PowerPoint Presentation

Dadi Sa CooperativeAnkita SirohiMegha ChaudharyPavan ChengalvalaAkshata KariRridhee MalhotraPuneet JainPrateek Bhatia

Institute of Rural Management 2013

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Papad is a popular and tasty snack itemMajor Players : Lijjat, Bikajiwala, MDH & Shakti BhogTraditionally papad making has been confined to households through sun drying by women in the house.Three types of processing techniques used are: 1. Handmade and then Sun-dry 2. Semi-automatic 3. Fully automatic (Dryer is Used)Handmade Papad preferred more than the machine made ones; its more crispy and tastes better.Latent demand for Handmade/ Semi handmade Papad

PAPAD and its market

Demand generally goes up by 15 to 20% during Diwali season(Nov. Feb.) Variants like single mari, double mari, jeera mari, garlic and punjabi papad Perishibility of 2monthsUttarsanda is the biggest cluster of papad making units in Gujarat catering to domestic as well as international markets. Others include Bikaner, Mumbai, Kheda.Huge export potential

Raw Materials RequiredFor 1 kg Papad,Urad Dhal flour (Black Gram) 1 kgBlack Pepper Dal 25 gmSoda-Bicarbonate (NaHCO3) 35 gmSalt 35 gmAsafoetida (Hing) 12.5 gmEdible Oil 25 gmFlavors (as per choice) - ground black pepper or garlic, or chiliWater - 350 ml

Manufacturing Process overview

Porters Five Forces ModelThreat of New EntrantsLow Entry BarriersEconomies of Scale Access to distribution channelsCost Disadvantages other than Size RelatedModerate Reactions from CompetitorsResources of existing participants

Large number of competitors in the marketLocal producers, Lijjat, Bikajiwala, MDH, Shakti Bhog

Moderate Buyer PowerProfitability of buyers Switching costsAvailability of InformationHandmade Papad as substitute No complementsHigh Supplier PowerProduct differentiationInformation available to buyersSwitching costsProportion of revenue represented by sales

Easy Availability of Raw material. Scattered suppliers across Himmatnagar, Indore, Dahod, Rajkot, low switching costs between suppliers and low concentration of sellers.

Suitable Agro-climatic availability for sun drying component of the manufacturing process; 320 days of bright sunlight in a year.

Easy availability of capital through member contribution, government subsidies of up to 35% on a loan amount of 10lac and above for setting up of business unit.

Strong infrastructural support in the state of Gujarat

Factor Conditions

Large number of buyers and sellers

Large number of competitors and relative size, each vying for the share in total value pie.

Low Entry Barriers, less barriers in raising of capital, low uncertainty in the industry

Quality & Quantity of raw materials assured

Increasing demand to the extent that the industry is unable to meet it through its current capacity

Latent demand for Handmade and Semi handmade Papad

Transparency in quality through appropriate grading criteria and fairness in quantity measurement

Industry Conditions Demand Conditions

Low fixed costs for semi hand made method of preparationEconomies of scale exist but limitedNo Economies of scopeLess scope for Backward integration.Forward integration possible by establishing own sales and distribution network- Economies of Integration exist

Economies of scale, scope, Integration

Cost / Kg.Raw materialRs. 50.37Variable costs (including raw material)Rs. 62.94Fixed costs Rs. 7.53Cost of Goods soldRs. 70.50Raw material cost / COGS71.45%

Cost structure

Margin model (per Kg.)

Margin=56.02%

Margin=13.6%Margin=20%

The Proposed SetupProduct PortfolioPapadKhakra

Chaurafali & Mathia (Seasonal Production)

Pickles

Production centers in 25 tier-1 and tier-2 cities of Gujarat Decentralized production at 50 production centers managed by HOAll sales under single brand name- Dadi-saSemi handmade and handmade products as USPCatering to upper middle class target segment in urban areas of Gujarat

Individual Production Center (Monthly stats)

Business model

Head OfficeProduction CenterDistributorsRetailers/ Own shopHotelsConsumer

Supply of Raw Materials Training, Maintenance, PromotionsMarketing and Sales

Low uncertainty in supply of raw materialLabour pool availableProcess risks low Availability of Sunlight for drying

