lease it
l  Retailers find it difficult to work directly with the
farmers and change the Mandi mechanism.
l  The Mandis remain more price-competitive. Retailers
source from mandis instead of developing their own
supply chains.
l  Supply chain is as efficient as that of a Mandi

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 Government Intervention Policies
Global Supply Chain Management
l  The Minimum support price offered by the
Govt. for 24 crops acts as insurance for
farmers against price fluctuations and
Ecosystem Aware

provides inputs to the PDS

l  The essential commodities act empowers the
Govt. to control production, distribution &
pricing, etc to secure equitable distribution
and fair pricing. This restricts interstate
movement of goods
l  These regulations may have lost their
utility and are hampering the growth &
modernization of organized retail
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 Supply and Demand in Retail Supply Chain
Global Supply Chain Management
Food Processing Industries
Demand Side
Retail Chains
Kirana Shops
Ecosystem Aware

Inconsistent Policies Bridge

Poor Governance Inefficient
Improper Transport facilities
Too many intermediaries

Farmers, SMEs,
Supply Side
And other Rural Industries

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 Ecosystem Aware
Global Supply Chain Management

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Resources & Management
Global Supply Chain Management
The India Advantage
l  In India, 52% of land is cultivable & World average is 11%
l  All 15 major climates of the World are in India (Snow
Ecosystem Aware

bound Himalayas to hot humid southern peninsula)

l  India has 20 agro-climatic regions & 46 of 60 in soil types
l  Sunshine hours and day length ideally suited for year round
crop cultivation.
l  Mega centre for biodiversity in plants, animals, insects,
microorganism and accounts for 17% animal, 12% plants
and 10% fish genetic resources of the globe.
l  Live stock sector: India has 16% of cattle, 57% of buffalos,
17% of goats and 5 % of sheep population of the world.
 Indian Agriculture
Global Supply Chain Management

l  Agriculture contributes 13.7% to GDP, 43 B exports and

employs more than 50.0 % of country’s work force.
Ecosystem Aware

l  India has more than 106 M small farm holdings

l  Second highest fruit and vegetable producer in the world
and cold storage available only for 10%
l  Second highest producer of milk. Additional cold storage
needed
l  Fifth largest producer of eggs. Cold chain needs are more
l  Sixth largest producer of fish
 Seed-Feed: Value Driven Agriculture
Global Supply Chain Management

l  Current Scenario, Supply driven : The farmer is

unaware of the market, Crops something and tries
Ecosystem Aware

to sell in a mandi or to an agent and expects a fair

price & immediate payment.
l  Desirable Scenario: The farmer crops to market
demand the right (Optimal) grade of produce and
sells to right customers to get maximum income
l  Need to transform the way agriculture works,
create business orientation among the farming
community

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Global Supply Chain Management
Standards

l  Standardization is a powerful tool for improving supply

chain efficiency.
Ecosystem Aware

l  Standards enable partners enables better compatibility

and interoperability of their systems and processes.
l  There are two kinds of standards in the food supply
chain.
–  The food standard that concerns the manufacturing process,
content and packaging etc for dairy, poultry, ready to eat foods
–  The logistics and IT systems standardization concerns the
cartons, pallets and IT software so that seamless transfer of
goods and information is possible.
Global Supply Chain Management
Resource Shortage

Talent for governance of dispersed (rural and

Ecosystem Aware

urban) & independently (small stake holders)

controlled agriculture, manufacturing &
service chains to make them globally
competitive

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 Ecosystem Aware
Global Supply Chain Management

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Delivery Service Infrastructure
Global Supply Chain Management
Cold Chain
l  Cold chain provides facilities for storage for
perishables from origin to point of
Ecosystem Aware

consumption in order to preserve quality and

ensure longer life.
l  Cold Chain Infrastructure includes
–  Pre-cooling facilities, Cold Storages ,Refrigerated
Carriers,
–  Multi-Modal Transportation

–  Information Management System, WMS, RFID,

l  These are in short supply in India

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Global Supply Chain Management
Distribution Logistics In India
l  Fragmented, Individual company based, technology
sophistication minimal, not integrated into the
supply chain.
Ecosystem Aware

l  Current attempts are to build hard infrastructure and

no attention to soft infrastructure such as trade
facilitation, ERP, WMS, Sensor Networks
l  Losses due to theft, spoilage, goods damage due to
manual handling, long lead-time and resultant
supply chain inefficiencies.
l  India ranks 46 on the 2012 logistics performance
index.
Global Supply Chain Management

There is no well designed hub-and-

Ecosystem Aware

spoke distribution network in India

and partly the taxation barriers
between states act as barriers to
efficient regional distribution.

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 Challenges Facing the Retail Sector
Global Supply Chain Management

l  Unavailability of Logistics companies offering

back-end support for retailers
Ecosystem Aware

–  Refrigerated transport and warehouse facilities

–  Timely distribution of supplies to retail outlets
l  The lack of efficient and organized supply-chain
management leading to
–  Higher costs and complexity of sourcing & Planning
for retailers and hence to consumers.
l  Unavailability of sufficiently skilled and trained
manpower leads to trial and error management in
retail operations.

N.Viswanadham
 Use existing Facilities more
Global Supply Chain Management
Fruitfully
Take advantage of the vast network and
Ecosystem Aware

logistical capabilities of the existing

institutions such as Post office, Road
transport corporations, Banks, etc to bring
a host of services to rural populations.

Do not wait for the infrastructure to be available

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Global Supply Chain Management
Food Safety and Hygiene
l  Need to assure consumers about safety and quality of
food.
The Sanitary and Phytosanitary (SPS) Agreement under
Ecosystem Aware

l 
WTO has lead to increasing recognition and adoption of
food safety measures.
l  Compliance with international food standards is a
prerequisite to gain a higher share of world trade.
l  Food standards are important
–  Concerns on food safety on the back of breakout of diseases
such as BSE, Avian Influenza, Bird Flu etc
–  Growing consumer demand for products which are healthy .
 State of Food Supply Chain In India
Global Supply Chain Management

l  VeryInefficient
Ecosystem Aware

l  Needs good Governance

l  Needs Food Processing Industry
l  Needs Cold Chain Logistics
l  Needs Immediate Attention