“Selection of right supply chain partner and measuring, monitoring quality parameters periodically are effective way of ensuring quality in supply chain. Quality issues can surface at any point in the supply chain. It is imperative to catch quality issues as early as possible. The costs of unresolved quality issues can be devastating if they are discovered in the latter stage particularly cold storage of perishables,” asserts Somnath Chatterjee, Head – Procurement & Logistics, ITC Ltd (Foods Division), during an exclusive interaction…
How has been the performance of the cold chain industry in the recent times?
The cold chain industry is developing at a faster pace in India due to a shift in focus from increasing the production to better storage and transportation facility of the commodity. The industry has now become an integral part of the supply chain industry comprising of refrigerated storage and refrigerated transportation. The cold storage infrastructure has the ability to maintain the shelf life of perishable goods by maintaining proper temperature of the products from the farm gate to the end-consumer. Owing to the rising need of the infrastructure to reduce wastage, the cold chain industry in India is forecasted to grow at a CAGR of 19% during the period of 2017-2022.
What are the challenges while operating amid the myriad complexities?
The cold chain industry is unorganized in nature. With around 3500 companies operating currently, the cold chain supply base only comprises 8-10% of organized players. About three-fourths of the 30-million-ton capacity is used to store only potatoes and onions and same is in the state of Utter Pradesh, Punjab, Gujarat and West Bengal. Further, a third of the cold stores are small, with capacities below a thousand ton each, and are largely in the hands of the unorganized sector. The current capacity allows only 11% of the total produce to be stored. The lack of ‘ripening chambers’ and pack houses leads to wastage of fruit & vegetables. These chambers are required where fruits could be ripened safely and scientifically. The pack houses are required close to farmlands where the produce could be brought, cleaned, graded and stored in cold rooms for a few days until they are dispatched to the markets. The country needs about 60,000 pack houses close to the farmlands.
How can technology help in enhancing the expanse?
The use of technology is the cornerstone of any successful business in the 21st century including cold storage industry. Many companies are moving from traditional cold storage build models to more up-to-date and aesthetically pleasing modern operation models, making it critical to create cold storage units capable of fulfilling this demand.
Indian companies introduced latest technology called ‘Black Box’ technology, which ensures the preservation of any agricultural commodity for 1,000 days. Black Box is a unique technology developed by scientists in Spain. It can be easily set up in any factory or plant. Regular cold storage utilizes nitrogen. However, in the Black Box system, there will be neither nitrogen nor any preservative. The stored commodities will have their natural content and nutrition value intact for 1,000 days. The technology helps farmers to increase their returns and reduce wastage of fruits and vegetables.
How can companies optimize end-to-end supply chain planning?
Optimized planning is a key factor for company’s success in end-to-end supply chain. The following methods will help companies optimize end-to-end supply chain planning:
Improving demand planning and forecasting by integrating point-of-sale data and actively influencing demand (revenue management/demand shaping)
Linking the push and pull principles as part of LEAN Planning & Scheduling
Maintain healthy supplier relationships
Source suppliers strategically and with collaboration
Move contract management responsibility to the supply chain
Optimize inventory for reduced cost
Establish regular reviews to ensure efficiency and mitigate risk
Be socially responsible and establish ‘green’ initiatives.
What are the global best practices that the country need to imbibe?
Increase inventory velocity: Inventory must move quickly; turns should be high. It must flow from suppliers or manufacturing sites to customers.
Implement lean logistics / supply chain management: Lean logistics complements supply chain management. Both emphasize pulling, not pushing, products through the supply chain.
Improve supplier performance: Success begins with supplier performance. They must deliver quality items and do it complete, accurate and on time. Collaboration is important.
Compress cycle time: Cycle time runs from the time the need for a productnow or replenished-is determined and goes until it is delivered to the customer or to the store.
Maximize inventory yield: There is a window of opportunity to get the maximum price, the maximum, yield for products.
Utilize meaningful metrics: There are numerous measures for companies and their supply chains. Many are measures for the sake of metrics with little meaning to C-level executives or with little value in really measuring supply chain performance. Meaningful metrics are orders delivered complete, accurate and on time and time related-such as days of inventory on hand, cycle time and others.
Segment the supply chain: Too many firms have one supply chain approach for everything. This monolithic approach handicaps performance, diverts resources, and creates static noise from external and internal sources that distracts the supply chain organization.
Employ supply chain technology: Supply chain execution technology is important to managing a global supply chain. It should provide visibility throughout the entire supply chain.
What crucial role does the 3PL provider play in the whole value chain?
Outsourcing supply chain services to third party logistics providers gives businesses the ability to focus on primary functions that are core to their operations. Forming these business partnerships allows retailers and manufacturers to more easily expand operations while increasing efficiency and reducing costs.
What are your expectations from service providers?
Accuracy of managing stocks, batch management, maintaining FIFO/FMFO, intactness of managing product temperature, power back-up, maintaining hygiene condition of the cold store, on-time despatches are some of the key expectations from service providers.
What’s your take on in-transit goods that require ambient temperature?
Following key points should be taken into consideration:
Proper use of tarpaulins and covers to ensure safety of stocks in-transit
Insurance cover should be taken to avoid possible losses from unforeseen situations
Proper stacking of cargo in the vehicle and avoiding dumping it with other material will help avoid in-transit damage to cargo
Food grade cargos should not be mixed with hazardous material or other material, which will contaminate or damage the food product.
What are the government initiatives needed to better the cold chain infrastructure?
The government has developed various schemes to push cold storages and warehousing in India through forms of tax exemptions, subsidies and an instrument called the Negotiable Warehousing Receipt (NWR). Subsidies if available should be directed to the right hands. There are few trade barriers and their effects on the industry as follows:
There are certain policies adopted by the Government like APMC, Essential Commodities Act (which have an indirect effect on the industry) that have been creating supply chain distortions and trade restrictions of fruits and vegetables. These have caused major impacts on the food sector and have an adverse effect on the cold chain industry. APMCs need to be replaced with an open and competitive market system, which should replace intermediaries and agents who currently control the mandis or markets.
Entrepreneurs, who want to conduct business in cold storage, have to endure a host of regulatory barriers, which thwart the growth of the sector.
Cold chain sector needs to be boosted through effective strategies and policies involving private players.
The development of road, port, rail and air infrastructure corresponds to the need of streamlining and strengthening the supply chain.
The e-commerce warehousing model has shown the way forward with tie-ups and aggregated usage of spaces for products.
The landholding and ceiling requirements should be liberalized for cold storages, as it shall facilitate the effective utilisation of commodities.
Regulations should give way for an open and transparent system that can substitute subsidies. Subsidies distort market and hence need to be replaced through incentives and ease of entry, operation and exit. Subsidies are tied to vested interests, and hence benefit only few parties, which antinomies the government’s role in the food and agricultural sector of the country.
The above barriers have to be addressed appropriately to better cold storage infrastructure in the country.
What are the ways to ensure quality throughout the value chain?
Selection of right supply chain partner and measuring, monitoring quality parameters periodically are effective way of ensuring quality in supply chain. Quality issues can surface at any point in the supply chain. It is imperative to catch quality issues as early as possible in the supply chain. The costs of unresolved quality issues can be devastating if they are discovered in the latter stage particularly cold storage of perishables. Therefore, it is critical to identify quality issues early in the supply chain to manage quality related costs and risk. These can be achieved by keeping a clear focus on establishing clear measurement programmes on quality; on-time delivery; service; price; total cost; contract compliance; responsiveness; and finally ensuring that supply chain partners understand issues and resolution requirements in a timely manner.