RK Foodland - PPT for Cold Chain

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Cold Chain : Building Infrastructure, Service Capability & Profiting from it Vishal Sharma VP Operations RK Foodland Pvt Ltd 1

Transcript of RK Foodland - PPT for Cold Chain

Page 1: RK Foodland - PPT for Cold Chain

Cold Chain : Building Infrastructure,

Service Capability & Profiting from it

Vishal Sharma

VP – Operations

RK Foodland Pvt Ltd

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Preview

• Overview of Food Supply Chain

• Macroeconomic Situation

• Cold Chain Industry challenges – Is Infra a barrier ?

• Growth drivers & Way forward

• Outsourcing & How Service Capability drives

Profits?

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Introduction

• India -- one of the biggest emerging markets,

over 1.2 billion population & 300 million strong

middle class.

• India --land area 2.97 mn sq. km., 180 mn

hectares of arable land (one tenth of the

world), 56 mn hectares irrigated .

• India -- second largest food producer in the

world and having potential to become first.

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Milk

Largest Producer

100 Mn T

F & V

#2 in the world

151 Mn T

Food Grains

#2 in the world

(220 Mn T)

Cattle / buffaloes

Largest in the world

283 million

Tea

Largest Producer

(0.85 Mn T) Sugarcane

# 2 in the world

(245 Mn T) Goat & Sheep

182 million

Fisheries

Marine: 2.7 Mn T

Inland : 3.1 Mn T

India is the front ranking producer of many perishable commodities

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Drivers Growth (2012 – 2020)

►GDP

►Population

►Per Capita Income

• 7% to 9%

• 1.2%

• >15% growth (disposable income)

• Women’s participation 70%

Entry level criterion • Entry player does not require large scale capital outlay and setting up of

small, single and independent store is possible

Lifestyle changes • 2.5% urbanization

• Education and awareness, health consciousness, increase in packaged food

Growth indicators in

other segments

• Growth of beverages segment and on premise consumption gives

opportunity to tap existing customers.

• Convenience of walk-in, facilitates quick chat/meeting over food.

Rapid Urbanization

• Changing and busy lifestyle, fast emerging middle class population and

surging disposable income, the industry will continue to grow

Growing Modern Trade • Projected contribution 30% of total trade by 2020, currently at 10%

Low labour cost • Currently Low but rising gradually

Macroeconomic drivers in India

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Distribution Network & Cold Chain in India

• India wastes more fruit /vegetables than are consumed in whole of UK

• Cumulative waste is more than $6.7 billion, equivalent to 40% of total

production of fruits and vegetables. Reason……

• Poor infrastructure - fragile produce being easily damaged / loss

• Untrained / Unskilled handling and subtropical temperature variation.

• Food contributes to 70% of retail trade - largely unorganized.

• Critical absence distribution network and cold chain.

• Growing urbanization will overload processed food industry, growth of

QSR with shifting consumer practices. • From traditional to …………………..modernized traditional (Thali system at restaurants)

• From globalize to ……………………Indianise (from hamburger to McAloo Tikki Burger)

• From value for money to……………value for time & convenience (home delivery of branded products)

• From conventional to………………..experimental (traditional to Chinese and Thai food)

Continued…….

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Cold Chain Landscape in india

• 5300 cold storages

• Cold chain capacity 60000 MT – grossly inadquate.

• Greater than 90% for potatoes

• Indian food mkt to grow from $182 bn to $344 Bn by 2025.

• Key Industries requiring cold chain—FFV,Ice

cream,processed meat/poultry,marine products & pharma .

• Lack of trained manpower/expertise for robust/process

driven cold chain service deliveries.

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Industry Challenges/Entry Barriers

• High real estate costs.

• High energy costs(30% Vs 10% in west) with 17-18% peak

power deficit & thus associated captive power costs.

• Low Capacity utilization – Average 50-60%

• Uneven distribution of capacity/regional

approach(UP,MS,gujrat,WB,Punjab),traditionally catering

single commodities

• Lack of logistics support—low cash strength to invest to

cover entire value chain.

• FDI restrictions in retail.

