Editorial We are close yet very far, the physical separation between regions is still a reality. Some goods can be damaged by shocks while others can be damaged by undue temperature variations. For a range of goods labelled as perishables, particularly food (produces), quality degrades with time since they maintain chemical reactions whose rate can be mostly mitigated with lower temperatures. Any small delay can have negative consequences. Narendra Modi, PM India realized these consequences and quoted, “Preventing wastage of food and agricultural commodities can help save upto Rs. 40,000-crore per annum.” Also, he quoted, “Farmers work to provide for us, but if they are not developed, then where will they go? Therefore, there needs to be value addition.” So, 'STRIVE', the bi-annual magazine of operations and supply chain (OPEP) club of IIM Raipur in order to further move the cause for a better tomorrow has considered Food and Cold Chain Logistics as the topic of our present issue. It emphasizes on increasing the reliance of businesses in pharmaceutical, medical and food industries on cold chain. Also, it throws light on how reduction in wastage and improvement in profit margin to meet the growing demands are becoming the new norms of industries in developing countries. To enlighten on the present scenario we have an interview from the industry expert, Mr. Pawanexh Kohli, Chief Advisor & CEO of NCCD, providing insight and better understanding on cold supply chain and clearing public anomalies with respect to FDI, cold warehousing related to potatoes, food
processing and need for sustainable cold chains and way forward to overcome the bottlenecks of infrastructure, capital investment etc followed by academia article by Prof Vinay Kumar Kalakbandi explaining advancements in improving shelf life and technologies like RFID, data loggers etc. for effective usage of cold supply chain . After an extensive research on various factors that build the cold supply chain, we have students' articles beginning with the evolution or how the need for controlled temperature handling arosed. It is followed by gurumantra giving basic understanding of cold chain continued by articles on market trends and various perishable sectors like food, fruits and pharmaceuticals emphasizing on the need for improved supply chains through facts, and various challenges involved. One such initiative taken by government was setting up of Mega Food parks integrating entire supply chain by linking agricultural production to the market . Also, Book Review of Logistics Outsourcing in Food Processing Industry by Hsin-I Hsiao gives insights on various global practices in food processing and how outsourcing of logistics is gaining prominence especially in Netherlands and Taiwan. We would to thank Prof. B. S. Sahay, Director, IIM Raipur for his motivation and support. We extend our gratitude to Prof. Parkshit Charan for guiding us throughout. We also thank all our authors for taking out time from their busy schedule and contributing to the magazine. We would also like to thank all our readers. Ruchi Sao Editor-in-Chief pgp13048.ruchi@iimraipur.ac.in
Director’s Message The wastage of food is the biggest problem that India is suffering at present and is bound to escalate in future with rising population. Improper infrastructure is one of the reason that is preventing India in reducing the wastage. This upcoming issue of Strive will enable readers to have insights about the cold chain condition of India and how it can be developed to reduce the wastage I wish OPEP (Operations & Supply chain) club all the best for the 7th issue and hope the readers enjoy the publication as previous 6 issues. Prof. B. S. Sahay
Prof. B. S. Sahay Director, IIM Raipur
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Contents Features Exclusive interview with Mr. Pawanexh Kohli, CEO and Chief Advisor National Centre for Cold Chain Development[NCCD] and Principal Advisor Cross Tree
What’s hot about cold supply chains in academic literature? - Vinay Kumar Kalakbandi
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Specials Cold Chain logistics - A Historical perspective
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-By Aniruddh Mukerji Conceptomania - Mega Food Park
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Tr e n d s Market trends in Cold chain logistics
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- By Issac Solomon Cold Chain Management in Pharmaceuticals
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- By Kritika Swaminathan Cold Chain Management in Fruit Industry
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-By Anish Kumar
Regular 7
Gurumantra Book review: Logistic Outsourcing in Food processing Industry
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- By Ravi Singh Crossword
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SSppeecciiaallss
Cold Chain Logistics - A Historical Perspective Abstract: The article talks about the evolution of cold/food preservation and transportation chains from ancient times to their present state, hinting at the social and economic impact that this evolution has had in history. This is with particular attention to the technological advancements and operational developments which resulted in the adoption of the cold chains by industries worldwide.
Aniruddh Mukerji is a PGP student at IIM Raipur. He completed his graduation in Marine Engineering from Tolani Maritime Institute. He has 36 months of work experience with Anglo Eastern Ship management Pvt Ltd and Cenmar maritime. He can be reached at pgp13063.aniruddh@iimraipur.ac.in
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n the classical sense of the phrase a supply chain is defined as, a system of organizations, people, activities, information, and resources involved in transferring a product or a service from the supplier to the customer. However depending on the kind of product and service involved there are many variants of this definition, a cold chain is one such variation of the classical supply chain. A cold chain is essentially a network of facilities and distribution options which performs the usual functions of a supply chain but with temperature and humidity control throughout all entities of the supply chain. Cold chain logistics are relevant to a multitude of industries ranging from the transportation of
vaccines and solutions under controlled temperature for the pharmaceutical industry to the transportation of propellants for the military. No sector has had more utility and significance for the cold chain concept than the food and beverage industry. From reducing wastage to ensuring round the year supply of seasonal items, the cold chains have proven to be the proverbial game changer in many ways. It may appear that the concept of cold chains is a gift of modern refrigeration technology catering to the needs of customers in the mature food and beverage markets. Where matters like price and volumes fade into triviality in front of the expectation of constant availability, markets where exotic produce are in Volume 4 issue 1 November 2014
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Specials in demand despite the inability to produce the same locally. Singapore and the UAE are stellar examples of such markets. But is the cold chain concept really that modern a concept and if it's not, then how did the ancient cold chains operate and evolve into their current state? These are few questions this article attempts to answer. Logically, the importance of food for man was only higher earlier than it is now. Hunt was scarce, agriculture was in its nascence and vulnerable to the vagaries of nature. To ensure sustainability of his food supply man must have found ways of preserving food not much long after he started to forage or farm for food. As civilizations grew, the food had to be transported for trade, to feed armies and other humanitarian purposes like staving off famines and droughts. Such food transportation chains were the first semblance of cold chains. These chains used techniques such as pickling of vegetables and smoking of meat and cheese for preservation but the purpose and concept behind these chains was similar to what is today. The first recorded use of temperature control for the preserved transportation of foodstuffs was in the year 1797 when British fishermen used ice to preserve their catch during transportation from the seas to the markets where they were traded. By the early 19th century ice was in common use for the transportation of produce from the rural areas to the urban consumption centres. The articles that were transported during this period primarily consisted of meat products along with vegetables and fruits. The breakthrough development of mechanical refrigeration technology in the early 1850s was embraced with vigour by the food and beverage industry for use in their cold chains. This new technology used brine as a heat exchange medium for temperature control. It allowed foodstuffs which were very sensitive to temperature to be stored for longer periods and to be transported over larger distances. With the oncoming of the steam engine food chains extensively used railroads for transportation. The first refrigerated railroad car was used in 1867. This invention by Detroit based engineer J.B Sutherland 5
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revolutionized food transport paving the way for modern cold chains as we know them. By late 1800s, there was extensive food based trade between the colonial powers and their respective colonies. The demand for exotic tropical fruits like mangoes and passion fruit was increasing in the cities and markets of the colonial powers. After railroad cars it was the turn of ships to have refrigerated cargo holds in which produce could be transported overseas. With increasing complexity of refrigeration machinery and more thermally efficient refrigerants this was attained in 1876 when French engineer Charles Tellier transported meat for the first time under artificial climate control. By the early 20th century the transportation and storage of foods under controlled environments was extensively used by the food and beverage industry around the world. By 1900 the number of refrigerated ships in the world numbered 352, refrigerated railroad cars in the USA alone numbered at 50,000. Great Britain imported an estimated 360000 tonnes of beef from Argentina, New Zealand and Australia. Banana became a global fruit with special refrigerated vessels designed to transport the refrigerated fruit from the tropical plantations of Jamaica, India and Burma to markets in Europe and the Americas. After the first Russian revolution in 1905, the first refrigerated trains were in Russia to transport grain and meat to the extremely remote regions of Siberia. This is the first time that refrigerated trains were used in Eastern Europe. The first decade of the 20th century saw a plethora of dedicated refrigerated railroad companies. The Pacific fruit express one of the largest of such companies had some 6000 refrigerated railroad cars. By 1910 the tonnage of imported beef in the British markets had risen to 760000 annually. Refrigeration companies like J&E Hall had installed some 1800 refrigeration kits on merchant vessels of the British fleet. Refrigerated cargo was not only being carried over seas but also in the inland waterways of Europe. By 1925 specialized refrigerated containers for the transport of dairy products had made in their appearance in the cold chains of many dairy firms.
