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Issue 1. Nov 2011.

śrr̥ṅkhalā

Manesar Misery for Maruti Suzuki Vinod Gupta School of Management, IIT Kharagpur 1


FROM THE EDITOR’S DESK Greetings from ScOpe - the Supply Chain and Operations Club of VGSoM!! The VGSoM Operations Club is a students' association, which seeks to equip the students with the knowledge, know-how and the resources to stay updated in the field of Operations and Supply Chain. It aims to provide the students the necessary exposure to build successful careers in Operations and thus present opportunities to promote excellence in Operations and Supply Chain. The club will anchor these efforts by creating forums for aspirants to learn skills, techniques and best practices from industry experts by

In this Issue Dean’s Message…….3

harnessing initiatives that enable students to assimilate the learnings into practical application.

Faculty Advisor’s Message………………..4

The responsibilities of the club include providing insightful information about the operations industry, raising awareness and inter-

Manesar misery for Maruti Suzuki………..5

est among the students and equipping the students with the tools and resources necessary for careers in the Operations domain. The club‘s mission is to build a healthy relationship between VGSoM and the leading Operations firms and to create opportunities for career exploration and development in Operations through events such as on-campus networking, Case Studies and Guest Lectures

Srr̥ṅkhalā

- the Operations Club magazine is an unique initiative

in this direction that aims at providing a common platform to VGSoM students to develop their skills and interests in the Operations domain. We aim to cover interesting articles, live case studies, industry interactions, operations quizzes. What‘s more, we promise to be regular with quarterly updates from our side!

All said and done, we present to you the first ever issue of Srr̥ṅkhalā. Happy Reading!

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Inventory Accuracy…………………………..8 Ubiquitous Mr. TIM WOOD………………….10 Summer Internship Experience………….12 Indian Agriculture……………………..13


MESSAGE FROM THE DEAN

Dear Readers, It gives me great pleasure to address you all through the inaugural edition of the magazine of Supply Chain and Operations Club (ScOpe) of VGSOM. I congratulate the students of Scope for their initiative in putting together this magazine and I am sure it will grow by leaps and bounds and become a magazine for the Operations and Supply Chain enthusiasts across various institutes. VGSOM being a forte for the Operations domain in the corporate world, it is fitting to say that such a club has been coming due for some time. VGSOM has been known for its specialization in the field of Operations and Supply Chain ever since it was formed as the first B-school in the IIT system in 1993. This field of study continues to grow in today‘s world as it is essential not just for an organization‘s success and profitability but also used for other purposes like medical missions, disaster relief operations, and handle other types of emergencies. Every management graduate needs to know the basics of Operations and supply chain and the world needs management graduates who are proficient in this field. The scope magazine is a great opportunity to inform the student community about the recent activities in this field; the best practices followed and also raise awareness about the same. Through this newsletter you shall find articles, trivia, and quizzes on quite a few topics pertaining to supply chain and operations domain. I hope you will enjoy reading this magazine as much as I did and I once again welcome you all to be a part of the ScOpe family.

Prof. Arabinda Tripathy The Dean, Vinod Gupta School of Management, IIT Kharagpur.

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MESSAGE FROM THE FACULTY ADVISOR

Dear Students/Fellow Readers, ScOpe - The Supply Chain and Operations Club was the one club in waiting here at Vinod Gupta School of Management, IIT Kharagpur. I wish that this club goes on to improve the industry interface and the visibility of VGSoM with its activities. As the Faculty Advisor for the club, it gives me immense pleasure in introducing you to the first magazine of ScOpe. The magazine through its articles pertaining to Operations management will help in fostering new ideas and opening up unseen vistas in Operations and Supply chain management, making our budding managers well armed to be leaders with a cutting edge. The Operations enthusiasts at VGSoM need to know that a career in Operations Management cannot be successful without a lot of hard work and motivation. Having more than 8 years of teaching experience in Supply Chain and Operations Management, I can say that today Operations is no more limited to the shop floor blues, the TS, Kaizen etc.., but also involves Six Sigma, the SAP bookings, SCM Management, ERP Implementation and many more diverse operation agendas that will all help in bringing out the better decision maker in you to grow up the corporate ladder. ScOpe is a students‘ initiative which will provide a platform to the VGSoM batches to learn the latest trends in the Operations and enhance the knowledge combining theory with practice. The club is committed to provide the students with ample opportunities for learning, exposure, and interaction with the industry. I wish ample growth to the club and a very happy learning to the readers.

