Application of value stream Mapping in waste minimisation.pdf

Application of value streammapping (VSM) for minimizationof wastes in the processing sideof supply chain of cottonseed oil

industry in Indian contextDinesh Seth

Department of Mechanical and Industrial Engineering, College of Engineering,Qatar University, Doha, India

Nitin SethDAVV, Indore, India, and

Deepak GoelNational Institute of Industrial Engineering (NITIE), Mumbai, India

Abstract

Purpose – The purpose of this paper is to identify and address various wastes in the supply chain ofthe edible cottonseed oil industry (specifically the processing side) using a value stream mapping(VSM) approach to improve productivity and capacity utilization in an Indian context.

Design/methodology/approach – Critical observations and interviewing techniques were used withopen-ended questions to understand the processes involved in the value chain of the cottonseed oilindustry. Different chain links/members were investigated through personal visits and discussions. VSMis applied as an approach to the industry to identify and remove non-value-adding (NVA) activities.

Findings – Major findings obtained from the study are as follows. There is an excess cumulativeinventory of 244 days in the whole supply chain. The industry is highly fragmented with a largenumber of small players present, which hampers the use of economies of scale. There are NVAactivities present in the supply chain such as the moving of cottonseed oil from expeller mill torefinery. The industry still uses outdated technology which hampers the productivity.

Practical implications – Attention needs to be given to boosting the productivity of the oil sector.Waste removal from the oilseed-processing sector is one key to improving the productivity of the sector.

Originality/value – The paper addresses the various wastes in the processing side of the supply chainof the Indian cottonseed oil industry, using VSM as an approach which was hardly ever attemptedbefore. Wastes are then individually attacked to reduce or eliminate them from the system. Suggestionsto make the whole chain more productive can be generalized and can be replicated in the context of otherdeveloping countries.

Keywords Edible oils, Waste minimization, Supply chain management, Value chain, India

Paper type Research paper

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1741-038X.htm

The authors wish to express their sincerest thanks to the learned referees for their constructivecriticisms that led to the considerable improvement of the earlier version of this paper. Theauthors also wish to put on record their indebtedness to one of the Guest Editors of the specialissue, Dr Vipul Jain, for his timely help and for giving them an opportunity to revise the paper.

Supply chain ofcottonseed oil

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Received May 2007Revised September 2007

Accepted September 2007

Journal of Manufacturing TechnologyManagement

Vol. 19 No. 4, 2008pp. 529-550

q Emerald Group Publishing Limited1741-038X

DOI 10.1108/17410380810869950

1. IntroductionIndia, the world’s seventh largest producer of oil crops (2001-2003 average), is a majorproducer of soybeans, rapeseed, peanuts, cottonseed, and sunflower seed and their derivedproducts. India is traditionally an importer of vegetable oils and an exporter of proteinmeals, and is not a significant trader in oilseeds. Oil imports have been on the rise as a resultof burgeoning consumer demand and import liberalization measures implemented in 1994.During 2001-2003, India was the second largest edible oil importer in the world, behind theEuropean Union (EU-25) and ahead of China. India is also the world’s fifth largest exporterof oil meals, although exports of soybean and other meals have slowed due to rapid growthin domestic feed demand. Despite substantial excess capacity in the domestic oilseedprocessing industry, imports of oilseeds remain restricted by tariff and non-tariff policies.

Indian edible oil demand is going to increase at the rate of 500,000-600,000 tonnesper year while production will grow only by 200,000-300,000 tonnes per year (Mehta,2005, 2006; Sharma, 2006). Despite the huge demand supply gap that persists forIndian edible oil industry, very little has been done for improvement in the productivityof the industry. In this paper, an attempt is being made to apply value stream mapping(VSM) approach to address various wastes in the processing side supply chain ofedible cotton seed oil industry sector in Indian context.

Motivations for the study: a lot of work has been reported in various journals andstudy reports to improve the agricultural productivity of oilseeds (i.e. per hectareproduction of oilseeds), but hardly any study has been carried out towards theproductivity of oilseed processing industry and process side of supply chain wheremost of the players are highly unorganized and fragmented. This is true for majority ofoil seed processing industrial sectors in developing countries including India. In a way,it is a first attempt to carry out a serious study in a relatively unstudied andunorganized sector. It is also a unique attempt to connect various links into a networkschema. Considering that Indian cottonseed oil industry is characterized largely bymechanical expeller units, academic and business needs were long being felt. As cottonseed oil constitutes an important part among the edible oils family in India.

Another major motivator for this study is, although the researchers have exploredvarious perspectives related with edible oil industry, yet they are silent on the lead timeto process oilseed and inventory levels at different stages of the processes. Inventory isan important waste which must be removed to make the supply chain efficient andeffective. Therefore, it was decided to use VSM as an approach to identify wastes in theprocessing side of cotton oilseed supply chain. The major strength of this approach isto highlight individual wastes while maintaining overall perspective of the chain.