Cold Chain Logistics- A Historical perspective The development of cold warehouses or cold storages had kept pace with the developments in temperature controlled transportation of goods. This ensured the availability of fruits and other seasonal foodstuffs around the year. This can be called as the modern cold chains as we know them know, since then many technological and chemical processes were developed to improve the shelf life of food items. However the problems associated with cold chains have changed only marginally. The high initial investment of installing such a chain had always been high as had been the requirement of a skilled workforce. These problems though still existent in modern cold chains have been somewhat mitigated by newer technology. But even these problems have a silver lining to them, these chains are a major source of employment across the countries which have them and have played a pivotal role in the management of national food resources. The markets these chains catered have matured in a
big way with the organisation of food retailing. This had resulted in optimal pricing policies and the consumer getting the product in the best possible condition. To conclude, though Indian retail companies have only recently started looking at cold chains as valuable acquisitions they have a history full of examples, from around the world to show how cold chains have improved the way food is stored and distributed. With all the advantages and challenges of building such chains left to one side the sheer historical credibility shows that in a country like ours where production is bountiful, cold chains do merit a better market. References: www.history.navy.mil/photos/sh-civil/civsh? h.htm www.gcca.org ?
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Gurumantra
Gurumantra - Cold Chain Logistics
Sir, what is cold chain? Is it just a cool synonym for supply chain? A cold chain is an unbroken series of distribution and storage activities performed to maintain a controlled environment for perishable products sensitive to temperature and humidity. Thus a cold chain is a temperature controlled supply chain. It encompasses the facilities, equipment and labor needed to keep products at a desired climatic condition during transit and storage from the time they are manufactured up until their consumption. What kinds of products need cold chains? Cold chains are primarily meant for perishable products with a very short shelf life. Cold chains helps extend the shelf life of products like agricultural produce, sea food, frozen food, photographic film, chemicals, pharmaceuticals to name a few. The products in a cold chain, during transit or in storage, are called cool cargo. Throughout the entire logistics cycle they are called cargo because unlike the goods & merchandise in a normal supply chain, cool cargo is perishable and is always enroute towards the end use or point of consumption. What are the various methods of controlling the transit environment? There are many methods to ensure a controlled environment during product transportation. Choosing the most appropriate method is key to the maintain efficiency and profitability of the cold chain. The most common method is using refrigerated containers where cooling takes place due the circulation of coolant driven by a compressor. The use of thermostats and electronic temperature 7
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control means this is one of the effective methods but need huge capital investment to install the necessary systems. This is used for highly perishable products and for long storage purposes. The second method is the use of materials like dry ice, silica gel packs etc. in the packing of the product. This is a relatively low cost alternative and cannot be used to control the product environment over a short period of time. The choice of the type of method and the material used depends on the characteristics of the product, the transit and storage time and packing and handling constraints. Are there any Quality standards in cold chain? There are standards such as ? Cold Chain Quality Indicator (CCQI)- This
industry standard measures quality, reliability, and skills in critical cold chain including human blood.It uses a benchmarking system to assess transparent and comparable quality measures. ? Hazard analysis and critical control points
(HACCP)- It is a preventive approach used predominately in production process to reduce the risk of failure. It follows a 7 step approach described below? Conduct Hazard analysis ? Identify critical control points ? Establish critical limits for each critical
control point ? Establish critical control point
monitoring requirements ? Establish corrective actions ? Establish procedures for ensuring the
Cold Chain Logistics HACCP system is working as intended ? Establish record keeping procedures
These standards are widely used globally in industries such as fish and fishery products, meat and poultry products etc. Why is it significant in the present context? India accounts for 11% of the total vegetables production in the world but only has a 1.7% share in the global vegetable trade. Milk production in the country was over 127 million tonnes in 2011-12, but the current storage infrastructure is limited to
70,000-80,000 tonnes. Conservative estimates put the annual wastage of fish at 20-30%. Moreover, India has thousands of unregistered slaughter houses lacking in adequate cold storage facilities. What measures does Government take to resolve the issue? The government of India has recognized the importance of cold chains in the food distribution & processing industries and therefore offers many subsidies and incentives to promote investment and growth to the country's cold chain infrastructure. GOI has taken following measures:
? GIO has offered Rs. 3.2591 billion to set up 451 cold storages ? GOI approval of FDI in multi brand retail is a step towards the development of
cold storage GOI in collaboration with Confederation of Indian Industry (CII), Federation of Indian Chambers of Commerce and Industry (FICCI) and cold chain equipment manufacturers has set up National center for cold chain development In Union Budget of 2010-11, GOI has exempted air-conditioning equipment and refrigeration panels used in cold chain from excise duty and allowed duty-free import of refrigerated units used in reefer trucks ? National Horticulture mission (NHM) – a centrally sponsored scheme. ? Horticulture Mission for North East and Himalayan States (NMNEH)- A central
sector scheme
National Horticulture Board (NHB) provides financial assistance for construction and modernization of cold storage for horticulture products
Agricultural and Processed Food Products Export Development Authority (APEDA) has schemes to set up re-cooling facilities and specialized cold storage facility
The Marine Products Exports Development Authority (MPEDA) - This schemes provides financial assistance to build cold storage for seafood. Also, the vision of this schemes is to achieve exports of Rs. 358 billion by 2017 The union agriculture ministry is working with Fresh and Healthy Enterprises to launch a special purpose vehicle (SPV) which would provide complete cooling logistics for fruits such as kinnows, oranges, bananas, and mangoes.
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Gurumantra What are the technological solutions that are adopted by industries in this sector?
costs and improve quality of products. Some of the technology solutions adopted are:
Technology is required to bring down the operating
Multi commodity cold storage ? Provides chambers that could be operated and maintained at different temperatures ? Offering flexibility to store range of products ? Cost & Space efficient , delivering high profitability
Controlled atmosphere storage ? Mainly used for long term storage of highly perishable items ? Along with temperature it regulates the oxygen, nitrogen, carbon dioxide and ethylene
atmosphere as required for particular product or fruit. ? Ensures Quality and long shelf life
Ripening Chamber ? For fruits such as mangoes, papayas and bananas which are allowed to ripen off the tree
leads to high fruit weight loss, desiccation and uneven rippening ? Chamber maintains specific conditions for specific products ? The ripening is more uniform and the fruit has a firmer pulp texture and a better flavor ? Farmers can also choose to pause or hasten the ripening process based on market demand. Distributed Refrigeration Architecture ? It consists of several miniature parallel compressor racks, distributed throughout the
store ? It reduces piping by 50-75 % over centralized systems and requires 60-80 % less refrigerant to operate efficiently. This can reduce installation costs by over 17 % ? It also consumes less energy with potential savings of up to 15 % in energy costs Electronic controllers ? Mainly useful when precise control of temperatures is required. ? It eliminates the need of manpower to continuously monitor the conditions
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Operations & Supply Chain Club, IIM Raipur
Interview
In Conversation With
MR. PAWANEXH KOHLI CEO and Chief Advisor National Centre for Cold Chain Development [NCCD] and Principal Advisor Cross Tree
Mr. Pawanexh Kohli is the Chief Advisor & CEO of NCCD, Ministry of Agriculture, Business Advisory to organizations, Chairman National Committee on Supply Chain & Logistics for Post Harvest Marketing (NCCD, GoI). He has been involved in various social and environmental causes. He currently serves as an advisor to various organizations such as Kaushalya Foundation, ILAM, CBI (Maritime Crime), Sampoorn Samridhi - We the People, Advit Foundation, Haryana State Rajiv Gandhi Renewable Energy Park- Gurgaon and Action Dyslexia - Beyond Education. He has been awarded with 'Exemplary Thought Leadership' at ICE 2012 and 'Cold Chain Personality of the Year' for Individual contributions by KPMG expert panel.
