CrossTree Blog

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Definitions are for convenience

At a recent formal discussion of a PPP proposal, the attending resource persons (consultants from one of big 5), rather categorically reasoned that food processing is not a part of cold-chain business and hence such units were not considered in the project under debate. Hearing such blanket statements is a very distressing experience, particularly when long term plans are being developed with the overarching aim of public good. Such single-minded differentiation between cold-chain and processing units stems from an academic or research bent of mind, inexperienced in matters of business. 

Yet, if the aim is optimal utilisation of resources, with profitability and success in mind, then these narrow interpretations need to be shed and put aside, firmly. In the world of commerce, reason relates to align opportunities, maximise revenue, increase profitability options - common business sense.

-for budding management consultants-
If one is in the business of cold-chain for perishable produce, then food processing units will be an integral part of their cold-chain network design, and these will need to be an important part of their business planning. The cold-chain in question was a produce-owner model that extended from farm-gate procurement all across to last mile distribution. This meant deploying the complete gamut of food logistics and in designing such a network, every consumption point ought to be factored in. Ignoring the role that food processing units play in enhancing revenue, in extracting and optimising and maximising value from harvest would be imprudent.

Every cold-chain promoter, especially one with backward integration with farmers, is advised to critically assess the ability to either set up a processing unit or of partnering with existing units so as to develop multiple consumption points or destinations for their produce. The only reason to ignore processing units will be paucity of resources or a lack of comprehension of how and why cold-chains make business sense. Even a cold logistics service provider will wish to link with processors.

To analogise, an overview of the fresh poultry business and how it has progressed over the years is put forth -

A few decades ago, live birds were transported and freshly slaughtered at point of sales in our cities. After end of each day, a lot of non-saleable leftovers was generated as waste – the offal was merely discarded, washed away. Today with the advent of cold-chain logistics, the fresh meat can be transported across long distance and this allowed the flourishing of organised poultry slaughterhouses. They have processing units as part of their business model, allowing the realisation of gainful value from parts of the carcass that would otherwise be redundant – giblets and sausages are the result (today even the unwanted feathers are brought into use for making paper, plastic, diapers, insulation, cosmetics, etc.).

Similar is the case with grapes, where the pomace (leftover skins, pulp, seeds, and stems) from grape pack-houses are processed into other gainful use, leading to enhanced value realisation.

This same principle is to be applied for fruits and vegetables, at source points of apples, mango, strawberry or others. The pack-house being the location where the raw harvest is sorted and aggregated by market linked quality. The resultant assortments, are directed towards distinct value realisation routes – the late harvest produce to local close by markets for a fast sale (in which case no cold technology may be needed), whereas the assortment that is judged safe for long travel would undergo preparation for such travel.

This latter category would be subject to suitable cleaning, trimming, de-sapping, washing, etc, before being graded and packaged into transportable lots. Thereafter, a dose of rapid precooling would prepare the packaged load for staging for shipment by rail or road to the next destination in the logistics chain.

There would be yet another assortment, evaluated as unsuitable for the fresh market, being slightly overripe or late harvest quality or visually indented, etc. This sorted volume, if discarded would be a loss, and typically no business-minded person would prefer this to happen. This is where a facility for juicing, pulping, jelly making, pickling, etc. comes handy. Such facilities allow for further value to be appropriated and hence allows for majority of the raw procurement to get gainfully used. If there are no processing units factored into the plan, owned or in collaboration, captive or as a market network, the weakest link in the value chain is hit with the most loss, with no recourse to mitigating such loss!

Any Business strategy must involve collaborating and integrating activities so as to a capture the most of the value chain. In doing so, the business is better at competing, profiting and succeeding. Strategic planning should not be limited by prejudiced definitions and must always leave scope for resource integration.
-Pawanexh Kohli