Prof. Ashutosh Sarkar B.E. (Gauhati Univ.), M.Tech., Ph.D. (IIT Kharagpur), Specialization: Supply Chain Management, Operations Management, Applied Optimization

4


MANESAR MISERY FOR MARUTI SUZUKI

L

abour woes are on the rise in India with major strikes and protests at Maruti Suzuki, Coal India, Bosch

India, Air India, Comstar, Ceat Tyres and Volvo Buses, all in this year. According to the data from the ministry of Labour and Employment‘s Labour Bureau, 620745 number of man-days have been lost in 2011 from January to July alone due to the strikes and lockouts. (See the bar graph below for more details). But none of the companies have been affected as much as Maruti Suzuki India Limited. Maruti is feeling the pinch of labor strikes, with about 2-4 per cent of the prospective customers of one of its successful models, Swift, deciding to cancel orders mainly because of the impact on its production at Manesar plant due to the labor strikes. Maruti Suzuki India Limited (MSIL, formerly known as Maruti Udyog Limited) is a subsidiary of Suzuki Motor Corporation of Japan and is India's largest passenger car company, accounting for over 45% of the domestic car market. It was the first company in India to mass-produce and sell more than a million cars. It is largely credited for having brought in an automobile revolution to India. It is the market leader in India both in terms of volume of cars sold and revenues earned. Manesar manufacturing plant: Maruti had inaugurated the Manesar manufacturing plant in Haryana state in 2006-07 with a production capacity of 100,000 vehicles per year initially. But it was later increased to 300,000 vehicles in 2008 and to 550,000 in 2009. It currently produces the A-star, Swift, Swift DZire and SX4 models. While all these facts present a rosy picture of the company from the outside, it has been going through a torrid time and has been in the news for the wrong reasons for quite some time now. There are around 3,500 to 4,000 workers employed at the Manesar factory. Out of these, around 900 to 1,300 are permanent workers, around 800 to 1,000 are trainees, around 400 apprentices and around

5


1,000 to 1,200 are ‗temporary‘ workers hired through contractors. The workers are initially hired as apprentices, then taken as temporary workers and then promoted as trainees and finally, but not necessarily they reach the stage where they get the coveted status of regular workers. MSIL is allegedly blocking the progress of the employees at the stage of temporary workers at the trainee level. This way it manages to keep a major chunk of the work-force as ‗temporary‘ or ‘trainee‘. Workers uprising: The unrest among its Manesar factory employees became public when around 2000 workers went on a sit-down strike from 4th to 17th June, 2011 for forming a new union - Maruti Suzuki Employees Union for the betterment of conditions and wages, which was their main concern. It was a hard strike. The workers gave no notice to the management. They stopped production completely and around 2,000 workers stayed inside the factory for nearly two weeks. The strike ‗postponed‘ the production of 13,200 cars and caused a loss of about 6 billion Rs. (133 mn USD / 100 mn Euros). Maruti Suzuki‘s June sales figures dropped by 23 per cent, the sharpest fall in two and a half years. In July, the management announced shifting of one production line back from Manesar to Gurgaon plant. Workers continued the strike despite the police having been stationed within the factory premises and despite the strike having been officially declared illegal by the Haryana government on June 10. Despite the workers‘ efforts and the fact that the company suffered production losses of 12,600 units and a revenue loss of Rs720 crore, the strike ended in defeat for the workers. Instead, the management induced a ‗punishment wage cut‘ of two days wage, per day of strike – something rarely seen in industrial relations in India. Another element of the negotiation stated that the 11 workers (Union Leaders) sacked during the strike were taken back, though they have were made to undergo an ‗Inquiry‘.

