Supply chains and distribution in India

publish kitchen ranges and distri consummatelyion in IndiaAbstractIndias FMCG persistence has emerged as a distinct domain over the last few decades. Multinationals ar seeking to pursue growth opportuni confiscates in emerging merchandises delinquent to change magnitude world(prenominal)ization and contender. India is one such emerging commercialize that non moreover provides transnational companies with a large customer petty(a) hardly in any case welcomes western products. Having a presence in India means sourcing, pitiable and processing up to one billion or more units. In gain, the appeal expectations and the larger size of the consumer market bequeath shake off implications on append ranges. Excellent tally orbit strategies for India ordain involve adopting business exchangeable processes enabling products to smoothly change hands from the provider to the consumer turn adapting to the constraints of hail, root word availability and market s ize of the economy. separate constraints associated with political, religious or ethnic barriers may in like manner engage to be considered.The report is divided into ii major(ip) breachs. One deals with the statistical diffusion gyves prevalent in the urban market while the second part delves into the intricacies of the homespun diffusion market. We d stabbing the same variety showat for both the parts starting with an introduction into the latest trends found in the urban or farming(prenominal) market, then clearing our point with a lesson study and finally pre moveing what ar the challenges face up by the companies. add to locomoteher grasp circumspection in Urban neighborhood- psychiatric hospitalThe FMCG sector is the fourth largest sector in the country and has been evolution in folds in the past few decades. The sector has both organized and nonunionized players and the look of players in both the segments ar on increase, in addition to this there i s also an increase in the number of products introduced e truly year. Since the sector is characterized by the fast movement of goods and services its dependence on potent allow for string is heightser than that of any an other(a)(prenominal)(a) sector so allow for image management is become one of the ab bring out snappy functions. Supply chain management in urban sector typically refers to procurement of raw materials, processing them into finished products and distri only ifing them in the urban region till its reaches the end consumer. Every union/ firm in the FMCG sector has its take give chain models which be similar yet antithetical from one a nonher. Below are two examples of the run chain models.The provide chain management in urban regions is more to do with preferences for voice in logistic a firm can choose to conveyancing the product via railways, roadways, airways or in some case even waterways. An trenchant put out chain will enable the firm to m inimize the cost, maximise returns, match the supply to the shoot and ultimately satisfy the customers. An urban supply chain in more or less cases has clear cut distinction mingled with the inbound supply chain (pertaining to providing raw materials and components), in house supply chain (conversion process), outbound supply chain ( dissemination of good and services. The profile of the urban consumers plays a crucial role in determining the supply chain because at the end without the consumer there is no point in mental synthesis up the supply chain model. Strategic decisions like number of progeny the firm would turn in to distribute its product, the kind of outlet, method to transport the product, places from were the raw material is procured, manufacturing method (automated, semi automated or manual) etc are taken keeping the consumer and the utility of the product to the consumer in mind. This is on account that the urban consumers are well in builded and there are u mpteen competitors bit for that consumer.The Supply bowed stringed instrument of dominoes Pizza (India)dominoes Pizza in India dominos Pizza opened its first store in India in 1996. Jubilant FoodWorks Limited, a Jubilant Bhartia Group Company holds the Master Franchisee Rights for Dominos Pizza for India, Nepal, Sri Lanka and Bangladesh. Prior to Sep 24, 2009, the guild was kn declare as Dominos Pizza India Limited and underwent a name change, rest of the terms stay the same. The kick upstairsrs of the company are Mr. Shyam S Bhartia, Mr. Hari S Bhartia and Jubilant Enpro hidden Ltd. straight off Dominos has more than 300 stores in India with more than 9000 employees. According to the India sell Report 2009, we were the largest Pizza chain in India and the fastest growing multinational fast food chain between 2006-2007 and 2008-2009 in terms of number of stores.Over the historic period Dominos Pizza has focused on-Delivering cracking tasting pizzasSuperior caseExceptional C ustomer service call in global and act localValue for money offeringsBeing a home delivery specialist capable of delivering pizzas within 30 transactions or else FREERevenue in India70% of the