Newspaper Logistics

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Trade Logistics EndTerm Project Report

Unorganised Sector -

Newspaper Delivery& Local Vegetable Seller

GROUP

No. 6

FORE School of Management

Submitted by Group 6:

Ankit Goyal 073005

Mitul Kathuria 073032

Niharika Pundir 073037

Piyush Kalra 073043

Shashank Chaturvedi 073051Vaibhav Sharma 073056

Manprit Singh 073059

Moksha Gupta 073060


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INDEX

S.NO. Chapter Page No.

1 UNORGANISED SECTOR 3

2 Logistics 6

3 Newspaper Logistics 10

4

Fruit and Vegetables Logistics 18


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CHAPTER 1: UNORGANISED SECTOR

1.1 Importance of Unorganised Sector

Unorganised or informal sector constitutes a pivotal part of the Indian economy. More

than 90 per cent of workforce and about 50 per cent of the national product are accounted

for by the informal economy. A high proportion of socially and economically

underprivileged sections of society are concentrated in the informal economic activities.

The high level of growth of the Indian economy during the past two decades is

accompanied by increasing informalisation. There are indications of growing inter-

linkages between informal and formal economic activities. There has been new dynamism

of the informal economy in terms of output, employment and earnings. Faster andinclusive growth needs special attention to informal economy. Sustaining high levels of

growth are also intertwined with improving domestic demand of those engaged in

informal economy, and addressing the needs of the sector in terms of credit, skills,

technology, marketing and infrastructure.

1.2 Economic Contribution of Unorganised Sector

The informal sector contributes to the economy and caters to the wide ranging

requirements of formal sector. The non-farm informal enterprises are predominantly own

account enterprise and enterprises operated in self employed mode, more particularly in

urban areas.

In the informal sector people often undertake multiple jobs, pursuing of multiple jobs by a

person may be taken as a sign of insecurity in jobs. A single job or even two may

generate income barely enough for subsistence. It therefore necessitates knowing the size

of the class of persons who are forced to take up multiple jobs just for a living to address

the issue of how to mitigate these conditions of job- insecurity.

1.3 Workforce and Number of Jobs in Unorganized Sector

The labour contribution in the economic activities is generally seen from two main

dimensions:

(i) population share in workers, their nature and type of participation, and(ii) number of jobs/positions in the enterprises.


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The estimates of workforce and jobs in unorganised sector may be worked out from

workforce participation rates (WPRs) of NSSO Employment Unemployment Surveys

(EUS) and population estimates from the Population Census, separately for rural and

urban areas and also by gender. The total workforce so estimated through this procedure

refers to the number of jobs performed and is taken as the controlling total. The

workforce in each industry group estimated from the EUS is then cross-validated with the

workforce data available from the decennial population census, to check for

inconsistencies. Suitable adjustments in workforce estimates are made from the

population census for some of the industry groups, for which the sample survey estimates

are not considered reliable, without changing the total estimated level of workforce from

the EUS.

Once the industry-group wise total workforce is estimated by using workforce

participation rates (WPRs) from EUS, the workforce is divided between organized

(comprising public sector and private organized sector) and unorganized sectors. The total

labour input and the share of organised sector is presented in tables below. The data on

total estimated workforce in public sector and private organized sector is available

annually from the administrative sources, which was used in the Indian NAS till the

1999-2000 base year series. However, in the NAS series with 2004-05 base year, data on

employment in organized sector too (along with the total employment) has been taken

from the EUS of NSSO, which provides employment by type of units (enterprise type

code in the questionnaire), in which they are employed. The residual is the labour input in

unorganized sector.

Estimated Workforce and Number of Jobs from the 61st Round of EUS

Adjusted for Census Projected Population for the Year 2004-05


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Share of Labour Input in unorganized Sector -2004 (%)


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CHAPTER 2: Logistics

2.1 Industry structure

Logistic is defined as management of business operations such as acquisition, storage,

transportation and delivery of goods along the supply chain which involves string of

activities through various modes of infrastructure and transport points. Strong economic

growth, increase in domestic and international trade together with increased outsourcing

of logistic needs by industries have driven the logistic sector in India. In the present

scenario India is emerging as one of the world's leading consumer market with the raise

of middle income group. Estimated at US$ 991 billion in 2010, total consumption

expenditure is expected to grow to nearly US$ 3.6 trillion in 2020. Food, housing &

consumer durables and transport & communication are expected to be the Top 3

categories, accounting for 65 percent of consumption in 2020. The FMCG sector alone is

expected to grow at a base rate of at least 12 per cent annually to become an INR 4000

billion industry by 2020. To service such large market at shortest possible time with least

cost, the logistics sector is expected to play an important role in accessing this emerging

market and enabling this growth.