ultimately on October 1, the workers at the plant agreed to sign an agreement with the management that led to the end of the standoff that began on August 29th. As per the agreement, MSI agreed to conditionally take back 18 trainees who were suspended. However, it refused to take back 44 regular employees against whom disciplinary action was taken and who remain under suspension. The workers, in turn, had agreed to sign the 'Good Conduct Bond', which required them to declare that they would "not resort to go slow, intermittent stoppage of work, stay-in-strike, work-to-rule, sabotage or otherwise indulge in any activity, which would hamper the normal production in the factory". However, after signing the agreement the workers again went on a strike a week later on October 7th, this time demanding that their colleagues, who were on contract and left out in the bond signed a week before, be taken back. They were also demanding that the 44 permanent workers who were suspended also be taken back and no action to be taken against them. The stir was supported by workers in different factories belonging to various companies at the GurgaonManesar industrial belt, including Suzuki Powertrain India Ltd, Suzuki Motorcycle India Pvt. Ltd and Satyam Auto. MSI had allegedly discontinued the transportation facilities for the workers which was thought to be the triggering point for the strike.

MSIL then asked its workers to sign a ‗Good Conduct Bond‘ before entering the factory. It suspended 10 workers, while dismissing 5, and discontinuing another 6 trainees from services following some quality issues that arose in July end which severely impacted the company‘s production at the plant. This was followed by further negotiations from both the parties and

6


Conciliatory Agreement: This time the strike lasted 14 days and it cost the company an estimated loss of Rs 825 crore i.e. Rs 55 crores per day. It was finally called off after a tripartite agreement between the management, the workers and the Haryana Government. As part of the agreement, the management agreed to take back 64 permanent workers but another 30 were to be suspended. The management also agreed to arrange for transport services for workers in line with shift timings. Also as per the agreement a ‗Labour Welfare Committee‘ is to be set up to promote measures for good relations between the management and workers. The agreement was signed in the presence of senior State government officials, including Deputy Commissioner (Gurgaon) PC Meena, Sub

Divisional Magistrate Satyendra Duhan, Labour Commissioner Smt Satwanti Ahlawat and Assistant Labour Commissioner Nitin Yadav. The company‘s shares rose by nearly 4 per cent on 21st October following reports that the 14-day long strike at the company's Manesar plant was called off. MSI board is now considering among other things, a proposal for setting up of a new plant in Gujarat. The management must be hoping for sure that it does not turn out to be as troublesome as the Manesar plant. - Bharathi Chellakkannan (First Year MBA)

SCOPEWORD - THE OPERATIONS BRAIN TEASER ACROSS 1 - An extreme change in the supply position upstream in a supply chain generated by a small change in demand downstream. (2 words) 5 - First person to recognize all forms of inventory as Waste. (2 words) 6 - He is credited with the accomplishment of introducing Kaizen to the world. (2 words) 8 - Japanese term for an activity that is wasteful/unproductive and doesn't add value. 9 - Provision to have paperless exchange of business information and document without human interaction. 10 - Abbreviation of a strategy that concentrates on delivering what the customer wants, when they want it, in the quantity they want. 11 - A five-step six sigma approach for driving costly variation from manufacturing and business processes: 12 - CEO of the worlds first IT service company to use six sigma. (2 words) DOWN 2 - A practice in logistics of unloading materials from an incoming truck or railroad car and loading them directly into outbound trucks or rail cars, with little or no storage in between. (2 words) 3 - A number or code used to identify each unique product or item for sale in a store or other business. (3 words) 4 - A graphical lean tool to depict the physical flow of work or material in a process. (2 Words) 5 - A lean manufacturing term to define the maximum allowable time in order to meet the customer demand. (2 words) 6 - A manufacturing process strategy where the manufacturing of a product begins only after an actual customer order is placed. (3 words) 7 - A term Jidoka used in TPS (Toyota Production System) which is defined as "automation with a human touch."