1.1 India’s production of cottonseed and other oilseedsCottonseed forms a substantial 23 percent (Figure 1) of the total oilseed production ofIndia.

Production of cottonseed is increasing for last three-four years. In 2004-2005, thecottonseed production touched 80 lakh tonnes and also similar figures during2005-2006. Good weather, remunerative prices for cotton, increased use of hybrid andBt. cotton seeds have resulted in increasing production of cottonseed and this emergingas second highest produces oilseed in the industry.

As cottonseed forms a substantial part of total edible oilseed production of India, wechose to study cottonseed oil sector as a potential research area. This paper makes an

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attempt to address the waste removal and productivity improvement for the edible oil,specifically Indian cottonseed oil sector.

1.2 World cotton/cottonseed production scenarioSeveral factors influence the world cotton trade, prime amongst them has been theplantation activity which is again dependent on weather conditions. Secondary factorsinclude the growth in economy, inventory levels, synthetic products availability anddevelopment in these products usability, etc. Global cotton scenario has been fastchanging due to obvious reasons. While cotton is one of the important cash crops,changing user preferences have been guiding the production pattern.

The world crop estimates for the year 2005-2006 is expected at 24.75 million tonneas against last year’s crop of 26.2 million tonne. The world average yield in 2004-2005was 731 kg per hectare. The world average yield is expected to drop to 688 kg perhectare in 2005-2006 due to poor weather conditions.

China leads the world cotton production with 5.82 million M.T of crop estimated in2005-2006 (Figure 2). The USA and India with figures of 4.49 and 3.36 million M.T,respectively, stand at second and third positions.

The USA is the largest exporter for cotton. The USA is expected to export 3 millionM.T of cotton in 2005-2006.

Figure 1.India’s production of

cultivated oilseeds

India's Production of Cultivated Oilseeds (Nov.-Oct.) (LakhTonnes) 2004-05

70.2, 21%

83.6, 25%7.1, 2%

1.7, 0%

1, 0%

1.8, 1%

8.3, 2%

79.9, 23%

75.1, 22%12.22, 4%

Groundnut Rapeseed & MustardSesamum SoybeanSunflower safflowerNiger LinseedCastor Cottonseed Production (lakh tons)

Source: AICCA (2005-2006), Solvent Extractor's Association of India

Figure 2.World cotton production

World Cotton Production 2005-06 Million MT

5.82, 26%

4.49, 19%3.36, 14%2.13, 9%

1.31, 6%

1.02, 4%

5.24, 22%

China (Mainland)USAIndiaPakistanBrazilUzbekistanOthers

Source: Annual reports of AICCA (2004-2005, 2005-2006)


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India has been one of the important cottonseed producers in the world. The countryduring the last 50 years has undergone various changes in agriculture sector, ingeneral, and in cotton cultivation, in particular. Cotton being the cash crop haswitnessed increased activity in cultivation. Recently, India stands number three forcotton/cottonseed production.

2. Literature reviewThe Indian oilseed processing sector is characterized by a large number of relativelysmall-scale, low-technology plants and substantial excess capacity. The structure of theindustry is heavily influenced by government policies that regulate plant scale, capitalintensity, and oilseed/product marketing; which also act as incentives for adding newcapacity; and at times discourage imports of oilseeds for processing. This structure isalso influenced and shaped by domestic demand preference for crude oils; demand forquality feed protein, and erratic supplies of domestic oilseeds for processing.

Indian oilseed processing units operate at just 30-40 percent of installed capacity incontrast with the 90 percent utilization of the US-oil industry (Persaud and Landes,2005). Indian vegetable oil industry comprises over 15,000 oil mills, 600 solventextraction units, 650 refining units and 250 vanaspati units, operating between 40 and50 percent capacity (Mehta, 2005; Sharma, 2006). They identified the unorganizedstructure of Indian oil processing sector and discuss the in-competitiveness of the oilunits because of various wastes and the usage of old techniques.

Sharma (2006) discusses how some policy changes can help to remove excesscapacity and wastes from the Indian edible oil industry. He emphasizes the imports ofoilseeds to support the excess capacity in oil units and diversification of farm productsby shift in yield from grains to oilseeds. Price policy initiatives need to be taken topromote the farming of oilseeds.

In another notable work done Cheng Hai (2002), has identified the supply chainmembers present in the Palm Oil Industry. Though, more or less similar structure ofthe supply chain will be applicable for all the edible oils, attention needs to be given toIndian environment for cottonseed industry. This is because of extremely smallcapacities installed and highly unorganized industry structure of India. Also forcottonseed oil industry, most of the installed capacity is in mechanical expellers.Specific attention has to be given to such small mechanical expeller units.

