1. ANALYSIS OF OVERALL LOGISTICS(TRANSPORTATION) OF
FMCG COMAPANIES IN BIHAR REGION
SUBMITTED IN PARTIAL FULFILLMENT OF THE
REQUIREMENTS
OF THE DEGREE OF POST GRADUATE DIPLOMA IN
MANAGEMENT
CHANDRAGUPT INSTITUTE OF MANAGEMENT
PATNA
BY
Danish Anwar
15/06/2014
CHANDRAGUPT INSTITUTE OF MANAGEMENT PATNA
3. Page 3
SYNOPSIS
The project "Analysis of existing logistics (Transportation) for FMCG companies in
Bihar region" aims at understanding the current medium of transportation being used by
different FMCG companies in Bihar. As analysts says that the urban market is being
saturated at the same time due to different programs and developments by the
governments the rural market size has been increased by the improvement in living
standard and purchasing power of the people. So, in this situation product availability has
became a major issue for all FMCG companies , and for availability transportation of
goods is one of the major factors of it.
Now talking about Bihar the rural population of Bihar is almost eight times more than
that of urban population(Census:2011). Bihar is mainly separated into two parts by the
holy river Ganges. So, for connectivity between north Bihar and south Bihar there are
three bridges on Ganges Mahatma Gandhi Setup, Rajendra Bridge and Bikramshila
Bridge in Patna, Mokama and Bhagalpur respectively. As far as these all three bridges
were working there was no such issue like the current situation. In 2013 government
banned passage of all kinds of heavy commercial vehicles on Rajendra Bridge due to
safety reasons, as the bridge was not in a good condition. So, all the heavy commercial
vehicle going towards north Bihar started going through mahatma Gandhi Setu .
Mahatma Gandhi setu was itself in a paralyzed condition since last decade. Actually the
maintenance that has to be done to the spring mechanism has not been done by the
government and so, the bridge faced difficulties in standing straight.
4. Page 4
Due to increase in load on the bridge the condition of bridge went on degrading day by
day .
In 2014 by the order of the Chief minister's office and district transport authority all ten
and above wheelers vehicle were banned for passage from Mahatma Gandhi Setu.
Here starts problem for transportation. Now due to restrictions on bridge need for six and
below wheeler vehicles increased drastically but as the variable cost associated with
multiaxle vehicles does not increase in that proportion as the capacity of the vehicle
increases. So, the transporter and the customer both are having benefit in multiaxle
vehicles. That is why nowadays transporters purchase mainly multiaxle vehicles. As the
supply was short and the demand was high so by the theory of economics price will go
high and that happened in actual also.
FMCG companies already have a very low margin with their products they just play on
volumes and another thing they can't increase the price in a certain territory. So with
these constraints and the price rise in transportation has impacted their business.
Another major issue is the cost associated with the inward delivery to the warehouse, in
this case what happened in the last few years is that earlier there were some commodity
available all the time for transporters to carry in return good while coming to Patna. But
now there is no enough commodity available for transporters. Transporters generally
charge one way freight from the company so the need for return goods is important for
them. As there is no commodity available and also there is no such industry whose goods
can be transported to other states so the transporters starting charging almost double
5. Page 5
freight and even some of the transporters refused to come to Bihar. This has also
impacted the business of FMCG companies in Bihar.
This project tries explain about the transportation channel used for intra distribution in
Bihar region by some top FMCG players like GCMMF, Parle, Nestle, HUL, GSK &
Coalgate Palmolive, Reckitt Benckiser and ITC.
The second part of project explains about the problems of transportation for C & F or
company, transporter who is involved in inward logistics to Patna and also the
transporters who are responsible for the product availability in Bihar i.e. the transporters
that are involved in intra distribution.
Third part of the project is a little bit analytical and in this part the factors that impact cost
and time of transportation has been analyzed.
The research design is descriptive and data collected is from primary as well as secondary
source. Above mentioned FMCG companies C&F agents were interviewed. The
transporters who were involved in the intra distribution were also interviewed . For the
third part of the project a survey was conducted between transporters. The targeted
population were all the transporters present in Patna. Convenience sampling was used to
collect data. A total of 40 respondents were taken. The literature review done for this
project helped in identification of major factors impacting cost and time of transportation.
The responses were taken on a likert scale of five. After analyzing it was found that
weight of goods is the most impactful variable affecting cost and time followed by
Traffic jam & Road safety and security restrictions.
6. Page 6
In the fourth part of project after all analysis of problems with transportation system a
suggestion has came out from the analysis. Some other things like route scheduling has
been done.
Problem Statement: Analysis of problem in logistics for FMCG companies at the
current stage due to less availability of commodity & blockage of big vehicles on major
bridges that connects north Bihar to south Bihar.
Research Methodology:
Objectives of Project:
The main objective of the Study can be listed as follows:
A. Primary Objective
1. To study the existing logistics medium used by GCMMF and other FMCG
companies like HUL ,Nestle , GSK & ITC in Bihar region.
2. To find the problems with the existing logistics network at current situation.
3. To find the factors that affect the logistics network in Bihar. (2 years trend
down the line)
B. Secondary Objective
1. To suggest some modification in existing logistics network to minimize cost.
7. Page 7
Research Design: Descriptive research.
Data sources & Type: The data sources used are both primary as well as secondary.
Primary information was achieved by conducting interviews and survey with the help of
interview guide and questionnaire. The secondary data such as sales data is obtained
from Amul office in Patna.
Research Tool: The main process of data collection was through filling of questionnaire
and interviews. The questionnaire consists of interval questions where the respondent
has to give points according to the 5 point likert scale.
Sampling Methodology
Sample unit & Frame: The set of all the transporters who are present in Patna .
Sample size: The sample size taken here is of 42 for third objective and for rest of the
two objectives 37 interviews were conducted.
Sampling method: The sampling method adopted is convenience sampling.
8. Page 8
DECLARATION
This is to certify that, this report entitled “ANALYSIS OF EXISTING
LOGISTICS(TRANSPORTATION) OF FMCG COMAPANIES IN BIHAR
REGION” submitted by Danish Anwar to Chandragupt Institute of
Management Patna, as a requirement for the award of the Post
Graduate Diploma in Management, is a bonafide record of research
work carried out by him/her under our supervision. The contents of
this report, in full or in parts, have not been submitted to any other
Institute or University for the award of any degree or diploma.
(Mr. Rebti Raman) ------------------------------
(Sign)
(Mr.Anoop Raj) -------------------------------
(Sign)
Date: ___________________
9. Page 9
ACKNOWLEDGEMENT
The satisfaction that comes through the successful completion of any task would be
incomplete without mentioning the names of people who made it possible, because
success is the epitome of hard work & guidance. So with gratitude, I acknowledge all
those guidance and encouragement that served as a beacon of light and crowned my
efforts with success so far.
I avail this opportunity to express with utmost sincerity my thanks to all the people of
Gujarat Cooperative Milk Marketing Federation Ltd. (GCMMF Ltd.) for giving me this
opportunity to undergo my summer internship in this prestigious organization.
I am deeply grateful to Mr. Manoj Prabhakar & Mr. Rebti Raman, Assistant Sales
Manager, for their support, suggestion and enthusiasm which helped me in the successful
completion of this report and to have thorough knowledge of the subject and its
application.
I would like to thanks Prof. Anoop Raj, faculty mentor, for providing me the key inputs
for the project and extending his continuous support during the tenure.
I also express my gratitude to Dr. V. Mukund Das, Director, Chandragupt Institute of
Management, Patna for giving me an opportunity to work with Amul.
