minimizatoin of wastage of fruits and vegetables at reliance fresh outlet

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minimizatoin of wastage of fruits and vegetables at reliance fresh outlet

  1. 1. 1 | P a g e 1. INTRODUCTION Fruits and vegetables typically constitute an essential part of the daily diet in India and they are in great demand round the year from most sections of the population. The commercial value of fruits and vegetables in terms of direct consumption, processing as well as trade has risen substantially in recent years. Their economic importance has also increased and high labor intensity in the production of most fruits and vegetables production also makes them important from the employment angle as well. Increase in area allocation under horticultural crops has often been suggested as a measure for agricultural diversification, increased employment and income. India ranks first in the world with an annual output of 32 MT fruits, about 8% of the world’s fruit production; also is the second largest producer of vegetables (ranks next to China) and accounts for about 15% of the world’s production of vegetables. The current production level is over 71 million MT. But the real challenge starts after the production. More than 72 percent of the vegetable and fruits are wasted in every year in the absence of proper retailing, storage and other infrastructure facilities. The sector is constrained by widespread fragmentation in the supply chain, low productivity levels, and huge post harvest losses arising out of inadequate storage, cold chain and transport infrastructure, logistics and supply chain management. Against a production of 180 million mt a year of fruits, vegetables and perishables, India has a capacity of storing only 23.6 million mt in 5,386 cold storages across the country, of which, 80 per cent is used only for potatoes, according to the latest DIPP paper on Foreign Direct Investment (FDI) in retail. According to industry estimates, 25 to 30 per cent of fruits and vegetables and five to seven per cent of food grains in India get wasted. Traditional Indian retailers account for 12 million retail outlets all over India and more than 40 percent of them sell vegetable and grocery (IBEF, 2008). Indian food retail consists of staple commodities comprising grains, pulses, and vegetables. The Indian food retail business, especially vegetable retailing is witnessing a rapid growth in India's organized retail sectors. The traditional retailing of vegetables is not very much organized, amounts to 97% of the total market (Ernst & Young, 2006), is extremely localized and highly fragmented with
  2. 2. 2 | P a g e large number of intermediaries. The intermediaries between the customers and farmers are traditional retailers with different outlet formats-mom and pop shops, non-permanent shops in the market, pavement vendors, roadside vendors and push cart vegetable sellers, wholesale traders, commission agents and auctioneers. The farmers themselves sell their produces directly to the end consumers in local markets, regulated and unregulated 'farmer markets', or they sell to intermediaries—agents and organized retailers. The market place is usually in close proximity to the farmland and customers accessing the market live in and around locale. Farmers selling vegetables directly to the customer amount to very small fraction by volume. Farmers sell bulk of their produces to agents and auctioneers. The agents buy small quantities of produces from farmers and transfer it to wholesalers directly or through another agent. The auctioneers are people who enter into buying contract with farmers for whole or partial quantity of the produce and sell the produce to an agent or a wholesaler. Auctioneers also transfer the vegetables to wholesalers directly or through another agent. Wholesalers of vegetables sell to retailers— both traditional and organized retailers, and to customers, who buy in large quantity. Cart vendors, a type of traditional retailers, buy vegetables from wholesalers or organized retailers, sell to customers in mobile carts and deliver to customers at customer's doorsteps. Currently, organized retailer Reliance Fresh (Reliance Retail Ltd) follows a Value Chain business model (VCM). Organized retailers who adopt VCM procure the produces directly from farmers and sell to customers by avoiding intermediaries. This model is based on its core growth strategy of backward integration and progressing towards building an entire value chain starting from the farmers to the end consumers. Very fewer players are involved in this model compared to the traditional retailing model or organised retailer's hub and spoke model. Farmers, organized retailers, and customers are the players who form this value chain. In this practice, farmers, organized retailer's operational units, consolidation centres, hub (distribution centres) and retail outlets stores, and customers are players. Small farmers, contract farmers and lease farmers are the primary source of supply of vegetables to the organised retailers. Contract farmers and lease farmers are farmers who execute a trade agreement with the organized retailers for sale of vegetables. Figure 3 illustrates the VCM business model of vegetable retailing. Vegetables move from farm locations to customers in four phases farmers to consolidation centres, consolidation centres to hub, hub to retail
  3. 3. 3 | P a g e outlets (stores) and stores to customers. Independent farmers supply their produces to the consolidation centres; contract farmers and lease farmer's produces are picked up by consolidation centres. One consolidation centre supplies vegetables to multiple hubs, depending upon the product. Hubs get direct delivery from the contract farming locations. The hub takes care of supply of vegetables to retail outlets. It has supply coverage to all stores of a specific geographical area. A hub is served by one or more consolidation centres and a consolidation centre serves one or more hubs. A store is served by only one hub. Store sells vegetable in retail quantity to the customers and is the last phase of distribution in VCM business model. The hub disposes off the shelf life-expiring vegetables and do not sell to cart vendors. Value chain business model differs from hub and spoke business model in dependency on wholesale market and supply link between hubs. The hub in the VCM disposed off the shelf life-expired vegetables, but hubs in HSM sell off to the cart vendors.
