Study of Supply Chain Management in vegetable Market in Bareilly District of Uttar Pradesh Project Report Submitted to the

G. B. Pant University of Agriculture and Technology PANTNAGAR-263145 (U.S. Nagar), Uttarakhand, India By Bhupendar Singh Id. No. 33047 IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF Master of Business Administration (Agribusiness)

July, 2012

ACKNOWLEDGEMENTS Firstly, I express my sincere gratitude to "Almighty" who helped me in this great endeavor by making so many great minds to guide me and so many loving hearts to enlighten my path and it is only by the blessing of that almighty lord and the creator of world, who bestowed upon me the zeal and strength, that I was able to complete this arduous task. It is my privilege to study and conduct my research under Mr. Nirdesh Kumar Singh, Asst. Professor, CABM Pantnagar, Chairman of my Advisory Committee, who provided me the research insight, illuminating and meticulous guidance, calm endurance, continuous and unfailing encouragement, scholarly suggestions, unique supervision, constructive criticisms, sympathetic attitude, plausible appreciation and sustained support during the entire course of investigation and preparation of manuscript. I owe a great deal of thanks for Dr. Devendra Kumar, Dean College of Agribusiness Management, G. B. Pant University of Agriculture and Technology for his valuable advice, constant encouragement and motivation during my study. I emphatically and gratefully acknowledge extend my loyal and venerable thanks to members of my Advisory Committee, Dr. T.S.Bhogal and Dr. M.L.Sharma, for providing proper guidance, critical comments, valuable suggestions and diligent support lead to timely completion of this work. Its my pleasure to thank other faculty members Dr.Ashutosh Singh, Mr. Saurabh Singh and Dr.Mukesh Pandey for rendering the help in all academic matters. I wish to record my grateful thanks to Honble Vice-chancellor Dr. B.S. Bisht and Dr. N.S. Murthy Dean PGS G. B. Pant University of Agriculture and Technology for providing necessary facilities, technical and administrative supports for conductance of this research work. Last but not the least, I would like to convey my heartfelt thanks and indebtedness to all the batch mates and seniors for their utmost cooperation and immense help during the entire project work. They really encouraged me and gave power to overcome all hurdles which I faced. Pantnagar July 2012 (Bhupendar Singh)
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EXECUTIVE SUMMARY Supply chain management is more important in sector of agribusiness because most of agricultural products are perishable and have a very short shelf life. Bareilly city was selected as the study area because of traditional formats practicing supply chain. A total 45 farmers, 4 intermediaries and 60 consumers were selected in aggregate from all the supply chain format models. For the homogeneity of the products in which these formats dealing 3 vegetables namely tomato, potato and capsicum were selected because these were commonly dealt in large quantities in all the selected models of supply chain. The intermediaries were involved in the traditional supply chain. The functions performed by the marketing agencies like intermediaries involved also provide advisory functions and services such as assembling service, grading service, packing service and storage service. The price spread found is very high in ongoing vegetable supply chain with low share of farmers in consumers rupee. There are the factors responsible which hampers the efficiency of marketing chain in relation with farmers, intermediaries and consumers. Lack of transportation, packaging, storage and financial assistance are factors causing a blockage at the beginning of platform for farmers. Intermediaries are being swayed away due to negligence of government and unorganized market and at last customers are dealing with problems like high prices and improper packaging.

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CERTIFICATE

We, the undersigned members of Project Advisory Committee of Bhupendar Singh, Id No. 33047, a candidate for the degree of Master of Business Administration (Agribusiness), agree that the project report entitled Study of Supply Chain Management in Vegetable Market in Bareilly District of Uttar Pradesh may be submitted in partial fulfillment of the requirements of the degree.

(Nirdesh Kumar Singh) Chairman Project Advisory Committee

(T.S Bhogal) Member

(M.L.Sharma) Member

TABLE OF CONTENTS
S. No. Acknowledgements Executive Summary List Of Exhibits Introduction Work Already Done Problem Statement Objective of the study METHODOLOGY Research design Area of Study Data Source Sampling Plan Universe Sampling Unit Sample Size Sampling Technique Research instrument Analytical Tool Duration of study RESULTS RECOMMENDATIONS FOR ACTION Conclusions Recommendations References Annexure VITA Title Page No. I II III 1-6 1-2 2-5 5-6 7-8 7 7 7 7 7 8 8 8 8 8 8 9-15 16 16 17 V Vi

1. 1.1 1.2 1.3 2. 2.1 2.2 2.3 2.4 2.4.1 2.4.2 2.4.3 2.4.4 2.5 2.6 2.7 4. 5. 5.1 5.2 6.