Danish Anwar
10. Page 10
Table of Contents
Chapter 1: Industry Profile...............................................................................................13
1.1 FMCG industry in India.................................................................................13
1.2 Dairy industry in India...................................................................................15
Chapter 2 : Introduction....................................................................................................17
2.1 Introduction to the organization.....................................................................17
2.1.1 Member Unions..............................................................................18
2.1.2 Distribution Network......................................................................19
2.2 History of Amul............................................................................................20
2.2.1 Amul Secret of Success..................................................................24
Chapter 3 : Logistic Medium of FMCG companies........................................................28
3.1 GlaxoSmithKline..........................................................................................28
3.2 Reckitt Benckiser..........................................................................................29
3.3 Parle Agro.....................................................................................................31
3.4 Colgate Palmolive.........................................................................................33
3.5 Hindustan Unilever Ltd.................................................................................34
3.6 Nestle India...................................................................................................36
3.7 GCMMF........................................................................................................37
Chapter 4 : Problem in Transportation.............................................................................39
4.1 Problem faced by C&F agent........................................................................39
4.2 Problems for transporters involved in inward logistics................................41
4.3 Problem faced by transporter (Intra distribution).........................................43
Chapter 5 : Factors Affecting Transportation................................................................45
12. Page 12
List of Tables , Figures
Table 2.1 GCMMF: An overview......................................................................................18
Table 2.2 Turnover details.................................................................................................25
Table 5.1 Alpha Table........................................................................................................46
Table 5.2 Case Processing Summary.................................................................................46
Table 5.3 Reliability Statistics...........................................................................................46
Table 5.4 KMO and Bartlett's test.....................................................................................48
Table 5.5 Total Variance Explained .................................................................................49
Table 5.6 Rotated Component matrix................................................................................50
Table 6.1 North Bihar........................................................................................................53
Table 6.2 South Bihar........................................................................................................54
Table 6.3 Other costs.........................................................................................................58
Figure 2.1 Foundation........................................................................................................22
Figure 5.1 Scree Plot..........................................................................................................55
Figure 6.1 Cost calculation and route scheduling..............................................................60
13. Page 13
Chapter1:INDUSTRY PROFILE
1.1 FMCG Industry In India:-
The fast moving consumer goods (FMCG) segment is the fourth largest sector in the
Indian economy. The market size of FMCG in India is estimated to grow from US$ 30
billion in 2011 to US$ 74 billion in 2018.
Food products are the leading segment, accounting for 43 per cent of the overall market.
Personal care (22 per cent) and fabric care (12 per cent) come next in terms of market
share. Growing awareness, easier access, and changing lifestyles have been the key
growth drivers for the sector.
What are FMCG goods?
FMCG goods are popularly known as consumer packaged goods. Items in this category
include all consumables (other than groceries/pulses) people buy at regular intervals. The
most common in the list are toilet soaps, detergents, shampoos, toothpaste, shaving
products, shoe polish, packaged foodstuff, and household accessories and extends to
certain electronic goods. These items are meant for daily of frequent consumption and
have a high return.
Future lies in Rural India
Rural areas expected to be the major driver for FMCG, as growth continues to be high in
these regions. Rural areas saw a 16 per cent, as against 12 per cent rise in urban areas.
Most companies rushed to capitalize on this, as they quickly went about increasing direct
14. Page 14
distribution and providing better infrastructure. Companies are also working towards
creating specific products specially targeted for the rural market.
The Government of India has also been supporting the rural population with higher
minimum support prices (MSPs), loan waivers, and disbursements through the National
Rural Employment Guarantee Act (NREGA) programme. These measures have helped in
reducing poverty in rural India and given a boost to rural purchasing power. Hence rural
demand is set to rise with rising incomes and greater awareness of brands.
Urban trends
With rise in disposable incomes, mid- and high-income consumers in urban areas have
shifted their purchasing trend from essential to premium products. In response, firms
have started enhancing their premium products portfolio. Indian and multinational FMCG
players are leveraging India as a strategic sourcing hub for cost-competitive product
development and manufacturing to cater to international markets.
Top Companies
According to the study conducted by AC Nielsen, 62 of the top 100 brands are owned by
MNCs, and the balance by Indian companies. Fifteen companies own these 62 brands,
and 27 of these are owned by Hindustan UniLever.
The top ten India FMCG brands are:
1.Hindustan Unilever Ltd.
2. ITC (Indian Tobacco Company)
15. Page 15
3. Nestlé India
4. GCMMF (AMUL)
5. Dabur India
6. Asian Paints (India)
7. Cadbury India
8. Britannia Industries
9. Procter & Gamble Hygiene and Health Care
10. Marico Industries
1.2 Dairy Industry in India : Dairy industry is of crucial importance to India. The
country is the world's largest milk producer, accounting for more than 13% of world's
total milk production. It is the world's largest consumer of dairy products, consuming
almost 100% of its own mi lk production.( Karmakar & Banerjee, 2006). Dairy products are
a major source of cheap and nutritious food to millions of people in India and the only
acceptable source of animal protein for large vegetarian segment of Indian population,
particularly among the landless, small and marginal farmers and women.
India has the highest livestock population in the world with 50% of the buffaloes and
20% of the world’s cattle population, most of which are milch cows and milch buffaloes.
India’s dairy industry is considered as one of the most successful development programs
in the post-Independence period. In the year 2006-07 the total milk production in the
country was over 94.6 million tones with a per capita availability of 229 grams per day.
16. Page 16
The industry had been recording an annual growth of 4% during the period 1993-2005,
which is almost 3 times the average growth rate of the dairy industry in the world.
The milk processing industry is small compared to the huge amount of milk produced
every year. Only 10% of all the milk is delivered to some 400 dairy plants. A specific
Indian phenomenon is the unorganized sector of milkmen, vendors who collect the milk
from local producers and sell the milk in both, urban and non-urban areas, which handles
around 65-70% of the national milk production. In the organized dairy industry, the
cooperative milk processors have a 60% market share. The cooperative dairies process
90% of the collected milk as liquid milk whereas the private dairies process and sell only
20% of the milk collected as liquid milk and 80% for other dairy products with a focus on
value-added products(Karmakar & Banerjee, 2006). Exports of dairy products have been
growing at the rate of 25% per annum in the terms of quantity terms and 28% in terms of
value since 2001. The major destinations for Indian dairy products are Bangladesh
(23.1%), UAE (15.4%), US (15.6%) and Philippines (8.9%). In terms of products, SMP
is the most important product accounting for about 63% of total export volume, followed
by ghee and butter (11.7%) and WMP (Karmakar & Banerjee, 2006). Over the years,
several brands have been created by cooperatives like Amul (GCMMF), Vijaya (AP),
Verka (Punjab), Saras (Rajasthan), Nandini (Karnataka), Milma (Kerala) and Gokul
(Kolhapur).
17. Page 17
Chapter 2: Introduction
2.1 INTRODUCTION OF THE ORGANISATION
Gujarat Cooperative Milk Marketing Federation (GCMMF) is India's largest food
products marketing organization. It is a state level apex body of Milk cooperatives in
Gujarat which aims to provide remunerative returns to the farmers and also serve the
interest of consumers by providing quality products which are good value for money.
Gujarat Milk Marketing Federation Ltd. (GCMMF) is the largest food product
marketing organization in India. Its daily milk procurement is approx. 13 million liter per
day from its 16,117 milk cooperative societies, 17 member unions covering 24 districts
and 3.18 million milk producer members. It is the apex dairy cooperative organization of
Gujarat. It is popularly known as AMUL. The main aim of the organization is to provide
remunerative returns to the farmers and provide quality products to its consumers which
are good value for the money they spend. GCMMF is largest dairy products exporter in
India. GCMMF is the exclusive marketing organization of AMUL and SAGAR branded
products. The AMUL brand is not only the product but it was a movement for economic
freedom of the farmers. It is the Brand which give farmers the courage to Dream, to Hope
and to Live. CRISIL, India's leading Ratings, Research, Risk and Policy Advisory
company, has assigned its highest ratings of "AAA/Stable/P1+" to the various bank
facilities of GCMMF.
18. Page 18
Table 2.1 GCMMF: An Overview
Year of Establishment 1973
Members
17 District Cooperative Milk
Producers' Unions
No. of Producer Members 3.37 Million
No. of Village Societies 18,536
Total Milk handling capacity per
day
24 Million litres per day
Milk Collection (Total - 2014-15) 5.42 billion litres
Milk collection (Daily Average
2014-15)
14.85 million litres
Cattlefeed manufacturing
Capacity
6340 Mts. per day
Sales Turnover -(2014-15) Rs. 20733 Crores (US $ 3.4 Billion)
2.1.1 MemberUnions
1. Kaira District Cooperative Milk Producers' Union Ltd., Anand
2. Mehsana District Cooperative Milk Producers' Union Ltd, Mehsana
3. Sabarkantha District Cooperative Milk Producers' Union Ltd., Himatnagar
4. Banaskantha District Cooperative Milk Producers' Union Ltd., Palanpur
5. Surat District Cooperative Milk Producers' Union Ltd., Surat
6. Baroda District Cooperative Milk Producers' Union Ltd., Vadodara
7. Panchmahal District Cooperative Milk Producers' Union Ltd., Godhra
8. Valsad District Cooperative Milk Producers' Union Ltd., Valsad
9. Bharuch District Cooperative Milk Producers' Union Ltd., Bharuch
19. Page 19
10. Ahmedabad District Cooperative Milk Producers' Union Ltd., Ahmedabad
11. Rajkot District Cooperative Milk Producers' Union Ltd., Rajkot
12. Gandhinagar District Cooperative Milk Producers' Union Ltd., Gandhinagar
13. Surendranagar District Cooperative Milk Producers' Union Ltd., Surendranagar
14. Amreli District Cooperative Milk Producers Union Ltd., Amreli
15. Bhavnagar District Cooperative Milk Producers Union Ltd., Bhavnagar
2.1.2 Distribution Network:
Most producers work with marketing intermediaries to bring their products to market.
