FOOD

SUPPLY
CHANNEL
IN
INDIA
INTRODUCTION
India is one of the largest food and grocery markets in the world and a large
consumer of food products. Despite having a rich raw material base for food
products, high food price inflation is becoming a major challenge facing the
country. There is a shortage of supply due to issues in the food supply chain.
The food supply chain is fragmented and only seven per cent of the perishable
products are being processed. To counter this, the Indian government is
offering several incentives to private and foreign investors in the food
processing sector reflecting the government’s intention to attract investment.
The large and unsaturated Indian market has attracted a number of foreign
companies yet the country has not been able to be a part of their global
production networks. There is a need for reforms in the food supply chain to
enable India to reach out to its unrealised potential.  

WHAT IS FOOD SUPPLY CHANNEL IN INDIA ?

   A food supply chain or food system refers to

the processes that describe how food from a
farm ends up on our tables. The processes
include production, processing, distribution,
consumption and disposal.
 The food we eat reaches us via food supply
chains through which food moves
systematically in domino-like motion from
producers to consumers while the money
consumers pay for food goes to people who
work at various stages along the food supply
chain in the reverse direction.
 Because a food supply chain is domino-like,
when one part of the food supply chain is
affected, the whole food supply chain is
affected, which is often manifested through
changes in price.

The Indian Food Processing Industry

India with its billion-plus population provides a large and growing market for food products.
Food products are the single largest component of private consumption expenditure,
accounting for as much as 49 per cent of the total spending. Furthermore, the upward
mobility of income classes and increasing need for convenience and hygiene is driving
demand for perishables, non-food staples and processed foods. Though companies like HLL,
ITC, MTR have introduced some innovative heatand-eat dishes with reasonably good
packaging, hygiene and quality issues remain since there is a fair amount of manual
handling. While domestic companies like Dabur, MTR, ITC, Godrej and Amul are aggressively
entering the food chain, multinationals are also gradually making their presence felt—Cargill
and Conagra in agri-inputs, Tropicana in food processing and Metro in wholesaling.
However, the pace is slow in the food sector when compared to IT and pharma. India is still
to get its share of billion-dollar players in the food industry like China and Philippines where
the companies are achieving sales exceeding US $ 1 billion.

Introduce supply chain expertise

There is need to embrace the Efficient Consumer Response (ECR) concept,
which was introduced in the US in the nineties and is now followed worldwide
in grocery supply chains. ECR refers to a set of strategies that aim to get
companies across a supply chain to work closely to serve their customers
better and at a lower cost. Consumers benefit from improved product
availability and choice, while distributors and suppliers derive better efficiency
and cost savings. Also collaborative planning, forecasting and replenishment
have yielded substantial savings. for retailers. Relationship between the stake
holders in a supply chain is of paramount importance for ECR, CPFR and other
relationship paradigms to work.
Several regulations along the supply
chain constrain its expansion and
functioning as a seed-to-feed chain.
Food processing industry: This is one sector where 100 per cent FDI is allowed. Incentives
are also offered to those interested in setting up processing plants either in Agri-Export Zones or
outside them. Given the diverse population and religions found in India, there is scope for creating
zones meant for specific communities. Thus, a “halal hub” could export its products to South-East
Asia and the Middle East. Likewise, a “vegetarian hub” could reach out to vegetarians in India and
abroad. Same way, there could also be “organic food zones” and “sea food hubs”.

Retail revolution: Retail, one of the largest sectors in the global economy, is going through a
transition in India. While globally, more than 72 per cent of food is sold through supermarkets,
Indian consumers buy most of their food products from the 12 million-plus outlets which include
handcarts, wet markets and neighbourhood kirana stores. The kirana stores usually have small
spaces, lack cold storage facilities and have restricted capital. The Indian retail sector is estimated to
have a market size of over $180 billion; but the organized sector represents only 2 per cent of this
market
 The Eight Components of
Supply Chain Management
1. Planning
This is one of the most important stages. Before the beginning of the entire supply chain,
it is essential to finalise the strategies and put them into place. Checking the demand for
the product or service, checking the viability, costing, profit, and manpower etc., are vital.
Without a proper plan or strategy in place, it will be well-nigh impossible for the business
to achieve effective and long term benefits

2. Information
The world today is dominated by a continuous flow of information. In order to be
successful, it is essential that a business stays abreast with all the latest information
about the various aspects of its production. The market trends of supply and demand for
a particular product can be best understood if the information is properly and timely
disseminated through the many levels of the business.

4. Inventory
For a highly effective supply chain management system it is essential that an inventory
is kept and thoroughly maintained. An inventory means the ready list of items, raw
materials and other essentials required for the product or service. This list has to be
regularly updated to demarcate available stock and required stock. Inventory
management is critical to the function of supply chain management,

3. Source
Suppliers play a very crucial role in supply chain management systems. Products and
services sold to the end user are created with the help of different sets of raw materials.
It is therefore necessary that suitable quality raw materials are procured at cost effective
rates. If a supplier is unable to supply on time, and within the stipulated budget, the
business is bound to suffer losses and gain a negative reputation.

5. Production
Production is one among the most important aspects of this system. It is only possible
when all the other components of the supply chain are in tandem with each other. For
the process of production to start it is essential that proper planning and supply of goods,
as well as the inventory, are well maintained. The production of goods is followed by
testing, packaging and the final preparation for delivery of the finished product.

