Six Sigma: The Roadmap for the Future

Introduction

In the olden times there was the concept of "Zero Defect" but it was considered more as a hypothetical term rather than having a more practical aspect because though the companies propagated that their processes or services were of Zero Defect but very few customers relied on them because defects were always there. A "Defect" can be defined as any product or service that does not conform to the set standards or satisfaction of the customer. Now, Six Sigma is a concept that tries to achieve a near zero defect with 3.4 defects in a million events.

What is Six Sigma?

Six Sigma is a methodology used to improve any business process by constantly reviewing, updating and re-tuning the existing process. Six Sigma provides the tools to improve the capability of any business process. Six Sigma professionals evaluate a business process and determine ways to improve upon the existing process. Six Sigma incorporates the same principles and techniques used in Business, Statistics, and Engineering.

Six Sigma improves the process performance, decreases variation and maintains consistent quality of the process output. This leads to defect reduction and improvement in profits, employee morale, product quality and finally customer satisfaction.

Six Sigma Strives for perfection. It allows for only 3.4 defects per million opportunities for each product or service transaction.

Six Sigma relies heavily on statistical techniques to reduce defects and measure quality.

Evolution of Six Sigma

Japan has been credited with the evolvement of Quality Systems like TQM, Kanban, Kaizen, etc., but Six Sigma has been evolved by the Americans by a company called Motorola in early 1990's. Later in the mid- nineties, GE and Allied Signal adopted it. According to Jack Welch CEO of GE, "Six Sigma is the most challenging and potentially rewarding strategy that GE has ever undertaken". Now Japan has always been known for controlling wastages by having Just-in-time Inventory systems but this concept of Six Sigma, which relies heavily on statistical controls, encompasses all the systems and gives near perfect and measurable results, which in other systems cannot be done easily.

Six Sigma was originally centered around manufacturing improvements. The reason for this was knowledge of the statistical tools in the manufacturing functions and the ease with which we can quantify the benefits. However the customers did not readily see these improvements. The approach was therefore broadened to all business operations. The success of these companies with the six sigma approach caught the attention of the Wall Street making it a popular strategy that is being adopted by many organizations worldwide. Indian organizations such as Wipro, Tata Motors, Hero Motors, Godrej-GE have also adopted six sigma strategy to improve their businesses (Reference: Business Today, Sept 22, 1999).

Six Sigma levels and Process

The Greek letter for Sigma, , represents one standard deviation from the normal or average. The higher the sigma level the better the quality level.

Levels of Sigma Performance

Motorola developed a five phase approach to the Six Sigma Process called DMAIC which is a continuous process as the diagram shows until the highest level in the Six Sigma is achieved, i.e., 3.4 defects per million.

D: Define Opportunities
M: Measure Performance
A: Analyze Opportunity
I: Improve Performance
C: Control Performance

Six Sigma Implementation

Implementation of Six Sigma begins with education and training within an organization. The beauty of this Quality Management Concept is that it has various levels of Six Sigma training which are: -

Six Sigma Champion: Champions undergo five days of training and are taught how to manage projects and act as advisors to various project teams.

Green Belts: They undergo two weeks of training that includes project-oriented tasks. They act as team members to the Six Sigma project team. Their cooperation and involvement is necessary for projects success.

Black belts: They receive four weeks of trainings and are directly involved in the implementation of Six Sigma Projects. They are the project leaders and go through in-depth training on Six Sigma approach and tools and work full time on the project.

Master Black Belts: These are the people who conduct Six Sigma Training and also have on the job training and experience.

The Six Sigma implementation can be done by following the steps in the given model: -

Step 1:
In order for Six Sigma to be successful, top level management and everyone below them must fundamentally believe in the strength of it. Managers need to support all individuals and teams involved in improving the quality of the product or service or process.

Step 2:
In this step information gathering through intensive communication with customers, suppliers, and employees takes place. Information about the conditions of the processes, products and services that can be improved, are found and analyzed.

Step 3:
Training this is the most important step and the organizations should strive to have all of its employees trained on Six Sigma on various levels. An organization should have a mix of Black Belts and Green Belts for effectively implementing a Six Sigma project. Black Belts are the all day problem solvers who also operate as team leaders in Six Sigma projects. Green Belts are the team members in Six Sigma projects.

Step 4:
In this step we develop a monitoring system that can be both internal and external. Internal like the amount of wastages and external like the customer satisfaction.

