Packaging And Raw Material Industry

Published Date: 02 Nov 2017

To understand the losses encountered in Agriculture Supply chain .

The main purpose here is to understand how losses in agriculture supply chain lead to wastage of food.

1.2 Introduction & Background:

Agribusiness commits 16.6% to GDP, 15.2% of aggregate fares and furnishes vocation to 58.4% of nation's work energy. As specified in the FICCI report of October 2011 India is the second most astounding products of the soil maker on the planet (134.5 million tones) with cold storage facilities accessible just for 10% of the produce.

The sustenance production network is unpredictable with perishable merchandise and various little stakeholders. In India, the base interfacing the aforementioned partners is exceptionally frail. Every stakeholder: farmers, wholesalers, food manufacturers, retailers all work in the same area. Request anticipating aka demand forecasting is completely missing and the agriculturists attempt to prod what they generate into the business sector.

Information incorporation, money related rush administration, supply-mandate matching, community determining, informative content offering, merchandise development synchronization through productive transport planning, are great drilled in elevated innovation businesses with enormous profits. The aforementioned most fittingly practices may as well discover their route into the nourishment supply chains.

Cold chain logistics supply chains may as well make the most of innovation enhancements in information catch and handling, feature following and following, synchronized cargo transport travel times for time pressure along the production network and supply-request matching. Likewise, the production network needs to be composed and manufactured in general in a combined way with the techniques of new feature growth, obtainment and request to conveyance forms decently outlined and decently underpinned utilizing IT devices and programming.

India has an immense chance to get a heading worldwide sustenance supplier if just it has the right advertising methods and obviously dexterous, adjustable and productive store network

1.3 Scope of the study:

Out of the entire agriculture supply chain, selective wastage for vegetables and fruits is taken. Major part of research is based out of wholesale markets of Khar , Dadar, Malad and Kurla. Through these markets, I have gained information from the wholesalers, traders, retailers, people involved in transportation of agriculture products. Also, I have tried to tap certain farmers around Mumbai, Pune. Further collected information from a few packaging industries who are involved in packaging of frozen vegetables and also make cans for fruits. In order to collect information A questionnaire has been used to target these various components of the supply chain.

1.4 Literature Review

Previously a research study titled " Can India be the food Basket for world" has been done by N Viswandham , ISB Hyderabad, The highlights of report are:

The food items can go to the final consumer from any of the three stages: from farmers in the form of fresh produce, from the manufacturer who directly who gives it to caterers, and finally from the retailer (small or big), which include the kirana stores to the big retail names like Big Bazaar, D-Mart to the consumer. The movement of goods from one stake holder to another is facilitated by the in house or third party logistics.

There is a 30% wastage in the Food Supply Chain, and the country has an accelerating number of dying mothers, malnourished children, mothers abandoning their children as they cant provide for them. The "Food Security Bill" and "Mid-Day meals" have not yet been able to address all the required issues in India.

Marginal losses have to be monitored at every single stage of the distribution network, not just at the final stages. Also we must realize that we do not have any facility for storage of the extra produced food grain. They are dumped in go downs, subject to mice and other insects, or they are left for the rain to rot them completely.

Another major issue is the absence of good infrastructural facilities in India, perishability is a major factor, and often due to bad infrastructure gets wasted mid way or due to the bad cold storage facilities.

Government Policies:

There is a high level of priority emphasized on the establishment of cold chains and the Government of India(GOI) has given the green light for such initiatives. 51% of foreign equity is permitted in the cold chain projects in India. All cold storage equipment and storages can be imported into India without any restrictions.

The Ministry of Agriculture has recommended an increase in the investment in the cold chain facilities of Rs. 2500 Cr, of which Rs. 625 is to be used as subsidy. Word to improve modernization of existing facilities has been put in, which costs an investment of Rs. 2100 crore, of which Rs. 525 crore is subsidy.

Mid day meal: This concept has been implemented for children, so that they attend schools. A concept wherein students are given meals during their lunches to keep their attention and interest to study.