The marketing intermediaries make up a marketing channel also called distribution
channel. Distribution channels are sets of interdependent organizations involved in the
process of making a product or service available for use or consumption.
The Head Office of GCMMF is located at Anand. The entire market is divided in 5
zones. The zonal offices are located at Ahmedabad, Mumbai, New Delhi, Kolkata and
Chennai. Moreover there are 49 Depots located across the country and GCMMF caters to
37 Export markets.
A zero level of channel also called a direct marketing channel consists of a manufacturer
selling directly to the final customers. A one level channel; contains one selling
intermediary such as retailer to the final customers. A two level channel two
intermediaries are typically wholesaler and retailer. A three level channel are typically
wholesaler, retailer and jobber in between.
20. Page 20
GCMMF has an excellent distribution. It is its distribution channel, which has made it so
popular. GCMMF‟s products like Milk and Milk products are perishable. It becomes that
much important for them to have a good distribution.
Distribution Chart
We can see from above figure that GCMMF distribution channel is simple and clear. The
products change hands for three times before it reaches to the final consumer. First of all
the products are stored at the Agents end who are mere facilitators in the network. Then
the products are sold to wholesale dealers who then sell to retailers and then the product
finally reaches the consumers.
2.2 History Of Amul
In the year 1946 the first Milk union was established. This union was started with 250
liters of Milk per day. In the year 1946 the union was known as KAIRA DISTRICT CO-
• FACTORY
• C&F Agent
• WHOLESELLER
• RETAILER
• CONSUMER
21. Page 21
OPERATIVE MILK PRODUCERS‟ UNION. This union selected the brand name
AMUL in 1955.
The brand name Amul means “AMULYA”. This word derived form the Sanskrit word
“AMULYA” which means “PRICELESS”. A quality control expert in Anand had
suggested the brand name “AMUL”. Amul products have been in use in millions of
homes since 1946. Amul Butter, Amul Milk Powder, Amul Ghee, Amulspray, Amul
Cheese, Amul Chocolates, Amul Shrikhand, Amul Ice cream, Nutramul, Amul Prolife
Lassee, Amul Pro and Amulya have made Amul a leading food brand in India. (The total
sale is Rs. 2 billion in 2012). Today Amul is a symbol of many things like of the high-
quality products sold at reasonable prices, of the genesis of a vast co-operative network,
of the triumph of indigenous technology, of the marketing savvy of a farmers'
organization. And have a proven model for dairy development (Generally known as
“ANAND PATTERN”).
In the early 40‟s, the main sources of earning for the farmers of Kaira district were
farming and selling of Milk. That time there was high demand for milk in Bombay. The
main supplier of the milk was Polson dairy limited, which was a privately owned
company and held monopoly over the supply of milk at Bombay from the Kaira district.
This system leads to exploitation of poor and illiterates‟ farmers by the private traders.
The traders used to beside the prices of milk and the farmers were forced to accept it
without uttering a single word. However, when the exploitation became intolerable, the
farmers were frustrated. They collectively appealed to Sardar Vallabhbhai Patel, who was
a leading activist in the freedom movement. Sardar Patel advised the farmers to sell the
Milk on their own by establishing a co- operative union, Instead of supplying Milk to
22. Page 22
private traders. Sardar Patel sent the farmers to Shri Morarji Desai in order to gain his co-
operation and help. Shri Desai held a meeting at Samarkha village near Anand, on 4th
January 1946. He advised the farmers to form a society for collection of the Milk
Figure 2.1 Foundation
These village societies would collect the milk themselves and would decide the prices at
which they can sell the Milk. The district union was also form to collect the Milk from
such village co-operative societies and to sell them. It was also resolved that the
Government should be asked to buy Milk from the union. However, the govt. did not
seem to help farmers by any means. It gave the negative response by turning down the
demand for the milk. To respond to this action of govt., the farmers of Kaira district went
on a milk strike. For 15 whole days not a single drop of milk was sold to the traders. As a
result the Bombay milk scheme was severely affected. The milk commissioner of
23. Page 23
Bombay then visited Anand to assess the situation. Having seemed the condition, he
decided to fulfill the farmers demand.
Thus their cooperative unions were forced at the village and district level to collect and
sell milk on a cooperative basis, without the intervention of Government. Mr. Verghese
Kurien showed main interest in establishing union who was supported by Shri
Tribhuvandas Patel who lead the farmers in forming the Cooperative unions at the village
level. The Kaira district milk producers union was thus established in ANAND and was
registered formally on 14th December 1946. Since farmers sold all the milk in Anand
through a co-operative union, it was commonly resolved to sell the milk under the brand
name AMUL.
At the initial stage only 250 liters of milk was collected every day. But with the growing
awareness of the benefits of the cooperativeness, the collection of milk increased. Today
Amul collect 14.85 million liters of milk every day. Since milk was a perishable
commodity it becomes difficult to preserve milk for a longer period. Besides when the
milk was to be collected from the far places, there was a fear of spoiling of milk. To
overcome this problem the union thought out to develop the chilling unit at various
junctions, which would collect the milk and could chill it, so as to preserve it for a longer
period. Thus, today Amul has more than 150 chilling centers in various villages. Milk is
collected from almost 1500 societies.
With the financial help from UNICEF, assistance from the govt. of New Zealand under
the Colombo plan, of Rs. 50 millions for factory to manufacture milk powder and butter
was planned. Dr.Rajendra Prasad, the president of India laid the foundation on November
24. Page 24
15, 1954. Shri Pandit Jawaharlal Nehru, the prime minister of India declared it open at
Amul dairy on November 20, 1955.
2.2.1 Amul Secret Of Success:
The system succeeded mainly because it provides an assured market at remunerative
prices for producers' milk besides acting as a channel to market the production
enhancement package. What's more, it does not disturb the agro-system of the farmers. It
also enables the consumer an access to high quality milk and milk products. Contrary to
the traditional system, when the profit of the business was cornered by the middlemen,
the system ensured that the profit goes to the participants for their socio-economic
upliftment and common good.
Looking back on the path traversed by Amul, the following features make it a pattern and
model for emulation elsewhere.
Amul has been able to:
Produce an appropriate blend of the policy makers farmers board of management
and the professionals: each group appreciating its rotes and limitations.
Bring at the command of the rural Milk producers the best of the technology and
harness its fruit for betterment.
Provide a support system to the Milk producers without disturbing their agro-
economic systems.
Plough back the profits, by prudent use of men, material and machines, in the
rural sector for the common good and betterment of the member producers.
25. Page 25
Even though, growing with time and on scale, it has remained with the smallest producer
members. In that sense, Amul is an example par excellence, of an intervention for rural
change.
The Union looks after policy formulation, processing and marketing of Milk, provision of
technical inputs to enhance Milk yield of animals, the artificial insemination service,
veterinary care, better feeds and the like - all through the village societies. Basically the
union and cooperation of people brought Amul into fame i.e. AMUL (ANAND MILK
UNION LIMITED), a name which suggest THE TASTE OF INDIA.
Amul (Anand Milk union ltd.) is based on four hands, which are coordinated with each
other. The actual meaning of this symbol is co-ordination of four hands of different
people by whom this union is at the top position in Asia.
First hand is of farmers, without whom the organization would not have existed.
Second hand is of processors, who process the raw material (Milk) into finished goods.
Third hand is of marketer, without whom the product would have not reached the
customers.
Fourth hand is of customers, without whom the products would have not carried on.
Table 2.2 Turnover details
Sales Turnover Rs (million) US$ (in millions)
1994-95 11140 355
28. Page 28
Chapter 3 Logistic Medium of FMCG companies
3.1 GlaxoSmithKline
GlaxoSmithKline is one of the world’s leading research based pharmaceuticals and
healthcare companies is committed to improving the quality of human life by enabling
people to do more, feel better and live longer. According to the officials of Patna office
GSK is having highest turnover in FMCG goods in Bihar in the financial year 2014-15.
The production location of company is Nabha, Sonipath and other parts of Himachal
Pradesh. It takes around 7 to 8 days to reach products to Patna. The transportation takes
place through 10 wheeler, 12 wheeler and 14 wheeler. The daily inbound delivery to
Patna warehouse is about 7 to 8 truck having around 750 to 800 cartoons in each truck.