Bohra (2002) of M/s. Rama Phosphates Ltd (oil division), has made an excellentattempt to identify some waste streams present in the solvent extraction units. He hasidentified losses occurring at different stages of process viz oil loss in de-oiled cake(DOC), oil loss in refinery, Hexane loss in DOC, excessive wastewater generation andpoor treatment, energy loss, inadequate steam generation, emission in workenvironment, improper material handling and house keeping practices. He has alsosuggested ways to remove such losses. But, the research work is silent on losses andother wastes like inventory and un-necessary transportation in mechanical expellerunits. Lean manufacturing approaches and the concepts like VSM were neverattempted in this sector. It will be meaningful to share about lean manufacturing andvalue stream at this junction.

Lean manufacturing is the systematic approach to identifying and eliminatingwaste (non-value added activities) through continuous improvement by flowing theproduct at the pull of the customer in pursuit of perfection (NIST-MEP Lean, 2000).

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The lean paradigm has developed as a holistic approach to manufacture and business(Womack and Jones, 1996). To support the implementation of lean principles,increasingly holistic approaches to mapping and evaluating the supply chain havebeen developed (Rother and Shook, 1999; Jones and Womack, 2002).

A value stream is all the actions (both value and non-value added) the required to bringa product, or group of products that use many of the same resources in much the sameway, through the main flow essential to every product – from raw material to the arms ofthe customer (Browning, 1998). VSM is a pencil and paper visualization tool that showsflow of material and information as a product makes its way through the value stream(Rother and Shook, 1999). VSM serves as a starting point to help management, engineers,suppliers, and customers recognize waste and its sources. These concepts are developedprimarily with two requirements – one to understand the interdependence of one function,department or even whole unit over other and, to capture holistic view about a situationwhere the conventional industrial engineering recording tools do not help much.

As the complexity of manufacturing and business is growing newer value stream toolsare emerging. Recently, there exists a plethora of different tools and techniques developedfor different purposes and waste reduction or elimination (Seth and Gupta, 2005).

The combination of supply chain and sustainability thinking demonstrates thevalue of an objective integrated appraisal of supply chain, various wastes and evenemission aligned to a systems approach. VSM (Rother and Shook, 1999) has beenwidely used to evaluate intra- and inter-company waste. The mapping reviews theflows of information and physical goods, aiming at eliminating waste and therebyimproving quality, cost and delivery. Value added time percentage is the key metric ofthe mapping – comparing value adding (VA) with non-value adding (NVA) activity(Monden, 1993; Irani et al., 2000).

Hines and Rich (1996) have identified seven VSM tools to identify the wastespresent in any system in form of inventory, overproduction, over capacity, wrongprocessing methods, NVA activities, etc.

This paper attempts to identify and remove wastes present in the cottonseed oilindustry using VSM. Two tools, viz process activity mapping and supply chain responsematrix as suggested by Hines and Rich (1996) have been used to effect. An attempt is madeto draw a current picture of value stream and develop a framework for the investigation.

3. Research methodology3.1 SamplingConsistent with the purpose of study, corporations carrying out different activities for thevalue chain were sampled. We selected listed members of All India Cottonseed CrushersAssociation (AICCA) in three states, namely Maharashtra, Karnataka andAndhra Pradesh. Maharashtra is the second highest producer of cottonseed in India. Soits choice as a sampling state was appropriate.

A questionnaire was prepared to structure interviews and discussions, andinformation was collected for markets of each commodity, plant processes, machines,processing costs, parity calculations, etc. through interviews and discussions with themill owners, traders and brokers in the above three states. About ten oil mill owners, 17traders and brokers and ten expeller/extraction machinery manufacturers wereinterviewed. Some questions were reworded to improve validity and clarity based onrecommendations from practicing managers.


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The questionnaires were answered by individual visit interviews or telephonicinterviews. The respondents were mainly business owners who were responsible formajor supply chain activities in the companies.

As mentioned earlier, sampling states were taken as Maharashtra, Andhra Pradeshand Karnataka. Assumption has been made that the research implications for thesethree states would be applicable for all other states.

3.2 Overall, supply chain mappingThe first stage of the project was value chain mapping and identifying the SupplyChain Members for Cotton. The data were collected from the reports of AICCA(2005-2006) and Cotton Corporation of India Annual Reports for demand, supply,import, export, prices, etc. of each commodity involved in the value chain of cotton.

3.2.1 Processing sector structure, capacity, and costs. The Indian Oilseed ProcessingIndustry includes three major processing technologies (Figure 3, Table I):

(1) traditional mechanical crushing, or expelling, used for oilseeds with relativelyhigh-oil content;

(2) solvent extraction for processing oilseeds and expeller cake with less than20 percent oil content; and

(3) expander-solvent extraction, a hybrid process used for raw materials withhigher oil content.