Step 5:
In this step the business processes that are to be improved are chosen the problems that were identified are removed and valueless activities and sub processes are terminated. Here the Six Sigma project is at a critical stage. Before improvements it is necessary that a plan is made and the changes are communicated throughout the organization. Documentation of the improvements is very necessary so that these improvements can be replicated everywhere in the organization.

Step 6:
In this step the Six Sigma project is at its mature stage and the changes and improvements are made and analyzed by simulations and statistical methods and if any discrepancies are found then again the cycle is repeated.

Conclusion

Six Sigma is a powerful approach to achieve breakthrough improvements in manufacturing, engineering and business processes. This approach relies heavily on advanced statistical methods that complement and reduce the process and product variations. It is a new way of doing business that would eliminate the existing defects efficiently and would prevent defects from occurring. In a country like India where high quality standards are still to be achieved Six Sigma has a very bright future.

NAMDHARI FRESH

Namdhari's Fresh (NF), a unit of Namdhari Seeds started in 2000 at Bangalore - 'The Garden City of India', with a view to export fresh vegetables and provide a premium quality produce to domestic customers. Namdhari Seeds is a market leader in Indian Vegetable Seed Industry and a leading Exporter of Vegetables and Flower Seeds.

Namdhari’s Fresh grows vegetables and fruits in its own fields and green houses. To meet the growing demand for fresh vegetables it also out sources produce from over 2000 growers.

Presently, more than 40 different vegetables and fruits are being cultivated by Namdhari's Fresh at various productions centers across the country.

The different agro-climatic zones enable us to produce most vegetables all round the year. European standards of Good Agriculture Practices (GAP) are strictly followed at production level.

Namdhari's Fresh handles more than thousand tons of fresh vegetables and fruits at domestic and International market. Our produces are mainly destined to Europe, Australia and the Middle East. Namdhari's Fresh would be India's first company to receive the EUREP-GAP (European Retailers Certified Vegetable Growing and Exporting Firm) certificate, which is an assurance for our high quality standards.

After the success in seed world, Namdharis have diversified into the production, distribution and export of fresh vegetables & fruits under the name "Namdhari's Fresh".

Uninterrupted Cold Chain

To ensure the freshness of the vegetables till it reaches the consumer, the company is having a continuous cold chain network right from the produce is harvested. The harvested vegetables are transported in refrigerated trucks, which also help in the removal of field heat. From the refrigerated trucks, the vegetables are transferred to the precooling room.

Then the vegetables are transferred to the grading hall, which is also air conditioned and packed under cool climate. The packed vegetables are stored in the cold rooms before being air lifted to the destinations and during the transit in the air also, the product is stored in reduced temperature. Thus the uninterrupted cold chain network makes Namdhari's Fresh to deliver the quality vegetables with optimum freshness. The good number of Flights per week to Europe guaranties a regular supply of produce.

Thus by amalgamating both self growing activities and outsourcing from large number of farmers Namdhari’s Fresh aspires to become a successful organized food retailer.

Vegetable production

Minimum use of chemical pesticides is the core of their Quality Policy. For crop protection they rely on the bio agents, and other Integrated Pest Management practices rather than the conventional indiscriminate use of pesticides. The chemicals permitted as per European norms are used and properly recorded. The produces grown by them could be traced back to its place of origin.

Namdhari's Fresh grows most vegetables throughout the year. Produce is grown on Namdhari's Fresh, own field farms and in our green houses (5 ha.). For outsourcing Namdhari has more than 2000 growers available. To ensure quality an effective extension team monitors the farms and the growers. Namdhari follows the EC prohibition list for chemicals strictly. It is mandatory for growers to keep records of substances used and the team follows this up in order to ensure a safe product, which can be traced back to its source.

HOPCOMS

Hopcoms

Horticulture Producers Cooperative Marketing & Processing Society (HOPCOMS) fresh fruit bottled beverage in mango and blue grapes flavour is a much preferred choice in Bangalore. The society manufactures the fresh fruit beverage at its processing unit in the city. The monthly production is around 4,000 bottles during off-season and 10,000 bottles during peak seasons. A 200 ml bottle is priced at Rs. 5.