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Interview 1. Could you please tell our readers about NCCD and its role in developing cold chain infrastructure in India? NCCD is an advisory body that serves as a think tank to the government of India on coldchain and agri-logistics. Its prime aim is to facilitate cold chain development across all user segments through policy intervention, capacity building, harmonising knowledge base & standards and undertaking a periodic revision keeping in view technological advancements. In fulfilling this core mandate, NCCD has provided inputs to help shape the assistance patterns and development direction for the next five years. In advising the Government of India NCCD also seeks various stakeholders' inputs from its member base which include all categories of stakeholders, students and researchers interested in cold-chain development. Your readers may be advised that infrastructure development is not a role NCCD professes to. NCCD's prime objective is to promote appropriate agribusiness models in India. Infrastructure development is therefore a fall out of this intent – it is a delicate difference but necessary to understand that infrastructure is a tool of the trade and must not be viewed as a target achievement in itself. The aim is to create a market link between our farming base with the available consumer base
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(domestic and international). Towards this aim, NCCD identifies the missing links in cold-chain infrastructure and guides policy for a more holistic development of suitable interventions. In NCCD's opinion, modern pack houses and transport (roadways, railways, waterways and airways) are missing infrastructure components which need a prioritization, to help drive more volumes through our very large existing base of cold-storages. Without these missing links, the cold-chain will not mature to fruition, and incorrect business models will promulgate. NCCD also plays a role of knowledge dissemination through facilitating capacity building/training programs and awareness campaigns. NCCD also supports the International Cooperation Division of the Ministry of Agriculture, among others, in various international collaboration activities. In September, NCCD also launched a toll-free number as an e-governance initiative. This number receives complaints from refrigerated truckers on the various bottlenecks faced by them around the country. This is true “Bhagidaari� in governance as users share relevant information on the basis of which future action and policy change is planned. This is globally the first such initiative and the opportunity will redress bottlenecks in multiple ways, including leading to reduced fuel consumption, mitigation of risks
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and better services. 2. How the changes in the Indian agricultural industry and farming practices are redefining the cold chain industry? There has been a significant growth in the production of fruits and vegetables, relative to grain production and this has put tremendous pressure on ensuring the supply of perishables from farm to consumer, for appropriate value realization. Similarly the development in the dairy sector has quickened and such changes are also evident in the live-stock sector of agriculture. The coldchain for milk, is not a storage based model but a dynamic market linked delivery model. Most people, including your readers misconstrued cold-chain to mean cold-stores only and hence relate to its development incorrectly. In reality the cold stores developed were mainly bulk stores with intention to hold a single crop across lean periods in production. This model sufficed in case of potato and was soon replicated for other crop types. The realization that the majority of perishable produce need many other infrastructure components to fully utilize and take advantage of the temperature controlled cold supply chain has only recently settled in. This understanding, a conceptual change brought about by NCCD, is one of the major changes in the agri-business world and is redefining the coldchain industry. To move farmers from peasant
Cold Chain Logistics- A Historical perspective mode of farming towards market linked production practices requires seamless information flow within the supply chain. Since the proper cold-chain intrinsically is a time-valuedistance matrix, its use further drives suitable changes in farming practices. In fact, it is the coldchain, as it further develops, that is driving and redefining agricultural and farming practices. 3. How the changing consumption patterns of Indian consumers are affecting the cold chain market? Changing consumption patterns have translated into rising demand for high value nutrition which means fruits, vegetables, meat and dairy products are replacing the earlier traditional staple of grain based foods. All these high value foods require the cold-chain as a conduit from producers to consumers and when the volume of production is high, it needs to be connected across long distances to cities. These changing consumption patterns are also a reflection of the increase in purchasing parity of Indian consumers and this positively impacts upon the total farm to fork value chain. Since cold-chain thrives best as a direct access link with markets, it inherently brings greater transparency to the value chain. Just like changing demand pattern in other sectors have interlinked the globe the similar interlinking is happening in high value agriculture sector. Without the
cold-chain, as a bridge between users and producers, none of the aspirations for improved quality, greater choice and better nutrition can be fulfilled. 4. Proponents of FDI in multibrand retail have argued that it will help in upgrading the backend infrastructure including the cold chain. What are your thoughts on the issue? Multi-brand retail and the scope of its impact on the food supply chain is misunderstood by many. Visit your neighbourhood multi brand retail store and you may find zero or miniscule volume of perishable produce in that store. Food items are typically positioned so as to maximise footfalls and to increase sales of other items. Consider a couple of our production figures ~ 150 million tons of milk , 270 million tons of horticulture; a 100 multi-brand retail mega-outlets, even if they major in perishable would impact on less than 1% of these volumes. Students need not imagine that multi-brand retail will translate into substantial impact in the development in cold-chain. Such development is happening and is a part of growth in the logistic and supply chain sectors. A retailer will primarily use the services of this sector and assist in such development depending upon their commercial interest. FDI in multi-brand retail is not necessary for developing the coldchain as there already exists the option of 100% FDI in cold-chain.
Besides this there are multiple other fiscal and financial benefits provided for cold-chain stakeholders. It is only with a stable supply chain, as a nationwide intervention, that our vision of reducing price fluctuation and nutrition-to-all will be met. Every small intervention would also be a step in this direction and hence strengthening multi brand retail, among other steps, is also welcomed. 5. Food processing sector presents an immense opportunity for growth as currently India is processing only 2 percent of its fruits and vegetable produce. What steps can be taken to leverage this potential? Food processing presents the potential to optimize yield from fresh harvest. In perishable food sector - the sale cycle is hastened through connectivity provided by the cold chain; the throughput volume is increased by establishing access to multiple consumption centres using the cold-chain; and left overs or nonsaleable grades are processed into other food ingredients or products. Non-food processing – composting, dye making, medical, etc. – is another end destination and also helps bring the losses down. In the perishable food trade (fruits and veggies), the primary opportunity and aim is to use the cold-chain as a market access tool
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Interview for fresh sales. Only where this is not possible, due to technological or other reasons will the focus divert to food processing. If a ready market exists for fresh whole food, food processing would not be forced as a requirement. Food processing buys time by transforming fresh whole produce into a product, through additives, preservatives and may not thereafter need the intervention of cold-chain. The vast majority of processed foods, barring dairy products, do not need cold-chain as a market link. For example, pickles, jellies, flakes, gems, beverages, canned products, sauces, cereals, flakes, etc. are methods designed to preserve without resorting to cold-chain. In the dairy segment almost 100% volume is processed (very rarely can a consumer find untreated fresh milk). In the future, as advanced food processing technologies are developed, many more options and opportunities will surface. In fact, the cold-chain may no longer be needed as a market intervention, with temperature based functions (flash freezing, heating, blanching, cooking) only being limited to the production line inside the food factory. Yet, one can safely say that in the foreseeable future the need for fresh food will continue to grow, requiring cold-chains. In the perishable food business, the first rule is to sell fresh into multiple markets, next to optimize on the wastage by processing it
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into other foods and lastly to process into non-food products. The metrics involved is not how much food is processed or not, but how much of our production reaches full utilisation, realising gainful productivity. So, having only 2% of fruits and vegetables volume being processed in not the moot point. The opportunity is in operating an organised logistics chain for food items, with processing units being a part of the supply chain. Every source point of the coldchain (modern pack-houses), would originate multiple supply lines. The destinations will depend upon quality, quantity and condition of the harvested lot. Off these, a certain component could be unsuitable for fresh sales and hence would be diverted for processing into food products. Hence, cold-chain and food processing require to function in close collaboration. It is for this synergistic reason that both coldchain as a logistical function and processing industry as a manufacturing function may find common stakeholders in the horticulture segment. To lever our inherent opportunity, of having a large producer and consumption base, we need to ensure that all our future entrepreneurs understand the concept properly – to target that maximum produce reaches point of retail in nutritionally safe and hygienic conditions. All else will automatically fall in to place. 6. In the past, majority of the
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focus on developing cold chain was centred on potatoes and potato seeds. At present, around 75% of India's cold storage facilities cater to potatoes. Which other goods are now gaining prominence in terms of developing the supporting cold chain infrastructure? Your question is incorrect in its reference. Potato does not need the cold-chain and cold warehousing is the sole intervention. Potatoes cannot be precooled and are warmed up on exiting the cold store for subsequent utility. Hence they are temporary residents in one part of the total cold-chain. In their case, cold storages sufficed as a successful interventions and are responsible for making this single harvest crop a staple item all through the year. Apart from potatoes this similar model of using cold warehousing alone, is also applied in case of dried spices and onions, cereals and seeds. The other fruits and vegetables, will need a different operating model and developing cold storage capacity as a solution will be incorrect. We have to pursue the model adopted by the dairy sector. A dynamic cold-chain, one that is in motion, serving as a conduit of fresh ready to retail packaged produce needs to be developed. This will involve more reefer transport options and more importantly, many more packhouses with pre-coolers to stage the produce – many more than all the cold stores put together. In effect, the pack-house becomes