The company ware house is located in Patna at Anishabad Shalimar cold storage which
has storage capacity of 1080MT and the total space is 50000sq ft. The average number of
products in the warehouse is 76sku and the average product quantity is 12kg per cartoons.
The stock turnover rate is 12 days. For GlaxoSmithKline cold storage is required for
some of its goods. The average value of product is 25lakhs in one truck which seems a
good value and becomes risky for company in place like Bihar especially from Mohania
to Patna. The company is having minimum ordering quantity which is 200 cartoons and
that is the capacity of model-407 and average size of order is 400 cartoons (4.8tone)
which is the capacity of Model-709 . It means company is using a mix of 407,709,1109 &
six wheeler. There is seasonal influence ,especially in July, August, September the
29. Page 29
overall demand is highest for example the highest demand of ENO is from march to
September and for Horlicks and Oxtrocalcium the demand in summer is more . For Iodex
the demand is high when rabi and kharif crop are harvested. during these times the
vehicles movement increases. The distributor of the company is located in every districts
of Bihar which means the company needs vehicles for whole Bihar. The company is
using third party logistic for outbound delivery. The daily number of shipment from
warehouse is 8 to 9 trucks and the vehicles used for transportation are 407, 709,1109 &
6 wheeler. The shipment is done by using one vehicle for both one distributor and
multiple distributors. It takes around 1 to 2 days to reach in any part of Bihar. The cost of
transportation depends upon types of vehicle used for transportation and the distance
from the warehouse. Transporter charges only one side freight.
In last two year the company has experienced 5 % hikes in costs for transportation on
contract basis. The blockage of Gandhi setu bridge for 10 wheeler from last two years
doesn’t have significant impact on cost because there transportation is fully on contract
basis it doesn’t consider any issue of roads or bridges in between contract time period.
Transporters are attached just due to high volume. Revision of price in between contract
period is done only when there will be 10% change in diesel price.
3.2 Reckitt Benckiser
The Reckitt Benckiser brand include French’s Mustard, the antiseptic brand Dettol, the
sore throat medicine Strepsils, the hair removal brand Veet, the air freshener Air Wick,
Calgon, Clearasil, Cillit bang, Durex, Lysol, Nycil and Vanish. It operates in around 60
countries and its products are sold in almost 200 countries.
30. Page 30
The production location of company are Sitarganj, Mysore, Ambala, Dankuni and
Hyderabd. It takes around 3 days to reach products to Patna from production locations.
The transportation takes place through 10 wheeler and 12 wheeler and most of them are
of third party. The daily inbound delivery to Patna warehouse is about 4 to 6 truck having
around 1000 to 1200 cartoons in one truck. As the size of their cartoon is lesser than that
of GSK one. Company ware house is located in Patna at Anishabad Shalimar cold
storage which has storage capacity of 60000 cartoons and the total space is 45000 sq ft.
The average number of products in the warehouse is 400sku and the average product
quantity is 50000 cartoons . The stock turnover rate is 7 days. As the company is not
having any perishable product for this market so there is no need of cold storage.
The average number of order per day is 22 which is quite high. The company is having
minimum ordering quantity which is 450 case. There is seasonal influence especially in
summer when demand is more and in rainy season the overall demand is less. The
distributor of the company is located in every districts of Bihar. The company is using 3
parties logistic for outbound delivery. They have a contract with a lot number of brokers
they get vehicles in pre specified rate from them. The daily number of shipment from
warehouse is 22 trucks and the vehicles used for transportation is pick up, 407, 6 wheeler
and 1109 . The shipment is done by using one vehicle for both one distributor and
multiple distributor .This is mainly done to use the capacity of the vehicle It takes around
1 to 2 days to reach in any part of Bihar. The cost of transportation depends upon types of
vehicle used for transportation and the distance from the warehouse. Transporter charges
only one side freight. The average size or quantity of shipment is 600 cartoons.
31. Page 31
In last two year the company has experienced 10 % hikes in costs for transportation
because of blockage of Gandhi setu bridge for 10 wheeler from last two years. The other
problem face due to blockage is traffic jam which is always present on bridge. Because of
this blockage there is extra burden of delivery. Recently government of Bihar announce
that no entry of commercial vehicle during certain daytime so it lead to failure of delivery
time. The company is giving different rates for south Bihar and north Bihar. For
transportation in north Bihar the company has to pay 4- 5% more than South Bihar. The
company use 6 wheeler and 709 for transportation in all part of Bihar. No 10 wheeler
used by company for transportation in Bihar.
3.3 Parle Agro
Parle Products is an Indian private limited company. It owns the famous biscuit brand
Parle-G. As on 2012, it has a 35% dominant share of the Indian biscuits market. Parle
products have been India’s largest manufacturer of biscuits and confectionery for almost
80 years. Makers of the world’s largest selling biscuit, Parle-G and a host of other very
popular brands, name Parle name symbolizes quality, nutrition and great taste. With a
reach spanning even to the remotest village of India, the company has definitely come a
very long way since its inception.
The production locations of company are located in maximum state. It takes around 3
days to reach Patna from other states. The transportation takes place through 10 wheeler
and 12 wheeler. The daily inbound delivery to Patna warehouse in three trucks is around
1000 to 1200 cartoons in one truck. The company ware house located in Patna at karmali
chowk, Patna which has storage capacity of 100000 cartoons and the total space is 20000
32. Page 32
sq ft. The average number of products in the warehouse is 100sku and stock turnover rate
is 30 days. For Parle no cold storage is required.
The average number of order per day is 10. There is a minimum ordering quantity of
400 cases so that a standard size of load can be generated and proper vehicle can be used.
There is no seasonal influence as its products are of everyday use. Minimum one
distributor is there in every district which means they need vehicle for whole Bihar. The
company is having their own vehicles as well as 3 parties logistic for outbound delivery.
The daily number of shipment from warehouse is 10 trucks and the vehicles used for
transportation is 709 and 6 wheeler. The shipment is done by using one vehicle for both
one distributor an multiple distributor. It takes around 1 day to reach in any part of Bihar.
The cost of transportation depends upon types of vehicle used for transportation and the
distance from the warehouse.
In last two year the company have experienced 7-8% hike in costs for transportation
because of blockage of Gandhi Setu Bridge for 10 wheeler from last two years. As in
smaller vehicles it is difficult to arrange cartoons properly so less number of cartoons is
being accommodated which increases per cartoon cost. The other problem face due to
blockage is traffic jam which is always present on bridge. Another reason is due to
increase in fare of 6 wheeler due to high demand of 6 wheeler. Recently government of
Bihar announced that no entry of commercial vehicle during certain daytime on
Mahatma Gandhi Setu so it lead to failure of delivery time. Due to this issue in 2012 they
have divided Bihar into three zones and opened two more warehouses in Hajipur and
purnia and distributed the load to these entire warehouses according to their reach. So
warehouse in Patna has not to worry about north Bihar.
33. Page 33
3.4 Colgate Palmolive
The Coalgate Palmolive Company is an American multinational consumer products
focused on the production, distribution and provision of household, health care and
personal products, such as soaps, detergent, and oral hygiene products (including
toothpaste and toothbrush).
The production locations of company are Goa, Baddi, Sanand etc. Goods coming from
the factory is having a average 7 days of transit time so the warehouse is always having a
stock of minimum 10 days. As their product is not bulky rather it is having a high volume
so they judge the capacity on the basis of no of cartoons. The transportation takes place
through 10 wheeler and daily inbound delivery to Patna warehouse in three truck is
around 3200 to 3600 cartoons. The company ware house located in Patna at Anishabad
Shalimar cold storage which has storage capacity of 30000 cartoons and the total space is
13000 sq ft. The average number of products in the warehouse is 200sku and stock
turnover rate is 15 days. For Coalgate Palmolive no cold storage is required.
The average number of order per day is 15. The company has no specific size in average
shipment size or quality but there is minimum ordering quantity which is around 1 lakh in
terms of value. There is no seasonal influence except cold creams. The distributor of the
company is located in every districts of Bihar. The company is using 3 parties logistic for
outbound delivery. The daily number of shipment from warehouse is 15 trucks and the
vehicles used for transportation is pick up, 407, 6 wheeler and 10 wheeler. In one vehicle
there can be goods for one distributor or two distributor It takes around 1 to 2 days to
reach in any part of Bihar but in case of Katihar and Purnia it takes 3 days sometimes.