Production risk

Utilize and enhance the skills of women membersGiving a stable source of income Build a reputed brand in home-made food productsBuild a reliable and efficient sales & distribution network to help members market the items they produce

Purpose of the Collective

Without Collective (Existing scenario per member) Wage rate / day= Rs.125- Rs.150 Annual earnings= Rs.37,500- Rs.45,000

Membership fee = Rs.2500 Deposit= Rs.8000 Annual opportunity cost of investment (@10%)= Rs.1050Member centrality

The collective may not be a cooperative as the membership cannot be voluntary in our model; The more members, more equipment required17

With Collective (per member) Wage rate = Rs.125 Annual wages= Rs.37500 Bonus on Annual wages (@10%)= Rs.3750 Share in retained earnings = Rs. 1,57,240 Net benefit per annum= Rs. 1,52,440

The Products Marketing PerspectivePoint/Product PortfolioPapadPicklesKhakra/Mathiya/ChaurafaliPoints of purchaseGrocery shops and next-door provision storesGrocery shops, snack shops and next-door provision storesSnack shops, sweet marts and next-door provision storesConsumption cycleand patternDaily with mealsDaily with meals and other snacksDaily as breakfast or as snacking optionsPurchase cycleWeeklyOccasional and longer 3 to 5 daysProduct typeVery highmargin- high volumeHigh demandHigh margin-low volumeModerate demandHigh Demand

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Business

Brand valueCompetitive skills Adequate returnsGrowth and expansion opportunities

Consumer

Consistent in quality and tasteCost-effectiveAccessibleReliable

Requirements from the setup

Members

Stable incomeHigher than current returnsLow investment requirementsLimited skillsPatronage Centrality

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Core and Periphery Activities

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Capital StructureLong termShare Capital: Rs. 2500 per memberMembers Deposit5 years lock-in-period10% annual interestRs. 8000 per member

Short term : Working Capital as per weekly operating cycle of Rs. 3,14,197 Source: Short term bank loan of Rs. 1,80,000

Member Profile1. Women residents living within a radius of 8 km of each center

2. Capable of making a small investment (Rs. 8,000+2,500)

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Member Induction

Initial orientation of a week to make them well versed with the various process and machine operations

The members would have to undergo a probation period of one and a half month, failing to successfully complete which the member would be refunded the membership fee.

On-the-job training by rotation on all the processes involved

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Probation Period

Mandatory job rotation hence training on variety of skills required.Appointment of trainer for training on quality management

S noWeeksTraining of11Papad22Khakra/Mathiyan/Chaurafali31Pickle41Quality Assurance51 Packaging & Accounting skills

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Structure Organization Level

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Roles & ResponsibilitiesUnitsRoles & ResponsibilitiesProduction Units Khakra, Papad and PicklesSupervisors (part of Committee)1. Management of daily production responsibilities of their respective products.2. Product innovation.3. Check of quality standards of each product.Sales and Distribution1. Taking orders 2. Distribution of products3. Inventory control 4. Transportation handlingProduct Innovation and Marketing1. Team would be formed if and when required on ad hoc basis2. Members from other units like Sales and Committee will be present3. Market survey will be conducted if required.Committee1. Sanchalika is the one responsible for all decisions at branch level, for profits and welfare of all members in the branch

Structure Centre Level

Decision-MakingDecisionResponsibilityRuleFlow of peopleNew member entryCoordination Committee2/3MajorityEmployee recruitmentCoordination Committee 2/3MajorityTermination of membershipGeneral body 2/3MajorityExit or retirement of membersChairpersonAs per the rule book

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Decision-Making.. DecisionsTackleRuleFlow of moneyIssues with members depositsGeneral Body 2/3MajorityTreatment of surplusGeneral Body 2/3MajorityExpansion and related investmentsGeneral Body 2/3MajorityWorking capital investment and managementCoordination CommitteeConsensus

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Decision-Making.. DecisionsTackleRuleFunctional aspectsInput arrangementProduct committeeConsensusSeasonalityManagement CommitteeConsensusNew product developmentGeneral BodyConsensusManaging distribution channelsDistribution committeeConsensusTerms of tradeGeneral BodyConsensus

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Decision-Making DecisionsResponsibilityHowArrangement of member dutiesManagement CommitteeConsensusTraining and skill developmentManagement CommitteeConsensusDispute settlementGeneral bodyConsensusElectionsGeneral bodyConsensus