Currently India's logistic sector is valued at around US$110 billion and is expected to

touch US$200 billion by 2020. The cost of logistics in India is valued at 13 - 14% of GDP

where as in developed nations the cost is in the range of 7-8% of their GDP. Since the

cost of logistics is a key component in the overall cost of a product or service,

manufacturers and providers of various services are always on a constant search for more

efficient and cost effective logistics solutions, which would make them more competitive

in the national and international markets. Currently the players in this sector broadlyconsist of local transporters, transporters with some value added services like warehouse

and integrated players providing 3PL services.

2.2 Key drivers of growth

2.2.1 Economic growth

India has witnessed strong economic growth and GDP in last five years. Along with

liberalization, rise in trade and export together with progress of service sector and


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market size has paved the way for growth of logistic sector. India today is viewed as

an important manufacturing hub. Consequently the need of logistic services such as

transportation, handling warehousing has gone up sharply across all industries.

2.2.2 Infrastructure investment

Transportation cost constitutes major portion of overall logistic cost. Increased

expenditure on transportation infrastructure would bring more efficiency by creating

time and place utility for goods. Investment in the logistics infrastructure has been

raised from $201 bn under the 10th Plan to $492 bn under the 11th Plan.

2.2.3 Globalisation

Globalisation of manufacturing sector coupled with technological enhancement has

helped industries across globe to go for cost saving options by way of outsourcing.

2.2.4 GST

With current tax structure decisions in logistic sector are based on tax avoidance

rather than operating efficiency. Proposed introduction of a Goods and Services Tax

(GST) are expected to significantly reduce the number of warehouses which

manufacturers are required to maintain in different states, thereby stimulating

integrated logistics solutions.

2.3 Express Industry

Express industry in India offers distribution services of documents, small packages and

freight on time definite basis carried by fleets of fully owned or dedicated aircraft, trucks,

trains and delivery vans both in domestic and overseas. The industry is highly fragmented

with large number of domestic players from unorganized segment and few global players.

According to Express Industry Council of India, Express industry is valued at Rs 90 bn which

is expected to grow at 25% and carrying over 1 bn shipments yearly. It employs over 1 mn

people and contributes over Rs 6 bn in federal taxes. The players of Indias express services

industry can be broadly classified into three segments: large mainly organised players who

operate on a national and international level; medium regional players whose operations are

concentrated within particular geographical areas; and small players who are unorganised.


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2.4 3PL

3PL companies provide one stop shop logistic services to its customers for part or all of their

supply chain management. Among the services 3PLs provide are transportation,

warehousing, cross-docking, inventory management, packaging, and freight forwarding.

Increased focus on manufacturing activities by industries and potential for significant cost

reduction has made many small and medium companies to opt for 3PL services for their

logistic needs. Planning commission of India has estimated the Indian 3PL market, at about

XLII US$ 890.3 mn in 2005 which is expected to grow at a CAGR of 21.9% to reach US$

3556.7 mn in 2012. The various sectors which have contributed significantly to 3PL growth

include automobile, IT hardware, FMCG and retail. The Indian 3PL industry can be divided

into three distinct tiersnational major 3PL companies with nationwide presence, regional

3PL companies with strong presence in one or two regions, and small remote 3PL companies.

2.5 4PL

Fourth-party logistics (4PL) differs from 3PL in that it is primarily a strategic partnership

with the client rather than a tactical engagement with a supply chain function. They work as

business process providers and coordinates with various 3PL. The no of companies offering

4PL services are still low.

2.6 Container logistic

This segment consists of inland container depot (ICD) and container freight station (CFS) is

also one of the fastest growing segments of logistic sector. ICD and CFS mainly carry out

ancillary activities such as handling, sorting, stuffing and de stuffing and storage pertaining to

import and export of goods. The concerns identified mainly include procedural issues and

high cost of developing facility, lack of technologically advanced equipments. India has 130

CFS and 61 ICD, with 10 mn TEUs compare with China which is 150 mn TEUs with 3000

ICDs and CFS and global volume of 600 mn TEU. Currently More than 40% of up-country

cargo is being transported to CFSs for carting and is containerized at CFS and transported to

Jawaharlal Nehru Port (JPT) for loading on the vessels at JNPCT, NSICT and GTI.