34. Page 34
The cost of transportation depends upon types of vehicle used for transportation and the
distance from the warehouse.
In last two year the company have experienced 7-8% hike in costs for transportation
because of blockage of Gandhi setu bridge for 10 wheeler from last two years. The other
problem face due to blockage is traffic jam which is always present on bridge. Recently
government of Bihar announce that no entry of commercial vehicle during certain
daytime so it lead to failure of delivery time. The company is giving different rates for
south Bihar and north Bihar. For transportation in north Bihar the company has to pay 5%
more than South Bihar. To minimize the cost in north Bihar Company is doing slightly
different from other company in transportation. They load the product on 407, pick up,6
wheeler from the warehouse to cross the bridge and after crossing they unload the
product to 10 wheeler. They find that this method is best to minimize cost in north Bihar.
3.5 Hindustan Unilever Ltd
Hindustan Unilever Ltd is India’s largest Fast Moving Consumer Goods company with a
heritage of over 80 years in India and touches the lives of two out of three Indians. With
over 35 brands spanning 20 distict categories such as soaps, detergents, shampoos, skin
care, toothpastes, deodorants, cosmetic, tea, coffee, packaged foods, ice creams and water
purifiers the company is a part of everyday life of millions of consumers across India.
The production location of company is Haridwar, Haldia and Solan. It takes around 4 to 5
days to reach goods to Patna. The transportation takes place through 10 wheeler and 12
wheeler. The daily inbound delivery to Patna warehouse is about 10 trucks .The company
ware house is located in Patna at Didarganj which has storage capacity of 1000MT and
35. Page 35
the total space is 52000 sq ft. The average number of products in the warehouse is
200+sku and the average product is 1000 tone. The stock turnover rate is 7 days.
The average number of order per day is 10 to 12. The company has no minimum
ordering quantity whatever order comes they have to deliver. There is no seasonal
influence on overall load because at a time if there is some influence on one product then
in another month influence shifts to other products due to wide variety of products the
overall load or dispatched load remains almost same. The distributor of the company is
located in every districts of Bihar. The company is using third party logistic for outbound
delivery. The daily number of shipment from warehouse is 10 to 12 trucks and the
vehicles used for transportation is pick up, 407 which is used for transportation in 20km
of radius only. For north Bihar either 709 or 6 wheeler is being used and for south Bihar
they normally preferred to use 10 wheeler, 6 wheeler and. The shipment is done by using
one vehicle for one distributor. It takes around 30 hours to reach in any part of Bihar. The
cost of transportation depends upon types of vehicle used for transportation and the
distance from the warehouse. Transporter charges only one side freight. There is no
standard size of order for delivery.
In last two year the company has experienced 7 to 8 % hikes in costs for transportation
because of blockage of Gandhi setu bridge for 10 wheeler from last two years. The other
problem face due to blockage is traffic jam which is always present on bridge. Because of
this blockage demand for six wheeler have increased so there monopoly has started .
Recently government of Bihar announce that no entry of commercial vehicle during
certain daytime so it lead to failure of delivery time. According to them there is
significance difference between transportation cost in north Bihar and south Bihar. In
36. Page 36
south Bihar it cost less because in south Bihar the load is supposed more than 10 tone
they can easily used 10 wheeler which cost just 30% more than what cost six wheeler and
the quantity that can be transported is almost double. So overall per tonnage cost reduces.
3.6 Nestle India
The Nestle India is a vibrant company that’s provides consumers in India with products
of global standards and is committed to long term sustainable growth and shareholder
satisfaction. Nestle India manufactures products of truly international quality under
internationally famous brands name such as Maggi, Milkybar, Kitkat, Bar-one, Milkmaid
and Nestea and rest in recent years the company has also introduced products of daily
consumption and use such as Nestle milk, Nestle slim milk, Nestle dahi and Nestle jeera
raita.
The production location of company is Rudrapur and Kolkatta. It takes around 2 to 3 days
to reach Patna from these production locations . The transportation takes place through 10
wheeler and 12 wheeler. The daily inbound delivery to Patna warehouse is more than ten
trucks and the number of cartoons received daily is around 8000. The company ware
house is located in Patna at Didarganj which has storage capacity of 80000 cartoons and
the total space is 44000 sq ft. The average number of products in the warehouse is more
than 100sku. The stock turnover rate is 3 days. For Nestle India cold storage is required.
The average number of order per day is more than 10. The company is not having any
minimum ordering quantity for delivery. There is no seasonal influence on any product of
Nestle India. The distributor of the company is located in every districts of Bihar. The
company is using 3 parties logistic for outbound delivery. The daily number of shipment
37. Page 37
from warehouse is more than 10 trucks and the vehicles used for transportation is pick
up, 407, 6 wheeler and 10 wheeler. The shipment is done by using one vehicle for one
distributor. It takes around 36 hours to reach in any part of Bihar. The cost of
transportation depends upon types of vehicle used for transportation and the distance
from the warehouse. Transporter charges only one side freight. There is no standard size
of order for delivery.
In last two year the company has experienced 10 % hikes in costs for transportation
because of blockage of Gandhi setu bridge for 10 wheeler from last two years. The other
problem faced due to blockage is traffic jam which is always present on bridge. Because
of this blockage demand for six wheeler have increased so there monopoly has started.
Recently government of Bihar announce that no entry of commercial vehicle during
certain daytime so it lead to failure of delivery time. According to them there is
significant difference between transportation cost in north Bihar and south Bihar. In south
Bihar it cost less because in south Bihar the load is supposed to be more than 10 tone so,
they can easily used 10 wheeler which cost just 30% more than what cost six wheeler and
the quantity that can be transported is almost double. So overall per tonnage cost reduces.
Another factor is that there is no such demand of six wheeler for transportation of other
goods.
3.7 GCMMF
The production location of company is in Gujarat and West Bengal. It takes around 3 to 5
days to reach Patna from factory . The transportation takes place through 10 wheeler, 12
wheeler and railway racks. The daily inbound delivery to Patna warehouse in 8 to 10
38. Page 38
trucks from Fatuha rack point. The number of cartoons received depends on the purchase
request. The company ware house located in Patna at Anishabad Shalimar cold storage
which has total space of 16000sq ft. For Amul cold storage is required as some of the
products are perishable.
The average number of order per day is 15 to 20. The company is having minimum
ordering quantity which is 2 tones for local distributors. There is seasonal influence
especially in summer due to increase in sale of ice cream. The distributor of the company
is located in every districts of Bihar. The company is using own logistic for outbound
delivery. The daily number of shipment from warehouse is 15 to 20 trucks and the
vehicles used for transportation is pick up, 407, 608 and 709. The shipment is done by
using one vehicle for both one distributor and multiple distributors depends upon the
order. It takes around 24 hours to reach in any part of Bihar except Purnia and Sharsha.
The cost of transportation depends upon types of vehicle used for transportation and the
distance from the warehouse. Transporter charges only one side freight but now they
started charging more. The average size or quantity of shipment is 5 tones.
In last two year the company has experienced 8 to10 % hikes in costs for transportation
because of blockage of Gandhi Setu Bridge for 10 wheeler from last two years. The other
problem face due to blockage is traffic jam which is always present on bridge. Recently
government of Bihar announce that no entry of commercial vehicle during certain
daytime so it lead to failure of delivery time. The company is giving same rates for south
Bihar and north Bihar. The other problem is that six wheeler is not always available and
they also started charging more for transportation.
39. Page 39
Chapter-4 Problem In Transportation
4.1 Problem faced by C&F agent
Difference of cost in North Bihar and south Bihar- Earlier the transportation
cost for north Bihar and south was same but due to blockage of bridge for 10
wheeler and above the transportation cost across north Bihar has increased in last
two year. Many company pays additional 5% for transportation in north Bihar. In
south Bihar it cost less because in south Bihar the load is supposed to be more
than 10 tone and they can easily use 10 wheeler which cost just 30% more than
what cost six wheeler and the quantity that can be transported is almost double.
So the overall per tonnage cost reduces but in case of north Bihar they have no
other option they have to transport by six or below wheeler so the transportation
cost increased in north Bihar.
Demand of six Wheeler has increased- Because of blockage of bridge for 10
wheeler the demand of 6 wheeler has increased and as a result there is shortage of
6 wheeler. Actually now commodities, coal sand and other products which were
earlier transported by multiaxle vehicles are now transported by six wheelers.
Many company have to transport there product by other vehicles like 1109,407
etc because of shortage of six wheeler which results in increase of transportation
cost. The other problem is that six wheeler are charging more because of their
monopoly in the market which results in increase in cost around 15 to 20%. As
40. Page 40
there is no option ultimately the C&F have to pay more to the six wheeler which
also result in increase of transportation cost.