2. Methods Used:

2.1 Research Design:

I have tried to identify the various losses in agriculture supply chain by segregation into various divisions and then tried to identify the problems at each levels of these divisions.

Points of identification –

What are the losses

Where the losses happen

How the losses happen

When these losses happen.

Understanding the losses helped gather some recommendations, which are listed later.

2.2 Sampling Design:

Sampling designs used is Cluster sampling.

Here the defined population coming under agriculture supply chain has been divided into subgroups like- Wholesalers, Transporters, Retailers, Manufacturing & Packaging industry. A certain number of samples, help discover all the losses.

2.3 Data Collection Method:

Primary method for data collection where a prepared questionnaire was used.

The questionnaire has been divided into 6 major parts, Questionnaire for

Wholesalers

Transporters( Truck/Lorry)

Retailers

Packaging and Raw material Industry

Farmers is the where the food supply chain starts from, but receiving information from them was difficult. Thus no primary data is collected, as I have been able to talk to just one farmer near Pune.

In Primary data used is the Personal Interview technique where respondents have been interviewed at Dadar , Kurla, Khar and Malad markets and retailers have also been questioned in Kandivali.

Information about Packaging industry has been taken through mail to the respective units, and previous experience.

Farmers have been questioned through telephone and personal interview techniques.

Certain data like the information about sector growth, the expected losses accounted by Food & Agriculture Ministry has been obtained from secondary data base.

2.4 Data Analysis:

Data analysis has been framed separately for each division chosen from the entire Agriculture supply chain. It is according to the questionnaire pattern formed.

2.4.1 Farmers:

The Objective of the analysis was to find out the wastages that occurred during the post production period as that is the beginning of the supply chain. The wastages mainly depended on the variety of products produced, shelf life of the produce, the area of sale and operation, the means of transport and storage used by the farmers. The produce mainly consisted of the green, leafy vegetables apart from a few farmers producing ground roots and fruits.

Fig 2.1

This showed that the farmers did not produce according to the perish ability factor of the product as the life of green and leafy vegetables is less than that of fruits and ground roots. This also indicates that whatever the farmers produced was sold immediately and there isn’t much wastage at the 1st stage.

The work force on the fields mainly comprised of the farmer and their families apart from a few employing outsiders. The families seem to be self employed. Around 80% of the fields wherein the workforce mainly comprised of family members. This shows that the farm sizes were comparatively small and the wastage was also less as compared to the remaining 20%

Around 50% of the produce is sold to the wholesalers and in the nearby localities. A very negligible number said that they sell it to nearby cities while around 33% said that they sell a part of their production in and around their locality.

A better option opted by the farmers is of selling the produce partly in both the dimensions (wholesalers & around locality).Here, it can be said that the wastage is in terms of transport that is used to suffice to the target areas. The ambiguity prevailed in the answers for the places where the farmers sold the production. Some refused to comment while the others answered vaguely. It mainly depended upon the farmers’ convenience to cost and effort.

The farmers refused to comment on their distributors. The possible reasons could be that the farmers weren’t so confident about the surveyors or they were conscious about the facts that were to be disclosed.

The markets varied marginally between the majorly known vashi, pune and dadar markets. About 75% of the respondents preferred vashi and pune markets. The monthly income was not disclosed by most of the respondents. One of them replied with a monthly income of more than Rs.5000.

The dissatisfaction prevailed in the entire sample regarding the margins given to them. A very few farmers who were well settled and who had multiple produces were satisfied with the margins. Overall, the margins received by the farmers are insufficient even to sustain in the existing markets.

The farmers on a whole were unaware of the damages and losses incurred while transportation but had a unanimous view that the wastages occurred while transport.

Fig 2.2

The biggest problem faced by the farmers (43%) is that of the improper storage facilities, this can be termed as lack of resources.

Most of the above options prevailed depending upon the circumstances and individual skill sets and perceptions about different stages of supply chain.