Turn to page 15 for the solution of Scopeword 7


INVENTORY ACCURACY Inventory is something which we are always trying

Employee Training: Handing out a written procedure

harder to control. It is like your girl friend;

does

not

constitute

employee

training. It is important to set a training schedule to go through all the procedures with groups of employees. Take whatever time is necessary to ensure they have a thorough

controlling which up to a level can be fruitful but may end up in break up otherwise i.e. production loss because of lack of material. You have to keep optimum inventory otherwise you may end up

understanding of the procedures. We have to

paying heavy bills only for inventory holding and

make it clear that the procedure document is

carrying cost. New technologies such as bar coding systems, RFID and pick-to-light are often assumed

the only way to perform the task.

to be the solutions for inaccurate inventory. These

Employee

systems definitely help you to reduce errors, however none of these will eliminate all errors.

employees formally on procedures. It will ensure employees atleast reading the procedures.

Testing:

We

need

to

test

Planning or implementing additional systems can be an alternative but we need to take care of the basics first. What are the basics for attaining Inventory accuracy?

Monitoring Process for Compliance: We must begin to monitor processes for compliance to the procedures immediately. Any actions

Attitude: Maintaining accurate inventory should be

involved

with

non

compliance

of

procedures should be addressed immediately

the organization‘s attitude, it should be in the

and if there is a better way to perform the job, it can be considered for next revisions.

organization DNA. The way we promote and campaign for quality, customer service, safety, etc., it should be the same way for accurate inventory. It should be an integral part of daily

Setting Standards: We should set minimum accuracy and production standards wherever possible. Standards should be set for the specific task being performed. Setting

routine of entire line or value chain i.e. starting from top executives to fore men or operators.

organization which affect inventory should be clearly defined. While defining the processes we should

standards requires tracking of accuracy and productivity of the tasks being performed which makes it more viable when we have

look for opportunities, for errors and

several people performing the same task.

Process Definition: The processes throughout the

imple-

menting changes to eliminate or reduce them. Procedure

Tracking Accuracy: We should track accuracy organizationally and individually. We should measure accuracy tracking in

Documentation: Now we use the

previously defined processes to document the

percentage

procedures the employee will follow to maintain

rather

than

in

flat

numbers

(number of errors), which puts more productive employees at disadvantage. We should communicate accuracy tracking to staff

inventory integrity. It should be like an SOP (Standard Operating Procedure), as clear and comprehensive as possible. It should not be limited to inventory issues, it should include the complete

in a positive manner; it is a tool to facilitate improvement in processes and people.

procedure vis-a-vis quality, physical aspects and safety.

Accountability: We should hold accountable for following documented

8

people


procedure. We have spent time to document the

these revisions with the proper training and

procedures,

testing

provide

training

and

testing.

If

someone is not following the procedures, we need to deal them with appropriate disciplinary action. Count, Count, Count: We need to count our inventory on a continuous basis (cycle counting) to maintain high level of accuracy. Re-evaluate: We should be regularly re-evaluating our processes and procedures. Results of our cycle count program point us in the direction of areas where enhancement is needed. Business conditions often change and new processes are added which will require evaluation. We should plan a revision date and group multiple revisions into a revised release of the procedures. We need to implement

as

had

been

done

during

initial

implementation. As in large organizations, it is regular practice to standardize all the processes and have SOP for the same, SMP (Standard Maintenance Procedures) and RA (Risk Assessments Sheets). Having standard procedures ensures optimum usage of inventory. There is always a possibility to book some consumables (e.g. Gloves, Grease, Lubricating Oil, Tapes, etc.) in excess than required, however by associating these consumables to the equipments worked upon this controlled.

excess

consumption

can

be

- Abhishek Awasthi (First Year MBA)