The traditional mechanical crushing industry has two segments: the very small-scale“ghanis” and the small-scale expellers. The processing industry also includes an oil

Figure 3.India’s oilseed processingsector

Soft seeds(peanuts, rapeseed, sunflower)

Expander Solvent extraction

Nonsoft seeds 1

(soybeans, cottonseed)

Solvent extracted oil Deoiled cake

Mechanical expellers

Losses

Expeller oil cake

Fertilizer& waste

Expeller oil

Filtration

Losses

Filtered oil

Domestic oil market

1Solvent extraction is used for raw materials, such as soybeans, cottonseed, and expeller oilcakewith less than 20 percent oil content.

Domestic feed market

Refined oilLosses

Oil refinery

Feed export market

Note: See appendix 1 for detailed picture

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refining sector, which primarily refines domestic solvent-extracted oils and importedcrude and solvent-extracted oils, and a “vanaspati” (hydrogenated oil) sector thatrefines and hydrogenates domestic and imported oils.

Each segment of India’s Oilseed Processing Industry has small capacities andlow-technical efficiency compared with other major processing countries. On average,India’s solvent extraction plants are about one-sixth the size of those in the USA andthe EU and use significantly more power, steam, and hexane solvent per unit ofoilseeds processed. Even India’s largest integrated expeller-solvent extraction plantsare small and high-cost by international standards.

Indian processing units also have more excess capacity than units in other majorprocessing countries. On average, Indian expeller and solvent extraction plants operateonly around the domestic raw material harvest, or at about 30-40 percent of capacity.This contrasts with capacity utilization rates of 92-96 percent for US plants (Millard,2001). Low rates of capacity use compound relatively poor technical efficiency andfurther increase the average and marginal costs of processing raw materials, becausefixed costs must be recouped over fewer units of output.

Additional inefficiency arises because some processes are not well integrated. Whileit is common to see an oil refinery and/or vanaspati unit combined with a solventextraction plant, expeller units are often not integrated with solvent extraction units.As a result, oil and meal production is lost because significant amounts of expeller cakeare not solvent-extracted. In addition, the costs of solvent-extracting the expeller cakerise, and processing delays reduce the quality of the oil and DOC.

India’s oilseed processors are able to operate profitably despite their high-costslargely because of the high-border protection afforded to vegetable oils. In addition,because the price of oilseeds is determined by the cost of processing – together withthe market value of the derived oil and meal – high processing costs dampen oilseedprices, partially offsetting benefits to producers from India’s tariffs on oilseeds and oils.

This paper also highlights some of the inefficiencies present in the oilseed,specifically cottonseed processing sector in India and suggests the ways to remove them.

3.3 Supply chain of cottonseed oil industryThe value chain starts from sowing of cotton in the month of June. The cotton crop is a120 days crop and gets ready for harvesting in October. The arrival of crop starts in thelast week of October/first week of November and continues till mid of April.

Capacitya

Process Units (number) Total (million tons) Average (tons/day) Use rate (percent)

Mechanical crushingGhanis 130,000 2.0 0.05 10Expellers 20,000 40.5 7 30-40

Solvent extractionb 766 36.0 157 30-40Vanaspati 241 4.8 66 35Oil refining 800 4.7 20 35

Notes: aCapacity and use based on raw material; 300 days/year, 24 hours/day basis; bincludesexpander unitsSource: Solvent Extractor’s Association of India Reports (2005-2006)

Table I.Structure of India’s

oilseed processing sector


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After the arrival of cotton starts in, the traders (through brokers) or governmentpurchase the unginned cotton (called Kapas) and they process it in the contract-basedginning mills. Ginning machines separate the ginned cotton and cottonseed from Kapas.

The cotton thus produced is pressed into bales and then sold to the textile industry forthe production of clothes. Cottonseed produced is sold to the cottonseed oil mills. Thecottonseed oil units may be expeller units or solvent extracted units. The yields ofexpeller mill are cakes (82-84 percent), oil (12-14 percent) and soap (1-2 percent), restbeing losses (detailed value chain of cottonseed oil industry is explained in Appendix 1).

The major players in the cottonseed oil industry in India are shown in Figure 4; theplayers are grouped under the following clusters:

. Upstream producers – essentially involved in the cultivation of cotton,production of cottonseed from cotton.

. Downstream producers – cottonseed oil refiners, kernel crushers, traders, brokers.

. Exporters and importers of cottonseed oil.

. Customers – institutional buyers and retail customers and investors.

. Industry organizations representing the interests of the upstream anddownstream producers.

Figure 4.Supply chain members atdifferent stages of cotton

UpstreamProducers

DownstreamProducers

Exporters/Importer

Customers

IndustryOrganizations,

e.g SEA

GovtOrganizations,

e.g CCI

OtherOrganizations,

e.g AICCA

FarmersGinning

MillsCrushers

SolventExtraction

Plants

Refineries

Major players inthe cottonseed

oil supply chain

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. Government agencies associated with the industry, particularly in respect ofresearch and development and regulatory functions.