LIST OF EXHIBITS
S.No. 3.1 3.2 3.3 3.4 3.5 Title Various services provided to farmers by intermediaries. Function performed by the intermediaries. Distribution pattern followed by intermediaries in supply of vegetable. Problems faced by farmers in selling the produce in the supply chain. Factors affecting efficiency of intermediaries in selling the produce in the supply chain. 3.6 3.7 3.8 Factors affecting consumers in buying vegetables. Time factor affecting availability of vegetable. Reason for sale of produce by farmers. 14 14 15 Page No. 9 10 10 12 13

LIST OF TABLES
S. No.

Title

Page no.

Price received by farmers vis-a-vis price paid by consumer in 11 supply chain

1. INTRODUCTION In todays highly competitive global market place, the pressure on organizations to find new ways to create and deliver value grows even stronger. Gradually, in emerging economies as well as mature markets, the power of the buyer has overtaken that of the customer. The rules are different in a buyers market. In particular customer service becomes a key differentiator as the sophistication and the demands of customers continually increase. At the same time, market maturity combined with new sources of global competition has led to over capacity in many industries leading to an inevitable pressure in prices. Prices have always been a critical competitive variable in many markets and the signs are that, it becomes an issue to think upon as commoditization of markets continues. In this context, logistics and supply chain management have become the crucial areas of management and national focus. Though India spends over 12 per cent of its GDP on logistic and supply chain management, customer value provided is unsatisfactory. This area becomes even more important in the sector of agribusiness because most of the agricultural products are perishable and have a very short shelf life. Supply Chain Management (SCM) is the process of planning, implementing, and controlling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible. Supply chain management spans all movement and storage of raw materials, work-in-process inventory and finished goods from point-of-origin to point-of-consumption. The term supply chain management was coined by a consultant Keith Oliver, of strategy consulting firm Booz Allen Hamilton in 1982. Supply Chain Management (SCM) is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. Supply chain management involves coordinating and integrating these flows both within and among companies. Supply chain management plays an integral role in keeping business costs at a minimum and profitability as high as possible. There are many factors involved in Supply chain management. Flow is the foremost element, the foundation for all aspects of the process. There are three main types of flow, such as the product flow, the information flow, the finances flow. The product flow includes the movement of goods from a supplier to a customer, as well as any customer returns or service needs. The information flow involves transmitting orders and updating the status of delivery. The financial flow consists of credit terms, payment schedules
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etc., to ensure prompt, efficient and accurate monetary transactions within these categories, various other elements falls, which includes the sourcing of raw material, coordinating, manufacturing and assembly of products, maintaining accurate warehousing and inventory accounts, researching supply and demand, and much more. The challenge for us in Supply chain management is to maintain all three flows and all three unique in an efficient manner, resulting in optimal results for the company. Components of supply chain management: Production: focuses on which suppliers to use, how much to produce, when to produce, where to produce (in source vs outsource, quantities, time, location) Inventory: decides where to store their produce and how much to store (make to order vs make to stock, consolidated vs break bulk, location). Distribution /Logistics: addresses issues about how the products should be moved and stored (Logistics methods own fleet vs 3PL). Payments: Looks for the best ways to pay suppliers and get paid to customers (Pricing policies, promotion and discounts). The concept of Agriculture supply chain refers to the activities of procurement, order fulfillment, product design and development, distribution, delivery and customer service executed by two or more separate organizations in the agribusiness industry, to fulfill customer orders. Agriculture supply chain consists of small and medium enterprises, such as farmers and raw material producers, suppliers of agricultural inputs, processors of agricultural outputs, farmers co-operatives, brokers, suppliers, distributors, wholesalers and retailers, that either tend to operate independently or in co-operation, mainly in the last stages of supply chain. An efficient supply chain can contribute to an increase in the marketable surplus by lowering down the inefficiencies in production, processing, storage and transportation. It ensures better prices to the farmers inducing them to invest more in the vital inputs so that productivity leaps frog. It widens market opportunities for products and thus helps in maintaining an ever increasing demand for the same. An organized retailing act as a stimulator to promote growth of agro based industries, helping the farmers in production planning in advance, based on demand forecast. Economic efficiency in a system can be examined as: 1. Technical efficiency 2. Allocative efficiency
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In marketing the produce, the technical efficiency is said to have increased when operational cost is reduced for performing a function for each unit of output. This can be achieved by reducing physical losses and improvement in the technology to carry out particular function viz. storage, transportation, handling and processing. A change in the technique can result in the reduction of per unit cost. Allocative efficiency of farm products either over time or across the space among the traders, processors and consumers protects the economic interests of the producers and consumer. Alternative methods employed in agriculture: Some of the alternative methods employed in agriculture in achieving the efficiencies in the system are 1) Contract farming 2) Direct, subcontracted purchases from farmers 3) Purchases from wholesalers, who either work directly with farmers or through wholesale market 4) Purchases through government sponsored centers 5) Purchases through informal groups, farmers associations or co-operatives 6) Multiple channels There are several players involved in fulfilling the needs of the consumer in the supply chain management of vegetables like farmers, traders, transporters, processors, retailers etc linked with material, information and financial flows. The supply chain management in vegetables has to be improved in all the stages of the supply by adopting global best practices in storage, packaging, handling, transportation, value added service etc. And also by disintermediation and participation of organized players i.e., modern supply chain with a view to benefit both farmers as well as ultimate consumers. Scope of supply chain An organized retailing penetration/ modern supply chain is very low in India as to other developing countries. All of them are based out of major urban centers in India. The penetration of these retailing experiences is very low in smaller cities and towns. It is only recently that they are opening up in other Tier A cities, excluding the leading metros. The reason for success of modern supply chain in India is twofold as illustrated below.