6. Location
Any business, that wants to survive as well as flourish, needs a location which is
profitable for the business. Take for example, a carbonated drink factory is set up in an
area where water supply is scarce. Water is a basic necessity of such business. The
lack of water could hamper the production as well as affect the goodwill of the company.
7. Transportation
Transportation is vital in terms of carrying raw materials to the manufacturing unit and
delivering the final product to the market. At each stage, timely transportation of goods is
mandatory to sustain a smooth business process. Any business which pays attention to
this component, and takes good care of it, will benefit from the production and
transportation of its goods on time.

8. Return of goods
Among the various components that create a strong supply chain is the facility for the
return of faulty/malfunctioning goods, along with a highly responsive consumer
grievance redress unit.
No one is infallible. Even a machine may malfunction once in a million times if not more.
As a part of a strong business process, one may expect the return of goods under
various circumstances. Even the best quality control processes may have unavoidable
momentary lapses. In the case of such lapses, inevitably followed by consumer
complaints, a business must, instinctively, recall the product/s and issue an apology.
This not only creates a good customer bonding, but also maintains goodwill in the long
run.

A D VA N TA G E S O F F O O D S U P P LY C H A N N E L I N I N D I A

 B e t t e r c o m m u n i c a t i o n b e t w e e n t h e   p ro du c e r a n d t h e
consumer
 E ff e c t i v e n e g o t i a t i o n s f or t h e   f a r m e r s w i t h t h e
re t a i l e r s
 I n c re a s e s t r a n s p a re n c y   i n d e a l i n g s
 R e d u c e s   c o s t s of t r a n s p o r t at i o n
 I n c r e a s e t h e l e v e l of   q u a l i t y a n d re du c e s r i s k s .
 G re a t er p rof i t s
D I S A D VA N TA G E S O F F O O D S U P P LY C H A N N E L I N I N D I A

 L a c k o f i nf r a s t r u c t u r e f a c i l i t i e s
 L o w i n c om e   f or t h e f a r m e r s
 Lesser value addition due to low processing
 P o o r q u a l i t y a n d s t a n d a r d s of s a f e t y.
 I n a b i l i t y t o m a i n t a i n t h e s a f et y a n d q u a l i t y o f y o ur
p ro d u c t s
 I n a d e q u a t e c o m m u n i c a t i on b e t w e e n p a r t i e s
 Rising supply chain costs
 F a i l u re t o t r a c k an d c o n t ro l i n v e n t o r y i n w are h o u s e s
a n d s t o re s
SU PPLY CH AIN RE DESIG N
 H i g h P e r f o r m a n c e S u p p l y C h a i n s : E ff o r t s o f S t a k e
holders for last two decades are highly risk prone.
  Te n s i o n b e t w e e n We a k a n d S t r o n g Ti e s a m o n g S u p p l y
Chain partners.
 New technologies are creating disruptive innovations
 Globalization has created long supply chain which are
f r a g i l e a n d n e e d m o n i t or i n g .
 Governance which involves partner selection,
coordination and execution takes center stage.

Agri-Service Ecosystem in India

 In 2011, ‘Food and Grocery’ accounted

for nearly 59.5 % of total revenues in the
retail sector in India;
 ‘Clothing and Fashion’ followed with a
share of 9.9 percent
 In 2011, 48 % of total household
income in India was spent on food and
groceries

Supply and Demand in Retail Supply

Channel in india
The role of supply chain in Indian organized retail is very significant for on it depends the growth of this sector.
The Indian Supply Chain Council have been formed to explore the challenges that a retailer faces and to find
possible solutions for India.

The role of supply chain in the organized retail sector in India should be a shelf- centric partnership between the
retailer and the manufacture for this will create supply chains that are loss free. This will also give rise to top and
bottom line growth. In the organized retail sector in India the presence of fresh produce (vegetables and fruits)
is very small. This is so for the nature of supply chain is very fragmented. This shows the important role of supply
chain in the organized retail sector in India.

In the organized retail market in India, the role of supply chain is very important for the Indian customer
demands at affordable prices a variety of product mix. It is the supply chain that ensures to the customer in all the
various offerings that a company decides for its customers, be it cost, service, or the quickness in responding to
ever changing tastes of the customer.

The infrastructure in India in terms of road, rail, and air links are not sufficient. And so warehousing plays a
major role as an aspect of supply chain operations. To overcome these problems, the Indian retailer is trying to
reduce transportation costs and is investing in logistics through partnership or directly. The Indian organized
retail sector is growing so the role of supply chain becomes all the more important. It should become all the more
responsive and adaptive to customers demand. There is also need for the supply chain to be more cost efficient
and collaborative to win the immense competition in this sector.             
The role of supply chain in Indian organized retail has expanded over the years with the boom in this industry.
The growth of the Indian retail industry to a large extent depends on supply chain, so efforts must be made by the
Indian retailers to maintain it properly.

Impact of COVID-19 on the food supply chain

A pandemic is not a new event encountered in the history of humanity
because mankind has faced various pandemics in history. The common point
of pandemics is their serious negative effects on the global economy.
Considering the food supply chain, one of the most important sectors of the
economy, it has been seen that COVID-19 has an impact on the whole process
from the field to the consumer. In the light of recent challenges in food supply
chain, there is now considerable concern about food production, processing,
distribution, and demand. COVID-19 resulted in the movement restrictions of
workers, changes in demand of consumers, closure of food production
facilities, restricted food trade policies, and financial pressures in food supply
chain. Therefore, governments should facilitate the movement of workers and
agri-food products. In addition, small farmers or vulnerable people should be
supported financially. Facilities should change the working conditions and
maintain the health and safety of employees by altering safety measures. Food
protectionist policies should be avoided to prevent an increase in food prices. 
FOOD SUPPLY CHAIN ECOSYSTEM