Traffic Jam- It is another factor which results in increase in transportation cost.
As there is repairing work going on Mahatma Gandhi setu bridge so daily there is
long traffic jam .Because of this traffic jam the vehicles which is supposed to
reach within 24 any part of Bihar actually take more than 30 hours to reach any
part of Bihar which affect the transportation cost and lead to failure of delivery
time. Recently the news came out that six wheeler are not allowed to cross the
bridge during certain timing in daytime which further increased the problem for
C&F.
Problem with smaller vehicles-After blockage of big vehicles the demand of
smaller vehicles has increased but the problem with the smaller vehicles is that it
is difficult to arrange cartoons properly and so less number of cartoon is being
accommodated due to less capacity of the vehicles and which result in increased
per cartoon cost. Some product have less weight but volume is more so they
require more space as a results arrangement of this type of product in smaller
vehicles is difficult the quantity is reduced and hence cost per cartoon increase.
41. Page 41
4.2 Problems for transporters involved in inward logistics
No business opportunity – The business opportunity is almost nil in South Bihar
only at the time of seasonal crops the transporter get something otherwise they
have to move either to Jharkhand or some other place for getting some return
goods. There is some business opportunity in north Bihar but the problem is that
the ten wheeler are not allowed to cross Gandhi Setu bridge so ultimately they
have to go far places like Durgapur and Jamshedpur or they are forced to return
from Bihar with empty vehicles. In Bihar there is no such industry whose goods
can be transported to other state. In some of the month of season in which there is
harvest they used to get fodder and even rice and wheat as return goods. In other
state there is some industrial belt or area in which they get something for
transportation. So because of this problem many of transporters don’t want to
come Bihar.
Condition of Bridge and roads- The trucks which enter in Bihar has to face a lot
of problem related to bridge and roads. For example after entry to Bihar from
Mohania the road is state highway and has no lane division .The condition of
roads is also not so good. A lot of traffic is always present. So, to cross 150km it
takes 10-12 hour and more than that. In the same there is a problem for high load
in Koyelbar Bridge. The height of Koyelbar bridge is less so truck cannot carry
good with more height. Because of this problem the transporter have to do loading
and unloading to cross the bridge which increases the cost.
42. Page 42
Unavailability of public provided infrastructure- In Bihar there is very less
public provided infrastructure because of this parking has became a big issue in
Bihar and in many places due to no parking space the trucks has to parked beside
the road which sometimes leads to traffic jam . Sometimes authority imposes fine
on transporter for parking.
Unwanted interference by policemen- Policeman disturbs a lot to outsider
transporter. They charge money illegally and if transporter doesn’t give money
they don’t allow them to move further. Because of the involvement of policemen
sometime it leads to traffic jam. Apart from policemen RTO also charges illegally
to make permit for the transporter.
Long detention period- It happens when there is no space to store goods in
warehouse and as results the trucks have to wait to unload the goods in
warehouse. Sometimes it takes more than five days to unload the goods in
warehouse. Although a fixed detention amount given to transporter but it not
enough as more time is losses because of detention. In Patna none of the
warehouse has been made with proper planning due to which what happens is
loading space got stuck if a multiaxle vehicle gets into the loading area and blocks
the way for other loading area.
43. Page 43
4.3 Problem faced by transporter (Intra distribution)
Condition of roads-In many parts of Bihar the roads are single lane so it difficult
to drive load vehicles and the road are not so widened. Availability of four lane
roads is less in Bihar. As the roads are not so widened traffic jam occurs in many
part of Bihar. In some of routes the bridges are too narrow and not properly built
so, chance of accidents are more. If we take example of the roads from Varanasi
to Patna the condition of is so bad that it takes additional three to four hours to
reach Patna. The mileage of vehicles is also reduced and as results the
transportation cost increased and these additional costs has to bear by the
transporter.
No entry of vehicles- As the Bihar government has recently announced that there
is no entry for commercial vehicles during 11am to 4 pm on Gandhi setu bridge. It
created another problem because any warehouse opens at 9 or 9:30 and trucks
gets loaded in 3-4 hours. So, then it has to wait another 2-3 hours then only it can
cross the river through bridge. It leads to failure of delivery time.
Increase in demand of six wheeler- The transporter is having 10 wheeler but
they cannot be used for north Bihar because of blockage of 10 wheeler on Gandhi
setu bridge. So, they are now used for sand procurement and get less freight. Now
for transportation in north Bihar every party now demands six wheeler. So, it is
being difficult to fulfill the needs of vehicles of a given party at stipulated time.
44. Page 44
Contract- The company signs contract with the transporter for transportation
which is based on per ton or kilometer .Company are not liable to pay anything
extra for traffic jam or condition of roads and if the cost increases the transporter
has to bear the cost . For example load of Muzzafarpur and Bettiah is always high
and in place of one vehicles now transporter are using two vehicles so the cost
increases and also timing increased but company are not going to listen these
things ultimately the transporter has to bear the loss . The change in contract takes
place only when there is more than 10 percent increase or decrease in diesel
price.
Toll charges- New tolls have been created in different route which also increased
the cost of transportation. For example earlier there is no toll between fathua and
Patna but recently there is new toll in Didarganj because of this toll the transporter
have to pay around 600 or more for transportation. Apart from toll charge the
transporter has to pay taxes to nagar nigam which has been increased in several
locations in last few years.
Parking Problem –The government has not provided any infrastructure for
parking in most of the places due to which transporters are forced to park their
trucks beside the road which sometimes leads to traffic jam.
45. Page 45
Chapter- 5 Factors of Transportation
5.1 Introduction
Prime focus in this entire project is on transportation and there are certain variables that
are having significant impact on the cost and time of transportation. So, to know those
variables a trial interview has been done with transporters. Focused discussion between
the interns of GCMMF Patna Depot also gave some variables. A questionnaire of 10
items covering those 10 variables was prepared and got it filled by the transporters. A
convenience sample of 42 respondents were taken. All the variables were to be scored
from 1 to 5 on the basis of their importance. So to find the most impactful variables we
have done factor analysis on our secondary data. Reliability test was done to test the
reliability of the compiled data. Factor analysis was used to come to a conclusive result.
5.2 Reliability Analysis
This measures the overall consistency of the items that are used to define a scale. As a
result, we have given sample size, number of items and reliability coefficients. In
statistics, Cronbach's (alpha) is a coefficient of internal consistency. It is commonly used
as an estimate of the reliability of a psychometric test for a sample.
46. Page 46
Table 5.1 Alpha table
Cronbach's alpha Internal consistency
α ≥ 0.9 Excellent (High-Stakes testing)
0.7 ≤ α < 0.9 Good (Low-Stakes testing)
0.6 ≤ α < 0.7 Acceptable
0.5 ≤ α < 0.6 Poor
α < 0.5 Unacceptable
5.1.1 Result
Table 5.2 Case Processing Summary
N %
Cases
Valid 42 100.0
Excludeda 0 .0
Total 42 100.0
a. Listwise deletion based on all variables in the
procedure.
Table 5.3 Reliability Statistics
Cronbach's
Alpha
Cronbach's
Alpha Based on
Standardized
Items
N of Items
.646 .588 10
47. Page 47
5.1.2Interpretation
The value of Cronbach's alpha comes out to .646, which is greater than the acceptable
benchmark of 0.6. So the data is reliable enough to be used for further processing and
analysis.
5.2 Factor Analysis
Factor Analysis is done to identify and club those important factors which drive to the
maximum possible variance. Factor analysis is a general term denoting a class of
procedures primarily used for data reduction and summarization. It is an interdependent
technique in that an entire set of interdependent relationships are examined without
making the distinction between dependent and independent variables.
Factor analysis is used in the following circumstances:
To identify underlying dimensions or factors that explain the correlations among a
set of variables.
To identify a smaller set of salient variables from a larger set to be used in
subsequent multivariate analysis.
Factor Analysis was done to identify the most important factors influencing the cost and
time of transportation.
. 5.2.1 Results and Interpretations
Kaiser-Meyer-Olkin (KMO) measure of sampling adequacy:
The Kaiser-Meyer-Olkin (KMO) measures of sampling adequacy is an index used to
examine the appropriateness of factor analysis. High values (between 0.6 and 1.0)
48. Page 48
indicate factor analysis is appropriate in terms of adequacy of number of samples.
Values below 0.6 imply that factor analysis may not be appropriate.
The KMO measure of this test is 0.679 which indicates the factor analysis is appropriate.