Benefits to customer i) Option of bulk purchases at discount rates ii) Due to effective supply chain management at these retail stores, the operating and distribution costs are kept low, reflecting in lower product prices for customers. iii) Continuous stock availability iv) Good quality control v) Good overall ambience and positive shopping experience in terms of ease of shopping. Benefits to producers i) Opportunity to show case brands to a wide target audience ii) A single point distribution network suffices, through which the products get distributed to all areas of the city. iii) Reduction in distribution costs translates to higher opportunity spend on promotion and advertising iv) Helps them to easily understand market trends and hence forecast sales
1.1 Work Already Done

Gopalan and Gopalan (1991) with regard to agricultural marketing system in India which suffered from severe constraints like high costs, the existence of middlemen, storage and transport bottlenecks and a lack of market information among farmers. This article uses a case study of the Tamil Nadu to evaluate various methods of raising marketing efficiency. The analysis suggests that the cooperatives has weakened the many small monopolies and malpractices of middlemen and has led to a considerable improvement in marketing efficiency. However, there is a need for more timely and adequate application of farm inputs, better coverage of potato growers, grading schemes and more efficient dispersal of information, among other requirements. Nicholas (1993) evaluated the role of quality in the US fruit and vegetable production and marketing. The most important quality attributes which emphasized recommended external appearance were size, shape, colour and defects. The author recommended the quality attribute should be regulated for international trade.

Lars-Fek (1998) conducted the study of understanding the modern cold chain in Sweden he concluded that frozen food consumption is estimated at 40 million tonnes a year and is a necessity for millions of families and institutional consumers in both developed and developing countries. It is no exaggeration to say that our food distribution systems are dependent on refrigeration. Timothy and Stephen (2005) the study was conducted in the Los Angeles market observation was taken in four major retail chains. They used data of two years of weekly data. They found out that there was lower elasticity of substitution among products within each chain than among chains and also that price promotion was highly effective in increasing product-level market share and variety had a strongly positive impact on sales volume in particular product line. They also noted that sales at the chain level are nearly unit elastic with respect to price. Sreenivasa et al. (2007) conducted study on marketing losses and their impact on marketing margins : A case study of Banana Karnataka. To estimate the post harvest losses field level, transit and wholesale marketing level and retail marketing level was selected for the study and they found out that the margin of the retailers after taking into account the physical loss during retailing has been found to be negative (loss), which otherwise, was positive (profit) in the conventional estimation. Similarly, the producers net share and wholesalers margins also decrease substantially. It has been shown that marketing efficiency is inversely proportional to the marketing losses. The cooperative marketing has been found to be a more efficient system in terms of both operations and price. Marketing cost has been identified as the major constraint in the wholesale marketing channel and bringing down the costs, particularly the commission charges as demonstrated in the cooperative channel, will help in reducing the price-spread and increasing the producers margin. The need for specialized transport vehicles for perishable commodities has been highlighted.
1.2 Problem Statement