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2.7 Warehouse and logistic park

Warehouse and logistic park is crucial link of logistic more so in case of just in time supply.

Unlike ICD and CFS which are developed for EXIM cargo, warehouses and logistic parks are

established for handling domestic cargo. As on the 31st March, 2010, Central Warehousing

Corporation operated 487 warehouses with a total storage capacity of 1059.8 MMT with

capacity utilization ratio of 85%. Indian railway is also developing logistic parks and

assisting private players to acquire land near railway stations. However there are still lesser

no of logistic park in India and they are looked upon as mere warehouse station rather than

value added service provider. In terms of modernization there are approximately 7-8% of

warehouses which are well equipped with racking systems, palletization and standardization,

having leak proof structures, 24 hour security, multi user facility located near optimal

locations with best use of automation and IT and about 3-4% of logistic parks with modern

amenities.


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CHAPTER 3: Newspaper Logistics

In a newspaper organization like Hindustan Times, one of the largest circulated newspapers

from the HT Media Ltd, in India, there are various factors that determine the successful

operation of the sales and distribution channels. Accordingly, even minor issues in these

operations can adversely affect the newspaper. A customer may choose a newspaper for

various reasons. However, its up to the newspaper agencies to communicate to the customer

that their newspaper can deliver all the values a customer may look for. The reach and

popularity of a newspaper to a large extent depends on its distribution network. Here we have

carried out an analysis on the delivery and sales management of the Hindustan Times in order

to better understand their channel and also identify and provide possible solutions to anyshortcomings.


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3.1 Structure of Sales and Distribution System

Edited articles are

received

templates are

prepared for each

page

all pages are printed

first except the first

page

few copies are

printed first,

checked according

to the print order

final printing ,

country edition first

and then the city

edition

Counting budling uploading

issue of

challan

wagon driver unloading to

depot

salesman takes

the responsibility

executive

supervision

city edition supplementsupcountry

edition

language

papers

foreign

papers

Vendorsinserting

pamphletssegregation

beat boys for

delivery

Printing

Packaging

Unloading

Newspapers

sold

Delivery to

home


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FIELD VISIT

The following photos were clicked during the field visit made to the Rohini Newspaper depoton 08 December, 2013, 5:00-6:00am.

Figure1. Arrival of Newspapers in wagonsfrom the HT printing press at Rohini

Newspaper depot at 5:30am.

Figure4. HT Salesman collects cashpayment from a vendor.

Figure5. Vendors squatting on a pavementside for sorting copies as per distributionareas and inserting pamphlets. He also

prepares copies for delivery by makingnewspaper rolls.

Figure 2. Labour unloading HT newspaperbundles from the wagon to the depot

Figure3. Bundles of HT, stacked together.Almost 14,000 copies of HT arrive atRohini depot each day.

Figure6. Copies mounted and vendor off todelivery


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3.2Role of each member

3.2.1 Printing Press

The press prints the required units of the newspaper for the day according to the

production plan. The content is taken from the editorial team and using high capacity

advanced press machines that deliver the product in packaged condition, the papers

are printed.

3.2.2 Transporter

Through contracted trucks and vans, the packed newspaper copies are transported to

different distribution locations. Each van has a capacity for about 20,000 newspapers.

3.2.3 Distribution Centre

The copies from the transporter are received at the distribution centre which stocks it

for a short duration before handing it over to the various vendors and hawkers who

source it from the centre. The payment for the goods is on a daily basis.

3.2.4 Vendors and Hawkers

Vendors and hawkers source their newspapers from the distribution centre and deliver

them to the customers. Vendors are larger in scale than hawkers and employ delivery

boys. The delivery boys have demarcated regions/housing societies, which they serve.

Hawkers are individuals who do not have established customers and sell at road sides,

bus stands etc. They make small quantity purchases.

3.3Relationships and ExpectationsThe various stakeholders in the value chain need to work closely in order to deliver the

service quality expected in a newspaper delivery, each morning, without fail. This infallible

commitment to the customers requires that each actor in the value chain clearly understands

the expectations off him/her and clearly communicates his/her expectations to the others.