2.4.2.Wholesalers:

Wholesaler acts as middlemen in the channel of distribution as he buys agricultural produce (vegetables, fruits and food-grains) in large quantity from the farmers and sells it to retailers in small quantities.

Responses were collected from various wholesalers in order to gauge the problem areas in food supply chain from the wholesalers end. They were asked questions related to:

Their geographical area of operation

Price at which they bought and sold the products

Means of transportation they used

Types of storage facilities used by them

Views on how the losses can be avoided.

Fig 2.3

The wholesalers bought the agricultural produce from the farmers who were nearer to their area of operation i.e.: from Pune, Mumbai, Sangli, Satara, and Panvel.

The farmers sold their agricultural produce either to the commission agents who in turn pass it on to wholesalers or else they used to sell it directly to the wholesalers. The wholesalers usually paid a commission of about 2-5% to the farmers. The price quoted to the farmers at times also depended on the quantity of goods sold.

The means of transportation that was used by the wholesalers in food supply chain was observed to be mainly out-sourced. Self-owned vehicles were used by very few wholesalers. Also the distributors who were exclusively in the business of food-supply chain used the self-owned vehicles for transportation.

The wholesalers had to bear the cost of transportation for procuring the agricultural produce from farmers place. This cost ranged from Rs. 2000/- to Rs. 4000/-. No zakat was levied on the goods transported by wholesalers. (ZAKAT-is a wealth tax levied on agricultural produce and it is obligatory if they reach a minimum weight of 847 kilograms.)

Fig 2.4

The storage of the vegetables and fruits was mainly done in the warehouses. Only few wholesalers could afford using the cold storage facilities. Among the respondents there were some respondents who were using dried leaves to store the vegetables.

The wholesalers were of the view that rough handling during the transportation and market infrastructure is the prime reasons for the deterioration of the products. Appropriate handling of the products and usage of better storage facilities like cold storage, loading and weighing facilities, etc. can cut down on the losses.

2.4.3. Transporters (Trucks/Lorry):

A generalized survey has been carried out of the truck and lorry drivers in order to understand how they are an integral part of food supply chain. Set of questions were asked to them out of which certain information has been deciphered regarding what are the losses at their ends in the food supply chain.

Most of the transportation takes from Vashi (APMC) market to different parts of Mumbai and Maharashtra. Vegetables and fruits are brought from various corners of Maharashtra to Vashi for sale.

Incoming to Vashi market:

Sr No

Regions

Items

1

Nashik

Grapes, Sugarcane

2

Pune

Vegetables,Fruits

3

Devgad

Alphanso Mangoes

4

Vengurla

Mangoes

5

Chiplun

Vegetables, Fruits

6

Nagpur

Oranges

7

Ratnagiri

Alphanso

8

Sangli

Vegetables

Outgoing From Vashi:

Sr No

Regions

Items

1

Jogeshwari

Vegetable, Fruits

2

Dadar Market

Vegetable, Fruits

3

Bandra

Vegetables, Strawberry, Pear

4

Kalyan

Vegetables

5

Malad

Vegetables

6

Cuff Parade

Mangoes, Strawberry

7

Thane

Vegetables, Fruits

8

Khar

Vegetables

9

Kurla Market

Vegetables, Fruits

Frequency Of Transportation:

Depending upon the demand in the market vegetables and fruits are transported to various areas and are also procured at Vashi. This may vary depending upon the traveling distance as well as the shelf life of goods to be transported.

Fig 2.5

Losses seen at transporters end:

Major losses seen are through Pilferage at Vashi market itself. Thus in order to avoid these normally these people have about three to four people with them where two will act as hamaals where as one would be present to guard the truck to avoid thefts.

Another type of loss that occurs is through packaging and material handling. Sacks of vegetables, fruits tend to tear during loading and unloading which causes heavy losses. Also too much of material in one truck can cause vegetables like tomatoes to crush. The sacks and hard wood boxes Peti) used for packaging are susceptible to Moss in rainy season as well as insects (Keed). An approximate Rs 200 to 500 loss is amounted through these in a fortnight. Many of the traders also use hard cardboard boxes which are rendered useless during rains.