  4. 4. 4 | P a g e Fig 1: value chain of reliance fresh
  5. 5. 5 | P a g e 2. COMPANY PROFILE Reliance Fresh is the convenience store format which forms part of the retail business of Reliance Industries of India which is headed by Mukesh Ambani. Reliance has made an investment of 250 billion in the last 4 years in their retail division. The company already has 886 Reliance Fresh outlets across the country and 47 in Bangalore. These stores sell fresh fruits and vegetables, staples, groceries, fresh juice, bars and dairy products. The company may not stock fruit and vegetables in some states. Though Reliance Fresh is not exiting the fruit and vegetable business altogether, it has decided not to compete with local vendors partly due to political reasons, and partly due to its inability to create a robust supply chain. This is quite different from what the firm had originally planned. When the first Reliance Fresh store opened in Hyderabad on October 2006, not only did the company say the store’s main focus would be fresh produce like fruits and vegetables at a much lower price, but also spoke at length about its “farm-to-fork" theory. The idea the company spoke about was to source from farmers and sell directly to the consumer, removing middlemen out of the way. Organizational structure: ZONAL MANAGER CLUSTER MANAGER AREA MANAGER
  6. 6. 6 | P a g e Fig 2: organizational structure of Reliance Fresh  STORE MANAGER ASSISTANT STORE MANAGER COMMERCIAL ASSOCIATE SUPERVISOR CUSTOMER SERVICE ASSOCIATE
  7. 7. 7 | P a g e 3. METHODOLOGY A descriptive research was carried out to fulfill the requirements of this project. In this chapter, objectives, sampling frame, database and method of analysis employed are presented under the following headings 3.1 Objectives The objectives of this project were to: 1. To identify different fruits and vegetables procured in the outlet 2. Identify the reasons for wastage of fruits and vegetables in the retail outlet. 3. To estimate wastage value of F&V in the outlet 4. To suggest remedies for minimization of wastages 3.2. Nature and Source of Data: The study was based on the secondary data which was collected from the concerned store. F&V that was sorted out and discarded was recorded as part of a daily routine normally performed by the store. Percentage of dump quantity is employed for analyzing the data. Record of dump of fruits and vegetables on daily basis was used as the data. No primary data gathering have been carried out within the project. The data presented in the report has kindly been given by representatives from the store This research has been conducted based on descriptive in nature. The data overstate the amount of fruits and vegetables actually ingested because they do not take into account all of the substantial quantities lost due to human use through waste, moisture loss, and spoilage beyond the farm gate in the marketing system and the home. Moreover, retail outlets of fruits and vegetables are more dependent on cold storage, logistics and distribution; this of study includes the same to identify the source wastages. Analysis of sources of wastage of fruits in retail markets is undertaken to suggest ways out to minimize this loss and improve the return.
  8. 8. 8 | P a g e 3.2.1. Nature and size of Sample: The value of fruits and vegetables sold and dumped extracted from the sales report is used for the study. The data is collected for each day for 60 days 3.2.2 Period of the study: The study was conducted for the duration of 2 months i.e. from the periods of July to August 2013. 3.3 Analytical tools and techniques employed: To fulfill the specific objectives of the study, the nature and extent of availability of data, the certain analytical tools and techniques have been adopted. Measures of central tendency and percentages were used to analyze the data and interpret the results properly. Percentage waste was calculated in relation to sold value in monetary terms.