3.3.1 Company

The company is at the head of the value chain and is clearly the Channel Leader. The

customers come to the vendors and/or hawkers with an intention of buying a


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particular newspaper which clearly indicates that the brand of the product is important

and not the vendor or hawker as such. Thus, from the point of view of the

vendor/hawker, the supplier power is relatively high. The dealers (vendors/hawkers)

expect the following from the company:

Timely delivery of the newspaper each morning in all weather conditions.

Proper quantity to be delivered each day as per their demands.

Newspaper which are not sold the prior day to be returned and reimbursed.

Their commissions to be maintained in the long run and not reduced

especially as the newspaper circulation picks up.

Make it easier for them to collect newspapers

There are several customer segments on the basis of income and age categories and

hence expectations differ. However, the following are a common subset across

different segments:

The newspaper should report all relevant news reports from the previous

day

There should be interesting feature articles suiting their taste.

The presentation should be good including the print quality and colours.

The higher the newspaper weight, the better since it can be sold for a higher

price at the kabadiwala.

3.3.2 Dealers

The dealers (vendors/hawkers) are the companys sole touch point to the customers.

The companys relationship with hawkers is temporary since they have a fluctuating

demand and hence the important dealers from the companys perspective are the

vendors who typically have a committed demand based on the number of customers

they serve. The company expects the following from these vendors:

To deliver the newspapers on time to the customers.

To ensure that they do not overcharge the customers making it expensive for

the customers.


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To ensure that any supplement/promotional material being sent along with

the newspaper by the company being delivered to the customers without any

pilferage (e.g. at times newspaper stick samples of products on pages in their

advertisers promotion campaigns).

3.3.3 Customers

The companys relationship with the customers is typically long term since people do

not usually change their newspaper reading habits. We could not gather any clear

expectations that the company executives had from their customers. On the editorial

side, there could be expectations on content related feedback especially through letters

to the editor etc. but these were not explicitly mentioned by the company executives.

3.4Physical DistributionThe readership for Hindustan Times is continually increasing in the northern India, with

simultaneous editions being brought out from New Delhi,Mumbai,Kolkata,Lucknow,

Patna,Ranchi,Bhopal andChandigarh.With readership of more than 3.5 million in 2012,

as said by the Indian Readership Survey, the mode of transportation used by Hindustan

Times to deliver newspaper in different areas is different. Tempos are used for

transporting newspapers in small quantities in areas near to printing press. For area where

volume to be delivered is high trucks are used.

3.5Sales Incentives and Trade PromotionThere are no sales incentives given to suppliers and vendors by Headlines Today. The

margin per paper of vendors and hawkers varies from 30 paisa to 50 paisa. Vendors are

free to put local inserts and advertisement pamphlet in the newspaper. On average 20

paisa per newspaper are paid for inserting pamphlets. So if a vendor sells more copies,

he/she can increase his/her earnings from newspaper distribution as well as from inserting

advertising pamphlets in the newspapers. Promotional offers are given to institutes and

organizations by Mail which buy newspapers in large quantity. Customers are also given

discounts if they subscribe newspaper for longer time periods, in form of goodies;

coupons etc. Hindustan Times has had strategic alliances with major sports brand, by

virtue of which coupons for a particular segment of shoes of that brand were given to the

customers who had subscribed for an annual subscription with Hindustan Times.
http://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Kolkatahttp://en.wikipedia.org/wiki/Lucknowhttp://en.wikipedia.org/wiki/Patnahttp://en.wikipedia.org/wiki/Ranchihttp://en.wikipedia.org/wiki/Bhopalhttp://en.wikipedia.org/wiki/Chandigarhhttp://en.wikipedia.org/wiki/Chandigarhhttp://en.wikipedia.org/wiki/Bhopalhttp://en.wikipedia.org/wiki/Ranchihttp://en.wikipedia.org/wiki/Patnahttp://en.wikipedia.org/wiki/Lucknowhttp://en.wikipedia.org/wiki/Kolkatahttp://en.wikipedia.org/wiki/Mumbai


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3.6Issues Concerning the Organization and its Distribution ChannelOn analyzing the interaction of the organization with its distribution network, the

customers and marketing decisions the following problems were identified:

3.6.1 Content

A newspaper needs to match the readers requirements, especially if the newspaper is

targeted in a local market. Thus, it not only needs to capture the articles of national

interest but also the local interest. Being a new entrant, Mail Today may also face stiff

competition from other local newspapers which operate in a very small size

community. Thus, there is a critical need to monitor the nature of the newspaper

content desired by the reader.

3.6.2 Layout and design

The layout and design of a newspaper appeals to the reader as much as the content in it.