Cold Chain Logistics- A Historical perspective the nerve centre of the cold-chain. By developing such facilities, we also brings much needed investment into rural India and has many other developmental offshoots and benefits. The presence of goods does not support development of coldchain infrastructure – cold-chain must be viewed as a demand driven tool and not a supply driven need. And demand is evident through our rising exports of fresh foods. The same fruit and vegetable is grown in India, but due to lack of appropriate cold logistics, is unable to reach the consumers from the farms. Yet, produce from across the seas is sold at profits in India – which means what we have developed as cold-chain, serves to profit foreign farmers and not our own. Students should immediately think about what is missing and the answers will be evident. Whichever product faces perishability, there is need for cold-chain, provided it is used to link with more buyers and hence increase transaction volumes (revenue). Where it is stored to delay a sales transaction, the benefit is limited and akin to commodity trading. 7. Cold chain is an energy intensive sector which makes the cost of operation very high. What steps the companies and the government can take to overcome this challenge? There is a difference between being energy intensive and energy dependant. All modern
applications are energy dependant - your daily transport, aircraft, ships, rail, your computer, all factories, hotels, etc. In the coldchain too, energy is needed to effect the cooling environment as well as for transporting it to consumers. Yet, once designed properly, the need to rely on continuous supply of energy can be minimised. While Cold-chain is energy dependant, it is not more energy intensive than many other industries. It is another incorrect supposition, too oft repeated! Take for example a 15 ton vehicle running for 12 hours at a speed of 50 kms/hour. It will cover 600 kms in this period and consume 150 litres of diesel. If this was a refrigerated carrier, the additional fuel used by the cooling equipment would be only about 2.5 litres per hour – a total of 30 litres only. So, the cold-chain component is only 16% of the fuel used. This is not extraordinary in relation to the gains involved. The manufacturing industries, smelting factories, cement industry, even the hotel industry are the ones which are highly energy intensive. The Government of India has various support schemes to assist in developing the cold-chain in a direction that makes it more energy efficient. NCCD has included changes in policy so that special support is provided to cold-chain operators to install PLC equipment, alternate energy equipment and more modern insulation, all with the aim to
minimise energy dependency and to bring about a greener coldchain. The schemes as developed by NCCD are followed and implemented by bodies such as National Horticulture Board, State Horticulture Missions and by many other departments and ministries. 8. Do you think that unavailability of skilled human resource is a factor impeding the development of cold chain in India? If yes, what steps should be taken to overcome this challenge? A cold-chain manager must have cross-functional understanding across diverse spheres such as business, logistics, biology, law, health, IT and mechanics – all of these are part of being a good food care specialist. Personally I do not see a shortage of such skills or resources in India. What is missing is an understanding of how these are to be applied in cold-chain, or even about the basics of cold-chain. With proper understanding of how and why a cold-chain functions, the relevant skill sets are developed and excelled upon by individuals once they are following on the job disciplines and these are best guided by the needs and operating processes of their organisation. Keeping your skills relevant and alive is an ongoing and recurring affair as it is the application phase of knowledge. Skills cannot be properly developed if there is lack of knowledge or no capacity to understand. Much like how your
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Interview build capacity in subjects such that in the operational world you can develop it into relevant skills. NCCD is of the opinion that such capacity building should be the focus area in case of cold-chain. While we do have technicians and professionals who are currently installing and commissioning the new projects, we require better business understanding to succeed in this sector. NCCD undertakes capacity development programs so as to instil better understanding about cold-chain. This is done for its member-base as well for Government officers tasked with developing this sector. NCCD developed a special curriculum for such capacity building and these are implemented through programs held with our members. One such curriculum is implemented at the Danfoss Learning Facility in Chennai, on successful completion of which the trainees are issued a certificate from NCCD. Another NCCD devised syllabus was implemented by Cemafroid of Group Tecnea in France wherein about 30 Indians from industry and government were trained. Besides these capacity building initiatives, NCCD is also holding almost 70 workshops on skill development for fruit ripening operations. In these workshops, the participants are provided some hands on training as well as provided knowledge on using bank loans 15
and government subsidy for building their own facility. To provide more impetus to such knowledge dissemination, colleges' students should set up special groups and debate on coldchain specific subjects. NCCD is
always happy to assist such interlocution. 9. A recent report by IMechE (Institute of Mechanical Engineers) suggested investment in Indian cold chain market could reach US$ 15 billion in next five years. Most of this growth will be driven by the private sector. What role will the government play in supporting this? The figure quoted by IMechE was provided by NCCD and we may inform your readers that this amount is not only for creation of new infrastructure but includes many other aspects for development. A breakup of these figures may be seen on the NCCD website. All this future development should happen by private sector as the need is evident and the opportunity very real. The government is already playing a major role by providing a series of
Operations & Supply Chain Club, IIM Raipur
fiscal and financial incentives to fast track such development. Almost all the major bottlenecks are being addressed by the Central Government and most State Governments are also facilitating cold-chain development. To ensure that attractive incentives are not the prime motive for private developers, various checks and balances are also implemented to minimise wasting of effort and funds. The central government has allocated more than Rs 5000 crores to incentivise such development. Another Rs 5000 crores low cost funding window is being opened via NABARD in this month. Besides these financial options, a 150% capital investment linked tax deduction is also allowed. Various Excise and Service tax exemptions are also provided for cold-chain users. 10. How effective the government policies such as allowing 100 percent FDI in food processing, ECB route for cold chain investments, etc. have been, in developing the required infrastructure? Almost all the recent cold-chain infrastructure development is a direct result of positive policies by our government. Some FDI partnerships have happened and more importantly, many young entrepreneurs have understood the concept and set up business with government support. Almost every two months or even earlier,
Cold Chain Logistics- A Historical perspective the government sanctions dozens of cold-chain projects across the country. Whereas earlier cold chains were setup with export markets in mind or for long term storage of certain crops only, now we increasingly see cold chains being setup to service the domestic consumer also. In case of products like ice cream, milk and other branded temperature sensitive foods, cold-chain is used exclusively. In case of health sector also, it has been the government policies and support that brought about nationwide delivery system of vaccines and the eradication of polio. The biggest vacuum exists in our fruits and vegetables sector and here is where the most development is also happening. Cold-chain for horticulture produce is the declared thrust area and accordingly provided the most of government support. Now it is the private industry and entrepreneurs who have to take it forward faster. 11. What effect do you think the implementation of GST will have on the cold chain infrastructure and practices? Not much - especially in case of fruits and vegetables because handling of agricultural produce is not subject to service tax and its sales is not taxed. In any case, an effective cold-chain will not be a storage based model but will drive a Direct Access model. Cold-chains run against time and
countering perishability is its prime motive which decides its choice of infrastructure location. Cold-chain always practices to do away with multiple touch points and optimises operations so as to run between OD pairs. Further, the opportunity is so large for the food product owner that taxation will not be a prime concern.
Railways owns all its infrastructure and integrates its operations. In the other case, the airport owners are different, the aircraft owners are multiple, the engineering sheds has another o w n e r, e t c . – t h e e n t i r e infrastructure is fragmented. Yet, this fragmentation works in an integrated fashion too.
In case of some other items that use cold-chain, the impact of GST will be similar as in case of noncold-chain logistics.
Very few businesses in the world develop their own infrastructure i n e n t i r e t y, i n s t e a d t h e y collaborate with others to set up vast networks. In the cold-chain too, it is for the industry to develop proper processes and handshakes so that they can lever each other's ownership for the good of the trade.
12. The current cold chain industry in India is highly fragmented with very few major players. How do you think the industry will evolve in the coming years? This is because need based cold storages were mostly developed by individuals, with trade in commodity as their model. Wherever a cold-chain with a service bias was built, these have been developed in an integrated fashion. The most famous example is that of Snowman Logistics and McDonalds network by RK Foodlands. In the latter, the cold-chain functions for its own goods as well as for other users, in the first it functions only to provide services to other product owners through its panIndia network. Fragmented ownership of the infrastructure is not a problem, it is fragmented operations and missing infrastructure that is the problem. For example our railways and airways have differing models – the Indian
Of course, the main business in case of cold-chain is the perishable goods it moves and hence the goods owner has the highest motivation to make the most of such service. In case of ice cream producers, they enforce it through service level agreements all the way from factory to outlet. In case of frutis and vegetables, the produce owners do not have the capacity to enforce such an agreement. This will soon change as more development happens to form Farmer Producer Companies and the produce owner becomes bigger. Understand what is the cold-chain and what are the multiple ownerships involved – on this basis you will realise how it accordingly develops in various formats. If a producer owner develops the infrastructure, he or she will have a set of priorities that will most likely lead to create an
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Interview integrated conduit to market. In coming years you are likely to see this as well as more consolidation in operations among different asset owners, working together towards higher profitability.
refrigerants with high ozone depleting and global warming potentials. NCCD is also interacting with United Nations environment programme (UNEP) to collaborate on such environmental concerns.
