RK Foodland - PPT for Cold Chain
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Transcript of 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?
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
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
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…….
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.
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