Hence, special attention must be paid to not only the layout of the newspaper but also

the size and the quality of the final print. The small size of Mail Today, in comparison

to its competitors, makes it easy for the readers to hold and read and handy to carry.

The effect of the small size can be seen from the fact that major national dailies have

come up with the mini versions of their newspapers. Also, the aim is to increase the

sales by keeping more pages in the newspaper print copy so as to provide higher resale

costs to the reader.

3.6.3 Costs

In a highly competitive industry like newspapers, one of the ways a newspaper can

make itself differentiable is by managing the cost to the customer. This includes both

the cost of purchasing a print copy of the newspaper as well as the profit from reselling

the newspaper.

3.6.4 Distribution

Newspaper is a highly perishable good and requires stringent timings to be followed. A

delay may result in the wastage of enormous costs. Hence, newspaper printing press

uses a highly time critical channel for the distribution where the risk of the delay is

borne by each participant in the channel as and when the goods are transferred to

him/her. Even a slip of a few minutes can create a cascading effect and the value of the


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newspaper diminishes (because the vendor/hawker will not pick up your newspaper

and deliver it, if he is getting late by waiting for your newspaper to arrive). Profit

sharing throughout the distribution channel is also critical. Different newspaper

agencies use different models for profit sharing, though they are bound by upper limit

of commission at each level by the Audit Bureau of Circulations (ABC). The

successful and efficient channel is the one where all the levels within the channel

(namely, the printing press, transport, vendor, distributor and hawker) are committed to

the timely delivery of the newspaper. For this, the newspaper agencies compete for the

commission per copy absorbed at each level. Maintaining such competitive

commission structures is one of the main issues faced by newspaper agencies in their

respective distribution channels.

A newspaper organization has no control over any of the levels of the channel except

through the competitive commissions being paid. Thus, the channel leader is not the

agency but the distributor who hires hawkers. This is disadvantageous for the

newspaper agency as they have to comply with the terms set by the distributor. An

expensive alternative to this issue is to set up its own distribution system. However,

such a system has been highly impractical in India as local distributors never let the

channel control get out of their hands. Besides these major issues, a newspaper

organization has to look for minor issues such as dynamic customer demands and

shifting channel control power towards the customer.


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CHAPTER 4: Fruit and Vegetables Logistics

4.1 Indian Retail Industry: Fruit & Vegetables Sector

The Indian retail sector is still in its nascent stage. The economic liberalisation policies and

globalisation had ignited country's economy for faster growth. The simultaneous act of

liberalisation of the Indian economy and globalisation triggered an accelerated industrial

growth across the spectrum of all market segments in India. The Indian industrial growth and

liberalised economic policy attracted global players to India in every industrial sector. Retail

industry as a whole is not an exception because it has witnessed advancement into organisedtrading. Organised retailing refers to marketing activities undertaken by licensed retailers,

that is, those who are registered for sales tax, income tax for whose business is corporate,

who implement management techniques managed by professionals as a firm or limited

company or cooperative. Traditional retailing refers to those who operate in unorganised

markets. The evolution of organised retailing had been initiated in a big way by the entry of

corporate, both domestic and global.

Retail sector in India is at the crossroads today. A shift between organised and unorganised

retail sector is apparent, especially in the vegetable retailing zone. This shift is a call for

transfer of consumerism towards organised retailing. The penetration of organised retail in

the field of vegetable retailing will face fierce resistance from traditional retailers with their

existing strong foothold. This resistance from the traditional vegetable retail cannot be

ignored. The most important thing to note is that the traditional retail format supports a larger

population and provides direct employments. So there is no way that government or anyone

can discount these foundation stones of Indian economy. The role of government and its

policy are vital in supporting, improving, and developing traditional vegetable retailers.

Vegetables, fruits, and grocery play a vital role for the existence of people and also a very

influencing role in the economy. Though fresh fruit, vegetable, and grocery retail has been

considered as a very low-margin business, the market potential has attracted Indian business

houses and corporate, driving the forays through different models like single-format, multi-

format or integrated urban-rural models. To attract the global leaders in vegetable retailing,

the government allows foreign direct investment in cash-and-carry type business model to the


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tune of 100 per cent. The joint ventures of domestic Indian companies with the global players

are allowed to operate in India. However, the domestic companies have controlling stake in

the vegetable and grocery retail. Currently, organised retailers are anchoring the metropolitan

cities and urban markets. In the near future, corporate retailers will concentrate on the rural

markets, which have been uncovered and have untapped potential. The traditional retailers

are unorganised small shopkeepers, Kirana (mom and pop) stores managed by families or

individuals. There are two classifications of their formatsstores and non-stores. Store

formats include stores with permanent and semi-permanent building, ranging around 50

square feet or more in size, corner stores, and paper and cigarette shops. Non-stores format

covers street vendors, pavement vendors, cart vendors, mobile vendors (head carrying), and

vendors at daily or weekly farmers markets.