13. What role the various stakeholders are playing towards building sustainability in the cold chain development efforts? Or is it too early to make the transition toward green cold chain in Indian context?
Furthermore, with adaption of NCCD's recommendations, India is the first country in the world that incentivises the cold-chain to use geo-thermal, solar thermal and voltaic, and other alternate energy models. In fact, NCCD is
India has among the most environmentally friendly cold chains in the world. Sadly, this is misunderstood and poorly projected. Almost 97% of our 31 million tons of cold storage capacity uses the greenest of refrigerants, ammonia with zero ODP and GWP. Conversely, in Europe more than 40% of their installations use HCFC (HydroChloro-Fluro-Carbon) based
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Operations & Supply Chain Club, IIM Raipur
proud to have moved policies that will keep the Indian cold-chain hot and make it global example in environmentally friendly terms. NCCD is also inviting innovative ideas to implement capturing stranded cold from LNG terminals for use in cold-chain. In fact a challenge was made by NCCD at an IMechE workshop in London and we are hoping to have some indigenised inputs too for implementation.
Academia
What's hot about cold supply chains in academic literature? VINAY KUMAR KALAKBANDI
Vinay Kumar Kalakbandi is a Fellow in Production and Operations Management from Indian Institute of Management Bangalore. He holds a Masters of Technology degree in Industrial Engineering and Operations Research from Indian Institute of Technology, Bombay. His areas of research include Behavioral Operations Management, Judgment and Decision Making, Supply Chain Management, and Advertising Analytics.
M
anagement of wastage, spoilage and expiry continues to remain a major challenge for the grocery and pharmaceutical supply chain managers. Managing perishable goods is getting more and more challenging due to consumer demand driven perpetual increase in volumes and variety of perishable products. A 2008 Joint Industry Unsalables Report estimates a loss of $15 billion due to unsalable inventory to the food, beverage, health and beauty industries. The sheer magnitude of these largely avoidable losses has stimulated academic research into the management of
perishable products. Perishable products have been the focus of a plethora of academic work in inventory management and optimization techniques starting from the classical newsvendor model which deals with making stocking decisions of a time sensitive product which would need to be salvaged in the subsequent time period. The single period perishable product inventory model in operations literature can be traced back to the classical Econometrica paper by . The various generalizations of the perishable goods inventory models rely on the basic structure as defined by Volume 4 issue 1 November 2014
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Academia Arrow, Harris and Marschak (1951). The most common generalization that could be found in academic literature on perishable products inventory management dealt with the shelf life of the product. The assumption of a single period shelf life was very limiting and therefore researchers extended the inventory models to products with shelf life higher than a single time period. The perishability characteristics of products were assumed either to be deterministic or stochastic and were considered to be exogenous and that nothing could be done to impact the shelf lives. The key challenge to the decision makers would be develop an inventory management policy to balance availability to avoid losing sales and product loss due to deterioration. Goyal and Giri (2001) provides an exhaustive review of the inventory policies and solution procedures under both these scenarios. Of primary focus in this literature was with respect to the inventory issuance policies: Last-In-First-Out (LIFO); First-In-FirstOut (FIFO) and a comparative analysis of these policies. While FIFO is the usual assumption in operations literature in the interest of model tractability, literature on consumer research has shown that FIFO is usually prevalent since consumers prefer to choose products with higher life times than those with lower lifetimes when both are available. The aforementioned theoretical work makes simplifying assumptions on the product deterioration, in that, they are fixed or follow a known distribution. In reality, the deterioration of perishable products is dependent of a plethora of environmental factors like temperature, humidity, handling and lighting. Technological advancements in cold chain storage and logistics enabled these environmental factors to be effectively controlled thus bringing about further complexity into the decision making process of the supply chain manager. While previously the supply chain manager was merely trading off lost sales and product wastage, now, yet another decision variable that impacts supply chain costs, the level of utilization of cold storage technologies within the supply chain was to be considered. Academic work in this context includes the usage of optimization 19
Operations & Supply Chain Club, IIM Raipur
techniques to design and operate perishable product distribution systems. While cold supply chains have been active for a long time now, the data on their effective usage was not available to the decision makers previously. With the advent of radio-frequency identification (RFID) chips, data loggers, and time–temperature integrators, supply chain managers now have the ability to track, record, and transmit the time and temperature history (TTH) of inventory further complicating the overall challenge for the supply chain managers. The intended use of these technologies is easy identification of food/health safety issues and accurate shelf life prediction. Data from these devices could also be used to come up superior inventory issuance policies like the FEFO (First to expire first) which can further optimize the overall costs of the supply chains. The temperature history information could also further be used for efficient inventory allocation based on proximity, cold chain infrastructure availability of the customer warehouse. Even after decades of research on perishable inventory models, there is plenty of scope for new avenues of research with respect to perishable goods supply chains. This can be attributed to the technological innovations providing additional levers to the supply chain managers to optimize supply chains. As long as this happens, the research trail of cold supply chains would not go cold and would remain piping hot! Bibliography Arrow, K. J, T Harris, and J Marschak. "Optimal inventory policy." Econometrics: Hournal of the Econometric Society, 1951: 250-272. Goyal, S. K., and B. C Giri. "Recent trends in modeling of deteriorating inventory." Europran Journal of Operations Research, 2001: 1-16. Ketzenberg, Michael, Jacqueline Bloemhof, and Gary Gaukler. "Managing Perishables with Time and Temperature History." Production and Operations Management, 2014: Early View.
Trends
Market Trends in Food and Cold Chain Logistics Abstract: With the amount of food wastage that India is presently sufferings from several steps should be taken to control the scenario. The article briefs through the facts and figures of Indian cold chain industry and its present scenario clearly signifying the importance and need for action.
Issac Solomon is a PGP student of IIM Raipur. He completed his graduation in ECE from Rajalakshmi Engineering College, Chennai. He has worked for 31 months with Nokia Siemens Networks. He can be reached at pgp13020.issac@iimraipur.ac.in
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he cold chain involves storage and transportation of products which are temperature sensitive and are likely to go waste if not protected through thermal and refrigerated packaging methods. The transportation could be done through trucks, railcars and refrigerated cargo ships or through air cargo. The cold chain is a critical factor to extend the shelf life, marketing period, avoiding over capacity and maintaining quality of these perishable goods. Development of this industry in a country like India where agriculture contributes 14% of country's GDP becomes a directive to reduce wastages and in turn providing remunerative prices to the growers. Cold
supply chain is also the backbone in the pharmaceutical industry and helps in maintaining drug efficacy through the supply chain by providing temperature controlled environment to sensitive drugs. Further dairy, horticulture, floriculture, confectionary, poultry etc. also operate cold supply chains. Demand for efficient warehouse management has increased with the growth of domestic manufacturing and retail segments in the country. Even with such pressing requirements, warehousing has seen very little investment in the country. Currently, spending in organized warehousing in India is only 9% of the total logistics spending Volume 4 issue 1 November 2014
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Trends (against 25% in the US). Logistics costs account for around 6-10% of total retail cost which is higher than the global average of 4-5%. Improvements in the supply chain and logistics Potato 13%(2nd) can bridge this gap. An integrated supply chain Brinjal 28% (2nd) (including the cold supply chain) can save more than ? 300 billion for the country. This along Caulifl‌ 36% (2nd) with saving perishable horticulture produce Onion 20% (2nd) should be an incentive to develop logistics Cashe‌ 17% (2nd) infrastructure in a country like India plagued with inflation and hunger. The integrated cold Papaya 38% (1st) chain industry of India (both surface storage and Banana 29% (1st) refrigerated transport) has been growing at a CAGR of ~20% for the last three years and is Mango 39% (1st) expected to be over Rs 600 Billion by 2017. Cold 0% 10% 20% 30% 40% 50% chain infrastructure includes cold storage % of World Production infrastructure, transport and point of production infrastructure. There are around 6300 cold Indian Pulses & Cereals Production and storages in India designed originally for single Rank compared with World's commodity storage. This accounts for storing only 11% of the country's total produce. While Lentils 33% (2nd) over 105 Million MT of perishable goods is being transported annually within India, only 4% Peas, Green 21%(2nd) are transported via cold storage. 60% of storage facility is located in 4 states: Gujarat, UP, West Rice, Paddy 21% (1st) Bengal and Punjab. Tamil Nadu had only 0.0239 million metric tonnes of actual cold storage Beans, dry 25% (1st) capacity but required 7.906 million metric Chick peas 66% (1st) tonnes of capacity, leaving a 97 per cent shortfall in 2010. An investment of Rs. 550.74 billion in 0% 20% 40% 60% 80% new cold storage is required by 2016-17 to keep % of World Production up with the fruit & vegetable demand. There are around 3500 players in cold storage market with Annual cummulative wastage across commodities w.r.t. % of Food production 85% are cold chain solution provider and remaining 15% provide transportation service. Milk 0.80% The market is very fragmented with many small Meats players. The organized players contribute only 8 2.30% to 10% of cold chain market. Fisheries 2.90%