THE FIVE PIRATES PUZZLE A typical Operations problem that is worth hitting back! Bring out the Game Theory in you and make Lemonade out of the Lemons. Five pirates (A, B, C, D,E) arrive from a lucrative voyage with 100 pieces of gold. They will split up the money according to an ancient code dependent on their leadership rules. The pirates are organized with a strict leadership structure—pirate A is stronger than pirate B who is stronger than pirate C and so on. The voting process is a series of proposals with a lethal twist. Here are the rules: 1. The strongest pirate offers a split of the gold. An example would be: "0 to me, 10 to B, and 90 to C." 2. All of the pirates, including the proposer, vote on whether to accept the split. The proposer holds the casting vote in the case of a tie. 3. If the pirates agree to the split, it happens. 4. Otherwise, the pirate who proposed the plan gets thrown overboard from the ship and perishes. 5. The next strongest pirate takes over and then offers a split of the money. The process is repeated until a proposal is accepted. Pirates care first and foremost about living, then about getting gold. In such a scenario what do you think the offer of the first pirate would be such that his offer stands?

Send in your replies to operations.vgsom@gmail.com and the best answer along with the correct answer will be published in the next round. Provide proper reasoning for your answers! Good Luck!

9


Ubiquitous Mr. TIM WOOD He is the nightmare employee of every

manager

all

around the

world. He is someone who has been working for a long time in the organization and whom the manager is unable to get rid of. He undermines

everything that

people do in the organization. He does not add value to anything and his motive is to make the entire

supply

chain

of

the

organization ineffective. If you are still wondering who this person is, then let me introduce you Mr. TIM

1) Transportation waste: Quite

tracking the inventory and

often

the amount of time spent in

manufacturing

products

require undergoing various

pro-

sorting this inventory should

cesses and if the processes are

a

not next to each other the work in

Finished goods inventory is

process (WIP) inventory requires

generall y

to be transported from one place

expensive inventory as it

to another resulting in wastage of

has

time, fuel and fork lifting efforts.

overheads

This in-transit time and money

along with the cost of mate-

spent on the work in process

ri al

(WIP) inventory does not do any

production.

value addition and hence needs to

formulae available to help

be avoided.

establish

Transportation waste

quality

concern

arise.

the

labor

m ost

and

other

attached

con sumed

to

du rin g

There

what

it

are

level

of

in

inventory to carry in order

layout designs. It increases the

to meet desired customer

TIM WOOD is a mnemonic to

lead time and reduces the

service ratings. In order to

remember the seven wastes of

ibility of the system. One of the

reduce

this

lean manufacturing. It was first

lean tools for handling

transpor-

process

improvements

developed at a company called

tation waste is the

Spaghetti

well as a higher accuracy in

Standard Products in UK and has

diagram which is used to measure

forecasting

now become the most standard

the product and

requirements is required.

way of remembering the 7 wastes

the total distance travelled by a

of lean.

material in a shop floor and time

WOOD.

Before we go ahead and see what

is

mainly

due to

problems

flex-

people flow and

spent in motion.

inventory, as

customer

3) Motion waste:

Motion

waste is the unnecessary movement of people while

comprises the 7 wastes, let us first

2) Inventory waste: Any form of

working. It could be due to

understand how exactly a ―Waste‖

inventory i.e. finished goods, sub-

the tools being placed at a

is defined in a lean world. Toyota‘s

assembly, raw materials etc. that

considerable distance from

Chief Engineer Mr. Taiichi Ohno

is in excess of the requirement by

the workstation or wasting

(considered to be the father of

the next stage is known as an

time

Toyota

inventory waste. Inventory is seen

particular tool or equipment

defined "Muda" (or waste) as any

as

waste,

in the shop floor. Motion

activity that does not add any val-

instead of adding and storing val-

waste thus is a significant

ue to the product/service i.e. any

ue,

factor

within

the

seven

activity for which the

counting.

wastes

and

every

effort

Production

Systems)

custom-

incurring

costs,

contrary

to

or

traditional

ac-

Most companies will

in

looking

for

a

er (both the end customer and the

create

by

should be made to remove

next stage customer in the supply

setting these levels too high. This

it from the processes to

chain) would not be willing to pay

requires space for storage, ties up

both increase efficiencies as

money. He classified the 7 wastes

cash flow and requires labor to

well as make work easier for

as follows:

move and rotate the stock (FIFO).