Seasonal variations tend to affect the shelf life of the products. Heavy losses amounting to Rs 1000 – Rs 2000 are seen during rainy season. This is mainly because shelf life of Leafy vegetables, Ground root vegetables reduces. Packaging material cost increases as plastic becomes a necessity. Transporters have to pay Rs 50 more to hamaals for adopting precautionary measures during material handling.

Breakdowns of vehicle tend to increase the lead time which also causes loss especially to those who have their own shops. Valuable time of early business is lost. Mostly this is avoided by having two or three vehicles running parallel on the same route (Crossing).

Rules and regulations also play a major role in losses. Trucks are weighed at Jakat nakas (Weighing Bridges) in order to verify the weight being carried as mentioned on invoice orders. If the weight is more then the goods have to be thrown or transferred to other truck. Another way to tackle this is done through unfair means which constitutes a large part of monetary loss to transporters.

Sometimes the variation of Supply and Demand incurs losses in supply chain.

Fig 2.6

All these reasons lead to increase in the loss of agriculture goods produced. The losses born by the transporters, wholesalers are put on the shoulders of consumers and farmers.

Direct losses are put on farmers commission where as the indirect losses are put on consumers as price is further hiked when it comes to retailers.

2.4.4. Retailers:

Retailers were targeted at 4 suburbs, namely Borivali, Bandra, Kurla and Vashi, which are located distinctly away from each other. The objective was to analysis the differences in trends at each location.

Interesting fact was that vendors still preferred to purchase from Dadar instead of Vashi. The reason being, in Dadar even small quantities can be purchased as per required whereas in Vashi only bulk purchases are allowed.

While retailers at Vashi incurred a direct commission to the farmers, the commission the other location varied in the range between 2% to 20% depending on two factors, quality of fruits/ vegetables and secondly the area of sale. In the western suburbs were customers could afford the high quality products, vendors made higher profit margins.

Such losses are observed only when the products traveled in piles, wherein the lowest layer of the fruit gets pressed and rotten immediately, resulting in a sharp 20% loss of inventory. Major reasons for loses include rotting, over ripening, pressing of lower levels of pile. Also, food grains incurred crushing due to over dumping in gunny bags.

In spite of using wax- coating, water – spraying and chemicals, it is noted that the fruits get spoilt within 3 days while vegetables on an average can last up to 1 week. Exceptions being strawberry that have to be sold within a day of delivery, in fact most of the stock gets damaged during the travel from Mahabaleshwar to Mumbai itself. Similar is the case for green leafy vegetables, hence are purchased in lesser quantity and sold quickly.

Significant losses include supply exceeding demand, those incurred during transportation, inferior quality gunny bags tearing apart, fungi development, rotting, over ripening, loss in weight during transport, monsoon and extreme summers, over piling in do downs, rodents and other insects in go downs.

The quickest and most favored shortcut adopted by retailers in selling at a lower cost, this helps in optimizing inventory level. The prices at which the retailers sell is too expensive for hotels to affords, hence hotels purchase the inferior quality fruits/ vegetables in bulk from the wholesale market.

2.4.5 Packaging & Raw material Industry:

Out of 4 respondents some were using plastic as a raw material used for packaging and others using paper. And even 1 respondent was using jute sacks

It shows that most of the packaging company uses plastic as a raw material because it is easy to use and clean there is less chance of Break down of packaging. Its Fits every season, increases the durability of product. Also some are who believe in tradition way of packaging that is by using paper and jute sacks

There is a certain losses involved like few quantity of product are lost in machining process and while using of hot water results in loss. Using chemical for pertain the life of product Company uses chemical. Sometime because of chemical reaction there is huge loss incurred. There is some other reason for which loss happens is Material handling process which lead to have fungus or rotten of product.

Overall analysis says that most of respondents are considering the quality aspects of products. It also seen that uses of chemical and plastic have incurred certain loss. Storages facilities and material handling are few problem areas.

