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Current Position:Home » News » Marketing & Retail » Supply Chain » Topic

Breakthrough innovation in dairy supply chain

Zoom in font  Zoom out font Published: 2016-06-02  Views: 74
Core Tip: Indian dairy market has come a long way since the launch of Operation Flood, NDDB’s dairy development programme, to become a Rs 5 lakh crore industry impacting the life of more than 75 million dairy farmers.
 Indian dairy market has come a long way since the launch of Operation Flood, NDDB’s dairy development programme, to become a Rs 5 lakh crore industry impacting the life of more than 75 million dairy farmers.
 
Three fundamental trends driving the industry  
1. Rapid growth in value-added products – The need for hygiene, convenience, evolution in taste and increased affluence is driving growth of value-added products. Tetra-packed UHT milk is growing at 15-20%, packaged dahi is growing at 20%, yogurt is growing at 40-45%, cheese is growing at 15%, probiotic, a very nascent segment has become a $5mn market while flavoured milk is growing at 20%.  
2. Increased share of modern retail – From a share of 18% in 2007-09, modern trade now accounts for almost 30% of dairy products retail. Modern retail offers better storage, improved visibility and in-store promotion opportunities. Modern retail is also offering opportunity to launch new categories. 
3. Proliferation in number of SKUs – Different products, packaging formats, flavours, serving sizes, calorific content is leading an exponential growth in number of SKUs. 
 
The three trends mentioned above though are spurring growth they are also posing significant challenges for the manufacturers. On the one hand, they are struggling with high wastage, while on the other, they are experiencing loss of sales. The gaps in existing supply chain, particularly, in the cold chain network, coupled with unreliable transit times are resulting in limitation of market access.  
For breakthrough in dairy sector, radical innovation in supply chain is required on five dimensions - 
1.Race to the retail shelf – Low shelf life of many dairy products means products should spend minimum time in-transit. Categories like yogurt, dahi have a shelf life of 15 days. Consumers in modern-trade compare manufacturing date of food items and prefer to buy the freshest available brand (Infographics – Bangalore to Delhi transit time in normal mode takes 7-8 days which eats away 50% of the overall life of product). This is where Rivigo offers unique competitive advantage. Rivigo operates trucks reefer and ambient with a unique “Driver Relay Concept” that ensures ~1,000km of run/ day (3x that of typical operators). The same Bangalore to Delhi therefore can be covered in two days giving significant boost to shelf life. It also gives opportunity to access new markets that are high potential but were having long lead time. 
 
2.Temperature integrity across the product supply chain – There are two key risks to temperature integrity in transit; 
a)Mismanagement/tampering by the driver - The Indian transportation industry has been facing the “bane of trip cost.” Drivers are expected to manage the entire trip within a nominal trip cost. As such they tend to switch off the cooling system to save fuel that would translate into direct savings for them. This causes grave risk to the products; 
b)Any breakdown/malfunctioning of the AC unit in transit – In such an event the driver feels helpless on how to address it. 
Rivigo has deployed a comprehensive “closed loop temperature integrity model” to address exactly these risks. It has got three building blocks:
a)Technology for real-time monitoring of temperature – Rivigo has deployed state-of-the-art remote temperature monitoring systems and along with that it has developed proprietary algorithms to generate product-wise alerts for temperature going out of range.  
b)24x7 control tower to monitor alerts on temperature violation – To supplement remote monitoring, Rivigo’s control tower ensures timely action is taken in case of any temperature violation, vehicle breakdown and issues with the reefer unit. 
c)On-ground service eco-system – This is the most critical component of the model. Rivigo has “pit-stops” every 200-250 km spread across the country. A service eco-system comprising vehicle maintenance team, reefer maintenance team and standby cold storage has been identified near each of these “pit-stops.” Any vehicle requiring physical help can be reached within 2-3 hours and addressed to.  
 
3.Technology for automation and visibility – Rivigo is working along with cutting edge technology players to push the frontiers in cargo safety, temperature integrity and route optimisation. 
a)Cargo safety – Rivigo is deploying next generation vehicle automation to help in predictive maintenance and collision avoidance. Vehicle vitals can be relayed to remote central control room and predictive maintenance activities can be undertaken. E.g. if the brake-oil pressure is below threshold, vehicle can be attended to in the nearby hub. Similarly anti-collision sensor is enabling autonomous brakes to be applied. 
b)Remote temperature management – The latest advancement is allowing 2-way communication between the AC control unit and central monitoring desk. It is possible to control the temperature of all vehicles and storages from a central desk rather than being left at the hand of drivers and store attendants. Years of abuse in the temperature management has created a deep distrust between the dairy manufacturers and logistics service providers. This remote management technology gives the power in the hand of the dairy manufacturer to ensure 100% adherence to temperature norms. 
c)Route optimisation & unscheduled stop reduction – Through GPS sensor and customised algorithms it is possible to optimise the routes to ensure least distance covered in milk collection from small farmers similarly customised algorithm enables one to track and avoid unscheduled stops both during milk-collection process as well as dairy distribution stage. 
 
4.Building physically responsive supply chain to cater to seasonality and demand volatility – Dairy products experience high seasonality with ice cream, flavoured milk, yogurt having peak demand in summer while ghee and butter in winter. The on-set and exit of season is highly unpredictable. Along with that high SKU proliferation and variations in tastes and preferences lead to significant demand variability. In such a situation a physically-responsive supply chain can give significant competitive advantage. In traditional model, transit time from Mumbai to Guwahati takes 10-12 days. With Rivigo’s unique driver relay model this transit time has been brought down to four days. This enables manufacturers to respond quickly to sudden changes in demand pattern. 
 
Growth in disposable income and evolution in tastes and preferences is bringing tremendous growth opportunities to dairy players. However complete paradigm shift is required in the supply chain to benefit from these growth opportunities. 
 
 
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