Currently, the beverage is sold at its retail outlets in Bangalore apart from strategic points in the city - railways stations, bus stands, Janata Bazaar and other government retail outlets. The Society plans to install mixies at certain locations where its 313 retail outlets dealing fruits and vegetables already exist. Right now it sells a fresh fruit juices in the evening using seasonal fruits and these are priced reasonably per glass.

There is a concerted effort on the part of the Society to manufacture jams, fruits pulp and sauces with the sun scorched fruits and vegetables like tomato which cant be sold to customers. Plans are underway to strengthen the beverage segment by investing in a bigger processing unit for which land is being identified. Under the government of India National Horticulture Mission grant of Rs. 200 crore, the Society has asked for funds to set-up the processing unit and a cold chain facility.

The primary objective of HOPCOMS is to procure fruits and vegetables from the farmers in the districts in Karnataka and gives the growers instant cash payment. These are sold through its 313 retail outlets in the State and the farmer is paid 75 percent of the prevailing cost of the produce.

HOPCOMS supplies fruits and vegetables in bulk to:

    • Industrial canteens
    • Government hospitals
    • Student hostels
    • Clubs
    • Marriage halls
    • Fertilizers and manures to farmers

HOPCOMS Bangalore experience

There was no proper marketing system of food and vegetables in Bangalore. From the system which was coming from a very long period of time, neither the growers nor the consumers are getting any benefits. To make the whole system much more organized and in line the co-operative societies/ farmers associations start looking into it much more seriously.

The department of horticulture with a burning desire to end the age of old exploitation by
middleman took a vow not to rest until an alternative arrangement is made for the marketing system for fresh fruits and vegetables. The result is the birth of Hopcoms and it was established in the year 1959 for organized marketing of fruits and vegetables in the co-operative sector.

Aims and Objectives

The major aims and objectives for setting up of Hopcoms are as given below:

    • To ensure remunerative prices to producers of horticulture crops
    • To ensure reasonable prices to consumers
    • To free both producers and consumers from the clutches of middlemen
    • To expand marketing and cold stage facilities progressively
    • To promote horticulture development on scientific lines by providing necessary
       inputs and technical advice

Management

Hopcoms is managed by a board comprising of 15 Directors. Of theses, 11 are elected from among grower members and 4 are government nominees.

The Additional Director of the state department is the managing director. The society has 15000 growers as members and paid share capital is Rs. 258.54 lakhs.

The department has four arms in the State of Karnataka, and these are given in the chart below:

The Department of Horticulture has a number of schemes to help improve horticultural production and marketing in the State. (http://www.nitpu2.kar.nic.in). Horticultural produce is classified as four elements:

   • Fruits and Vegetables
   • Spices
   • Flowers
   • Cash crops

HOPCOMS works only with fruits and vegetables. The promotion of other items is done through other activities of the Department of Horticulture, which specializes in marketing of fruits and vegetables and has as members farmers growing these crops.

Handling

The society is presently handling 90-100 tonnes of fruits and vegetables daily. The farmers bring their produce directly to the society and to the procurement centers. As soon as the produce is brought by the farmers, it is graded, weighed and cash payment is made immediately.

Procurement Centers

To avoid losses during the transportation and to save time of the farmers, the society has opened 10 procurement centers in the growing areas. The produce of that area is either collected from the member’s field or the growers bring their produce directly to the procurement centers. The material so procured is transported to central godowns from where it is supplied to retail outlets and to the various institutions.

Retail Outlets

Hopcoms so far has opened 318 retail outlets in its area of operation. Bangalore being the major consuming area has got 278 retail outlets which provide fresh supplies to the consumers in the city. For the opening of retail outlets, the sites have been provided by the respective corporations/municipalities/ development authorities on lease basis at nominal charges. The retail outlets are being managed by the salesmen who are the employees of Hopcoms. As incentives, they are allowed to absorb Driage and damage to the extent of 3.7% of the value beside wages. Every day the salesman will remit the sales proceeds of the previous day and collect the materials required for the day’s sales.

The supplies to retail outlets are being made through the 19 own and 40 hired vehicles. Mobile sales of fruits and vegetables are being arranged through society’s vehicles at the place where Hopcoms does not have its retail outlets.

Other Activities

The society has set up a unit for preparing fresh fruit drinks out of fruits like Bangalore blue grapes, mango, oranges etc. It is selling the same to the general public at a reasonable price of Rs. 5/- per 200 ml bottles through its retail outlets and through dispensers located at important places. The society has opened centers at its procurement centers for supply of manures, fertilizers, plant protection chemicals, garden implements, seeds etc. in order to help the grower members.