Raw material Industry

There is Loss incurred due to machining process. Sometimes Market condition plays an important role as the demand and supply fluctuates. Losses has been also seen due to storage which approximately cost 2-3% of loss in overall inventory

3. Findings

3.1 Result:

After a detailed analysis it has been found that the losses incurred in supply chain are a bit different as predicted by industry experts as well as the wholesalers who do estimate the direct losses. Most of them are indirect losses.

In order to understand what is the extent of the loss we have compared the observed and the expected data using Chi-Square Test.

Ho: Losses are in a uniform range over months

H1: Losses are non-uniformly distributed

( All values are in 00’)

Months

Losses (O)

Expected

 

 

Jan

22

53.25

 

 

Feb

11

53.25

 

 

Mar

35

53.25

 

 

April

70

53.25

 

 

May

73

53.25

 

 

June

67

53.25

 

 

July

90

53.25

 

 

August

77

53.25

 

 

Sep

46

53.25

 

 

Oct

72

53.25

 

 

Nov

37

53.25

 

 

Dec

39

53.25

 

 

 

 

 

 

 

 

 

 

 

 

Sum

639

 

p-value

126.5775

Expected

53.25

 

 

 12657.75

Reference value: 10000 (approx) as per the findings of ITC ltd.

Result: P-value > Reference value

Thus Null Hypothesis Ho is Rejected.

Conclusion: Losses are non-uniformly distributed over the months

Correlation between farmer’s income and losses encountered.

Losses

Income of farmer

 

5

3000

 

10

2500

 

15

2000

 

20

1500

 

25

1000

 

30

5000

 

 

 

 

 

 

 

 

 Result

 

 

 

 

 

Losses

Income of farmer

Losses

1

 

Income of farmer

0.188982237

1

Table 3.2

As clearly seen as the % of losses increase the farmers start loosing their income. This happens because the wholesalers, transporters, industries push over all the cost incurred in losses onto farmers by cutting their commission.

3.2 Interpretation:

The analysis has clearly shown that losses occur due to various reasons few are direct. The Hypothesis clearly states that when the losses are taken monthly they show variation depending on various internal and external parameters.

Internal include the farming technique undertaken, Type of storage used, Type of crop planted, Maintenance of vehicles for transport, Accurate inventory levels on part of retailers. Correct manufacturing procedures and processes.

External are the seasonal variations, Economic conditions of the market, Rules & Regulations set up by the government, Vehicle breakdowns, Pilferage.

Seasonal variation is a major cause that has been highlighted in analysis and hypothesis.

During monsoons wastage has occurred maximum. Mostly these are associated with Wholesalers and Transporters. Increase lead time, Breakdowns, Water leakage and weak storage facilities are the reasons.

Variation in supply & demand has led to increase inventory holding costs as well as wastage.

All these costs are pushed onto farmers which make him the lowest earning member of this family in many cases.

4. Conclusion

Lack of knowledge and basic understanding of the business has resulted in poor functioning of the chain. Government gives out rules and regulations but these are unknown to people.

Schemes of NREGA should be properly implemented as those include rectification measures for supply chain. NABARD can also increase the lending power to farmers for better selling prospect which has been there major complaint.

Entry of private players like Reliance, Godrej will definitely increase the profit margin as they follow a structured supply chain.

4.1 Recommendations:

Augmentation in Agriculture send out zones (AEZ), this might prompt an exceptional procurement for trusts, offices and likewise assist in mapping the necessity of universal inventory network

A solid retail front-close can additionally furnish the indispensible top off to farming and sustenance handling, and different commercial enterprises. 100 % FDI could be a choice.

Given the fact India has surplus new sustenance stuffs that are at present squandered away and additionally has an exceptionally extensive nearby business, the Government can welcome prepared nourishment producers to set up large scale manufacture shops in the nation which may be showcased through the reasonable cost shops

Process to interest rather editing as a matter of routine is a total need. This will likely accelerate contract cultivating with guaranteed nature of the produce.