4.2 Vegetable retail Scenario

Traditional Indian retailers account for 12 million retail outlets all over India and more than

40 percent of them sell vegetable and grocery. Indian food retail consists of staple

commodities comprising grains, pulses, and vegetables. The Indian food retail business,

especially vegetable retailing is witnessing a rapid growth in India's organised retail sectors.

The traditional retailing of vegetables is not very much organized, amounts to 97% of the

total market, is extremely localised and highly fragmented with large number of

intermediaries. The intermediaries between the customers and farmers are traditional retailers

with different outlet formats-mom and pop shops, non-permanent shops in the market,

pavement vendors, roadside vendors and push cart vegetable sellers, wholesale traders,

commission agents and auctioneers.

The farmers themselves sell their produces directly to the end consumers in local markets,

regulated and unregulated 'farmer markets', or they sell to intermediariesagents and

organised retailers. The market place is usually in close proximity to the farmland and

customers accessing the market live in and around locale. Farmers selling vegetables directly

to the customer amount to very small fraction by volume. Farmers sell bulk of their produces

to agents and auctioneers. The agents buy small quantities of produces from farmers and

transfer it to wholesalers directly or through another agent. The auctioneers are people who

enter into buying contract with farmers for whole or partial quantity of the produce and sellthe produce to an agent or a wholesaler. Auctioneers also transfer the vegetables to


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wholesalers directly or through another agent. Wholesalers of vegetables sell to retailers

both traditional and organised retailers, and to customers, who buy in large quantity. Cart

vendors, a type of traditional retailers, buy vegetables from wholesalers or organised retailers,

sell to customers in mobile carts and deliver to customers at customer's doorsteps. Wholesale

market is a vital link in vegetable supply chain. Both the traditional and organised retailers

are dependent on wholesale market with different propositions.

4.3 The Role of Distributors and Brokers

In dealing with independent food stores it is quite common, when getting started, for the

vendor to present products directly to the store owner or store buyer. It is also quite common,

when getting started, for the vendor to arrange all the shipping, handling and invoicing of the

products to be shipped to the stores. However, over time and as the business expands, many

companies look to alternative ways of selling or shipping to the stores. At this point in time,

these companies often begin to look for a broker to help with the sales to the stores or a

distributor to handle the sales, shipping and servicing of the products to retailers in a specific

geographic area or to a specific class of trade.

4.4 Shipping Direct To Retail by the Vendor

When getting started many small companies choose to approach retailers directly and arrange

for their own shipping of products to the store. It is considerably easier to approach an

independent or specialty retailer than a national or regional chain. The independent or

specialty retailer normally has fewer gate keepers to protect them from the solicitations of

new companies with products to sell.

4.4.1 Pros and Cons Direct Approach to Retail

Pros Cons

The direct approach by a new

company or new vendor to an

independent or specialty store may

work quite well, if you are prepared

to invest the time and energy it will

take to capture a new account, the

same approach may not succeed

Servicing independent stores can be quite

costly when consideration of the order size

is compared against the drop cost. The

drop cost is the cost of time and resources

such as fuel, vehicle lease cost, insurance

and other considerations against the gross

margin of the order. If the order size is


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with a regional or national chain.

The majority of independent and

specialty retailers prefer to deal

directly with a small vendor as the

service is more specialized and the

small vendor can usually react more

quickly to their needs.

INR 20.00, not unusual for a small store,

then the gross margin may total INR 10.00.

If the cost of delivering the product,

including the opportunity cost of time and

transportation and administrative and other

costs are factored against the gross, the net

margin may be lower than dealing with a

distributor.

Works well with independent and

specialty.

Difficult to get appointment with majors

Easier to launch products at retail

with independents.

Majority of products delivered by

distributors

Independents are receptive to new

and innovative products.

Opportunity cost of time with independents

and hundreds of stores with majors

Establishes relationship with retailer. Cost of establishing logistics links to

retailers

Better feel for acceptance of product

by consumer.