all those workers involved in

On top of that is the cost of

the production.

waste

of

10

inventory


4) Waiting waste:

This

management intro-

is considered to be the

duce

most dangerous of all the seven

wastes.

one

more

additional waste as

No

the

customer likes waiting in

eighth

waste

which is:

line be it for a movie ticket, in a restaurant or while

8) People waste:

visiting a doctor. So no

People waste is the

customer would be

underutilization

ing to pay for any

willmate-

the

of

human

rial that is made to wait.

resource

Waiting waste occurs pri-

organization.

marily due to

un-

Ignoring the

balanced work

pro-

ative skills of the

process

workforce is also a

takes longer than the next

waste as an effec-

then

tive and

cesses.

If

the

one

operators

will

of

the cre-

innova-

either be stood there idle

tive idea can add

waiting or they will be

more value to each

performing

often confused. It is the extra

process and thereby reduce

speed that makes it appear that

operations

the traditional 7 wastes. Lit-

they have work to complete.

reprocessing, handling or storage

tle or no

that occurs because of defects,

a formal training program,

overproducti on

excess

no morale and a poor work

inventory. It simply means that a

culture all contribute to the

process is not necessary or uses

people waste.

more resources (energy, steps,

introduction of the eighth

time

w a st e ,

5)

their

tasks

Overproduction

at

a

waste:

This is the worst of all the wastes as per the concept of Just-in-Time which says that the organization should only produce what is needed, when it is needed and at the right quantity. Overproduction often leads to other

wastes

like

inventory

or

such

as

or

materials)

rework,

than

the

Mr. TIM P. WOOD with the P

other 6 wastes.

stressing on the newly add-

when products or service deviate

dealt

strictly.

from what the customer requires

How many times have you taken

or the specification. When you talk

extra photocopies of a particular

about waste most people think of

document which are not used

defects

rather

later? These extra photocopies

wastes

such

are nothing but overproduction

transportation.

waste i.e. producing more than

defects from the processes you

what is actually required.

will reduce your costs, and every waste:

This is the waste that is most

have

uncommon as compared to the

waste and hence needs to be

Over-processing

ex p ert s

modified the mnemonic as

7) Defective waste: Defects are

6)

With the

customers' needs require. It is

waste, waiting waste and motion with

investment in

than as

the

waiting By

other and

reducing

ed

eighth

waste.

Now that you have been introduced to Mr. TIM P. WOOD, make sure you get rid

of

him

organization possible.

from as

soon

Remember

your as the

longer he stays, the more damage he might do to your organization.

saving you make within your costs

- Bharathi Chellakkannan

is added directly to your profits.

(First Year MBA)

Some books on the wastes of lean

11


HCCB SUMMER INTERNSHIP EXPERIENCE Nikhil Yagnic shares his experience of his Summer Internship at Hindustan Coca-Cola Beverages Pvt. Ltd. (HCCB), the company–owned Bottler in India for The Coca-Cola Company

Hindustan

project was very important for them as it was a part of their strategic planning for the product category they serve. With the steep increase in the

Coca-Cola Beverages Pvt. Ltd. is a

100% subsidiary of The Coca-Cola Company which handles the majority of the bottling

future demand and opportunity for a better value

operations of Coca-Cola in India. The Coca-Cola in India has its operations that are either Company based bottling operations (COBO) or Franchise

based

bottling

operations

that they can generate by entering in selfmanufacturing, this project was very vital for the company.

(FOBO).