Design of E-procurement and just in time delivery systems

Permitting remote administrators for nourishment preparation, dissemination and retailing is a choice of national vitality. The choices need to be steady up and down the store network and commonly fortifying and not opposing.

4.2 Limitations of the study:

Contacting the farmers directly was difficult so had to be done through references and telephonic conversation.

Research had to be carried out during the time of operations of the wholesalers, retailers so refusals were more

Farmers, wholesalers were hesitant to tell their margins.

Transporters were hesitant to tell information assuming that researchers were from rival companies

Thinking that researchers were potential customers there was a biasness in answers or questions were unanswered

Entry to storage areas like warehouses was restricted at APMC market Vashi

Information from government sources like Jakat naka was unavailable

Industries data had to be mostly collected from secondary source especially packaging industry ( Brochure, Websites)

4.3 Future Scope:

Food demand is expected to be doubled by 2050

Growth of employment opportunities in farming technology, supply chain management, distribution networks.

Developments in molecular biology, biotechnology, nanotechnology, information technology and geo-spatial technology are expected to provide significant new opportunities for productivity enhancement

The corporate sector is entering and investing at different levels in the supply-chain, thus linking production eco-regions with consumers in the promising domestic and global markets

Globalization and FDI

NABARD is ensuring allocation of funds for synthetic farming

2012-13 budget saw the government infusing investment in agriculture infrastructure including warehousing, terminal markets and testing laboratories

5. Appendix

Questionnaire for Wholesalers/Distributors:

1) What is your Geographical area of Operation?

Pune

Nasik

Kolhapur

Panvel

Mumbai

2) Which are the Farmers from whom you get the products?

3) What is the share of price quoted to each farmer and what are the basis?

4) What are the means of transportation used in order to bring the products ?

Self Owned Vehicle

Transport is outsourced

5) What are the Charges required for transportation?

6) What kind of losses are seen?

Pilferage

Bribery

Over Weight

Rules & Regulations

Packaging materials

Storage Problems

Temperature

Vehicle Breakdown

Where the storage is done or Fresh supply is directly brought to the market? ( Skip If direct supply)

A) What type Of storage Facilities are used?

Warehouses

Cold Storage

Dry Leaves

Wet Floors

B) What are the losses in storage?

Where are these products sold & to whom?

How are they transported?

By you

By the Buyer

Third Party

What are the ways in which these losses can be saved?

Questionnaire for Transporters: (Truck/Lorry/Container Vehicles)

What are the products that you normally transport?

What are the frequencies of your transport?

What are the difficulties you have faced in terms of pilferage or damaged packing?

Are there losses due to increase lead time and varied temperatures?

Are losses suffered when Carriage is weighed at toll nakas? ( Bribery*)

Are there certain indirect losses in transportation?

Questionnaire for Retailers:

From which wholesale market do you purchase vegetables, fruits?

Vasai

Borivali

Vashi

Dadar

What are the rates at which the wholesalers sell products to you?

Are there any defects or spoilage in products when they come to you?

What is the shell period for

Vegetables

Fruits

What are the losses seen at your end?

If products are not sold what is done to leftover inventory?

Sold to Hotels/Juice centers

Sold at less price

Trash

What is the loss incurred through leftovers and waste inventory?

Questionnaire for the Packaging Industry

What are the type of materials used for packaging?

Plastic

Paper

What type of technology is available with you?

Does this processing have any use of chemicals and is plastic processed?

What are the process losses?

Does quantity sold of particular type result in losses?

Questionnaire for the Raw material Industry

What raw materials are required by your industry?

What are the production processes?

What are the losses in processing?

Are there losses due to storage & temperature?

How do you calculate shelf life of processed food?

What are the losses and complaints from the other end of chain?

Secondary Data:

Data has been teken from the Nabard report 2011 for understanding allocations of funds to agriculture

Reference from ICAR report 2011( Indian Council For Agriculture Research)

Information taken from Food & Agriculture ministry website.

Data from a research paper " Can India be the Food Basket for the World"