• Low private investor’s interest(prominent deals through

PE/M&A—2009-2,2010-3,2011-1)

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Opportunities/Growth Drivers

Govt Initiatives

Increasing Nuclear Families and Working

Women—rising disposable incomes

Increasing spends on health foods

Cold Chain Demand Drivers

Rise of Pharma-vaccine mkt 1000 cr ,YOY 25-

30% growth

Demand for Functional Foods

Organised Retail and Private Label Penetration

Presently, the Indian cold chain industry is between Rs 10,000-15,000 crore, and is

growing at 20-25 per cent and is expected to touch Rs 40,000 crore by 2015.

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Key Govt Initiatives to Promote Cold chain

Cold chain given ‘Infrastructure’ status in 2011-12 budget.

Exemption of excise duty for AC equipment,refrigeration panels

& conveyor belts.

5% concessional import duty with full exemption of service tax.

Duty free import of reefer units for vehicles.

Tax benefits on investments.

Access to external commercial borrowings.

100% FDI & 25% subsidy in project costs.

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Way Forward

Measures by Govt--(Land,FDI in retail,GST).

Flow of investments.

Willingness of customers to pay a premium for higher quality

food products & Thus,

Helping in a equitable distribution of cost of a strong cold chain

infrastructure.

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Outsourcing & How Service

Capability drives Profits?

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SCM Generates Value

Invest in efficient,effective & realiable supply chains

while keeping a reasonable service level

customer satisfaction/quality/on time delivery, etc.

This is how SCM contributes to the bottom line

SCM is not strictly a cost reduction paradigm but an

INVESTMENT !

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A picture is better than 1000 words!

How many words would be better than 3 pictures?

- A supply chain consists of

- aims to Match Supply and Demand,

profitably for products and services

SUPPLY SIDE DEMAND SIDE

The right

Product

Higher

Profits The right

Time The right

Customer The right

Quantity The right

Store The right

Price = + + + + +

- achieves

Supplier Manufacturer Distributor Retailer Customer

Upstream Downstream

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Scope of activities as Supply Chain Partners

`

Strategies Requiring Logistics Support

SCM / Menu Operations IT Marketing

Simplification Lean

Responsive

Supply Chain

Competitive

predictable

Pricing

Standardization –

Driven

efficiencies

Quality assured

supply Sustainable

Logistics Business

Model

End-to-End Supply Chain Management ( Plan Source Make Deliver)

Creating a lean, responsive logistics network that enables restaurant simplification

• Demand Planning

• Supply Planning

(Upstream / Supplier)

• Supply

Planning (Replenishment)

• Supply Chain network

Design

• Inbound Freight

• Transport Optimization

• Warehouse Optimization

• DC Procurement

• Risk Management

• Inventory

management

• Receiving & delivery

• LP managed inventory

• Reverse Logistics

Quality Assurance, Social Accountability

Organization, Governance, Skills & Capabilities

Information Management Systems

Asset and Capital Management Valu

e E

nab

lin

g

Valu

e C

reati

ng

D

irecti

on

Sett

ing

Simplify Deliver Plan

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Focus on one’s core competency and outsource non-core activities, and develop a positioning in the supply chain

Can consider

outsourcing

M & A Develop with

outside

consultant

Low High

The enterprise’s capability

Hig

h

Low

The u

niq

uen

ess of th

e capab

ility

Outsourcing

Self-

established

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Competitive Strategy

Supply Chain Strategy

Drivers

Inventory Transportation Facilities Information

Supply Chain Structure

Efficiency Responsiveness

Drivers of Supply Chain Capability/Performance

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Considerations for Supply Chain Drivers

Driver Efficiency Responsiveness

Inventory Cost of holding Availability

Transportation Consolidation Speed

Facilities Consolidation/Dedicated Proximity/Flexibility

Information What information is best suited for each objective

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Supply Chain Champions:

Service vs. Costs

Source: McKinney & Institute for

supply chain management 19

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Supply Chain Champions:

Service Capabilty will drive Profits

Source: McKinney & Institute for

supply chain management 20

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Total Cost of Ownership

Impact on Profitability if a service provider fails to deliver

ON TIME Loss of sale for material not reaching on time Additional overtime of crew waiting to unloading the material

IN FULL Stock out at stores Loss of sale and drop in foot fall Loss of opportunity to delight customer and impact on brand image

Quality of product Drop in yield of the product; more wastages at stores Chances of stock getting HOLD at stores leading to loss of sale Drop in gross margin at store and loss of incentive for teams

Promotions Could delay time bound promotions planned at stores Opportunity loss to generate high sales during festivals Loss of sale and impact due to inventory carrying costs

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Thank You