A miser once wanted to buy some palm fruit. He was shocked on hearing that this was for eight anna (50 paise), and wanted to know where would he get this cheaper and fresher. The hawker directed him to the townplace, and the miser travelled to discover the price to be four annas, and wanted this produce at a cheaper cost. Finally the hawker indicated that this man could climb the tree and pluck it himself. This would be free. So the man climbed and fell down and had to be hospitalised.
While you may smile at the above anecdote, it perhaps encapsulated the Supply Chain for the food industry. Fresher and cheaper is always near the source, but as the product moves away, the cost increases and the quality of the produce is almost near rotten on account of modes of transportation, storage and handling.
India is the world’s second-largest producer of food after China and has the potential of becoming the largest in the food and agriculture sectors. The total food production in India is likely to double in the next 10 years and there is an opportunity for large investments in food and food processing technologies, skills and equipment, especially in areas of canning, dairy and food processing, specialty processing, packaging, frozen food/refrigeration and thermo processing, fruits and vegetables, fisheries, milk and milk products, meat and poultry, packaged/ convenience foods, alcoholic beverages and soft drinks and grains.
Unity in diversity
India – unity in diversity - is often a repeated and clichéd phrase to illustrate the oneness despite the cultural diversity. One can use the same term when one describes food, for the challenges here are different. We also revel in stating that we are an agrarian economy, with this sector contributing to about 65% of the nation’s GDP. We are amongst the largest producers of fruits and vegetables in the world, but the same may not be true when it comes to consuming. Most of these fruits and vegetables get wasted in transit. The first solution that was suggested was food processing, and that has been able to address the issue to some extent though not completely.
With close to 70% population dependent directly or indirectly on the farm sector, the government has in recent years been more focussed in helping the lot of the farmers. There have been a number of initiatives taken in terms of irrigation, better seed varieties, road and communication connectivity.
The government has liberalised the food processing sector considerably keeping in mind their value in increasing farm level incomes. 100% FDI has been allowed in this sector. However there is clearly a need to incentivise manufacturing to give fillip to the industry. Further they need to come up very close to the farms due to attendant benefits of location and manpower.
In recent times, the government is encouraging the growth of cold chain infrastructure and has rolled out a lot of sops for this. More importantly they give a willing ear to any development that could benefit farmers and bring prosperity to their areas.
The advantage
India has the advantage of its geographical spread and seasons to support diverse horticultural products and provide year-long business. Typically, in the months of April to June, the availability of litchis, cherries, mangoes, and grapes are plenty, while from July to September, pineapples, and mangoes are available. During the months of October to December, the season is for apples, and oranges, while January to March is for kinnows, strawberries, and roses. Apart from these, year-long there is availability of processed food, melons, organic products, and mushrooms.
Fruits and vegetables can be reached keeping the farm freshness intact for the final consumer, by also plugging the wastages along the way, thus boosting productivity on account of better storage, handling and transportation. This will help maintain the costs and shatter the myth that use of better technology or transportation will result in the product cost going higher and hence we all need to be antagonistic to such measures.
Marketing fruits and vegetables at the right time becomes imperative to get a good price, the fact is many of our farmers are unaware of the daily market prices and often depend on middlemen, who easily exploit them. Many of these brokers often work on an established network and quote the same (low) price. Typically the farmer lacks information on the right price and often sells the produce to the middleman as storing his produce is simply not possible. To a small and marginal farmer, selling his produce at the earliest ensures some cash flow, but imagine if he engages in a price discovery mechanism wherein he can locate the best buyer for his produce at a better price.
Move out of immediate geography
Farmers can derive value for their produce based on certain factors like
Move out of immediate geography. The farther the product moves out of its immediate geography better is the value derived. In such areas the consumer is willing to pay a higher price based on the novelty factor. There is thus a need to have linkages to such markets and a supply chain for efficient deliveries
Product integrity at retail end
The consumer is willing to pay for quality due to improved incomes even in the most remote places. This need has to some extent been filled by imported fruits which are expensive but carry a quality tag. Any quality assurance would need development of a brand to separate the grain from the chaff. Indian apples are carried outside of a cold chain and suffer moisture loss of 2% daily as a result. This leads to shrinkage and product deterioration. Hence there is a crying need for cold chain management and quality-consciousness.