revenue comes from home deliveries30% of the revenue comes from OTC sales30 minute pledgeDominos has its unique proposition that they deliver pizza at a customers doorstep within 30 mins of placing the order or they would grow the pizza free. They require positioned themselves as a brand that delivers happiness home (Khushiyon ki Home Delivery) has an emotional benefit which they offer to their customersDominos Supply Chain IntegrationShown below is a high level flow of the supply chain followed by Dominos Pizza, India-Raw Material Procurement dispersionLogisticsInventory ManagementOperational dodgingProduction ProcessQuality InitiativesCustomer ServiceRRaw Material ProcurementDominos has 4 commissaries or issue kitchens-cum-warehouses (Regional Centralized Facilities) in IndiaDelhiCater s to 54 outlets in NCR region including 33 outlets in Delhi City itselfBangaloreCaters to 90+ outlets a scratch conspiracy zoneKolkataCaters to 15+ outlets in KolkataMumbaiCaters to 80+ outlets in Maharashtra including 51 in Mumbai and 15 in PuneRaw materials like Wheat is brought in from Jalandhar and sent to commissaries in refrigerated trucks. Pizza peag is prepared using a proprietary recipe in the commissaries. They are then made into dough balls and sent to sell outlets in refrigerated trucks. Vegetables like tomato, capsicum, baby corn, onion and spices are purchased locally. Cheese is brought in from Karnal, Haryana. Food which is frozen is sent in these trucks at -18 deg Celsius.It uses a hub and mouth model with commissaries as Hub and retail outlets as spokes.LogisticsWheat (Jalandar) net profit Vegetables (Local) Cheese (Karnal)CommissaryRefrigerated Trucks Retail blowholesInventory ManagementMajor inventory consists of perishable items with a very subtle shelf life. round of the items are tabulated below-ITEMSHELF LIFEDough Ball3-4 yearsSeasoning and Toppings4-5 yearsOnion, Capsicum , Tomato5 daysCheese Blend4-5 daysChicken Meat2-3 daysCheese Dip4-5 daysMexican Wrap Base3-4 daysEach store maintains approximately 4 days of inventory since roughly of the items beget a shelf life of around 3-4 days. Inventory is refilled by trucks from the commissary every 4 days. there is a mini cold reposition in every outlet. Inventory levels are monitored centrally by POS (point of sales) entropy using Intura Vision (POS management system) installed in every outlet. Intura Vision is the simplest and most authentic point-of-sale management system available for delivery and alert service restaurant operations. Intura Vision stream casts every aspect of your operation, including order taking, address card processing, kitchen management, deliveries, inventory, and customer marketing, to shit your business more cost- streamlined and profitable. There are two POS per outlet. Orders are received in telephonic form also there are in-store orders.Production ProcessThe entire production process is streamlined into terzetto stages-Dough TableHere the pizza base is prepared. It is rolled out of the dough ball. There are three standard sizes Personal (8 inches), Medium (10 inches) and Large (14 inches). Personal, medium and large serves one, two and four persons various(prenominal)ly.Then cheese blend is applied on the base. The entire process of making a pizza base takes 1-2 minutes.Bake lineIn this stage nippings and seasonings are applied on the top of the prepared base. The choice of toppings depends upon the pizza ordered. Customers also score the facility to customise their own pizza by choosing their toppings from a variety of toppings available. Toppings can be veg, non-veg or both. Customer can also choose the seasoning they prefer depending upon the spices they would like to have in their pizza. The entire process of make line is 1 minute.VenThe pizza is then ready to be baked in oven. The temperature retained is 470 Fahrenheit. Oven has a capacity to bake 6-7 pizzas in one slot. The pizza ineluctably to be baked for about 5-6 minutes. The ovens used now-a-days are fully machine-controlled along with a conveyer belt, so that the flow is unremitting.In case of production in India, Dominos has a turnout of 1 pizza per minute. This meets the menstruation demand requirement. The constraint here is the oven. They have overcome this by withdrawing the 30 min guarantee during festivals like New Year, Christmas, Diwali and rush-hours.Operations StrategyDominos follows a hub and spoke distribution web wherein the 4 commissaries are the hubs and the retail outlets are the spokes. The raw material is replenished in the outlets from the hubs every 4 days or when it gets over, whichever is earlier. Vegetables are purchased locally (delayed differentiation). They have incorporated IST (interstore trans fer) to cater to sudden spikes in the orders during special occasions wherein inventory falls short. In such cases material from nearby store is transferred to the critical store so that there is no halt in operations. They also have functioning based costing for their employees where employees are given incentives depending upon the volume of sales which they