. Other players who have an interest and/or stake in the oil industry (NGOs,unions, etc.).

3.4 Application of VSM to identify and remove wastes from cottonseed processing industry3.4.1 The seven VSM tools. The typology of the seven new tools (as suggested by Hinesand Rich (1996)) is presented in terms of the seven wastes (Table II).

3.4.1.1 The seven wastes of cottonseed processing industry:

(1) Overcapacity (overproduction).

(2) Unavailability of cottonseed (waiting).

(3) Raw material and finished good transport (transport).

(4) Use of mechanical expeller mills (inappropriate processing).

(5) Cottonseed inventory (unnecessary inventory).

(6) Unnecessary movement of RM/FG (unnecessary motion).

(7) Defective cottonseed oil or cakes (defects).

In this paper, VSM tools are applied to understand these wastes clearly and an attemptis made to eliminate or reduce them.

3.4.1.2 Waste removal inside value streams. As the focus of the value streamincludes the complete VA (and NVA) process, from conception of requirement backthrough to raw material source and back again to the consumer’s receipt of product,

Mapping tool

Waste/structure

Processactivity

mapping

Supplychain

responsematrix

Productionvarietyfunnel

Qualityfilter

mapping

Demandamplification

mapping

Decisionpoint

analysis

Physicalstructure

(a) volume(b) value

Overproduction L M L M MWaiting H H L M MTransport H LInappropriateprocessing H M L LUnnecessaryinventory M H M H M LUnnecessarymotion H LDefects L HOverallstructure L L M L H M H

Notes: H – high correlation and usefulness; M – medium correlation and usefulness; L – lowcorrelation and usefulnessSource: Hines and Rich (1996)

Table II.Seven value stream

mapping tools


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there is a clear need to extend this internal waste removal to the complete supply chain(Figure 5) (Andersen, 2001; Hines et al., 1996, 1999).

3.5 Process activity mappingIn an internal manufacturing context, there are three types of operation that areundertaken. According to Ishiwata (1991), Monden (1993) and Murman et al. (2002),these can be categorized as:

(1) non-value adding;

(2) necessary but non-value adding (NNVA); and

(3) value adding.

The first of these is pure waste and involves unnecessary actions which should beeliminated completely. Examples would include waiting time, stacking intermediateproducts and double handling.

NNVA operations may be wasteful but are necessary under the current operatingprocedures. Examples would include: walking long distances to pick up parts;unpacking deliveries; and transferring a tool from one hand to another. In order toeliminate these types of operation it would be necessary to make major changes to theoperating system such as creating a new layout or arranging for suppliers to deliverunpacked goods. Such change may not be possible immediately.

VA operations involve the conversion or processing of raw materials or semi-finishedproducts through the use of manual labour. This would involve activities such as:sub-assembly of parts, forging raw materials and painting body work.On the basis of above, VA and NVA activities are identified by the process map asgiven (Table III).

In summary:. VA activities ¼ 7;. NNVA activities ¼ 10; and. NVA activities ¼ 6.

Figure 5.Current state of cottonseedprocessing supply chain

Supplier ManufacturingUnit

Refinery Customer

SeedCleaner

NeutraliserExpeller Refinery

10-20 days1 day 80-90 days

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3.6 Application of supply chain response matrixThis mapping approach first project by Jessop and Jones (1995) as shown in Figure 6,seeks to portray in a simple diagram the critical lead-time constraints for a particularprocess. In Figure 6, the horizontal measurements show the lead time for the productboth internally and externally. The vertical plot shows the average amount of standinginventory (in days) at specific points in the supply chain.

In the cottonseed processing industry case, the horizontal axis shows thecumulative lead time to be 124 working days. The vertical axis shows that a further120 working days of material are held in the system. Thus, a total response time in thissystem of 244 working days can be seen to be typical. Once this is understood, each ofthe individual lead times and inventory amounts can be targeted for improvementactivity, as was shown with the process activity mapping approach.

4. Discussion and suggestionsThe following observations can be made from the use of above tools on the cottonseedindustry:

. There is excess cumulative inventory of 244 days in the whole supply chain.This includes the inventory locked at manufacturer who stores the inventory of90 days for the fear of unavailability of raw materials.

. There is no big player present in the market. There are large number of smallexpeller mills which are unable to operate with economies of scale.