STRENGTHENING OF HOPCOMS FOR ORGANISED MARKETING OF FRUITS & VEGETABLES BY KARNATAKA STATE CO-OPERATIVE HORTICULTURE MARKETING FEDERATION LTD (KHF)

KHF is:
   • State Level body.
   • Established in 1996.
   • Administration and Management of Existing District HOPCOMS except Bangalore      HOPCOMS
   • 22,129 farmer members
   • Rs.22.33 Lakhs as share capital

Aims and Objectives of KHF

   • To promote & encourage development of horticultural crops
   • To admit members and allot shares
   • To arrange for the sale of horticulture produces
   • To purchase & sell horticulture produces
   • To provide financial assistance to members as advances
   • To open its branches, central godowns with cold storage facilities, procurement &
      grading, retail outlets for marketing facilities
   • To open sale counters outside the State.
   • To promote and establish its own processing and manufacturing units.
   • To arrange supply of plant inputs to the members
   • To carryout publicity and propaganda.
   • To supply both processed and fresh horticultural produces on credit basis to Government       institutions, co-operative, public sector companies and non-private organizations at nominal       prices.

Facilities provided by KHF and HOPCOMS

A. Overall Benefits to Farmers

Several farmers were interviewed as part of the study. All farmers stated the same benefits from HOPCOMS. The most important benefit is that HOPCOMES purchases the produce directly from the farmers. This eliminates the middleman, and the commission payment to the agent. Consequently, a remunerative price is paid to the farmers, usually 10-15 % higher than the open market prices. Further, during periods when there is excess supply of certain produce in the market, the open market price drops. HOPCOMS, however, assures a minimum support price for the produce at the time of distress sales.

Another major benefit is that cash is paid to farmers on the day of the transaction; there is no delay in payments. The discussion with private commission agents revealed that these agents extend advances to the buyer merchants and to the seller merchants. This system of extending credit is prevalent in the private businesses. HOPCOMS does all its transactions in cash, thereby eliminating the need for such credit.

HOPCOMS have weigh-bridges at each procurement centre; hence farmers are assured of correct weights. HOPCOMS also has infrastructure facilities like cold storage and godowns to store the produce. The procurement centers have places where farmers can keep their products and sell directly to consumers. This facility is provided for sale of watermelons

As farmers come to procurement centers to sell their produce, HOPCOMS also provides for sale of seeds and fertilizers at subsidized rates to them. They also sell plastic crates to transport the produce at subsidized rates.

As farmers travel long distances with large quantities of produce, HOPCOMS has provided lodging and boarding facilities. Farmers have found this very useful and have taken advantage of these facilities.

B. For Consumers

Several customers were interviewed, who were regular visitors to HOPCOMS retail shops. They said that HOPCOMS assured good quality produce both to the individual as well as bulk consumers like the hostels, hospitals, public sector units (PSUs) etc. Moreover, vegetables and fruits are available at reasonable rates, which are normally less than the prevailing market rates. They also avail the following benefits:

   • Correct weighment
   • Quality fruits & Vegetables at reasonable prices
   • Retail outlets in extensions
   • Mobile sales
   • Supplies to Marriage and other functions
   • Capital supplies to institutions, organizations, hostels, hospitals & others
   • Seasonal fruit drinks at reasonable price
   • Conducting seasonal fruit fairs at discount price

Price Setting

The APMC markets play a major role in setting market trends and prices. These are established by the Department of Agricultural Marketing. The price at which HOPCOMS buys the produce from the farmers is based on the rates and prices released by this department. The department collects the maximum, minimum and model prices for the various commodities sold in the APMC markets the previous day and the same is released to the markets the next day, published in the newspapers. Based on the rates released by the department, HOPCOMS fixes the procurement and sale price for the goods. These prices form the basis of the price offered by HOPCOMS in the indents issued to its members.

The prices of horticultural produce vary from day to day and from hour to hour in private markets. HOPCOMS determines the price based on the previous day’s prices in APMC yards, and adds an additional half rupee per kg. This is the price quoted on the indent given to members. The indents carry the price and the quantity that HOPCOMS will buy on a particular day from the farmer member. Thus it offers price certainty to the farmers, even if the quantity it picks up from the farmer is not too high.