Service costs and inventory financing

costs;

Full program costs are responsibility of

vendor; Set up customer service, sales

reps, return logistics, collection

procedures, credit procedures, storage,

inventory control

4.5 Using a Broker

Many small companies decide to hire a food broker to sell the product into stores. The broker

is a contract sales representative and besides conducting the sales many brokers offer a wide

range of services, for a fee, to their principles. As a rule, brokers are not responsible for the

shipping, invoicing or inventory control of products at the store level. The brokers role is to

make the sale, represent the line to the retailer and assist on the pull of the products at

retail.


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process can greatly expedite the

introduction of a new line at retail.

Established relationship with

retailers

Represents limited number of lines and will

not often pioneer new lines

Experienced and effective sales force Will not devote a significant amount of time

to new lines if not successful right away

Sales costs for vendors are fixed Quick to drop lines that are not immediately

Productive

4.6 Using a Distributor

Retailers will often refer to a food distributor as a truck to the door. The distributor

typically purchases products from vendors and resells them to retailers. The distributor

requires a margin of 20%-30% to purchase and stock inventory, sell, deliver and invoice the

products.

4.6.1 Pros & Cons - DistributorPros Cons

The specialty or independent store

will normally deal with two or three

distributors and several dozen

independent vendors. Vendor

management becomes achievable

with a limited number of contacts. A

chain buyer may buy for 4-10

categories of products and deal with

6-10 distributors and dozens of

major nationals and also be

responsible for category

management of thousands of items.

There is limited time to return a

Distributors may carry between 1,500

and 50,000 stock keeping units

(SKUs). Most distributors sales reps

only spend between 20-40 minutes in

a store each day. In that period they

must handle returns, answer

questions, take orders and talk about

new or existing products in three or

four departments. In order to not get

lost in the assortment the small

company must ensure that the

distributor has top of mind awareness

about the brand and work the


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24 | P a g e

phone call or e-mail much less attend

a meeting on a new product.

Distributors will purchase products

directly from their vendors, stock

inventory, take orders from retailers,

manage the inventory on the shelf,

service the retailers needs, introduce

new products into retail and deliver

the products to the stores (DSD -

direct store delivery), handle the

returns and normally assist in any

product recalls.

The distributor will normally

specialize in a category area such as

frozen or in a number of areas such

as fresh, grocery or deli but not

frozen. The distributor may be a

conventional, natural or organicdistributor or a combination of all.

The distributor survives by delivery

of products to retailers and is usually

on the hunt for new lines to carry.

The distributor, like the broker, has a

relationship with the retailer that can

assist in the placing of new products

on the shelf. The distributor will

normally not take on a line of

products that they feel cannot be

moved into their distribution

channel. The actual and opportunity

cost of carrying a non-productive

line is very high and is the reason

most distributors will drop existing

stores to ensure sell through and

demand. Distributors will drop a line

that is not performing and usually

will not pick up the same line that

they have dropped. It should be noted

that the line may not perform at retail

for a number of reasons unrelated to

the quality of the product. Examples

include shelf placement, pricing,

number of facings, location in the

store, out of stocks due to poor

reorder cycles and the distributor not

purchasing enough products.

The principles of a small line can

lose control of their products at retail

and lose control of the relationship

with the retailer. Most distributors

insist on maintaining the relationshipwith the retailer and will discourage

the development of an independent

relationship.


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25 | P a g e

lines and bring in new lines on a

regular basis.

Established relationships with

retailers

Relationships will vary with retailers

Logistics and administrative systems

in place

Carries between 5,000 and 100,000

SKUs

Sales force and customer service

systems in place

Order taker rather than sales driver

Stock inventory and place orders

with vendors

Reluctant to stock untested lines

Carry retail receivables May pay vendors in 120-180 days


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4.7 Challenges faced by Fruit & Vegetables Sector

The Indian fruits and vegetables production faces multiple challenges across the value chain from

the supply side to the demand side, according to a study released by EXIM Bank of India. The

study was conducted with an aim to examine the factors responsible for India's low share of in the

world trade of fruits and vegetables. This is despite being the second biggest producer of fruits

and vegetables. The study said that at production level, the major challenge is low productivity,

while at post production stage, the wastage rate is very high. The study noted that average

productivity of most domestic fruit and vegetable crops is low compared to international

standards. There is a wide gap between existing and potential yields. This can be narrowed

through improved varieties and technologies. Some areas of concern are water management,

quality seed development, pest and diseases management and technology suitability for small and

marginal land holdings. While admitting that there are problems facing the Indian fruits and

vegetables sector, Siraj Hussain, Secretary, Ministry of Food Processing Industries, said that

India also has several success stories. "We have put up a reasonably good supply chain in grapes,

apples and now bananas". But these successes have not been replicated in other fruits and

vegetables, he said.