S No. Step Value

1 Cottonseed received NNVA2 Cottonseed moved to drying platform NNVA3 Cottonseed unpacked NNVA4 Cottonseed dried NNVA5 Cottonseed packed NVA6 Cottonseed moved to stores NVA7 Cottonseed stored NVA8 Cottonseed moved to seed cleaner NVA9 Cottonseed unpacked and fed to seed cleaner NNVA

10 Cottonseed cleaned VA11 Cottonseed moved to expeller NNVA12 Cottonseed fed to expeller VA13 Crushing of cottonseed VA14(a) Cottonseed oil from expeller moved to tank NNVA14(b) Cottonseed cake moved to packing area NNVA15 Cottonseed oil fed to neutralizer NNVA16 Neutralisation of cottonseed oil VA17 Neutralised cottonseed oil stored in tanks NVA18 Neutralised cottonseed oil shipped to refinery NVA19 Refining of cottonseed oil VA20 Refined cottonseed oil stored NNVA21 Refined cottonseed oil packed VA22 Cottonseed oil shipped to market VA

Table III.Process activity mapping


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. There are NVA activities present in the supply chain such as moving of cottonseedoil from expeller mill to refinery. This can be avoided if refinery is integrated withthe expeller mill. This is possible only if large-scale projects are implemented.

. The industry still uses outdated technology which hampers the productivity.

Let us attack each waste one-by-one to eliminate it! (Figure 7):

(1) Overcapacity (overproduction).

(2) Unavailability of cottonseed (waiting).

(3) Raw material and finished good transport (transport).

(4) Use of mechanical expeller mills (inappropriate processing).

(5) Cottonseed inventory (unnecessary inventory).

(6) Unnecessary movement of RM/FG (unnecessary motion).

(7) Defective cottonseed oil or cakes (defects).

Overcapacity can be reduced by consolidation of the industry. As pointed out earlier in thispaper, the industry is highly unorganized with large number of small players presentin the industry. This restricts the players from exploiting economies of scale possiblefrom operating on large-scale. Thus, consolidation is the key to remove this waste.Policy changes such as import of oilseeds and price policies to favor the production ofoilseeds in the field by farmers will also help to feed the excess capacity.

Unavailability of cottonseed can be addressed once the industry moves towardsconsolidation. The bigger players can integrate backwards till farmers in form ofcontract farming (exploiting economies of scale) and thus eliminate the risk of

Figure 6.Supply chain responsematrix

CumulativeInventory = 120

days

1 day7 days

1 day

1 day

90 days

Refinery

Transportation& receiving

Shipping

Total LeadTime = 244 days

Oil Expeller lead time to produce 4 tonnes ofCottonseed oil

10 days

120 days

Farmers growing Cotton and supplying cotton /cottonseed to traders (Inventory considered isat traders store)

Transportation& receiving

2 days

Cumulative LeadTime = 124 days2 days

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unavailability of raw material. This can also help to reduce the amount of inventoryheld at expeller mill levels from 90 to 6-7 days (as identified in supply chain responsematrix). Again, policy changes cited above may be useful to remove the problemscaused by unavailability of cottonseed.

Transportation can be addressed with the large-scale units located near to farmfields and consolidating the outbound shipment through large distributors.

Inappropriate processing methods viz. use of mechanical expeller is causing a huge lossof cottonseed oil. Even after crushing with a mechanical expeller, there is 6-7 percent oil leftin the cottonseed meal. If the solvent extraction is used instead of mechanical expellers, theoil can be extracted to the maximum and many more useful by products in the form oflinters and hulls can be obtained. Generally the oil left in decorticated (solvent extracted)meal is only 0.5 percent. Solvent extraction mills are profitable only at large-scale. Thus,consolidation of industry is again useful for removal of this waste.

Other NVA activities identified in process activity mapping can also be reduced byuse of better processing methods and use of mechanical conveyors which can directlydeliver the dried cottonseed from the drying platform to store and then to seed cleaner.

Unnecessary inventory in the form of cottonseed can be addressed by backwardintegration with the farmers. Also automatic conveyors can be used to eliminateunnecessary WIP from the process.

Unnecessary motion as identified in the process activity mapping, the oil refineriesare located far away from the expeller mills. Because of this, the neutralized cottonseedoil has to be transported to the refineries, which causes extra lead time. Thus,integration of refineries with the expeller mills will help to reduce the extra lead time ofunnecessary transportation. This will be possible when an expeller unit is operating ona large-scale to feed the refinery with sufficient volume to run profitably.

Cottonseed oil defects can be eliminated by carefully purchasing the right quality ofcottonseed and selecting the right make and technology of expeller unit. Proper storage

Figure 7.Current state of cottonseed

processing industry


SeedCleaner

Expeller Neutraliser Refinery

10-20 days1 day 80-90 days

Refinery Customer


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of raw material and finished goods (oil and meal) is essential to remove the storagerelated losses and defects.

Thus, all the wastes need to be addressed for the successful transition of IndianCottonseed Oil Processing Industry from an inefficient supply chain to an efficientsupply chain.

The future state (to be state) of the oil processing units is shown diagrammatically(Figure 8).