Indian Fruits & Vegetables Production and Rank compared with World's
Poultry
3.90%
Cereals
6%
Oil Seeds
6%
Pulses
6.10%
Fruits & Vegetables
18% 0%
5%
10%
15%
% of World Production
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Operations & Supply Chain Club, IIM Raipur
20%
India, blessed with varied agro climatic conditions, is capable of growing a large number of horticulture crops such as vegetables, fruits, aromatic plants herbs and spices. India is one of the largest producers of horticulture crops in the world. However, India is way behind countries like China and the US in yield per hectare and stores only two percent of its produce in
Market Trends in Food and Cold Chain Logistics
temperature controlled condition. This is though the fact that the country has adequate abilities to store ten percent of its yield. Of the total produce, 30-40% is wasted before consumption due to inadequacies in the supply chain. Cold storage in India has been largely adopted for long-term storage of potatoes, onions and high value crops like apples, grapes and flowers. 75 percent of the cold storage capacity is used to store potatoes, while only 23 percent fall in the multi-product category. Cold storages for meat, fish and dairy items and for other items such as chilies and other spices account for only 1 percent of total cold storage capacity. These cold storages are also usually smaller in capacity. Some of the challenges faced by Indian cold chain industry is as follows: ? High real estate cost ? High energy cost coupled with frequent power
cuts leading to installation of back-up power in return increasing the operating costs. ? Type of storage facilities- mostly a single
commodity facility
? Most of storage facility is located close to
consumption points leading to uneven distribution of cold storage facility. ? Low awareness about the importance cold
chain development Enhancement in the cold storage capacity would be very beneficial to both the farmer and the consumer as it minimizes wastages and provides fresher and off-seasonal food items to the consumers. The government understanding the need for cold supply chain infrastructure has opened up FDI up to 51% in the industry. This, the government hopes will attract prospective foreign investment into the country. A further focus that the government needs to have is on the old and inefficient technology that is currently in place. Automation with mechanized operations and more hygiene operating conditions needs to be brought into the system. Government is implementing schemes for capital investment subsidy from the National Horticulture Board, the National Horticulture Mission and the Ministry for Food Processing Industries for investors to set up cold chain infrastructure. Nation Centre for cold Volume 4 issue 1 November 2014
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Trends Cold Chain Development which would help in standardization through international benchmarking and promote research and developmental activities in the cold chain sector has been setup by the government. Indian Railways also are helping out to set up cold chain infrastructure by facilitating in transportation. References: http://www.onicra.com/images/pdf/publications ?
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Operations & Supply Chain Club, IIM Raipur
/coldchainindustryreportjune2014.pdf http://www.reuters.com/article/2012/08/27/idU ? S56497+27-Aug-2012+BW20120827 http://www.asiafoodjournal.com/article/india? cold-chain-market-forecast-to-reach-11b-by2017/8771 http://www.emerson.com/SiteCollectionDocum ? ents/India%20Cold%20Storage%20Report%20201 3/Report_layout_Reduced.pdf
Trends
Cold Chain Management in Pharmaceuticals Abstract: Pharmaceutical industry employs cold chain management to protect the potency of drugs and vaccines before it is delivered to the customer. Temperature monitoring and control throughout the supply chain poses problems in managing the supply chain and therefore a careful planning of the cold chain is essential for the health care.
Kritika Swaminathan is a PGP student at IIM Raipur. She completed her graduation in Chemical engineering from Maulana Azad Institute of Technology, Bhopal. She has worked for 11 months with Samsung Heavy Industries. She can be reached at pgp13087.kritika@iimraipur.ac.in
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he World Health Organization (WHO) and the United Nations Children's Fund (UNICEF) have estimated overall wastage rates in developing countries at around 50%. An appropriate solution for reduction in this wastage and provide better the medical supplies to urban and rural regions a good cold chain management is necessary. As per the report by Healthcare Distribution Management Association, around 10% of drugs (200 billion dollars) in pharmaceutical distribution, are temperature sensitive and the cold chain logistical planning is used for protecting the value of the
material carried. The key elements of Cold Chain Logistics System are personnel for management of the supply chain, Equipment for storage and transportation and Procedures for monitoring and controlling the temperature and humidity conditions. For providing potent and effective vaccine to the beneficiaries, a vast cold chain infrastructure is required, which should have a network of Vaccine Stores, Walk-in-Coolers (WIC), Walk-in-Freezers (WIF), Deep Freezers (DF), Ice Lined Refrigerators (ILR), Refrigerated trucks, Vaccine vans, Cold boxes, Vaccine carriers and Icepacks.
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Trends Cold Chain Planning The following aspects are considered by a company (logistics department) while planning a pharmaceutical cold chain: ? Manufacturing: Characteristics of the product are assessed and the storage and transportation requirement are dealt in accordance with it. ? Vaccine Storage : All Vaccines are stored at a temperature higher than 0oC and lower than +8oC. Different storage temperatures are suitable for different levels in the cold chain cycle and each level requires different type of storage cold chain equipments depending on the quantity ,the duration, and the temperature needed for storage of medical supplies. Some of the widely used storage conditions are: Cold rooms, top-opening freezers, and icepack freezers differing in
cold life provided high to low. ? Vaccine Transportation: The mode of transport, the manner in which the goods are packed and the environment conditions must be such that it should be able to protect the vaccines from high temperature. It should be able to defend the vaccines against heat, humidity and freezing conditions and maintain the potency of the vaccine. Issues in pharmaceutical cold supply chain ? Handling the demand uncertainty caused by seasonal variation due to weather conditions and the diseases prevailing in it. ? Inability to handle excess inventory in the event of low demand due to the product sensitivity. ? Adulteration of product due to delays in time or pick-up, interrupted power supply, exposure to unregulated environmental conditions during handling. 25
Operations & Supply Chain Club, IIM Raipur
? Continuous weather conditions monitoring and equipping the system with sensors for proper control of the ambient conditions. ?
Quality maintenance and assurance while transportation and distribution of the product since its sensitive and may result in adverse reactions.
? Keeping a track of the improvements in technologies and cost containment. ?
Locating distribution nodes throughout regions in different nations that have infrastructure and flexible vehicle fleets to meet unexpected demand.
Although these problems are more related to the environmental conditions but a proper planning and compliance with necessary standards can help reduce the adversities. Use of high-tech equipments and good personnel training for monitoring the
process can help reduce the wastage of medical supplies. Good practices in the cold chain have been observed throughout by different companies an example of which is the practice followed in Abbott Laboratories . Post manufacturing of the drug , semi-finished product is sent to the distribution centre at 2-8oC then to the packaging site and finally to the customer. During the process temperature is tracked at each step ,a product stability profile is developed before transportation of product. Thermal Cycling Study and temperature excursion study is carried out to determine the appropriate storage conditions and the period of storage so that the potency of the drug is retained. Storage equipment is calibrated accordingly with sensors for constant monitoring and further shipment qualification conditions are determined which include the thermal and transportation qualification criteria that needs to be met for the
Cold Chain Management in Pharmaceuticals shipment to be dispatched to the desired destination Indian Scenario Samar Nath, Chief Executive Officer, DHL Global Forwarding, India, put forth his views on why supply chains are expensive. He says, “Providing lifesaving products is a big responsibility, one with risks that far outweigh those in a typical supply chain environment. The pharma industry has a significant
need for high-end logistics, given that these products
products.� The current pharmaceutical supply chain scenario in India is extremely complex with presence of more than 55,000 retail pharmacies which are spread across India. Indian pharma industry's strength is low-cost generic medicines which mostly do not require high end logistics. Hence supply chain operators in India have limited themselves to certain levels of logistics solutions. The demand for generic drug in emerging markets such as India, China and Brazil are expected to increase the need for low temperature handling and transportation facilities. As a result, it is estimated that the value in India is expected to expand at a CAGR of 23.9 per cent to reach US$ 55 billion by 2020. The market value of vaccine market in India is around USD 180.5 Million, which is growing at a healthy pace of around 25%-30% annually. WHO presented at the Cold Chain Logistics meeting in Geneva in February 2008, estimated that 40% of non-vaccine needs for 2008-2010 will be for cold chain and maintenance (22%) and vehicles and transport (18%). Currently the market value of temperature controlled vehicles which are deployed for the transportation of pharmaceutical products is more than USD 3.8 Million, which is likely to reach at around USD 17.1 Million in next five years. In India, large number of medicines and other such facilities are required to be transported to the distant areas through poorly connected routes. Due to the poor transport facilities , (becomes even more severe with emperature sensitive drugs such as Polio vaccines, life saving drugs, etc ) in India the cost of drugs is much higher than the USA or Europe. About 1/3rd of the revenues generated by the drugs companies have been spent on the transportation only , keeping drug prices under control continues to take a hit. They are mostly banking on sale of generic drugs.
