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4. Analysis and Discussion
This part of the study describes the Indian FMCG sector and tries to find out if there is any difference in the supply chain between the countries United Kingdom and India the later part of the discussion. This study would begin by providing a detail outline of the Indian FMCG and its working.
The supply chain practices carried by each firm in there country or in any other country differs. Infrastructure of the country also plays an important role in seeing how the firms supply chain activities should carried out right from the point of origin to point of consumption. In the case of UK and India there is lot difference in the infrastructure of the country and different ways and measures are used by firms working within these countries to reach the product reach the customer. By taking into account firms in India they are still trying bring in the latest technology and practices in supply chain to improve there standard of operation. But in the case of FMCG sector companies in both these countries have to very much responsive as the product is of that much critically and a detail explanation of the UK FMCG sector have already been mentioned in the literature review. This part of the study try to establish different supply chain practices in FMCG sector in India and how different it is from united kingdom and it would also focus on the FMCG sector mainly the Dairy and fresh produce and also taking into account other major things that happens in the FMCG supply chain in India.
The FMCG sector has been the cornerstone of the Indian economy. Within the FMCG Category India is the second largest producer of fruit and vegetable and milk production with a cold storage facility of 70,000 tonnes(N. Viswanadham,2006).Though, the sector has been in existence for quite a long time, it began to take shape only during the last fifty-odd years. To date, the Indian FMCG industry continues to suffer from a definitional dilemma. In fact, the industry is yet to crystallize in terms of definition and market size, among others.The sector touches every aspect of human life, from looks to hygiene to palate. Perhaps, defining an industry whose scope is so vast is not easy. After witnessing booming sales and flooding markets with innumerable products, FMCG companies have had to abruptly apply the brakes and look for various ways to save costs. In 2005, the Rs. 48,000-crore FMCG segment was one of the fast growing industries in India, which has been on a roll for many years, faces tough times ahead, although many segments still shows good growth. FMCG sector has been estimated that the FMCG market will reach to US$ 33.4 billion in 2015. (Online article). Some of the top FMCG companies in India are the following Hindustan Unilever Ltd., ITC (Indian Tobacco Company), GCMMF (AMUL) etc. In comparison with Uk FMCG markets the India market have the longest supply chain due to its nature of operation.
As compared to uk the infrastructure and the geographical location of the places in India makes the firms to be highly alterative with there supply chain strategies in case of supplying the product at the right time to customers. Environmental changes have made Indian firms to realize the importance of the supply chain in the organisation the term which was quite new to them and where firms in uk have already started implementing these strategies at an early stage. Today Indian industry are spending 12 to 15 % of its revenue on logistics and trying to improve there supply chain quite exceptionally( B.S. Sahay, Jatinder N.D. Gupta, Ramneesh Mohan,2006). These supply chain improvements taken by the firms would be quite different or some way similar according the firms in uk and these strategies are made in accordance with the infrastructure of the country as mentioned above. It also a point to note that in most of the developed countries there would be some degree of uncertainties regarding the basic requirement for any business such as road, water, electricity etc compared to developing country like the India chances are more for uncertainties and the infrastructure would pose many new challenges. The main analysis that would be focussed would on the FMCG sector mainly the Dairy and fresh produce and also taking into account other major things that happens in the FMCG supply chain in India that is same or different from uk.
Diary industry in India is one of biggest revenue generating industries with millions of small producers and varies from region to region and state to state. India has emerged as the largest milk producers compared to uk crossing 800 million tonnes. There has been tremendous increase in the output of milk and milk products since 1970 faster than crop (Vijay Paul Sharma and Ashok Gulati, 2003).The production of milk takes place in the rural household through out different parts of the country and these produced milk are delivered to different cooperatives across the country which are then delivered out. But over the years the milk production has increased largely due to the efficient supply chain activities. In India the milk supply chain takes place some what in a different way from that happens in the united kingdom. The milk production of each firm in India is coordinated by the cooperative milk marketing federation of each state. The cooperatives in turn would set up numbers of unions within the state for the processing of the milk and other subsidiary products. Each state would have more than 8-9 unions that collects milk that is produced by the farmers which is then collected from the cooperative village society. The main reason why these unions was implemented was to reduce the other intermediaries in the supply chain and reduce the cost within the supply chain. The structure for the above is given below
Indian Diary Supply chain
Cooperative Village Society
The unions collect more than 6.3 million litres of milk from millions of farmers around the state through the societies in the village. These products are distributed to consumers through a channel of 4000 distributors and 500,000 retailers( Pankaj Chandra Nimit Jain,2007).It is also important to note that supply chains in the Dairy industry can be characterised into organised and unorganised dairy supply chains. The Figure shown above is an organised diary supply chain with other the major intermediaries acting within the supply chain leaving out others. In the unorganised dairy system there is no government body or other institutions like the national federation .and it is the middleman and contractors that plays a major role compared to the co-operative in the unorganised dairy sector which also quite different from the working in the uk.
Fresh produce Industry
The other industry that is also important to the Indian sector is the fresh produce sector and country is the second largest producer in fruits and vegetables in comparison with uk with a total global production of 9.2 %(Rabo India Finance Ltd ,2007).The volume of fresh produce that is produced is consumed in the domestic market. The supply chain of fruit and vegetable differ according to the seasonality of the product, nature of the market etc. There is always a difference in number of players in supply chain depending on the market condition.