Price discovery of the product
The farmer insures himself by pre-selling his entire produce much before harvesting. The value realisation is therefore low since the buyer carries all attendant risks. The main sufferer in this entire process is the marginal farmer who does not have the financial muscle to wait for a price discovery.
Availability throughout the year
The global retail markets are very well organised these days and have specific products on the shelves all the year around. For example a specific fruit will always be available, based on the season it will be sourced from any part of the world. We need to be a part of such global supply chains.
Efficient payment mechanism for farmers
The farmers are in need of immediate payment once the goods are sold. Also the fulfilment of payment remains an issue which needs to be addressed to wean him away from traditional methods of selling.
Such a practice is being made possible by our company in association with NCEDX, where we are the enablers and facilitators between the farm gate and the final consumers. A marketplace has been formed wherein the farmer could get his produce, get this validated through a third-party quality audit to ensure quality aspect.
A farmers' market will increase the connect points between farmers and consumers, thereby providing competition to retailers, middlemen and aggregators in the supply chain. A system of this kind could revolutionise the agriculture sector thus changing the paradigm in supply chain in the food industry. This will reverse the trend from a buyers market to a sellers market thus empowering the farmers.
Various factors
We follow a system that we have captioned as QH2S2EMC -- Quality Hygiene Health Safety Security Environment Maintenance Community. For instance, if we look at say mangoes that have a typical season of February to say June every year. The quality (produce) is the very basis of what everyone across the supply chain wants. A farmer looks for a good produce, a buyer looks for a freshness and in good quantity.
Looking at hygiene (plucking) one has to be careful of the plucking methods and the health (ripening) aspect involves the way the fruit has ripened, while the safety aspect brings in the way the fruit has been cleaned, packed and transported to retain the juiciness. Security is the transaction between the buyer and the seller on the produce, while the environment will look at sustainability of the soil, plant and product. Maintenance is the aspect where the farmer is updated on the technologies to update the farm and when one looks at community, one is referring to a smile across the supply chain.
There are more than 300 million small and marginal farmers in India. More than 60 per cent of their livelihood is derived from small holdings. And everyone who analyses this sector and farmer clearly says that the survival of these small grower is crucial to the nation’s food security. Small farms are the most efficient food producer. Survival means empowering them with the latest technology and practices so that this results in a better business proposition for everyone in the supply chain. To cater to this market, we are one of the few players operating in Tier II & III towns in India that can offer temperature-controlled loads as small as 500 kg, catering to India’s fresh fruit & vegetable, food processing industries.
Cold chain market
The cold chain market in India is expected to grow at a brisk pace over the next five to eight years and offer opportunities for consolidation and professionalisation in what is a highly unorganised space. Schedulers offer pan-India storage solutions with real-time visibility of inventory for temperature-sensitive products with a wide range of cold temperatures, ranging from -25°C to +5°C (-20°F to +40°F).
Customers can avail of the end-to-end cold storage and secondary distribution that are cost-effective, as they provide flexibility beyond conventional loads, and choose the service depending on the market and volume. We are also enabling small delivery vans that can maintain three different temperature zones that will surely be a boost to the e-retailers across the nation. This leads to enhanced efficiencies, optimised costs and a competitive advantage that translates into high impact return for food supply chains in India.
Supply Chain, means back to basics, for it is all about everything that starts from nature and ends back in nature. But looking at the various sectors, the natural resources are dying – water is scarce, there is a concern for soil erosion, garbage and e-waste increases and results in landfill, and other environmental challenges. It is imperative to develop a robust Supply Chain that encompasses all stakeholders. We should only take out what can be consumed and develop robust systems to take care of surplus. Indian can truly emerge as a food basket to the world, but with the timely adoption of technology and transportation that can catapult us as leaders in this sector.