Investment and Infrastructure

The major investment that HOPCOMS has made is in the infrastructure created for the marketing and processing of horticultural produce. These include

   • Procurement centres
   • Retail outlets
   • Processing centres
   • Cold Storage centres
   • Staff
   • Vehicles

The society has at present not borrowed any money for improvement/ increase of its infrastructure. The reason given was that the society was building its reserves to utilize it
for increasing its infrastructure like increasing its retail outlets, vans etc.

HOPCOMS has two major uses of its funds:

   • The first one is the investment in retail outlets
   • Infrastructure in terms of procurement centers

Another major use of funds is the daily purchase of fruits and vegetables. The daily operating expenses of the company are around 10 lakhs ($20,833). The society handles around 20 lakhs ($41,666) on cash on every single day, including all other operating expenses like transport costs, etc.

Process

The first step of interaction is for a farmer to become a member of HOPCOMS. HOPCOMS issues indents giving the quantity of a particular vegetable or fruit to be purchased from members. On receiving the indent order for a particular amount, the member has to bring in the produce to the procurement centre, either in Bangalore City or to the procurement centers in other districts/ taluks as the case may be. The produce is verified as regards it quality, it is graded and a receipt for the same is given to the farmer.

The farmer presents the receipt to the payment officer, who pays the sum of money in a cash voucher to the farmer. The cash voucher can be en-cashed at the bank which has a branch within the procurement centre, thus enabling farmers to take cash immediately for their sales for the day. This is shown in the chart below:

The process ensures that farmers who bring good quality produce to the procurement centers can sell this at good prices and get cash the same day. When compared to open market transactions, where they sale to wholesale traders, they get the money late, as they usually have accounts with these traders and settle them only one a fortnight or once a month.

Driage and wastage

F& V being highly perishable products, control of wastage affects the performance the performance directly. Driage and wastage is around 4-5% of the total procurement of the produce. However, D&W has been reduced from 4.32 % of the total procurement to 1.85%.

Environmental Sustainability

HOPCOMS engages in wholesale purchase and sale of fruits and vegetables and eliminates the need for plastic packing of vegetables. However, it could contribute more if it collected all the spoilt vegetables and processed it for production of bio-gas. This was planned at some time, but it did not come through partly because of the lack of funds and partly because it needs an organizational effort and new roles and processes to be introduced for this additional activity. As the organization currently focuses all its efforts on just breaking even, this aspect is neglected.

Retail Scenario

Retail Scenario

India's vast middle class and its almost untapped retail industry are key attractions for global retail giants wanting to enter newer markets. Driven by changing lifestyles, strong income growth and favorable demographic patterns, Indian retail is expected to grow 25 per cent annually.

Modern retail in India could be worth US$ 175-200 billion by 2016. With the economy
booming, competition in the marketplace is fierce. According to 'Retail in India Getting Organized to Drive Growth', a report by AT Kearney and the Confederation of Indian Industry, retail is one of India's fastest growing industries with a 5 per cent compounded annual growth rate and expected revenues of US$ 320 billion in 2007. Rising incomes,increasing consumerism in urban areas and an upswing in rural consumption will fuel this growth to around 7-8 per cent.

KSA-Technopak, a retail consulting and research agency, predicts that by 2010,
organized retailing in India will cross the US$ 21.5-billion mark from the current size of US$ 7.5 billion.

Spread of Organized Retailing in India

Organized retailing is spreading and making its presence felt in different parts of the country. The trend in grocery retailing, however, has been slightly different with a growth concentration in the South. Though there were traditional family owned retail chains in South India such as Nilgiri’s as early as 1904, the retail revolution happened with various major business houses foraying into the starting of chains of food retail outlets in South India with focus on Chennai, Hyderabad and Bangalore markets, preliminarily. In the Indian context, a countrywide chain in food retailing is yet to be established as lots of Supply Chain issues need to be answered due to the vast expanse of the country and also diverse cultures that are present.

Retail Models in India: Current & Emerging

The Indian food retail market is characterized by several co-existing types and formats.

These are:
     1. The road side hawkers and the mobile (pushcart variety) retailers.
     2. The kirana stores, within which are:
                      a. Open format more organized outlets
                      b. Small to medium food retail outlets

Modern trade – the organized retailers

Within modern trade, we have:

    1. The discounter (Subhiksha, Apna Bazaar, Margin Free, Namdhari, Hopcoms)
    2. The value-for-money store (Nilgiris)
    3. The experience shop (Foodworld, Trinethra, M2S)
    4. The home delivery (Fabmart, Fabmall)

While the focus of this note is on modern organized retail trade, we hereunder present insights into the smaller, semi and unorganized retailers.

