Perishable Food Chain

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A “Perishable Food” chain Industry facing energy and distribution challenges

Kunal Bajaj
Indian Institute of Technology Kanpur

Kunal Bajaj is M.B.A student at Indian Institute of Technology Kanpur 208016 India (e-mail: kbajaj@iitk.ac.in, (M-9198433257)). Specific Conference – Bangkok, 2013
Paper Category- Case studies
Track-Business

Abstract: - There have multiple warehouses (Distribution Centers) located in India and there exist common suppliers for each product. Also, these suppliers are located across the country. Warehouses order as per their requirement. Since the per trip loads are not enough to send a dedicated truck from supplier to each warehouse, receiving on-time deliveries  and  food safety of the products was a challenge. This had affected inventory holding in warehouses leading to   higher inventory carrying cost, high inventory days, threat of stock-out situation and in-transit damages, safety of food items in transit and higher inbound cost. Moreover, Retail Stores were delivered Frozen, Chilled and Dry goods in separate vehicles. This resulted in higher transportation cost, more manpower in loading / unloading / delivery and inconvenience to stores which were receiving, multiple deliveries and multiple documents. Once Orders were placed, the status was available on the order w.r.t. the date and time when the delivery will reach and the fill rate / quantity received, was  known only when the delivery reached the customer.  This affected further commitments from Distributors to the retailers and impacted subsequent orders.  Since the retail purchase of the products, is  driven by impulse, absence of product in the shelf means loss of sales. Higher energy costs primarily, electricity contributes major operational cost of running the high capacity warehouse, which leads to scope of high use of Technology i.e. Puff Insulated panel on floor, roof and walls, highly efficient and durable heat exchangers, compressors, Wind mill depending upon the climate of location. Technological designed and strategically located warehouse is proposed saving cost in electricity, transportation, ensuring consolidated delivery of all items at single time leading to one invoice, optimization of inventory and truck load per trip.

Index Terms—Fill Rate, Inventory holding/carrying, and Truck Load

INTRODUCTION

India’s $250-billion food and agri-sector is expected to double in the next 10 year where transportation of food products plays a critical role in the value chain .India struggles with an annual wastage of over $12 billion. Retailers would want to whittle down these losses by using cold chains extensively. Financial investors are excited about this opportunity. This is a capital-intensive industry, traditionally the gestation has been varying between four-six years but if a new facility were to be established at current property prices, the gestation could stretch beyond 10 years

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In perishables, the revenue charges per square feet are higher. But the storage need in most cases is very short, so it becomes a volume-driven business with high margins. But cold infrastructure for perishables also guzzles capital. Other products like electronics, phones and consumables of computer hardware may not need much space, but requires careful handling and a dust-free environment. Some of these can turn into low-capital, but profitable niches where small entrepreneurs can hold their own.

II. Current Political, Economical, Social and Technical Scenario.

The recent announcement in the Union Budget contains an important item. Capital expenses (other than land) made for the development of cold chain infrastructure will be expensed in the year after they are incurred instead of being depreciated over many years. Essentially this creates a tax benefit and is widely expected to jumpstart the development of critical infrastructure...
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