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Meetings Committee/UnitsFrequencyPurposeProduction UnitsEvery weekTo decide members tasks for the week. The members required for the week vary according to demand. Management Committee would advise the production units. Quorum: 30Management CommitteeEvery WeekIf required this meeting would take place and advise the production units. Quorum: 5

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MeetingsCommittee/UnitsFrequencyPurposeManagement CommitteeEvery quarterQuarterly Review and review the product profile.Quorum: 5Management CommitteeWhenever requiredNew product approval, new policies regarding packaging, orders etc.Quorum: 5Sales and Distribution GroupWeeklyTo review the sales of the week , get the feedback and draw tasks for the next week. Quorum: 3

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Member ComplianceWorking TimeMembers will have to sign in the registry both in the morning and evening with time specification.Task AllocationMember should follow the task instruction. Rotation of job should be followed strictly. No request for change of task is entertained more than once in a month.MeetingsNo member can absent herself from any meetings. A cut of one day wage would be imposed. Exceptional conditions would be considered.UniformIn order to comply with cleanliness and quality, and also to maintain uniformity, the members have to wear uniform, apron and a pair of gloves.

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Checks and Balances

A team comprising HO members will be formed for surprise visits at various centers once every three months to ensure that the quality standards are adhered to. Defaulters will be penalized with a heavy fine of 1% of monthly productionThe quarterly review committee reports would be shared to all members after the management committee meets.Suggestions from each and every member would be respected and considered in the management committee meetings.Each member would be allotted a target and her performance in work would be evaluated every three months.

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Performance IndicatorsLevelIndicatorsMemberTarget productionAttendanceAdherence to Quality StandardsCooperativeReturn on CapitalReturn on Capital EmployedMarket PowerPatronage DistributionSocial InstitutionOpenness & transparencySocio Economic UpliftmentHealth Check for members Maternity LoansEducation Promotion for children of members

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Activity Mix

The activity for the week would be decided on every Saturday.The number of workers in plant for the week would be decided depending on the demand for the next week.Every member would be in an activity only for one month at most.Every week four members from each group would shift (rotate) to another group, ideally two members for each of the other two groups.

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ActivityMain TaskProblem areaSkills requiredMajor agencies involvedOpportunitiesProduction n packagingMaking of papad, khakra, Mathia, picklesMaintaining quality standards, wastagesHandling machinesHigh market demand, profitabilityInput procurementPurchasing, distribution to different centresFluctuations in commodity pricesinventory management, demand forecastingTraders, APMC mandiesFirming up ties with suppliersTrainingProvide training to new members during probation periodMembers with longer learning curveGood HR skillsTrainerSkill improvement, increased output of workersQuality assuranceMonitoring and doing timely quality checksDealing with inconsistent qualities, rejectionsMonitoring and evaluation skillsQuality assurance teamLess rejections, standardization

Quality AssuranceStandard FormulationStandard Manuf. ProcessTrainingGroup level check before packingSealed packs with complete detailsSample Testing of Sealed PacksDepotHotelsErrant GroupIdentifiedErrant Employee IdentifiedFine Rs. 100per pack

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Quality Assurance

Quality Assurance..

Terms of Exchange

Risk mitigationTechnological Risks - Resource re allocationPlanning Errors Planning inclusive of safety times and buffersInput Prices fluctuations- Buying in bulk, maintaining a pool of suppliers and establishing good relationshipsInput storage proper storage facilities attached to each centre.Seasonal fluctuations Coal drying, more concentration on khakra and other products.Member falling sick- Job RotationRented Facility Proper contractual terms and relationships

RetailersHotelsDistributorsKhakraPicklesSales Price (Rs. / Kg.)150125110160135Variable Cost (Rs. / Kg.)73.1573.1573.1534.0289.38Contribution (Rs. / Kg.)76.8551.8536.8585.9845.62Sales-mix7.02328.0935.1228.90.87Proportionate Contribution5.397175514.5646712.9417224.848220.396894Weighted Average of Contribution58.1486745Total Fixed Cost2466718Breakeven Sales (Units)2979119161489812260369Time required (including promotion)55 days 2 months

Break even analysis

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