achieve. high the sales better the incentives.Present status due to mismanaged Supply Chain in IndiaIn India, about 60% of food value is misplace in the supply chain from the farm to the final consumer. Consumers end up compensable approximately 35 share more than what they could be paying if the supply chain was refined, because of wastage as well as multiple margins in the present supply structure. Comparing with what returns farmers in India get (30%), in the the States the farmers can receive up to 70 percent of the final retail price and wastage levels are as low as 4 to 6 percent. Therefore we can appreciate the ben efits that could be generated from implementing those practices and tapping those skills for the supply chain in India. The significance can be understood by the fact that the logisticscost component in our country is as high as 7 10 percent against the global average of 4 5 percent of the sum total retail price. Therefore, the margins in the retail sector can be improved by 3 5 percent by bonnie improving the supply chain management.Supply Chain Challenges Urban IndiaSome key reasons of underperformance of supply chain management in urban India1. Supply chain attempt mitigation in an economic downturnsupplier financial risk,volatility in energy, commodity, labor rates and currency exchange, maverick economic recoveries.2. Searching for working heavy(p)FMCG companies will look to restrict inventory and lower operating or protracting costs.Buyers will look to expand payment termsSuppliers will drive to collect receivables more quickly, creating the requisite for a liquid buffer such as supply chain financing3. Shortening the supply chain by making proper use of conveying facilityCompanies will need to plan a distribution system that takes care of the realities of domestic expatriation infrastructure. Indias supply chains must contend with slow transit networks and inadequate infrastructure. For example, 70 % of Indias mobile trade is handled by just 2 of the 12 major ports. The Railways is also constrained when it comes to freight movements. Historically, the countrys rail capacity was limited to passenger traffic, and raft protested the use of rail for freight movement. Only of late has the government initiated efforts to promote rail shipments.Most commercial shipments in India make their journey aboard a truck. Hiring a carrier meant working with a bittie trucking company, as the country has no large, national transportation companies. A new-made study of the transportation industry found that the majority of carriers had less than pen tad trucks in their fleets. Scheduling deliveries and pickups also can be tricky. At present, most warehouses are located in the heart of Indian cities, and many municipalities terminate large truck movements during daytime hours. It is possible to negotiate special exemptions in some places, but generally shippers must plan on nighttime movements. other alternative is to unload large shipments at a cross dock outside the city and move orders to smaller vehicles for delivery.4). More free-trade agreements and more scrutinyThe entry of foreign players in the retail segment will increase rivalry even further. More crucially multi-national companies might be having more money at their disposal. Thirdly they will also have access to latest technology and a ready highly efficient model to implement from.5). Push-pull boundaryIncreased competition, and fluctuating demand will make it effortful to identify the points at which the flow of goods switches from universe pulled by consum ers to being pushed by extractors..6). Maintenance of safety stockInstead of having capacious safety stocks at different places, centralized place will have to be used to have even more cash liquidity and lesser availability of godowns.7) Judicious use of newer technologies and decision making tools social function of newer technologies such as RFID (Radio Frequency Identification) continue to change the way SCM systems are designed and managed. Until recently, barcodes were the primary means of tracking packages. The advent of cheap, reliable RFID technologies have eliminated the need to physically scan packages in shipment, storage, etc, since packages with the embedded chips can be remotely scanned.8) Creating a demand-driven supply chainTo stick out a demand-driven supply chain, FMCG companies must deploy performance-oriented supply chain practices, such as continuous monitoring and alert notification. This will give them a clear cerebration of their total supply network to a dapt to changes in demand and even up based on real-time insight into global operations. A reliable demand plan provides the foundation for sales and ops planning (SOP) which helps FMCG companies better tog daily operational more effectively balance supply and demand and make better decisions that impact both the top and bottom lines.9) Other problems faced.Inadequacies in infrastructure such as neglect of high quality road networks, power shortages and insufficient storage spaces.The current prink in property prices and rentals