India is a land of agriculture diversity. With 2/3 of population still depend on agriculture and contributing about 14.6 per cent to Indian GDP, but the condition of farmers is still miserable. The main reason for this can be accounted due to poor realization by the farmers in the consumer rupee this low realization can be attributed to large number of intermediaries present in the chain between producer and ultimate consumer, hence to counter this problem
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what is needed is a development of a proper supply chain so that farmers, intermediaries and consumer get their objective fulfilled, that is farmer get proper realization in consumer rupee. Keeping this in mind the present study entitled Study of Supply Chain Management in Vegetable Market in Bareilly District of Uttar Pradesh was undertaken with following objectives.

1.3 Objectives:

To analyze the role played by various intermediaries in vegetable supply chain of Bareilly. To analyze farmers share in the consumer rupee. To analyze the factor that can improve the efficiency of vegetable supply chain in Bareilly.

3. METHODOLOGY
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2.1 Research Design Exploratory research design was undertaken for the study considering the scope and nature of study. Exploratory research design was chosen because it is a method which involves observing and describing the behavior of a subject without influencing it in any way. 2.2 Source of Data The achievement of the objectives of the proposed study required two types of data. They are as mentioned below: 2.2.1 Secondary data Secondary data was collected from different websites and portals, magazines, organizational records, thesis available in the university library and from other published or available in public domain sources. 2.2.2 Primary data Primary data was collected from retailers and consumers of traditional retail sectors. 2.3 Area of Study The area for study was Barelliy district of Uttar Pradesh. 2.4 Sampling Plan Following sampling plan was adopted to conduct the study: 2.4.1 Universe Survey was conducted on the individual engaged in vegetable marketing in Barelliy district of Uttar Pradesh. 2.4.2 Sampling unit Sample unit comprises of farmers, intermediaries and consumers of selected area involved in vegetables supply chain.

2.4.3 Sample size

A total of 45 farmers, 4 intermediaries and 60 consumers were selected. For the homogeneity of the results 3 vegetables namely tomato, potato, capsicum which was commonly dealt in large quantities in selected area. 2.4.4 Sampling Technique Judgmental sampling technique was followed in selection of sample consumers. 2.5 Research Instrument Field survey using a structured questionnaire containing closed ended questions was used as main research instrument to collect the required data from the sample consumers. 2.6 Analytical Tool All the data collected was presented in tabular form and analyzed with the help of statistical tools like percentage and averages. Analyzed data was presented with the help of various comparison techniques, using bar charts, pie charts and other graphical methods. 2.7 Duration of Study Duration of this research work was 60 days i.e. April - May 2012

3. RESULTS 3.1 Roles played by the intermediaries in vegetable supply chain In order to have better understanding about the different roles played by the intermediaries in supply chain are discussed below. 3.1.1 Various services provided to the farmers by intermediaries in the vegetable supply chain. In case of services, transport and assembling facility was not provided by the intermediaries, the grading service facility was provided to the extent of 51 per cent. 27 per cent of farmers were provided packing services by the intermediaries while 53 per cent of farmers are being provided by storage facility from intermediaries.