  9. 9. 9 | P a g e 4. RESULTS AND DISCUSSION Keeping the specific objectives of the study in view, the results were presented under the following headings: a. Fruits and vegetables procured in the outlet b. estimate wastage value of F&V in the outlet c. reasons for wastage of fruits and vegetables in the retail outlet d. suggest remedies for minimization of wastages 4.1 Fruits and vegetables procured in the outlet Table 1: Fruits and Vegetables catalog of Bhuvaneshwarinagar Reliance Fresh Retail outlet Sl. No Name of Vegetables Name of Fruits 1 Amranthus Red Bunch Banana Robusta 2 Brinjal Purple Papaya 3 Broad Beans Banana Yellaki 4 Cabbage Pomegranate 5 Capsicum Apple royal gola 6 Carrot Regular Melody melon 7 Cauliflower Guava 8 Chilly Green Mango Neelum 9 Cluster beans Sapota Round 10 Coriander Bunch Apple Rose 11 Cucumber Apple Red Delicious 12 Curry Leaf Plum Indian 13 Methi Watermelon 14 Mint Bunch Apple Fuji
  10. 10. 10 | P a g e 15 Okra Mosambi 16 Onion Muskmelon 17 Potato Pears Indian 18 Radish White Orange Imported 19 Ridge guard Banana Red 20 Spinach Bunch Banana Nendrean 21 Tomato Custard Apple 4.2 estimated wastage value of F&V in the outlet Dump can be divided into two groups: Recorded in-store dump and unrecorded in-store dump. Recorded in-store dump was defined as waste occurring after purchase from the supplier. This waste is sorted out and discarded by stores when there is little or no possibility of selling the products. This could be due product deterioration for unpackaged FFV. Unrecorded in-store dump consisted of waste that was discarded but not recorded. This means that it had the potential to be either pre-store waste or recorded in-store waste if recorded in any of these categories. Unrecorded in-store waste originated from two sources: underestimated mass when recording unpackaged waste; and unrecorded of wasted items. The latter can occur in error or as a deliberate act, e.g. it is not cost- effective to record small amounts of waste. The general procedure for registration of dump amounts: all products that are discarded are registered via the item-code and also the reason behind the discard is registered. The amount is registered in monetary terms. Only products that are sold by weight are registered by weight, sometimes with estimated weight and sometimes actual weight. The purpose of this very comprehensive registration is not primarily to quantify waste for the retail sector, but to get statistics about product loss that might have a significant influence on the economic result of each retail shop and company, as this might have a significant negative impact on the economic results for the shop owner and the retail company. F&V that was sorted out and discarded was recorded as part of a daily routine normally performed by the stores. The routine starts with an inventory in the morning where products considered unsellable are sorted out. Products
  11. 11. 11 | P a g e are considered unsellable if they have passed their best before or use-by date. Since FFV are sold without a date label, the sorting of these products is based on visual appearance. Table 2: Table showing average daily F & V sales DAY F & V SALES (Rs) Monday 50916.33 Tuesday 51221.457 Wednesday 64239.429 Thursday 62661.794 Friday 53045.203 Saturday 71315.612 Sunday 83692.96 AVERAGE 62442 Chart 1: chart showing behavior of F& V sales 0 10000 20000 30000 40000 50000 60000 70000 80000 90000 F & V SALES F & V SALES Linear (F & V SALES)
  12. 12. 12 | P a g e Table 3: table showing daily average of dump Chart 2: chart showing behavior of dump values 2680 2690 2700 2710 2720 2730 2740 2750 2760 2770 2780 DUMP DUMP Linear (DUMP) DAY DUMP (Rs) Monday 2747 Tuesday 2749 Wednesday 2759 Thursday 2773 Friday 2767 Saturday 2766 Sunday 2714 AVERAGE 2754
  13. 13. 13 | P a g e Chart 3: pie chart showing proportion of dump to F & V sales 4.3 reasons for wastage of fruits and vegetables in the retail outlet As this study emphasizes dumping at retail level but before that it is necessary to acquaint with the different parts in value chain where dump occurs. The most important reasons for dumping in different parts of the value chain are described below: Damage in the marketing chain: Fruits and vegetables are very susceptible to mechanical injury. This can occur at any stage of the marketing chain and can result from poor harvesting practices such as the use of dirty cutting knives; unsuitable containers used at harvest time or during the marketing process, e.g. containers that can be easily squashed or have splintered wood, sharp edges or poor nailing; over packing or under packing of containers; and careless handling of containers. Resultant damage can include splitting of fruits, internal bruising, superficial grazing, and crushing of soft produce. Poor handling can thus result in development of entry points for molds and bacteria, increased water loss, and an increased respiration rate. Produce can be damaged when exposed to extremes of temperature. Levels of tolerance F & V sales 96% Dump 4% F & V sales Dump