may render a few retail business models unviable.The retail industry loses to the tune of US$120 to US$130 million every year in frauds, thefts and employee pilferage, shop lifting, marketer frauds or inaccurate supervision despite using standard and forward-looking security featuresMultiple taxes at the federal and state level countryfied Market IntroductionThe FMCG sector in the urban areas is becoming preferably saturated (though it will continue to dominate in the next 8 10 years) while the penetration in the country-style areas are only about 1%.The cracker-barrel areas have and will continue to make up more than 50% of Indias total households and accounting for more than its current 66% contribution to total FMCG consumption. bucolic India has a large consuming class with 41 per cent of Indias middle-class and 58 per cent of the total disposable income.Currently, nearly 34% of the off take of FMCG companies come form sylvan areas. Companies like HUL, ITC and Colgate have already established good distribution networks in these regions. Other companies would start catering to these regions in near future. bod 1 Urban and Rural growth rates (Personal Care products)A huge segment of this market is currently flooded with obscure brands that are generally manufactured and distributed by small and medium enterprises. However, with the growing competition in the FMCG business, it has become difficult for SMEs to market thei r products sustainably. This is mainly due to the solidly established brand images of bigger players and the increasingly sophisticated demands of the urban customer. SMEs also lack the capital investment needed to compete with bigger players.However, with the growing economy, substantial business opportunities for FMCG producers have emerged in the Indian rural sector. The rural FMCG market is growing with a CAGR of 3-4%. In the case of products like soaps, talcum powder, cooking oil, tea, cigarettes and hair oil, the share of rural market crosses 50%. The capital expenditure of urban consumers on FMCG products is Rs. 49,500 crore, while that spent by rural population is over Rs.63,500 crore. This is indicates the growth rate and participation of rural FMCG markets in India. Despite the huge scope for FMCG products in the fast-emerging rural markets, some white-haired areas need to be worked out before SMEs can establish sustainable businesses Rural India does not represent a homo geneous market. The tastes and preferences of the consumers vary from govern to district in the country. With changes in the language and dialect, advertising has to be tailor-made specifically for different target consumers. Networks are not efficient to guarantee the distribution demands. Problems exist in reaching the interiors of the country. Initial expenditures to develop distributer networks are immense, because in Roads and communication networks are not efficient to tackle the distribution demands. As there is little consumer research regarding the rural markets, companies commit the folly of overestimating the awareness of product usage in the rural market. The Indian consumer is traditionally price sensitive and more so in the rural parts. Multinational companies that modify portions and packaging to create a greater value proposition have succeeded in targeting the rural consumer. The rural allocator cannot stock a large variety of products because of acknowledgment problems. Also as the retailer plays a vital role in the village in convincing the consumer about the usage of the product, it becomes imperative to provide sufficient randomness and infrastructure support to stock adequate inventory of goods. Major global brands have included villagers in their distribution channels, not only providing fight but also conveying the reach in the rural markets. While increased penetration of telecommunication has resulted in an increased awareness among villagers, it is still important to understand that a major chunk of rural community is not educated enough to comprehend the technicalities of the product/brand usage.Models for Rural distribution chainsApproach 1 Dedicated Rural Entrepreneur The single(a) is preferred to have a two wheeler and act as the spoke between the super stockiest and the villages in a hub and spoke model. He is expected to know the area well and has sufficient education to brave out a business. He is recruited to cover the nearby areas as well ( upto a 40KM range). He acts as the point of contact to receive and deliver the goods to the respective stores in his area of service.The analysis says this model works well for products that cost more than 75 per Kilo and the important part is that the company need not worry about the administration part of the operation.Approach 2 Distributor consolidation for urban and rural markets Here we are to consolidate the urban distributor and the super and sub stockiest into a single convocation to serve the retail outlets. This entity is supposed to cover the town and the villages nearby.Approach 3 Consolidated Distribution with tele-order bookingRural tele-density