Exhibit 3.1 Services provided to farmers by intermediaries 3.1.2 Advice to the farmers with respect to time of planting and varieties to be planted It can be seen from the exhibit 3.2 that 75 per cent of the intermediaries provide advice to the farmers with respect to time of planting and varieties to be planted while 25 per cent provides no services. Exhibit 3.2 Function performed by the intermediaries 3.1.3 Distribution Pattern of vegetable supply by intermediaries In Exhibit 3.3 nearly about 70 percent of the intermediaries go for distant marketing by involving other marketing agents. Only about 30 per cent of the intermediaries prefer the local market keeping the product on their own. Exhibit 3.3 Distribution pattern followed by intermediaries in supply of vegetable

3.2 Comparison of price received by the farmers vis--vis price paid by the consumers. In Table 3.1 the average selling price of the farmers or price received by the farmers was compared with average price paid by the consumer was presented. The difference between the price paid by the consumer and the price received by producer was referred to as price spread.
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Farmers share in consumer rupee is the price received by the farmer expressed as a percentage of the retail price (i.e., the price paid by the consumer). It can be worked out as percentage of price received by the producer to the price paid by the consumer. Table 3.1 Price received by farmers vis-a-vis price paid by consumer in supply chain SI Vegetables No Selling price Price paid by the Price of the farmers consumers Spread (Rs per Kg) (Rs per Kg) (Rs per Kg) Farmers share in consumer rupee (%) 1 2 3 Tomato Capsicum Potato Aggregate average 20.09 21.50 7.60 16.39 40 50 25 38.33 19.91 28.5 17.4 21.93 50.22 43.00 30.40 42.7

3.3 Factors affecting efficiency of vegetable supply chain Efficiency of vegetable supply chain dominantly rely upon factors which affect famers, intermediaries and consumers which are the main nodes in chain which connect production, supply as well as consumption of the produce.

3.3.1 Factors affecting farmers efficiency Exhibit 3.4 depicts the factors which are affecting the farmers in selling the vegetables in the Bareilly vegetable supply chain. Major factors which are reducing the efficiency of farmers are lack of transportation facility 31 per cent, lack of storage facility 22 per cent, lack of packaging

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facility 17 per cent, lack of financial facility 18 per cent and malpractices of intermediaries 12 per cent.

Exhibit 3.4 Problems faced by farmers in selling the produce in the supply chain 3.3.2 Factors affecting intermediaries efficiency Intermediaries are the marketing agency which have pivotal role in distribution of the produce. Exhibit 3.5 depicts the factors which are affecting the intermediaries involved in selling the vegetables in the Bareilly vegetable supply chain. Major factors which are reducing the efficiency of intermediaries are reluctance in government support for intermediaries. About 75 per cent of the intermediarys supported this. Lack of organized market is the other main factor as conveyed by 50 per cent of intermediaries. About all of the intermediaries confirm lack of quality regulation and for price fluctuation as per survey done.

Exhibit 3.5 Factors affecting efficiency of intermediaries in selling the produce in the supply chain 3.3.3 Factor affecting consumers efficiency in buying the vegetables in the traditional supply chain

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Factor affecting consumers efficiency in buying the vegetables in the traditional supply chain are listed in exhibit 3.6 The major factors are unhygienic condition 31 per cent, no proper packaging 20 per cent, very high prices of vegetables 38 per cent and inconvenience 11 per cent. Exhibit 3.6 Factors affecting consumers in buying vegetables 3.3.4 Time factor affecting marketing availability of vegetable. The marketing of vegetables is also affected by the timely availability in the market. Exhibit 3.7 shows that only 45 per cent of the farmers are able to send their produce as earlier availability. Nearly about 70 percent of farmers sell their produce at the end of month. Sale of vegetable by the farmers increases next 10 to 15 days of next month and then decreases simultaneously. Exhibit 3.7 Time factor affecting availability of vegetables 3.3.5 Reasons for sale of produce by farmers to the traditional format in the supply chain. Exhibit 3.8 shows factors which affect the farmers to sell vegetables in supply chain. Factors like correct weight and absence of other supply chain has got higher influence for sale of produce. Exhibit 3.8 Reason for sale of produce by farmers 4. RECOMMENDATION FOR ACTION 4.1 Conclusions The most important findings of the study are summarized below. The functions performed by the intermediaries were to provide advisory functions and services such as grading service, packing services and storage service and provide timely advices to the farmers regarding planting and sowing. With the use of empirical formulas, it was found that price spread in supply chain of vegetable is very high and farmers share in consumer rupee is also very low in traditional format of selling. The efficiency of farmers are reduced by factors such as lack of transportation, lack of storage facilities, lack of packaging facilities, lack of financial facilities and malpractices of intermediaries.
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Major factors which are reducing the efficiency of intermediaries are lack of government support, lack of organized market in the locality, lack of quality regulation of vegetable and price fluctuation in market. Consumers buying efficiency are affected due to many factors like unhygienic condition of selling, lack of proper packaging, very high prices of vegetables and inconvenience to reach.