  14. 14. 14 | P a g e to low temperatures are important when cool storage is envisaged. All produce will freeze at temperatures between 0 and -2 degrees Celsius. Although a few commodities are tolerant of slight freezing, bad temperature control in storage can lead to significant losses. Some fruits and vegetables are also susceptible to contaminants introduced after harvest by use of contaminated field boxes; dirty water used for washing produce before packing; decaying, rejected produce lying around packing houses; and unhealthy produce contaminating healthy produce in the same packages. Losses directly attributed to transport can be high. Damage occurs as a result of careless handling of packed produce during loading and unloading; vibration (shaking) of the vehicle, especially on bad roads; and poor stowage, with packages often squeezed into the vehicle in order to maximize revenue for the transporters. Overheating leads to decay, and increases the rate of water loss. In transport it can result from using closed vehicles with no ventilation; stacking patterns that block the movement of air; and using vehicles that provide no protection from the sun. Breakdowns of vehicles can be a significant cause of losses, as perishable produce can be left exposed to the sun for a day or more while repairs are carried out. Loss of product because of changes in supply chain management, for example, changes to packaging specifications or incorrect demand forecasting leading to disposal of product either to landfill or anaerobic digestion. Such losses are estimated to equate to the order of 100,000 to 150,000 tonnes or around 5% of the total waste arising. Although precise estimates are not available, disposal to anaerobic digestion is increasing while disposal to landfill is falling.  Dump at Retail and wholesale sector At the retail marketing stage losses can be significant. Poor-quality markets often provide little protection for the produce against the elements, leading to rapid produce deterioration. Sorting of produce to separate the saleable from the unsaleable can result in high percentages being discarded, and there can be high weight loss from the trimming of leafy vegetables. Arrival of fresh supplies in a market may lead to some existing, older stock being discarded, or sold at very low prices. Following were the major reasons identified for dumping at the retail outlet:
  15. 15. 15 | P a g e  Lack of knowledge on how different products should be handled especially fruit and vegetables as they are sensitive to storage etc.  Lack of timely sorting of fruits and vegetables.  No sale for long duration and the stock held up in the store.  Damage caused by customers while picking for the good produce.  Nature of the produce: for example Tomato is more prone to be dumped compared to other vegetables.  Weight reduction due to loss of moisture in fruits and vegetables after certain period of time.  problems with product quality, quality that does not meet the retailer’s specifications and additional trimming of edible parts, such as for precut produce (ex. Cauliflower, Cabbage  Bad display- banana in front of chiller will decrease the quality of banana  Watermelon, papaya, muskmelons are dumped due to stacking one over the other, fruits are spoiled due to weight exerted by each other.  Fruits and vegetables are exposed in large piles (Musambi, Pomegranate) – with the results that fruits in the middle or the bottom of the pile will easily get damaged and must be disposed. Also if a fruit becomes rotten in the pile, the surrounding fruits are more likely to be rejected than if they are displayed one by one.  Improper Indenting: What the customers buy is dependent on the weather, the season, the offers of the week, and on the general mood of the customers. All this makes it difficult to indent adequately: Lack of knowledge among the personnel regarding ordering, it takes a long time to learn how to calculate the right amounts to Indent.  Improper handling while arranging and keeping the stock. Break-down of products due to wrong mechanic handling also occurs. (Watermelon easily get damaged due to rough handling).
  16. 16. 16 | P a g e  A part of the wastage was due to occasional reasons such as mistakes and special occasions. Special occasions, e.g. promotions or holidays, and festivals cause waste since they can be difficult to predict.  Expectation of customer perfection: Many customers select stores based on the quality of perishables, and therefore retailers feel compelled to have only produce of perfect shape, size, and color—leading too much of the culling.  Large Pack sizes: Produce arrives in preset quantities according to case size. This limits the flexibility for produce buyers to purchase exactly the amount needed. For example, if a grocer wants 200 gm grape but they come in cases of 500 gm, the store is then stuck with 300 gm extras.  Unnecessary inventory: excessive storage and delay of products or information resulting in excessive cost, overstocking and over handling by both staff and customers and damage to items on the bottom from the accumulated weight.  Products, do not achieve their intended market outlet because, they have to be marked down for sale or because they do not meet the required specification. Such products are channeled to dump. This type of loss can represent a significant economic loss to business even though it reflects an efficient use of the product because it is being channeled into its next best market rather than being disposed off.  Poor ventilation of produce also leads to the accumulation of carbon dioxide. When the concentration of carbon dioxide increases it will quickly ruin produce. (For example, Lack of aeration due to tight packing of vegetables like Brinjal, Okra, Carrot, French beans, Radish etc.)