HCCB is involved in manufacturing, distribution and sales of the Coca-Cola

The project involved understanding the existing sourcing framework of these categories and then analyzing the existing operations involved

products of COBO business in India. The HCCB

process

of

Summer

selection

for

Internship

is

in the procurement to its final use. It was followed by visiting su ppl i ers‘ l ocat i on s an d

three stages – CV shortlisting, then Group discussion and finally

understanding

t rai n ees

at

business

and manufacturing complexities. With all this information I developed models of each of

a Personal Interview. The internship period begin with an induction session of all the su mmer

their

these categories to assess their

the

self-manufacturing opportunity for HCCBPL.

corporate office, from where the trainees leave for their respective destinations for the rest of their training period. The final

My experience of working with HCCBPL was very good. The summer trainee program is very structured. I really liked the level of importance

assessment takes place again at the corporate office at the end of the training.

they give to these projects. Innovative thinking was always encouraged. There was significant amount of support from the company. They will

I was located at the corporate office of HCCBPL in Gurgaon. This place is given to me based on the nature of the project. I really liked the place,

spoil you with the quality work.

despite of it being really hot at that time of the year. But the accommodation provided to us by

My message for the juniors interested in doing

HCCBPL was fantastic. We were provided AC Guesthouses and a cab for pick and drop to the

their intern at HCCBPL would be that it‘s a great opportunity. It‘s an awesome place to work. Give your best during this time. They take this trainee

office daily.

program

very

seriously

so

live

My project was to evaluate the opportunity of the

expectations.

company to have a backward integration for two of the categories of the materials that they were currently sourcing from their vendors. This

- Nikhil Yagnic (Second Year MBA)

12

up

to

the


INDIAN AGRICULTURE The missing link in the Global Food Supply Chain

India

has all the resources to become the food

supplier of the world - cultivable land, all the seasons for production of all varieties of fruits and vegetables, an agribusiness system that works although it needs to be vastly improved. The single most important problem facing the Indian

mand forecasting is totally absent and the farmers try to push what they produce in to the market. Because of lack of cold chain infra-

agricultural industry is the highly inefficient supply chain.

structure and also a food processing industry about 20 per cent of all foods produced in India

In India, 52% of total land is cultivable as against 11% in the world. There are 20 agro-climatic

(Rs. 500 b) are wasted.

regions and nearly 46 out of 60 soil types in the country. Agriculture contributes 24.2% to GDP, 15.2% of total exports and provides employment to

The Road Ahead

58.4% of country‘s work force.

The Food processing industry has an important

As mentioned in the FICCI report, India is the:

role to play in linking the farmers to the final consumers in the domestic as well as the

international markets. Food processing combined

Second highest fruit and vegetable producer in

with marketing has the potential of solving the basic problems of agricultural surpluses, wastages, rural jobs, and better remuneration to the growers. In the next ten years, food

the world (134.5 million tonnes) with cold storage facilities available only for 10% of the produce. 

storage capacity of 70,000 tonne.

production is expected to double. These produces, if processed and marketed smartly, can make India a leading food supplier of the

Fifth largest producer of eggs. Investments in

world.

cold chain required to store 20% of surplus of meat and poultry products during 10th plan

The processed food industry should introduce

Second highest producer of milk with a cold

requires Rs 500 Crore (US$ 100M)

innovative new products of high quality at low cost in small package sizes in ready to eat format

Sixth largest producer of fish with harvesting volumes of 5.2 million tonnes. Investment

to cash on this booming opportunity. HLL, ITC, MTR and others have introduced some innovative heat and eat dishes with reasonably good packaging. But there is lots of manual handling

required is estimated to be Rs 350 Crore (US$ 70M)

and hence food hygiene and quality is suspect.

Inspite of the vast natural resources and abundant agricultural produce, India ranks below 10th in the

Opportunities for improving the Supply Chain

export of food products. The food supply chain in India is complex with perishable goods and

Cold chain infrastructure - Investments in real

numerous small stake holders. The infrastructure

estate and cold chain infrastructure are capital

connecting these partners here is very weak. Each

intensive and will yield slow returns. However, 100% foreign direct investment (FDI) is allowed

stake holder: farmers, wholesalers, food manufacturers, retailers all work in silos. Also, de-

13


in this sector. The Infrastructure consists of Coolers, Warehouses, Refrigerated Trucks, Carri-

also the least competitive of all global markets.

ers, Shopping malls, etc. One needs to study of the potential risks and the ROI for this activity?

