12 Jan 2015

Decisions, decisions...Pack-house play

A modern pack-house is the initiator of the cold-chain for fruits and vegetables, and a cold store the midway platform. A pack-house is effectively the intelligent nerve centre of cold-chain, and it inherently sets off multiple logistics or supply lines catering to various demand centres. At such a pack-house, after the harvest is sorted into marketable or value based lots, they are then directed into different elemental value chains, some to continue within the cold-chain and some without.

©Pawanexh Kohli

As an integral part of the cold-chain, a modern pack-house not only preconditions or prepares designated volume for onward dispatch in the cold-chain, but after sifting the “raw arrivals” also feeds other supply lines which may not use temperature controlled technologies. A cold-chain business operator cannot ignore various other post-harvest market options for the produce they handle. If other market options do not exist, then these should be ardently pursued by the cold-chain business person, either to develop the utility or reaching out to others to do so.

It may not be obligatory that any cold-chain promoter develops her own processing units, but it would be preferable if able to extract the most out of all the material sourced. One is not obliged to directly develop all the infrastructure links in the chain, own rail wagons, or own an entire captive fleet of vehicles… Yet, every business mind knows, if one is able to extend control across the total value chain, the profits are better. A produce-owner model will aim to control and own at least a strategic share of the crucial links that contribute to the total value, while also outsourcing or partnering some assets. It is pleasing to report that some entrepreneurs who had established cold-chain logistics facilities at the back end are considering expanding into juicing units, etc.

In an industry still deemed (in some terms) fledging, where delivery services have a direct impact on the value realisation and where maximising such value requires other technological interventions, access to various physical links is necessary. Factoring in food processing units in business plans is sensible. A produce buyer, should preferably opt to be the marketer, and would find justification in owning or partnering with food processing units as these would be another source of revenue from his/her produce.
These aspects need to be understood when developing business models. Links to food processing units will be natural to a cold-chain business model.
The model discussed here is the produce-owner model, where revenue is dependent on offtake of the produce sourced. If the business model is limited to rent seeking on assets owned or for service provision, the strategic concerns would be comparable. 

Viewing the cold-chain exclusively as a purely logistics activity may be true when considered for pharmaceutical goods and certain other cargos or when viewed from the prism of literal interpretation. Yet, in appreciating the concept from the business perspective, as a fresh produce supply chain, the logistics is only an enabler for market access while the business of cold-chain would encompass areas across the entire supply chain, and all types of demand for the produce handled would come under its purview. A Cold logistics operator is service oriented and the business of cold-chain is produce oriented. 
Logistics, and associated infrastructure, is a tool for the supply chain and we must seek to projectise resource intensive models, the aim being to achieve and maximise gainful realisation.

- Pawanexh Kohli
Cold-chain Insights, 
NCCD Newsletter ISSN 2395-4515
Edn 8, 2014 (www.NCCD.gov.in)

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