According to the study, estimated wastage in India ranges from 11 per cent in mangoes to as high

as 90 per cent in tomatoes. This has resulted in low marketable surplus and low trade in the

sector. Some other contributors are slow development of post-harvest technologies and their

dissemination.

Total existing cold storage capacity in India is only 10.4 per cent of the total production of fruits

and vegetables, it said. Of this total, 75 per cent caters to potatoes and around 24 per cent is used

for meat and dairy, leaving only a miniscule capacity for fruits and vegetables.

The study stressed the need for production and post-production management, international quality

compliance, and marketing strategies for development of the export market. The report said that

the analyses of production, productivity and major fruit and vegetable trade reveal three areas that

the country needs to work on - "productivity improvement through technological interventions,

reduction of wastage through efficient post-harvest management and diversification of markets

through development of customized products."

(Reference: http://businesstoday.intoday.in/story/fruits-vegetables-sector-faces-multiple

challenges-exim-bank/1/200230.html )
http://businesstoday.intoday.in/story/fruits-vegetables-sector-faces-multiple-challenges-exim-bank/1/200230.htmlhttp://businesstoday.intoday.in/story/fruits-vegetables-sector-faces-multiple-challenges-exim-bank/1/200230.htmlhttp://businesstoday.intoday.in/story/fruits-vegetables-sector-faces-multiple-challenges-exim-bank/1/200230.htmlhttp://businesstoday.intoday.in/story/fruits-vegetables-sector-faces-multiple-challenges-exim-bank/1/200230.html


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4.8 FUTURE IMPROVEMENTS/ PROSPECTS IN LOGISTICS OF FRUIT &

VEGETABLE INDUSTRY

The use of RFID in logistics in the fruit and vegetable industry

In October 2011 Orange Business Services developed an application platform, accessible

24/24 using cloud computing (SaaS) through a secure ergonomic web interface, that enables

the management at Auchan's fruit and vegetable distribution centre and their provider of

reusable plastic crates to track the entire fruit and vegetable logistics chain in real time.

The application retrieves the RFID information that is detected by chip reading systems,

either using portals (for reading large numbers of tags simultaneously, in warehouses for

example) or hand-held readers (for fruit and vegetable producers) supplied by IER.

In this way the crates can be tracked in a closed loop: from the crate supplier to producers, to

distribution platforms and shops. The cleaning of the crates after use marks the start of

another cycle.

In addition to optimizing the logistics chain (increased turnover and tracking of the crates

etc.), this solution offers greater security for packers with a reduction of the risk of accidents

associated with wooden crates, and also the major benefit of reducing the numbers of lost

crates, as they can always be precisely located.

RFID contributes to sustainable development. Using plastic RFID crates produces 150 tons

less waste and enables a 30% reduction in emissions of greenhouse gases.

Furthermore, this solution respects current European regulations relating to food hygiene for

fresh products. We are proud to have provided a group such as Auchan with the means to

optimize their logistics chain in an area as sensitive as fruit and vegetable distribution. This is

the first real application of the potential of RFID technology in the domain of large-scale

distribution. The cloud solution that we have developed could not only be applied to other

distribution channels, but also to other sectors and industries.

(Reference: http://en.econostrum.info/The-use-of-RFID-in-logistics-in-the-fruit-and-

vegetable-industry_a113.html)
http://www.orange-business.com/fr/entreprise/index.jsphttp://en.econostrum.info/The-use-of-RFID-in-logistics-in-the-fruit-and-vegetable-industry_a113.htmlhttp://en.econostrum.info/The-use-of-RFID-in-logistics-in-the-fruit-and-vegetable-industry_a113.htmlhttp://en.econostrum.info/The-use-of-RFID-in-logistics-in-the-fruit-and-vegetable-industry_a113.htmlhttp://en.econostrum.info/The-use-of-RFID-in-logistics-in-the-fruit-and-vegetable-industry_a113.htmlhttp://www.orange-business.com/fr/entreprise/index.jsp

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