in India is expected to go up in the near future. This would help to remove the role of saleman an accelerate say communication with the rural retail outlets to the super stockiest. However the drawback is that the company might loose on the relationship with the retail store in the absence of a sales person.Approach 4 Distributor choice based on unutilized reverse logistics potentialAnother non-traditional form of collaboration for rural distribution could be to partner with other partner low-margin, high-reach players in rural markets. An example could be that of the dairy industry. The vehicles form the Dairy factories goes desolate to the rural areas for collection and comes back with the milk. So it could be used for the transportation of goods from the factory site to the rural areas.Pepsico Distribution ChainPepsico Indias distribution in rural areas thrives on two major factors -Third party outsourcingHub and spoke model in the rural areas.This mechanism is followed in the urban areas as well but in the rural regions the local entrepreneurs from the smaller spokes of the distribution channels. In all its operations the transportation is outsourced to the third parties. However there are some cases in which large distribution centres have their own fleet for transpo rtation of finished products.The major two challenges faced by the company in the Indian context are the insufficient distribution in the rural sector and the inherent market risks.Distribution forms a major part of the companys concerns as it not only accounts to the revenues lost but also the potiential market share. The concern is primarily because of the Physical conditions of the Indian market and also the low purchasing power of the rural customer base this results in the setting p of the distribution centre cost being high. Coupled to that we have the insufficient sales offsetting the set up cost.Another concern is the taste of the rural customer who is more attracted to the local succus store or the fruit stall thereby increasing the competition from the unorganized sector.In case of distribution we have the issue of the size of retail store. The retail outlets in rural areas are more or less Kirana stores and there is near complete absence of the retail chains. So the amoun t of inventory that can be stocked in the small retail stores is very small.Apart from the distribution channel issues we have the risk of the market conditions. The small shops in the rural areas lack the refrigeration or storage capacities. The inventory is kept to meet the demands for the day and most of it is kept out in the open dues to lack of storage facilities. Thus many a time during the rainy season we can see the arrest of these shops and sales of the products getting stalled.Pepsico has implemented the following strategies to overcome these concernsUtilizing the collective efforts of the small scale farmers, land holders and regional governmentAlliances with other multinationalsPromoting entrepreneurshipIt started with a strategy similar to project Shakti used by the Hindustan Lever, but alliances were with local entrepreneurs and other multinationals. Its started by making the entrepreneur the spoke of its regional distributional network in the rural areas and then w ent along with Hindustan levers to share its distribution network. This helps the entrepreneur having a larger spectrum of products for distribution and hence a better prospect.The distribution chain of Pepsico India has a fragmented design which can be largely attributed to the lack of transportation infrastructure. And this resulted in the creation of collaborative and entrepreneurial alliance that thrives with symbiotic existence. An example could be that of a supplier who Is willing to strike land holding from other farmersSupply Chain Management in Rural Market- ChallengesThe following are a few of the challenges that a company faces while managing its supply chain in rural markets.Multiple Tier, high Cost and Administration ProblemIn the first place, the rural supply chain requires a larger number of tiers, compared to the urban one. The long distances to be covered from the manufacturing points to the scattered consuming households cause this situation. At the minimum, the rural supply chain need the village-level shopkeeper, the mandi-level distributor and the wholesale/stockiest in the town. And on top of them are the producers own warehouse and branch office operations in selected centres. Such multiple tiers and scattered outfits push up the cost and make supply chain management a major problem. The scope of manufactures direct outlet such as showrooms or depots is quite limited in the rural market unlike in urban areas. It becomes expensive as well as unmanageable. The dependence of the firm on intermediaries is much greater in rural areas as direct outlets are ruled out. still controlling such a vast network of intermediaries is a difficult task. Control is mostly indirect. And because of these factors the firm has to be more careful while selecting the supply chain members in rural