4.2 Recommendations
1. The role played by intermediaries in traditional format of selling is limited to grading,

packing and storage as per result obtained. The other untouched areas like transportation and assembling are being managed by farmers alone. Hence there is large potential in supply chain which can be exploited by intermediaries. Even in the areas in which intermediaries are spotted, they need to work out more efficiently by making an organized chain in vegetable production and marketing. An organized farm activity in the vegetable production and marketing can be encouraged by collaboration between different marketing agents involved in vegetable supply chain.
2. As per result found, price spread found in selling of vegetable is very high (21.93) with

low share of producers in consumers rupee (42.7 per cent) i.e., of 1 Rs of consumer spend about 57 paisa goes to intermediaries and less than half paisa goes in farmers pocket. It can be made profitable to farmers by creating a network of farmers,
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cooperatives and modern format in marketing of vegetables. Government role is needed to have an eye on intermediaries working so that farmers share could be encouraged.
3. There is need to improve transportation, storage and financial facilities. It can be done

with government support as well as private players in marketing of vegetables. Contract farming is upcoming better solution as it provides necessary facilities and improves bargaining power of the farmers. There is need to reduce price fluctuations with seasonal gluts and boom which can achieved by providing information regarding early and late sowing varieties. There is need to encourage proper attractive packaging in hygienic condition which increases the demand as well as fetch good prices.
4. Producer member are not well integrated in supply chain. Hence, by suitably integrating

the members of the supply chain and maintaining production and information flow within the organization will surely help to meet the demand in the market place providing satisfaction to the customers.

5. REFERENCES Devaraja., 1998, Channels and price spread in potato marketing- A case study in Belgaum District. Agric. Mktg, 41(1): 19-21. Gupta, S.P. and Rathore N.S., 1999, Disposal pattern and constraints in vegetable market: A case study of Raipur District of Madhya Pradesh. Agric. Mktg. 42 (1) : 53-59. Kothari, C.R. (2009). Research methodology- Methods and Techniques,2, New Age International(P) limited, New Delhi, India. Kumar Anil and Arora., 1999, Post harvest management of Vegetables in Uttar Pradesh hills. Ind. J. Agric. Mktg, 13(2) : 6-14. Lars Fek., 1999, Understanding modern cold chain. Food packers, 52(1) : 59-62. Pandey, N.K., Arun Pandit., Nalini R. Kumar and Rana, R.K., 2003, Price spread analysis of potato marketing at Shimla. J. Ind. Potato Assoc. 30 (1-2): 99-200. -Somayajulu.G. and Venkataramana. V., 2002, Issues and challenges for organized retailing in india. Ind. J. Mktg. 31 (3): 16-21.

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Suresh Reddy, J., 2005, Gaining competitive advantage through Supply chain management. Ind. J. Agric. Sci., 35 (6) : 32-34. Vijay Durga Prasad, V., 2007, The spread of organized retailing in India- with special refrence to Vijayawada city. Ind J. Mktg. 47(5) : 3-9.

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VITA
Bhupendar Singh, the author of this manuscript, born on July 3th, 1986 in Ranikhet. After passing his matriculation from Campus School, Pantnagar in 2004, he got admission at College of Agriculture in 2006s, G.B. Pant University of Agriculture & Technology from where he completed B.Sc. in Agriculture in year 2010. Due to the interest in management, he joined post graduate degree programme in management and therefore he got admtted to G.B. Pant University of Agriculture & Technology, Pantnagar to pursue the study programme leading to degree of MBA (Agribusiness) of G.B.PANT University of Agriculture and Technology Pantnagar. While pursuing MBA, he did his summer internship at Dhanuka Agri tech. Ltd. Permanent Address: Bhupendar Singh, S/O Mr. Bhupal Singh H. No. 748, Jha Colony Pantnagar, U.S. Nagar, Uttarakhand- 263145 Email: bhuppi33047@gmail.com