Multilayered Distribution System in India: Practice and Issues

Multilayered Distribution System in India: Practice and Issues

Sumeet Gupta (Shri Shankaracharya Institute of Technology and Management, India), Tushar Agrawal (Shri Shankaracharya Group of Institutions, India), Priyanka Jain (Shri Shankaracharya Group of Institutions, India), Dolly Jaisinghani (Shri Shankaracharya Group of Institutions, India) and Ritika Rathi (Shri Shankaracharya Group of Institutions, India)
DOI: 10.4018/978-1-4666-2618-8.ch009
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Abstract

This chapter presents several case studies of the multilayered system in India and shows how the prevalent distribution system preclude any means of cost reduction and making these supply chains efficient. Supply chains of perishable goods, electronic products, FMCG products and Pharmaceutical products are discussed in this chapter. Each of these supply chains present unique challenges and issues that need attention. The three main objectives in these studies are to understand the distribution systems as well as cost economics of the supply chains, identify potential conflicts and issues in their distribution system, and to study the effect of macro-environment on the distribution system. Apart from these objectives, these cases are also meant to prepare those venturing into such supply chains to come up with efficient solutions for improving these supply chains.
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Case I: Distribution System Of Perishable Goods: Vegetables

Perishable goods present the biggest challenge for supply chains partners because if such goods are not properly handled they perish before reaching the end customer. Therefore, the supply chain partners have to keep some margin for the amount that perishes on the way. The supply chain of vegetable is very simple but the supplier base and the customer base is very complex. In a broad sense the partners in the supply chain of vegetables are the local producers, big farm owners and cold storages which supply vegetables to a central marketplace in a city. In every city there are a few wholesale marketplaces (commonly termed as mandi) which act as a hub for supplying vegetables to small markets and stores in the city. Here, the vegetables are auctioned throughout the day till the supply of vegetables for that day is finished. The vegetables are then supplied to malls, vegetable shops, and small marketplaces in the city. Sometimes small vendors purchase vegetables and deliver them from door-to-door. Figure 1 shows a simple supply chain of a vegetable market, although in reality the supply chain would be much more complex.

Figure 1.

The vegetable supply chain

Here we discuss the vegetables supply chain in a farm rice state of India – Chhattisgarh. The case study has been conducted for Peesegaon farm which is a sprawling farm of around 20 acres and supplies various kinds of vegetables and fruits to the vegetable marketplaces. Fresh vegetables from local farms are harvested a day before or early in the morning. And those vegetables that are transported from far off places are harvested 2-3 days prior to reaching mandi. Big farm owners also utilize cold storage facilities where they can store and export their vegetables for international markets. Many farm owners grow and sell their vegetables for Metropolitan markets of India and they do not intend to sell them in the local markets. The fork of farmers requires hard labor as they have to work in an open area. Different vegetables require different treatment. Some require more water and some less. Likewise some require shed whereas others do not.

Figure 2.

The vegetables are harvested by people paid specifically for harvesting

Generally vegetables are supplied to mandi from nearby farms. Some vegetables which have low production in Chhattisgarh are supplied from places like Jabalpur, Bangalore etc. outside the state. The intra-state transportation is mostly done by small trucks in case of big farm owners and commissioning agents and by cycle or pushcart by farmers. The vegetables from outside the state are delivered using truck transportation.

Figure 3.

Transportation of vegetables and fruits using small trucks to Mandi

Mandi opens at 6:00 am and ends at 3:00 pm. From morning onwards farmers bring their vegetables to Mandi. The vegetables are supplied to the commissioning agents who act as intermediary between the farm suppliers and the bulk purchase customers. These commissioning agents work on a fixed commission of 8% of the total sales. There are a number of commissioning agents who operate in the mandi and therefore there is no monopoly. Moreover, since they compete among each other, no cartels are formed but there are chances of price signaling by big commissioning agents. The big farm owners post their own commissioning agents. Most commissioning agents have developed relationship with farms and farmers and they work closely with them.

Figure 4.

Vegetables arrive at the Mandi from various parts of the state as well as other states

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