  17. 17. 17 | P a g e 4.4 ways to minimize dumping at Retail outlet:  Marking down the price of F and V in order to dispose of excess stock.  Promotions that have passed (post-holiday discards are most common) so to reduce the dump, offer discount for out-of-date promotional items or slightly damaged goods.  Avoid exposing Fruits and vegetables in large piles. This was the main cause of dump of Musambi in the concerned store.  Poor ventilation of produce also leads to the accumulation of carbon dioxide. When the concentration of carbon dioxide increases it will quickly ruin produce. (Ex. Lack of aeration due to tight packing of vegetables like Brinjal, Okra, Carrot, French beans, Radish etc. Avoid tight packing and punching of plastic bags should be done.  The increased pre-store waste could be a consequence of waste reduction measures in previous steps in the supply chain, meaning that if the producer and supplier allow through products with questionable quality, the wastage might just move to a later stage in the supply chain. Shifting the waste from in-store to pre-store is a way to save money for the store. Allow only good quality produce or produce without any damage to enter the store.  Common and more standard appearance of crates used to deliver fruit and vegetables would make the personnel’s work easier.  Information to the personnel and set target goals for decreasing the wastage.  Packages – using the right type of packages for specific fruits. For example Watermelon comes in gunny bags, which is one of the reasons of dump during loading, unloading, transportation, stocking and arranging. Separate nylon bags should be used for packing of Watermelons.  Indent the right amounts at the right time. What the customers buy dependent on the weather, the season, the offers of the week, and on the general mood of the customers. All this makes it difficult to order. Proper training for indenting should be provided to the personnel.  One idea is to Store at the right temperatures and right light. Lowering the temperature in the fridge/freezers does increase the freshness of the products especially green leafy vegetables. Fruit and vegetables should be stored at optimum temperatures.
  18. 18. 18 | P a g e  “Separate display” for the different produce. In store, produce of less quantity used to be kept in a single crate, for ex. Banana stem, Banana flower and Drumstick which is one of the reasons of early dumping.  Avoid overstocked product displays: retail stores operate under the assumption that customers buy more from brimming, fully stocked displays, preferring to choose from a towering pile rather than from a scantly filled bin. (Ex. Apple). Product display redesign using platforms and other props to make produce bins appear fuller.  In order to reduce the dump, workers should be instructed about product quality specifications.  Proper display: Workers should be trained on display considerations. For example Tomato should not be kept beside Papaya as ethylene production from tomatoes cause early ripening of Papaya.  Timely segregation of fruits and vegetables like tomato, onion, okra and chilli.  Adapt the FIFO inventory management method.  Nailing done by customers to check tenderness especially in Bottle gourd and Pomegranate. Company should attempt to restrict damage caused by customers while picking for the good produce.
  19. 19. 19 | P a g e 5. CONCLUSION The objective of this research was to assess the monitory value lost due to dumping of fruits and vegetables at Bhuvaneshwarinagar Reliance Fresh. The store has average daily total sales of Rs. 206000 and F and V accounts for 31 per cent of total sales. In the process of research various sources identified for dumping of fruits and vegetables. Among them most common reasons were poor indenting practices, poor segregation of fruits and vegetables in order to separate dump from fresh produce, improper stacking of fruits like watermelon, papaya, banana. From the above study we come to know that the average daily F and V sales of Bhvaneshwarinagar Reliance fresh was around Rs. 62442/-. The average dump values to be Rs. 2754/-. The F and V dump value accounts for 4.54 per cent of average daily sales. It is observed that at the weekends have relatively high F & V sales and low dump. In order to reduce dump at the store level the store must follow proper indenting, proper stacking of F & V.
  20. 20. 20 | P a g e REFERENCES  http://en.wikipedia.org/wiki/Reliance_Fresh  R. Arivazhagan, P. Geetha, and Ravilochanan Parthasarathy, Analysis of Sources of Fruit Wastages in Retail outlets inChennai, Tamilnadu, IndiaInternational Journal of Trade, Economics and Finance, Vol. 3, No. 3, June 2012  Business Models of Vegetable Retailers In India, Paulrajan Rajkumar and Fatima Jacob Department of Management Studies, Anna University, Chennai, India Retrieved from www.greatlakes.edu.in/uploads/pdf/Chapter3.pdf  DIPP report on multibrand retailing. Retrieved from dipp.nic.in/...paper/DP_FDI_Multi-BrandRetailTrading_06July2010.doc

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