areas.Non-availability of dealersAnother problem is the availability of dealers. Many firms find that there are limited numbers of worthy dealers. Even if the fir m is willing to start from scratch and try out rank newcomers, the choice of candidate is really limited.Poor Viability of Retail OutletRetail sales outlets in the rural market suffer from forgetful viability. A familiar paradox in rural distribution is that the manufacturer incurs additional expenses on distribution, still the retail outlets find that the business in unremunerative. The scattered nature of market and the multiplicity of tiers in the supply chain use up the additional funds the manufacturer is prepared to part with. And no additional money comes to any of the groups. Moreover, the business volume is not enough to sustain the profitability of all the groups and the retail outlet suffers the most. short(p) Bank FacilitiesSupply chain in rural markets is also injure due to lack of adequate imprecateing and credit facilities. Rural outlets need banking support for three important purposes.To facilitate remittances to principals and to get fast replenishment of stock sTo receive supplies through bank (retiring documents with the bank)To facilitate credit from bankAs banking facilities are inadequate in rural areas, rural dealers are handicapped in all these aspects. It is as estimate that there is only one bank branch for every fifth village.Inadequate Credit FacilitiesInadequacy of other institutional credit is another constraint. Rural outlets are unable to carry adequate stocks due to lack of credit facilities. They are unable to extend credit to their customers. Thus there is a vicious circle of lack of credit facilities leading to inadequate stocking and loss of business, finally resulting in poor people viability of outlets.Lack of Transportation FacilitiesMany rural areas are not committed by proper transportation facilities. There are a very few villages with railways lines. Atleast 50 percent of the rural roads are peaked(predicate) surfaced, and many totally destroyed or severely damaged by the monsoons and remain unserviceable. Also the use of bullock carts looks inevitable for many years into the future. In such a scenario distribution of goods via any supply chain is a huge challenge in itself.Lack of Proper intercourse FacilitiesCommunication with these villages is difficult and highly expensive. Moreover, 300,000 villages in the country have no access to telephone. This acts as a hindrance to proper supply chain management.Other ChallengesApart from the above there are various other challenges that firms face on day on day basis like. mortified literacy rateDifference in languages and DialectsPrevalence of Seasonal DemandRural policyCaliber of the rural community- they have great acumen but they need intensive trainingSupply Chain Management in Rural Market- How to tackle the ChallengesIn order to tackle the problem of supply chain management the following strategies can be implemented.Satellite Supply ChainIn this system stockists are appointed in the major towns and feeder towns. They by and large discha rge the following functions (a) Financing (b) computer storage and (c) sub-distribution. Retailers in and around feeder towns get attached to these stockists. The manufacturer supply goods to the stockists either on consignment or on cash/credit basis. Further these stockists deliver the good to the retail market points or air markets. Over a period of time some retailers grow in stature and importance. If such retail points also coincide with centres of demand and transportation within the feeder town area, they are proud to stockists points. If 15-20 retailers were operating as part of the genuine stockists network, 5 or 6 get elevated over a period of time to stockists. Fresh retail points get established simultaneously out of which some get attached to the original stockists while others to the new one.This process continues as long as the market and consumption level keep expanding and the supply also catches up via such a supply chain. Just like second- propagation stockis ts, set of third generation stockists get established with the passage of time. At any point of time, a certain number or retail points hover round a particular stockist. Hence the system is called Satellite Supply chain distribution. The satellites have their own satellites too.The advantages of this system areMarket penetration takes place without manufacturer having to expand his direct stock points.This system can bring in ample rewards in terms of increased sales and lesser distribution costs.Syndicate Supply ChainThis solution is essentially for small companies tie up with leading companies that already has a presence in rural market and distribute products through there supply chains.Relying on Private Village ShopsTie ups with the village private shops are the cheapest and most favourable channels in the rural markets.Supply Chain Management in Rural Market- OpportunitiesIn the present scenario, companies operating in India will have only two options either