Introduction
India is one of the leading producers of variety of horticultural crops in the world and is one among
the world’s five largest producers of over 80 per cent agricultural produce, including many horticultural crops. The vast geographical area and varied climatic conditions prevailing in the country help the farmers to produce a variety of fruits and vegetables. Among the horticultural crops grown in the country, greater emphasis is given to vegetables like tomato, brinjal, chilli, cauliflower,
cabbage, peas, potatoes, onions, common cucurbits and other leafy vegetables which are in high demand. These crops also help in generating higher income and employment opportunities, particularly for the small and marginal farmers throughout the year. However there are several constraints in marketing of these commodities. The country need to develop an efficient supply chain for the distribution of fruits and vegetables.
Supply chain management plays a pivotal role in minimizing operational costs and profitability as high as possible. Of the several factors of supply chain, flow is one of the most important factors. Flow refers to the product flow, the information flow and flow of finance. The product flow mainly includes the movement of goods from farmers to consumers, as well as any customer returns or service needs. The information flow involves transmitting orders and updating the status of delivery and while the finance flow includes all the financial aspects such as invoices and payments. The present challenge in supply chain management is to maintain all three flows in a most efficient manner, resulting in optimal results for farmers, wholesalers and the consumers.
Overview of Fruits and Vegetables Production
In India per capita availability of fruits and vegetables is low due to post harvest losses which account for about 25% to 30% of production. Besides quality, sizable quantity of produce deteriorates by the time it reaches the ultimate consumer. Most of the problems relating to the marketing of fruits and vegetables can be traced to their perishability. Perishability of fruits and vegetables is one of the main reasons for high marketing costs, market gluts, price fluctuations and other similar problems. There is a rise of about 4% in the production of fruits and vegetables but there is significant increase in production area also which results in low per hectare production. This phenomenon is caused due to various factors in which economic and technological factors lead the race. There is a need to educate the farmers of the latest technological innovations and also help them by providing support in getting latest technologies and proper supply chain management interventions.
With rise in the population of middle and upper middle class coupled with increase in number of working couples, the demand for semi-processed foods, fast foods, packed foods, ready-to-eat foods has increased in the recent years. The change in taste and preference of consumption are driven by longer working hours, increasing incomes, exposure to advertising, comfort and convenience etc. As urban population is becoming increasingly health and hygiene conscious, they prefer to buy any food and food products either from super markets and modern retail stores instead of conventional markets. This has led to the entry of more number of organized retailers into the horticulture
produce marketing.
Marketing of Fruits and Vegetables
Marketing of horticultural crops is quite complex and is associated with several risks due to their perishable nature, seasonal production and bulkiness. The spectrum of prices from producer to consumer, which is an outcome of demand and supply transactions between various intermediaries at different levels in the marketing system, is also unique for fruits. Moreover, the marketing arrangements at different stages also play an important role in price levels at various stages viz. from farm gate to the ultimate user. These features make the marketing system of fruits to differ from other
agricultural commodities, particularly in providing time, form and space utilities. While the market infrastructure is better developed for food grains, fruits and vegetables markets are not that well developed and markets are congested and unhygienic. Hence, development of an efficient marketing system can help in reducing postharvest losses; enhances farmers’ realization; reduce consumer price; promote grading and food safety practices; induce demand-driven production; enable higher value addition and facilitate export.
The different channels that exist for marketing include:
• Farmer-trader-wholesaler-retailer-consumer
• Farmer-trader-retailer-consumer
• Farmer-trader-consumer
• Farmer-consumer.
Supply chain and need for a supply chain management
Supply Chain Management includes management of the entire set of production, processing, distribution and marketing activities by which an end user is supplied with a desired end product. The supply chain development not only benefits the private sector but also creates spin-offs that stimulate social, economic and environmental sustainable development in the region. The advantages include; reduction of product losses in transportation and storage; increasing sales; dissemination of technology, capital and knowledge among the chain partners; better information about the flow of products, markets and technologies; transparency of the supply chain; tracking and tracing to the source; better control of product safety and quality; large investments and risks are shared among partners in the chain; productivity Improvement; high customer satisfaction; increased profit and on time delivery.