An effective food supply chain India has a huge opportunity to become a leading global food supplier if only it has the right marketing strategies and of course agile, adaptive and efficient supply chain. Data integration,

Third Party Logistics - The food supply chain is temperature sensitive and manual handling reduces the product quality and life. Logistics providers with air conditioned trucks, automatic handling equipment and trained manpower will

financial flow management, supply-demand matching, collaborative forecasting, information sharing, goods movement synchronization through

provide end to end support. They can also adapt state of the art techniques such as cross docking that will reduce the transit times and inventory.

efficient transport scheduling, are very well practiced in high technology industries with immense benefits. These best practices should find their way in to the Indian food supply chains.

Food processing industry - The Government of India allows 100% FDI in this sector. There are

Food chain clusters should be formed with the

incentives for setting up processing plants either in Agro-Export Zones or outside of them. Sourcing of raw materials either fruits and veg-

participation of all stake holders such as farmers, seed growers, merchants, transporters, wholesalers, retailers, financial institutions, and

etables or flowers or meat is easier with an AEZ since there are already participants with

insurance companies. Information sharing is essential for generating the efficiencies. The In-

knowledge about the industry standards.

ternet and mobile communications should be used to enable information and financial transfer between the stake holders. Also, recent advances in RFID technology will have tremendous impact in the management of the food chain particularly for

Retail - Retail, one of the largest sectors in the global economy (USD 7 Trillion), is going through a transition phase in India. One of the prime factors for non-competitiveness of the food processing industry is because of the cost and quality of marketing channels.

source identification and tracking and also in providing supply chain visibility.

Globally more than 72% of food sales occur through super stores. In India there are 12 mn

Conclusion India is all set to become the food supplier of the

outlets selling food and related items including

world. The business system here is tuned to food

push carts, wet markets and neighborhood kirana stores. The kirana stores are generally located in small space and have no cold storage facilities.

habits (cooking at home) and convenience (kirana stores) of rural and urban folks of the previous generation. Factors such as rapid growth in the economy, the technological innovations in home

They also have restricted capital resulting in lack of shopping variety. The Indian retail sector is

appliances such as refrigerators microwave ovens,

estimated to have a market size of about $180 bn, but the organized sector represents only 2%

rise of families with dual incomes and the changing food habits of the population all point to

share of this market. A strong retail front-end can also provide the necessary fillip to agriculture and food processing, and other industries. Currently,

the increasing need for healthy processed food. The supply chain sector is very weak with no process owner and this can spell disaster. The food

100% FDI is not allowed for foreign cos. India

supply chain needs immediate attention of the academics, the industry and the Government.

presents a huge opportunity and is all set for a retail revolution. India is the least saturated of global markets with a small organized retail and

- Partha Pratim (First Year MBA)

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UPCOMING EVENTS AT SCOPE Industrial Visits: ScOpe proposes to organize Industrial Visits to manufacturing companies in a 150km belt around Kharagpur. These visits would start from the next Semester.

Online events: ScOpe proposes to conduct an online event in the month of February 2012. The event is expected to include Case Studies, Online Quizzes and Article Writing competitions.

SCOPEWORD SOLUTION

ScOpe Summit: ScOpe proposes to conduct a Summit on the topic ‘Future of Supply Chain in India’. It is expected to feature insights into the current state of Supply Chain in India, Scenario post the GST implementation, Development of the 3PL Industry, Growth of Organized Retail, Impact on Inflation, etc. The Summit is scheduled for the next Semester.

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Write back to us: If you have any feedback or suggestions, write back to us at the following id operations.vgsom@gmail.com

Editors Team Harish Thangaraj Prashant Saurabh Partha Pratim Bharathi Chellakkannan Abhishek Awasthi Cover page designed by

Yash Mehta

ŠCopyright : ScOpe - Supply Chain and Operations club of VGSoM, IIT Kharagpur, Kharagpur—721302, India 16


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