5. ConclusionsRother and Shook (1999) rightly argue that whenever there is a product for a customer,there is a value stream. The challenge lies in seeing and working on it. VSM can bedone in the same way for practically any business activity and expanded upstreamor downstream. Indian Cottonseed Industry has a huge potential due to fast risingdemand and insufficient supply of edible oil in India. Use of inappropriate methods ofprocessing, unorganized industry and presence of large number of non-networkedsmall players is making the overall supply chain inefficient and is causing losses andwastes.

Thus, the wastes of the industry in terms of overcapacity, unnecessary inventory,motion and transport, etc. need to be addressed to improve efficiency and effectivenessof supply chain. Four major recommendations come out of this paper for the industry.

One, consolidation of the industry to form bigger players who can exploit economiesof scale. Second, backward integration with the farmers to assure continuous supply ofraw material (cottonseed). Third, forward integration with refineries or combining therefineries with the oil mills. Finally, last but not the least, use of solvent extraction toextract the maximum oil from oil meal.

In the existing scenario of processing capacity and low-capacity utilization – India’sprocessors operate their plants at a level where average costs are high. They can

Figure 8.State of cottonseedprocessing industry


Refinery Customer

SeedCleaner

Expeller Neutraliser Refinery

1 day1 day 5-6 days

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reduce unit processing costs by increasing capacity use. In the future, costs can dropfurther if larger, more technically efficient plants are built and can operate at highlevels of capacity use. Lower processing costs would create a stream of benefits toprocessors that could be shared with producers (in the form of higher oilseed prices)and consumers (in the form of lower oil prices).

With the above recommendations being in practice, the cottonseed oil industrymight look into future with positive outlook. The future scope of work lies in exploitingother powerful tools of value stream to attack down stream wastes in the supply chainof edible cotton seed oil industry. Similarly, the concepts can be replicated for otheredible oil industries to capture various scenarios and attack wastes in processing anddistribution chains. Similarly, studies can be used to compare value streams in contextto country specific situation.

References

AICCA (2005-2006), Annual Reports for 2005-2006, All India Cottonseed Crushers Association,Mumbai.

Andersen, H. (2001), “The history of reductionism versus holistic approaches to scientificresearch”, Endeavour, Vol. 25 No. 4, pp. 153-6.

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Appendix 1. Value chain of cotton

Figure A1.

GinningLints – Used forTextile Industry(33% of cotton)

Cottonseed(65% of cotton)

Cleaning

Cotton

Losses (2%)

Twigs, leaves andother trash

Expeller UnitExtraction Unit

(a) (b)

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544

Figure A2.

Delinting Linters (4.2 %)

First cut linters

Second cut linters Delintedseeds

Hulling Hulls (26.4%)

Kernels(meats)

Flakingrollers

Extraction Unit

(a)

Thin flakesof meat

Cooking at 170 F(to reduce moisture)

Cottonseedmeal (extraction) (49.2%)

Cottonseed crude oil(12.5%)

Screw pressmills

Solventextraction mills

Washing withCaustic Soda

Washed Oil

Losses – 5.6%

Cottonseed (100%)


industry

545

Figure A3.

Expeller Unit

Evaporation losses atmachine temperature

(3 %)

Moist

Washed Oil

Washing withCaustic Soda

(b)

Cottonseed (100%)

Crushing

Dry

Dried

Oil (11 %) Cake (84 %)Soap stock

(2 %)

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546

Appendix 2. Oilseed tables

Oil

seed

s19

95-1

996

1996

-199

719

97-1

998

1998

-199

919

99-2

000

2000

-200

120

01-2

002

2002

-200

320

03-2

004

2004

-200

5

Gro

un

dn

ut

75.8

86.4

73.7

89.8

52.7

64.1

7044

8270

.2R

apes

eed

and

mu

star

d60

66.6

4756

.757

.941

.951

3962

83.6

Ses

amu

m5.

36

5.7

5.3

4.8

5.2

74

87.

1S

oyb

ean

5153

.864

.671

.470

.852

.860

4679

75.1

Su

nfl

ower

12.6

12.7

8.9

9.4

6.9

6.5

79

1012

.22

Saf

flow

er3.

84.

31.

22.

42.

62

22

11.

7N

iger

1.9

1.8

1.4

1.4

1.5

1.1

11

11

Lin

seed

2.9

3.3

2.4

2.7

2.4

22

22

1.8

Cas

tor

7.8

8.9

8.3

8.4

7.7

8.8

74

88.

3T

otal

pro

du

ctio

nof

nin

eot

her

oils

eed

sin

lak

hto

nn

es22

1.1

243.

821

3.2

247.

520

7.3

184.