Factors affecting India’s Supply Chain Management
• Availability of cold storage: Availability of proper cold storage is one of the important factors in supply chain management. The growth of the cold storages in India is not uniform and adequate. The
shortage of cold storage capacity is resulting in over 30 percent of farm produce goes waste every year, more than 20% of produce from fields is lost due to poor post harvesting facilities and lack of cold chain infrastructure. The present supply chain that connects the farmers to both the organized, as well as the unorganized retail, is not efficient with many intermediaries and manual handling. This results in around 30 percent of wastages and also less remuneration for the farmers.
• Infrastructure for better connectivity: For transferring goods from one place to other connectivity plays a vital role. In India the road infrastructure is not so good so transferring food and other goods is a real big challenge. Thus to improve the efficiency of food supply chain more attention is needed on transport.
• Sorting and grading system: The sorting and grading methodology needs to be updated on scientific grounds as farmers do it themselves and they have very little knowledge about the processes. To improve the efficiency of the supply chain we need to improve the skills of the farmers.
• Handling and packaging: Most of the agriculture is in remote village areas and all the places are not provided with proper facilities of handling and packaging. Because of this lot of fruits and vegetables get spoiled, wasted and deteriorates in quality to be used in supply chain. Thus, proper training and knowledge has to be provided on handling and packaging.
• Market intelligence and linkages: Proper marketing and market intelligence provides efficient food supply chain and thus help in development of strong economy. It is essential to provide linkages
with actors in market chains.
• Policies of Government: The Governments play an important role in formulating the policies for agriculture, horticulture and food industry which includes farming, production, processing, distribution besides the financing and retailing these activities. There are several multitudes of Departments handled between both State and Central Governments. In view of the globalization of this industry, the decisions if are mutually reinforcing and consistent would be extremely productive.
Current scenario of supply chain in India: It is found that around 30–40 percent of fruits and vegetables are wasted due to post harvest losses and in value terms the loss is estimated to be 25%. Wastages at every stage of the food supply chain has resulted in low availability of fruits and vegetables for consumers and also its imports in-spite of India being second largest produce. The country has a huge opportunity to become a leading global food supplier only if it has an agile, adaptive, responsive and efficient supply chain. However, lack of infrastructure (cold storages, refer vans, cool chains, ripening chambers etc) has resulted in wastages. Some
of the other factors include, missing link between production and research system and consumers, capacity building market information, research and intelligence. Isolated functioning of various stake holders and the infrastructure connecting these partners is very weak. There is lack of demand estimation and technology applications such as cold chain logistic supply chains and product tracking and tracing. Lack system integration and presence of large number of unorganized retailers result in making unorganized supply chain practices further inefficient.
Measures for improving supply chain and its
effectiveness:
Improving the supply chain the following measures can be adopted. There has to be structural changes at different levels - farmers, intermediaries and consumer. The government, private, public-private partnership, cooperatives, technology providers, and even media can play a crucial role. Infrastructure like roads, transport, information and communication technology and cold storage are basic requirement for better results in supply chain.
• Demand forecasting: It is one of the important requirements for improving the effectiveness of supply chain. Poor forecasting demand can result in an imbalance between supply and demand. In some months vegetables are either not harvested from the fields due to lack of demand. In some reasons, produce is not available and thus results in prices increase.
• Coordination between farmers: Vertical coordination of farmers through FPOs, cooperatives, contract farming and retail chains would facilitate better delivery of output, reduce market risks, provide better infrastructure, attract more public interest, acquire better extension services, and create awareness regarding the prevailing and new technologies.
• Customized logistics: It is another important requirement to make logistic more effective. This
reduces the cost, facilitates the maintenance of quality of the produce and fulfills the requirements of targeted customers.
• Government policies: The State Government is providing subventions of Rs.1/- per KWH of electricity consumed by cold storages in the horticulture sector. Further, National Horticulture Board is providing a back ended subsidy of 25% (maximum of Rs.50 lakhs whichever is less) for construction/modernization of cold storage units. Cold storages are classified as Agro Food Processing Industry for providing incentives and concessions available to Agro Food Industry.
• Better Information system: It is required for better coordination among different stakeholders from farmers to consumers is the need of the hour. The internet and mobile communication can also be used to enable information and financial transfer between the stakeholders.
• Public private partnership: It is another important strategic solution. Supply chain like washing,
waxing, grading, sorting, packing, pre-cooling, handling facilities, insurance, finance, transport and processing facilities would add value to supply chain functioning.
• Establishment of food parks: This promotes agro and processing industries in cluster in area where there is predominant production of process able agriculture and Horticulture Products. These parks also provide the required infrastructural facilities.
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