Bartlett's test of Sphericity
Bartlett's test of sphericity is a statistical test used to examine the hypothesis that the
variables are uncorrelated in the population. In other words, the population correlation
matrix is an identity matrix; each variable correlates perfectly with itself (r = 1) but has
no correlation with the other variables (r = 0).
The Significance level of 0.000(which is less than 0.05) allows to reject the null
hypothesis of no correlation between the variables.
Table 5.4 KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .545
Bartlett's Testof Sphericity
Approx. Chi-Square 110.982
Df 45
Sig. .000
Eigenvalue.
The eigenvalue represents the total variance explained by each factor.Eigen value >1
means components are significant.
49. Page 49
Table 5.5 Total Variance Explained
Compon
ent
Initial Eigenvalues Extraction Sums of Squared
Loadings
Rotation Sums of Squared
Loadings
Total % of
Variance
Cumulativ
e %
Total % of
Variance
Cumulativ
e %
Total % of
Variance
Cumulativ
e %
1 2.620 26.205 26.205 2.620 26.205 26.205 1.949 19.492 19.492
2 1.993 19.929 46.134 1.993 19.929 46.134 1.915 19.147 38.639
3 1.375 13.751 59.885 1.375 13.751 59.885 1.774 17.742 56.381
4 1.002 10.024 69.909 1.002 10.024 69.909 1.353 13.528 69.909
5 .893 8.931 78.840
6 .734 7.342 86.182
7 .531 5.311 91.493
8 .362 3.619 95.112
9 .319 3.190 98.302
10 .170 1.698 100.000
Extraction Method: Principal Component Analysis.
These four components are able to explain 69% of the total variation in cost and time of
transportation. This is a pretty good bargain , because we are able to economize on the
number of variables (from 10 we have reduced them to 3 underlying factors), while we
lost only 30 per cent of the information content.
Scree plot.
A scree plot is a plot of the Eigen values against the number of factors in order of
extraction.
51. Page 51
Extraction Method: Principal ComponentAnalysis.
Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 17 iterations.
By taking .7 as the threshold loading factor these variables can be classified into these
four components as follows-
Component 1 consist of Weight(.847)
Component 2 consist of Traffic Jam & Road Safety & Public Restrictions
Component 3 consist of Condition Of Roads
Component 4 consist of value of goods
As the Eigen value of component 1 is highest ( 2.620) so this the most impactful factor
which consist of weight. This means that weight is the most impactful variable followed
by Traffic jam & Road safety and security restrictions . From interviews also it was
found that main delay in timing is due to Traffic jam and safety restrictions in the city
due to which trucks have to wait for whole day and that increases the delivery time and
also cost for transportation.
52. Page 52
Chapter- 6
6.1 Data Analysis
In this part after analyzing the current situation of transportation of goods to north Bihar
and the problems associated with it several analysis like sales analysis, route scheduling ,
warehouse location has been done for GCMMF.
Sales analysis - One year sales data except for ice-cream for Bihar has been taken from
the secondary sources. Then the total sales volume has been divided into the sales of
north Bihar and south Bihar. In this north Bihar and south Bihar has been separated on
the basis of the Holy river Ganges. As the major portion of Bhagalpur district is in south
side of river so Bhagalpur has been considered in south Bihar. It has been assumed that
the last year sales volume will be the demand for the next year. Based on that location
wise demand has been generated and a report showing north Bihar and south Bihar sales
data has been made.
Ice cream sales has not been considered in the analysis as the mode of transportation for
ice cream is totally different. It is being transported through refrigerated vans (mainly
Pickup vans). Ice Cream being a perishable good, transportation plays and important part
in the whole logistic chain of the product. Delays and not meeting the pre-requisite
conditions for the Ice cream storage can be detrimental to the health of the business. In
total 3 vehicles are being currently used of 60, 80 and 120 crates in which former is
solely responsible for transportation in City region and later two are for rural regions of
Bihar.
53. Page 53
After this according to the current freight rate given by GCMMF to transporters the total
freight paid per distributor wise has been calculated for north Bihar and South Bihar.
Table 6.1 North Bihar
Location Distance Sales Qty Freight
rate(MT)
Freight paid
Begusarai 130 84.63 1073 90807.99
Betiah 260 41.406 1951.75 80814.1605
Chakia 175 4.61 1221 5628.81
Chapra 150 147.749 1646.5 243268.7285
Dalsinghsarai 140 15.943 1193.25 19023.98475
Darbhanga 160 340.526 1467 499551.642
Gopalganj 180 52.23 1572.5 82131.675
Hajipur 30 158.195 476.38 75360.9341
Supaul 290 19.6 2386.5 46775.4
Siwan 150 302.415 1646.5 497926.2975
Sitamarhi 140 91.52 1304.25 119364.96
Saharsa 290 134.689 2386.5 321435.2985
Samastipur 140 67.256 1193.25 80253.222
Raxual 210 58.853 1785.25 105067.3183
Purnia 300 101.013 1924 194349.012
Narkatiaganj 260 98.262 1951.75 191782.8585
Muzaffapur 80 623.448 732.6 456738.0048
55. Page 55
Jehanabad 80 42.263 741.85 31352.80655
Sherghati 150 18.39 1609.5 29598.705
Sasaram 165 84.87 1174.5 99679.815
Patna* 1422.16
Nawada 112 252.049 897.25 226150.9653
Naugachia 255 20.65 1424.5 29415.925
Munger 215 93.4 1443 134776.2
Masuarhi 80 25.104 741.85 18623.4024
Lakhisarai 160 42.83 1350.5 57841.915
Jhaja 200 51.37 1461.5 75077.255
Rajgir 100 33.12 1036 34312.32
*As these two locations comes in local so these have been left out.
While interviewing transporters of intra distribution a rate list has been prepared by
asking rates for locations for different types of vehicles. These rates have been collected
from two origin locations i.e. Transport Nagar Patna, Hazipur Industrial Area.
After analyzing all the problems for the transportation in north Bihar from all the
C & F agents and transporters and also the political and developmental scenario it
has been suggested that the company GCMMF should have a different warehouse
for North Bihar which will be located in north Bihar.
After concluding with a concept of new warehouse next task was to find the
location of the new warehouse and to check the benefit and cost associated with
it. So for this task after a lot of analysis it has been concluded that Hajipur will be
56. Page 56
the best location for new warehouse. For every decision there must be a reason in
the same for choosing Hajipur as the warehouse location there are several reasons
and those reasons are-
o It is located on other side of Gandhi Setu Bridge. So from hajipur we can
send goods in 10 wheeler in any part of north Bihar as the it is connected
with most of the places with national highway.
o Most of Amul products comes through railway racks and there is a
railway station Sarai located near hajipur which can be used to unloads the
goods from railway racks.
o The 10 wheeler trucks can directly come to Hajipur from Gorakhpur via
Gopalganj . So there is no need to cross Gandhi setu bridge
o Business opportunity is more for 10 wheeler in north Bihar.
o No need to open new office in Hajipur because it is within 25km so it can
be supervised and monitored from Patna.
o Transporter has to not worry about traffic jam on Gandhi Setu Bridge.
o The rent charges of ware house in Patna and Hajipur is same. So company
don’t have to pay more in Hajipur.
In the next phase after analyzing the location the benefit and cost has been calculated.
After interviewing some of the warehouse owners and also staffs it has been found that
the rent for warehouse in Hajipur is as follows-
Dry- Rs 10-12/Sq ft
Frozen- 17 -18/ sq ft
57. Page 57
As the rent for warehouse in Patna is also in the same range so this rate can be accepted.
In ward delivery of Goods in GCMMF is done through railway rack from last 2 years,
this is actually due to increase in freight rate. The reason for this has been explained in
the earlier parts of the project. In Patna warehouse goods comes from fatuha rack point.
transportation for this has been outsourced to a company and fatuha is about 28 km from
Anishabad warehouse. In the same way that company can be used in hajipur as the
nearby rack point is sarai which is 34 km from Hajipur. so for this company will not have
to pay extra.