420

715

125

326

1.02

Cot

ton

seed

pro

du

ctio

n(l

akh

ton

s)43

4737

.15

40.9

638

.832

.17

52.6

145

.29

58.9

479

.9

Source:

AIC

CA

(200

4-20

05,

2005

-200

6),

Sol

ven

tE

xtr

acto

r’s

Ass

ocia

tion

ofIn

dia

Rep

orts

(200

5-20

06)

Table AI.India’s production

of cultivated oilseeds(November-October) (lakh

tonnes)


industry

547

Appendix 3. Oil tables

Year 2001-2002 2002-2003 2003-2004 2004-2005

Exports of cottonseed (in tonnes) 277 269.19 559.73 726.49

Source: Annual Report of AICCA (2005-2006)

Table AIII.Export of cottonseed byIndia

ProductionState 2002-2003 2003-2004 2004-2005

Punjab 2.64 3.66 6.24Haryana 2.81 3.83 5.82Rajasthan 1.49 2.83 3.41North Zone 6.94 10.32 15.47Gujarat 10.07 16.65 23.31Maharashtra 7.92 10.32 17.31MP 5.94 6.49 5.49Central Zone 23.93 33.46 46.11AP 6.6 8.65 10.32Karnataka 1.98 1.33 2.66TN 1.32 1.16 1.83South Zone 9.9 11.14 14.81Other states 0.33 0.33 0.5Loose cotton 3.8 3.66 2.99All India 44.9 58.91 79.88

Source: Annual Reports of AICCA (2004-2005, 2005-2006)

Table AIV.Area wise production ofcottonseed (lakh tonnes)

Year 2001-2002 2002-2003 2003-2004 2004-2005

Cotton production (lakh bales) 158 136 177 240Cottonseed production(@333 kg/bale) (lakh tonnes) 52.61 45.29 58.94 79.9Retained for sowing and directconsumption (lakh tonnes) 11.3 10 12 16Marketable surplus (lakh tonnes) 41.31 35.29 46.94 63.9

Note: Availability of cottonseed for processing in IndiaSource: Annual Report of AICCA (2005-2006)Table AII.

Year 2001-2002 2002-2003 2003-2004 2004-2005

Export qty (tonne) 101.1 643.96 5,629.17 2,007.99

Source: Annual Reports of AICCA (2004-2005, 2005-2006)Table AV.Exports of cottonseed oil

JMTM19,4

548

Year Output

1996-1997 4.81997-1998 3.41998-1999 51999-2000 4.32000-2001 42001-2002 4.132002-2003 3.532003-2004 4.692004-2005 6.39

Source: Ministry of Agriculture, Government of India, Cottonseed Complex Report (2005-2006);adopted from www.mcxindia.com

Table AVII.Production of cottonseedoil in India (lakh tonnes)

Import of vegetable oil

Oil year(November-October)

Domestic vegetable oilavailability

(lakh tonnes) Edible Non-edible

Total importveg oil

(lakh tonnes)

Totalavailability

(lakh tonnes)

1996-1997 74.2 17.5 1.5 19 93.21997-1998 67.9 20.8 1.6 22.4 90.31998-1999 69.1 43.9 1.9 45.8 114.91999-2000 63.2 44.9 2.5 47.4 110.62000-2001 58.1 48.3 2.6 50.9 1092001-2002 67.2 44.2 3.9 48.1 115.32002-2003 51.5 51.1 2.8 53.9 105.42003-2004 75.9 43.9 2.3 46.2 122.12004-2005 (P) 74.2 50 3 53 127.22005-2006 77 52.5 4 56.5 133.5

Source: Sharma (2006)

Table AVI.India’s vegetable oils

production and import(million tonnes)

Actual EstimatesConsumption in lakh tonnes 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007

Soybean oil 17.8 19 28 31.5 33.7Cotton oil 3.9 5.2 6.6 7.2 7.5Gn oil 7.4 11 9.5 10.2 10Sun oil 5.75 5 5 6.8 6.8Rape oil 11.9 17 14.2 19 19Sesame oil 1.5 2 2 1.6 2Palm oil 40 35 33.2 26 29Coconut oil 4.5 5 4.5 4.5 4.5Castor oil 1 1 1 1.2 1.2Ricebranoil 5.5 6 6 6.5 6.5Others 1.8 2 3.5 3.5 3.5Total 101.05 108.2 113.5 118 123.7Population (millions) 1,060 1,070 1,080 1,090 1,100Per cap kg 9.53 10.15 10.5 10.83 11.25

Source: Dorab (2006)Table AVIII.

India’s consumption


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549

Corresponding authorDinesh Seth can be contacted at: [email protected]; [email protected]

Year Quantity (lakh tons)

1997-1998 0.04431998-1999 0.38241999-2000 0.43162000-2001 0.2382001-2002 0.11752002-2003 0.00552003-2004 0.00892004-2005 0.0271

Source: DGCIS, Ministry of Commerce, Cottonseed Complex Report (2005-2006); adopted from www.mcxindia.com

Table AIX.India’s imports ofcottonseed oil

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550

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