11 Jul 2011

Get inside the box but think outside

India Advantage

The inherent advantages of India; growing productivity, growing demand, growing purchasing parity, growing aspirations, are a business opportunity of enormous potential. At a domestic level, malls and food courts span across the country, even in Tier-II and Tier-III cities, stocking abundant quantities of perishable food to cater to this ever-increasing market.

A well-defined logistics and cold supply chain system if properly harnessed could equip the country to feed not just its own people, but the rest of the world. Apart from rejuvenating its own economy, India could truly impact be the food basket of the world; proviso is that we have to have an efficient cold chain supply system. Only the cold chain will allow India to expand its portfolio of food exports to Europe, Dubai, Singapore, the US and maybe, one day, Africa.

The market for cold chain supply systems is estimated to balloon to $9 billion by 2015.  But these estimates depend on the cold chain developing beyond its misconceived notion of storage space and to develop into an integrated supply chain system. Through my website, one has tried long to clear many of the misconceptions about the industry which now stands on the threshold of growth. The industry, however, will have to clear the obstacles in its path before it can dream of unfettered growth.

Poor Knowledge, Hard Realities

Quite a few times, it is said that the demand for quality cold chains is weak, because high costs prevent usage and the user companies are willing to live with compromise.

There are deeper reasons for cold chains not developing in a holistic manner, for this malaise. The industry has been established “in a very fragmented and unstructured way” by small and medium enterprises (SMEs) and single entrepreneurs in a manner which has not permitted or augured well for development of appropriate skill sets. The ground work has to be laid out carefully for any new industry which starts off. 

After all, even with the software industry it took 12-15 years before it reached the stage where an Infosys could happen. So similarly, the cold chain industry which at one level has been around for 25 years, but at another level; where we talk about a processes, organized sourcing and moving of goods from one place to another, it has happened at a real scale for not more than four or five years. So it has barely taken off yet, as a profession in India.

The complicated nature of cold chain has also hampered growth. In any other supply chain when a factory manufactures a product, the supply chain delivers it to the market, with an attractive price realisation accruing to the product. The cold supply chain is the only supply chain which not only transports the value of the product, but actually affects the value realization of the cargo.

This is due to the fact that the cold supply chain transports fresh products which have to be delivered in a particular time matrix, else the price declines. Defective supply-chain Service Level Agreements (SLAs) and an inability to maintain required parameters force the services to slide further. 

Any ordinary person who is allured into this business, is suddenly affected by debit notes, and penalties because he did not realize the operational excellence that needs to be maintained. While the rest of the supply chain says ‘I’m carrying boxes’, but in the cold chain you need to understand the product.

A further impediment to the development of cold supply chains has been the government’s inability to understand the industry. For the government, the growth of cold chains has been unfortunately linked with the construction of cold stores which are just a component in a complicated supply chain. Industry sources reveal that over the last 20 years the government has indulgently loosened its purse strings for the construction of cold stores. This has led to a proliferation of cold stores, focused on the easy stuff, fresh potatoes. 

The construction of cold stores cannot be arbitrarily equated with the development of the cold supply chain industry. Anyone who sells anything knows that you need to move to the market. And how is the situation in the cold chain sector, we have 12 percent of transport and 88 percent of storage when it should be the right opposite! You produce something... please move to the market, reach the consumer and sell it. Don’t store it, for God’s sake!

The trade must get inside the box, understand the cargo, serve the need. And its leaders must think outside the box, understand the future, prepare to serve the world.

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