Another major factor is the railway freight charge but from the secondary data sources
taken from official railway website it has been found that the dairy products came in to
rate class category-50. for rate class category 50 when freight rate according to distance
has been analyzed following things has been found -
Distance of Sarai from Anand- 1623km(shortest Path)
Distance of Fatuha from Anand- 1592km(shortest path)
Freight charge for rate class 50 from 1501km to 1625 km- Rs 2189/MT
So it has been found that the there will no difference in freight charges
58. Page 58
Table 6.3 Other Costs
WAREHOUSE
COST
AREA RATE(per
sq ft)
CHARGE/
MONTH
ANNUAL
COST
7000 10.5 73500 882000
1000 17 17000 204000
OVERHEADS
SALARY NO OF
EMPLOY
MONTHLY
COST
ANNUAL
COST
10000 2 20000 240000
ELECTRICITY
BILL
4000 48000
WAGES NO OF WORKERS
5000 4 20000 240000
MISC 50000
Furnitures
Value Life per year
cost
100000 5 20000 20000
59. Page 59
Total cost =1,684,000
6.2 Calculation for benefits
In earlier part as the cost associated with the new warehouse has been calculated so in
this section the benefits associated with it has been calculated. For calculation of benefits
first of all route scheduling has been done for north Bihar.
Route Scheduling-
Objective:- The objective of route scheduling is to minimize the overall cost of
transportation.
Route scheduling has been done keeping in view of following factors-
Sales volume
Road connectivity
Timing of delivery
Capacity of vehicle
On the basis of these factors route scheduling has been done and with the help of
collected freight rate list the cost associated with this network has been calculated.
Total cost in new network for north Bihar = Rs 2,950,380
Total cost in existing network for north Bihar = Rs 4744323
Difference = Rs 1,793,943(38%)
In new routing total of Rs 1,793,943 is being saved from transportation but there are
some other costs associated with it which amounts to Rs1,684,000. So net savings is
60. Page 60
Rs109943 which is around 2 percent of the existing total cost. As the profit is coming to
be positive so the decision for new warehouse is financially viable.
Figure 6.1 Cost calculation & Route scheduling
61. Page 61
Chapter 7
7.1 Conclusion
At the present situation it was found that all the FMCG companies are facing problem of
transportation. on an average they have experienced a hike of 10% in freight charges in
last 2 years. As the load is not so high in all locations so they generally use 6 and below
wheelers vehicles for intra distribution. most of the companies are having single
warehouse located in Patna for distribution in the market of Bihar. Most of the C& F
agents are using third party logistics and they mostly depend on contractors or
commission agents for vehicles. Due to blockage even if there is a good amount of load
in some places of north Bihar they cannot use 10 wheelers.
There are various problems from thee view C & f agents, transporters of intra distribution
and transporters in involved in inward logistics.
Traffic jam and Road safety and security restrictions are one of the important factors that
is impacts cost and time of transportation so, there is a need to plan the route of
distribution keeping in mind of these two factors so that cost and time can be saved.
With the help of new warehouse locations and new route scheduling GCMMF is able to
save 2% of its existing cost of transportation in North Bihar which is a good bargain as
the company always tries to follow a low cost model. From this even the problem of late
delivery will be solved to a great extent.
62. Page 62
7.2 Recommendations
FMCG companies in Bihar can have demand division into north and south bihar
and have warehouse for both to avoid blockage and traffic jam problems.
Company GCMMF can open their warehouse as it is financially viable and it will
remove the problem of late delivery to a large extent.
A new route scheduling for north Bihar which has been prescribed in the project
can be used.
FMCG companies should advice their distributors to have their warehouse beside
of highways so that trucks can go easily and the restriction problems can be
solved.
Transporters coming to Patna should have contacts with local brokers to have
return goods at the earliest possible time.
7.3 Limitations
Assumptions: This research assumes that sales data for last year will be the
demand for next year.
Time constraint: Due to lesser time, many C & F in different areas were not
covered which restricts this research to certain areas only.
Supply Chain Model: Due to unavailability of secondary data .
63. Page 63
References
Dr G Karmakar and Dr. G. D. Banerjee (2006), 'opportunities and challenges in
the Indian dairy Industry' Issue 9, NABARD
Nimah Mazaheri, Edouard Al-dahdah, Sandeep Poundrik & Soujanya
Chodavarapu (2013), ' leadership and institutional change in the public provision
of transportation infrastructure: an analysis of india’s bihar' vol. 49, no. 1, 19–35,
rutledge taylor and francis group
Harish chawla (2007), ' Amul India: A Social Development Enterprise'Asian
case research journal, vol. 11, issue 2, 293–326
Rajendra Nargundkar (2014), 'Marketing Research - Text and Cases'
64. Page 64
Appendix 1
Interview Guide for C&F
Dear respondent, we students of Chandragupt Institute of Management Patna are
conducting a small survey on existing logistic condition in Bihar. The information given
by you will be kept strictly confidential and will be used for academic purposes only.
General information
Name of company
Name of company (warehouse)
Location of warehouse
Production location of your company
Distributor locations in Bihar
Warehouse design
Total space
Floor storage
Shelf storage
Total Capacity (MT)
Cold storage (Y/N)
65. Page 65
Stock in warehouse
Average number of products
Average product weight
Stock turnover rate
Inbound delivery(daily)
1. Number of trucks
2. Types of truck
3. No of cartoons received
4. Average value
5. Average weight
6. Average lead time
Order handling
Average numbers of order per day
Standard size of order
Any minimum ordering quantity
Seasonal influence on order(Y/N). If yes specify
Outbound Delivery (daily)
66. Page 66
Mode of transportation
o company owned
o 3PL
Number of shipment
Type of vehicles
Average shipment size/quantity
Shipment in one vehicle
o One distributor
o Multiple distributor
Normal lead time
Cost
Basis of cost of transportation
o Value of goods
o Weight of goods
o Number of vehicles
o Distance from warehouse
Does transporter charges cost for both way and only one way?
67. Page 67
Blockage on bridges is having impact on logistics(Y/N)? If yes then please
specify the problem?
Cost increase in transportation in last two years-
Is there difference in cost for north Bihar or south Bihar(Y/N)? If yes what is
the percentage difference?
68. Page 68
Interview Guide for transporter (Intra distribution)
Dear respondent, we students of Chandragupt Institute of Management Patna are
conducting a small survey on existing logistic condition in Bihar. The information given
by you will be kept strictly confidential and will be used for academic purposes only.
o Name of company
Location
Type
o Company owned
o 3PL
Size of fleet
Are you working for FMCG companies (Y/N)? If yes name them?
Does your company involved in intra distribution in Bihar?Y/N
Major route currently being used for intra distribution in Bihar?
Average toll tax paid in different route?
Major problems in different route?
Are you charging both side freight?
Basic of charging freight?
o Volume based
o Distance based
o Value based
o Vehicle type based
69. Page 69
What is the impact of blockage of big vehicles on two major bridges of Bihar on
your business?
Percentage of cost increase in transportation in last two year?
Changes in the public infrastructure in last 2 years?
Average lead time?
Average freight charge for north Bihar and South Bihar
North charge South charge
Less than 100 km Less than 100km
Less than 150km Less than 150km
Less than 200km Less than 200km
70. Page 70
Interview Guide for transporter inward
Dear respondent, we students of Chandragupt Institute of Management Patna are
conducting a small survey on existing logistic condition in Bihar. The information given
by you will be kept strictly confidential and will be used for academic purposes only.
Name of company
Location
Type
o Company owned
o 3PL
Size of fleet
Are you working for FMCG companies (Y/N)? If yes name them?
Does your company involved in inward logistic to Patna from other state? Y/N
Major route currently being used to reach warehouse in Patna?
Average toll tax paid in different route?
Major problems in different route?
Are you charging bothside freight?
Basic of charging freight?
71. Page 71
o Volume based
o Distance based
o Value based
o Vehicle type based
What are the business opportunities available in Bihar for logistics? How it is
different from other states?
72. Page 72
Questionnaire for Factors of transportation
Dear respondent, we students of Chandragupt Institute of Management Patna are
conducting a small survey on existing logistic condition in Bihar. The information given
by you will be kept strictly confidential and will be used for academic purposes only.
Name of the company
Name of the respondent
Please rate these factors impacting logistics on the basis of their impact on cost and time
from
1= very low impact
2 =low impact
3=moderate impact
4=high impact
5= very high impact
Factors:-
Fuel price
Distance
Weight / volume
Route(bridges)
73. Page 73
Value of goods
Toll charge
Traffic/congestion
Condition of road
Publicly provided infrastructure
Road Safety policy and restriction
87. Page 87
Total 1422.16
Nawada Lalchand Rameshwarla 252.049
Naugachia Arun Kumar Traders 18.37
Baba Traders 2.28
Total 20.65
Munger Habeeb Store 75.657
Vinayak Marketing 17.743
Total 93.4
Masuarhi Jai Mata Di 25.104
Madhepura A K Enterprise 10.35
Lakhisarai Sri Bhagwati Agency 42.83
Jhaja Ram Bhandar 51.37
Rajgir Sri Ram Trading 33.12