are temperature-sensitive, require specialised handling and bespoke solutions. A robust infrastructure is vital to preserve their efficacy and ensure safe delivery without any damage to the
Ever wondered how and where pharma and bio companies are allocating their cold chain budget. Cold Chain logistics Euro 2012 Major bottle necks in pharma supply chain in India are mentioned in next pageVolume 4 issue 1 November 2014
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Trends Poor infrastructure, very high taxation, infrastructure boundaries (sales tax check posts), poor driver training facilities, no clear legislation for the road transport industry, very heavy corruption at
Under the 12th Five Year Plan (2012-2017), The Department of Pharmaceutical has asked for the assistance of around INR 50 Crore (USD 9.2 Million) for setting up the cold chain facilities across India. Way Forward Since Indian market is mostly low-cost generic medicines, supply chain operators limited themselves to certain levels of logistics solutions. A revamp of pharma supply chain is a immediate need as global trends shift towards in-life licensing, continuous manufacturing and value based pricing. A shift in industry trend from high volume to high value can be expected if pharma MNCs focus to drive to increase their R&D spend. This will increase vertical integration in terms of increased partnerships from raw material manufacturers (APIs, excipients and other chemicals – back ward integration) to pharma distribution companies (forward integration) in the overall pharma supply chain. References ? Cold Chain Management in Vaccines Logistics -
state boundaries, lack of wayside amenities, highly fragmented supplier base leading to rise of intermediaries and very low accountability by small suppliers in terms of service levels leading to high level of unreliability.
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Operations & Supply Chain Club, IIM Raipur
A Review Peer Reviewed http://archive.financialexpres s.com/news/indian ? -drug-firms-may-lose-out-as-us-pharma-supplychain-consolidates/1230616 ? ibef.org
Trends
Cold Chain Management of Fruit Industry Abstract: Cold chain logistics in fruit transportation in an Indian perspective introduces to what has been going around the world in the field of cold chain logistics. The Indian perspective is explained in brief with the problems being faced by the industry in India and bottlenecks hampering its growth. The different steps, which could be taken to improve the Supply Chain Management in fruit industry and their effects.
Anish Kumar is a PGP student at IIM Raipur. He completed his graduation in marine engineering from ISM Dhanbhad. He has worked for 35 months with Coal India Ltd. He can be reached at pgp14068.anish@iimraipur.ac.in
Movement of perishable commodities has become a necessity in the modern world. With the world being divided into producers and consumers, companies like Olam, Noble have bought large tracts of land in Africa where perishable goods are grown and then transported to consumption centers. In the most simplest of the terms cold chain logistics can be defined as temperature controlled supply chain and finds its major implications in industries concerning movement of perishable products like pharmaceuticals, Fruits and vegetables, dairy and meat. Cold chain may be defined as a “logistic system that provides a series of facilities for maintaining ideal storage conditions for perishables
from the point of production to the point of consumption.� Growth of Cold chain logistics has led to a situation where seasonality of fruits doesn't exist anymore. Supply chain Structure 1. Contracts are finalized and orders are placed with the farmers. 2. Mangoes are transported from farms to nearest refrigerated warehouses managed by the consolidators who collect the stock from all the farmers. 3. From consolidators, mangoes are transported to the different areas of India and for Volume 4 issue 1 November 2014
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I n d u sTt rrieanl dTs r e n d s shipping to the different ports. 4. From the local storages mangoes are transported to the market and from ports mangoes to be exported are transported to different countries using refrigerated containers called as reefers. 5. There is no concept of reverse logistics, as cost of sending the fruits back will have similar cost as procuring more and moreover the time limit available is very less, so these are just discarded. Why is Cold chain logistics so important in Indian Scenario? In India 64% of population directly or indirectly still relies on agriculture. A major part of India's population sleeps without food at night and still we are a country where 30% of farm products are wasted in supply chain due to poor infrastructure and poor handling of available resources. Considering that India produces more than 270mn tons of perishable goods these numbers become too big to be called as rational. Cold chain logistics in India - a combination of surface storage and refrigerated transport - has been growing at a CAGR of 20% for the last 3 years. The cold chain market in India is anticipated to reach INR 624 Billion by 2017. India has about 6300 cold storages in India designed for single commodity storage. One of the major things to be noticed here is that out of the total investment, government investments accounts for only 10% of the value and that too is marred by severe corruption. In the current scenario India produces about 40% and 25% of world's mangoes and bananas, respectively, ranking first in both the crops. Despite 1,000 varieties of mango production, exceeding 14mt over 1.3 million hectares, its exports accounted to only 83,703 tons, valued at 171crores in 2008-09 and India not even ranks in the top-10 among Mango exporting countries despite being the largest producer of mangoes in the world. One of the major problems, which India system faces, is absence of a channel master in the supply 29
Operations & Supply Chain Club, IIM Raipur
chain network like in US where retailers like Walmart have taken the role of channel master, managing the supply窶電emand situation and coordinating the supply chain and managing logistics. The bottlenecks faced by Indian Cold Chain Logistics industry which has hampered the development of Cold chain Infrastructure: 1. Static Infrastructure: In India it is very difficult to build a cold storage near a farm as it involves acquiring a major area of land and a change in CLU (Change of Land Use) permission is required. 2. Lack of fast track permit and lack of preferential financing by banks for cold chain logistics sector as it is concerned a nascent industry. 3. In India technology is imported in this sector, which makes it extremely difficult in setting up the business. Government does provide some incentives during setting time but no further incentives in imports for maintenance purposes, which is in itself highly capital incentive.
Farmers
Consolidators
Retailers
Customers
Advantages of a well designed Supply chain will offer: 1. Reduction product losses in transportation and storage. 2. Increase of sales. 3.
Dissemination of technology, advanced techniques, capital and knowledge among chain partners.
4. Better Information about the flow of products, markets and technologies. 5. Tracking and tracing to the source.
Industrial Trends Cold Chain Management in Fruit Industry 4. Better Information about the flow of products, markets and technologies. 5. Tracking and tracing to the source. 6. Better control of product safety and quality. 7. Large investments and risks are shared among partners n the chain. 8. Increasing efficiencies and increasing the volume of trade. 9. Customer satisfaction. India needs a more effective, efficient and wellthought-out cold storage infrastructure. No doubt that there has been efforts from both public and private sector like Reliance industries, Sanghvi Group and ESSAR Group are all involved in mango production. They offer their expertise to any farmer interested in learning and applying these expertise but still huge amount of work needs to be done. Private corporate houses need to contribute a lot more to this sector, which represents a large majority of India and caters to their livelihood. The future of Indian fruit industries lies in hands of the different stakeholders. It depends highly upon the way these stakeholders adapt to each other and to changing
technological environment .The technology of construction has undergone a phenomenal change from conventional brick wall construction to sandwich insulated panel and reinforced concrete (RCC) structures to pre-engineered buildings (PEB) steel structures. Energy-efficient practices like energy recovery systems, energy-efficient designs of refrigeration equipment and automation are some of the innovative features. Efforts to be taken to introduce the concept of green technology, as also the use of renewable energy for the cold chain sector. Special emphasis needs to be laid on development of reefer infrastructure in view of India's exports thrust and potential. It has huge potential in India and cons India being the largest producers of mangoes; bananas and apples worldwide can play a major role in boosting the Indian economy. Bibliography: 1. http://agritrade.iift.ac.in. 2. http://www.ripublication.com. 3. http://elkjournals.com 4. http://www.freshfruitportal.com. 5. http://www.freshfruitportal.com.
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Concepto Mania- M What is MFP? The Scheme of Mega Food Park aims at providing a mechanism to link agricultural production to the market by bringing together farmers, processors and retailers so as to ensure maximizing value addition, minimizing wastages, increasing farmers' income and creating employment opportunities particularly in rural sector.
What are its benefits? Processors & Retailers
Farmers
Government
post-harvest
? This integrated food park
? Benefit 6000 farmers /
? Shifting the farmers to
will help us reduce supply chain costs
producers directly and 25000-30000 farmers indirectly
? Reducing
losses more market driven and profitable farming activities ? Additional
generation farmers
income for the
? Maintenance
of the supply chain in sustainable manner
? It will be a one stop shop ? Common facilities thus
reducing operating costs ? Improve
quality and hygiene to create food products in the country
What kind of support is provided by Government? ? Aims to
encourage public-private partnership in creating rural infrastructure in food processing sector
? Financial Support ? A special purpose vehicle (SPV) would be
created to set up of MFP ? SPV can
be constituted by stakeholders like FI Banks, PE firms, Org. Retailers, Food processors, infrastructure developers etc.
? SPV to bring at least 20% of project
cost
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Operations & Supply Chain Club, IIM Raipur
? Reduction
in wastage across the food value chain in India
? New employment
opportunities to ~40,000 people created within rural area further will reducing rural-urban migration, unplanned u r b a n i z a t i o n , slums/social problems in cities
EGA FOOD PARK What is the operating model of MFP? ? Cluster approach - Cluster of agri/ horticultural-processing zone containing state-of-the
art processing facilities with support infrastructure and well-established supply chain ? Hub & Spoke model
What are the facilities provided in MFP?
Volume 4 issue 1 November 2014
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Regular
Book Review
Logistics Outsourcing in Food Processing Industry
Ravi Kumar Singh is a PGP student at IIM Raipur. He completed his graduation in Metallurgical & Materials Engineering from VNIT Nagpur. He has 33 months of work experience with Indian Steel and Wire Products Ltd. He can be reached at pgp13103.ravi@iimraipur.ac.in
T
he book presents a unique effort by the author to understand the aspects of logistics in the ever-growing food processing sector. The author, who is a PhD candidate at Wageningen University, has limited the study to Dutch and Taiwanese food processing companies. The author believes that Taiwan, with its growing food processing sector, is on the same growth trajectory as The Netherlands. The Netherlands, known internationally as the logistics and distribution hub of Europe and currently being the world leader in food processing, serves a great learning model for 33
Operations & Supply Chain Club, IIM Raipur
Taiwan due to its similarity in terms of land size, location and the importance of the agrifood industry. In the book, the author has put forward a logistics outsourcing decision making framework. The framework is developed based on extensive primary and secondary research, which the author has highlighted in the book. This framework tries to answer two basic questions - What kind of logistics activities can be outsourced by food processors? And what decision criteria are considered when outsourcing logistics activities? Author's framework is capable of answering these questions at the basic
Book Review- Logistics Outsourcing in Food Processing Industry level. However, the complex nature of any practical logistics situation will need more research and a more robust/refined framework.
lacks multiple scenario propositions to understand the direct impact of outsourcing decision on the perceived service performance.
The book also presents extensive research into the relationship between the outsourcing decisions at each level of logistics activities. The key research question the author has focused upon is what decision-making criteria are considered by food processors when outsourcing a certain level of logistics activities? Asset specificity, performance measurement uncertainty, core competency and supply chain complexity are the relevant areas which can be linked to the key research questions for better insights. In an earlier research by Beaumont and Sohal (2004), they had found that total in-house logistics outsourcing can help respond quickly to customer needs. Likewise, the findings of this book reveal that only total outsourcing shows service benefits. In total outsourcing, the LSPs (4PLs) take full control of the manufacturer's logistics operation from daily transportation to strategic planning activities such as relocation of warehouses or selection of road and ocean carriers. Through network optimization, 4PLs could help manufacturers to cope with high demand complexity because 4PLs often have superior capabilities in assembling and managing multiple resources.
The author has come up with some interesting results upon comparing the logistics outsourcing activities of companies in Netherlands and Taiwan. Only a few companies (about 10%) outsource level 4 activities. In particular, the Netherlands has higher percentages for levels 1 and 3. Taiwan will outsource level 2 (40%) and 4 activities (36%) much more than the Netherlands (resp. 13% and 17%). It is clear from the research in the book that logistics strategy and supply chain complexity were related to the outsourcing levels. Dutch firms aim for higher flexibility. Taiwanese firms focus more on low costs. Furthermore, most of the Dutch firms operates under higher supply chain complexities than Taiwanese firms.
The book further investigates the impact of different levels of logistics activities on logistics performance of companies in the food processing industry. It elucidates how outsourcing can be a valueenhancing activity. The book presents insights that help to advance our understanding of the relationship between the outsourcing decision, outsourcing level and a firm's logistics service performance. However, in such situations, the supply chain complexity may play a moderating role in the proposed relationships. In this regard, the book
A major limitation of this study is that to test the propositions/hypotheses, however, cross-sectional data is used. Ideally, it would be desirable to use longitudinal data, i.e. measuring the independent variable service performance at a later moment in time than the independent variables. Overall, the book serves a good example of a quality, clear and concise research in fewer than 100 pages. However, for a more global relevance of this research, it is necessary to adapt the study to various types of food processing industry in different countries factoring in industry maturity levels. The basic framework of research used in this book is quite robust and can be a sound foundation for further research. The findings of this book provide equally interesting views to scholars on theoretical debates as well as to managers in food processing industry who are looking for a successful outsourcing experience.
Volume 4 issue 1 November 2014
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Crossword
Across 3. This e-Commerce giant is testing the use of U.S postal service trucks to deliver meat, vegetables and other groceries to consumers. 6.
____________ is the world leader in the manufacture of cold chain systems.
9.
________is mandated with the responsibility of promotion and development of the export of its scheduled products in India.
12. The only Quick Service Restraunt to feature in the top 25 Supply Chains in Gartner.com ranked second is _____ 13. ______ is the world's largest milk producer, second largest producer of fruit and vegetables and third largest producer of food grains. 14. The shortage of this vegetable in 2010 pushed the Indian government to stop export and scrap the import tax on the same vegetable to bolster supplies. 16. The items in cold chain during transportation and when in transient storage are called as________
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Operations & Supply Chain Club, IIM Raipur
Crossword
18. _______ is a flagship program of MPFI to provide state-of-the-art infrastructure in food processing sector. 19. In India ____________is an autonomous centre of excellence to be established as a registered society to work in collaboration with industry and other stake holders to promote and develop Integrated cold chain.
Down 1.
_________ Generic name for a temperature controlled container, which can be a van, small truck, a semi or a standard ISO container.
2.
__________ logistics is the biggest and the only pan India cold chain logistics provider in India.
4.
_________ is the India's cold storage hub for the storage of potatoes containing 7% of India's cold storage capacities.
5.
The Golden Pallet award is sponsored by Food Logistics, are the first industry awards to recognise the excellence in _______
6.
The Global Food Cold Chain Council was formed at the special United Nations _________ Summit 2014.
7.
______ has a manufacturing plant in Pune that supplies ice creams to the entire South Asia.
8.
_________refers to the stages of the production of food: harvesting, storage, processing, packaging, sales, and consumption.
10. The loss of fruit and agriculture products in India due to pilferage and spoilage is mainly attributed to the lack of ____ infrastructure 11. Operation _______ by NDDB which was the biggest dairy development program that made India a selfsufficient nation in milk production 15. This company tested its drones to deliver first aid kit, candy bars...etc. in Australia under the "Project Wing" 17. _____________ has been named as the top 3PL and Cold storage provider for 2014 by Food Logistics, a respected industry trade publication.
Volume 4 issue 1 November 2014
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Answer Key
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Operations & Supply Chain Club, IIM Raipur
About OPEP OPEP, The Operations and Supply Chain Club of IIM Raipur endeavors to facilitate sharing of knowledge in the field of Operations and Supply Chain Management through activities such as Inhouse Activities
Fortnightly Newletter OPULSE
Industrial Visit to Bhillai Steel Plant in February 2013
Intra-college Competitions
Simulation Game on real estate
OPEP Quiz on 21st August 2014
Upcoming Inter-college events ? Cogitate- A case study competition ? Simulation Game
Events Team Sameer Pandey Bharat Aarava Vanamamalai R Charles Vasanth Anish Kumar
Cover Page Credits: Rajesh Jangam
Strive Team Ruchi Sao Rahul Ranjan Anudeep
PR & Media Team Gautham Jayan Sravana Mavudi Kiran Kumar Bora
Towards a More Food Secure World
For more details, please contact: Operations and Supply Chain Club Indian Institute of Management Raipur, Sejbahar, Raipur - 492 015. Email Id : opep@iimraipur.ac.in
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