Hawkers – ‘mobile supermarkets’

The unorganized sector is characterized by the lari-valla vendors (also known as “mobile supermarket”) seen in every Indian bylane and is, therefore, difficult to track, measure and analyse. But they do know their business – these lowest cost retailers can be found wherever more than 10 Indians collect – a rural post office, a dusty roadside bus stop or a village square. As far as location is concerned, these retailers have succeeded beyond all doubt. They have neither village nor city-wide ambitions or plans – their aim is simply a long walk down the end of the next lane. This mode of “mobile retailers” is neither scalable nor viable over the longer term, but is certainly replicable all over India. Most retailing of fresh foods in India occurs in Mandis and roadside hawker parks, which are usually illegal and entrenched. These are highly organized in their own way. However, if you put these hawkers together, they are akin to a large supermarket with little or no overheads and high degree of flexibility in merchandise, display, prices and turnover. While shopping ambience and the trust factor maybe missing, these hawkers sure have a system that works.

Kirana/Grocers/ Provision Stores/Mom-and-Pop Stores
Semi-organized retailers like kirana (mom-and-pop stores), grocers and provision stores are characterized by the more systematic buying – from the mandis or the farmers and selling – from fixed structures. Economies of scale are not yet realized in this format, but the front end is already visibly changing with the times. These stores have presented Indian companies with the challenge of servicing them, giving rise to distribution and cashflow cycles as never seen elsewhere in Asia. The model is very antithesis of modern retail in terms of the buyer (retailer)-seller (FMCG) equations. It is not unknown for MNC leaders to link the supply of one line of products to another slower moving line of products. These retailers are not organized in the manner that they could challenge the power of the sellers, most protests have been in the form of boycotts, which really haven’t hit any company permanently.

Impact of Organized Retail
Organized retailing is spreading and making its presence felt in different parts of the country. The trend in grocery retailing, however, has been slightly different with a growth concentration in the South. Though there were traditional family owned retail chains in South India such as Nilgiri’s as early as 1905, the retail revolution happened with the RPG group starting the Foodworld chain of food retail outlets in South India with focus on Chennai, Hyderabad and Bangalore markets, preliminarily. The experiment has reaped rich dividends and the group is now foraying into other territories as well. Owing to the success of Foodworld model of RPG group, several new models such as Trinethra, Subhiksha, Margin Free and others have made their foray into this sector albeit at regional levels. Today the food retail sector in India is about Rupees Ten Lakh Crores (USD 200 billions) of which the organised food retail segment is about 1 per cent and increasing at a pace of over 20% y-o-y.

To be successful in food retailing in India essentially means to draw away shoppers from, the roadside hawkers and kirana stores to supermarkets.

This transition can be achieved to some extent through pricing, so the success of a food retailer depends on how best he understands and squeezes his supply chain. The other major factor is that of convenience shopping which the supermarket has the edge over the traditional kirana stores. On an average a supermarket stocks upto 5000 SKU’s against few hundreds stocked at an average kirana stores.

Though with excellent potential, India poses a complex situation for a retailer, as this is a Country where each State is a mini-Country by itself. The demography’s of a region vary quite distinctly from others. In order to appeal to all classes of the society, retail stores would have to identify with different lifestyles. Hence we may find more of regional players and it would take enormously long time before nation wide successful retail chains emerge. This is the main reason as to why the successful retail chains in the country today operate at regional segments only and are not aiming at nation wide presence, atleast for the time being.

Food and grocery retailing is a tough business in India with margins being very low, and consumers not dissatisfied with existing shops where they buy. For example,
the next-door grocery shopkeeper is smart and delivers good customer service, though
not value.

As of now, while Chennai has about five organised food and grocery retail chains, other big cities such as Delhi, Bangalore, and Mumbai average only two-three such chains. Almost all food retail players have been region-specific as far as geographical presence is concerned in the country. To illustrate with examples, the RPG Group's FoodWorld, Hopcoms, Nilgiris, Margin Free, Giant, Varkey's and Subhiksha, all of which are more or less spread in the Southern region; Sabka Bazaar has a presence only in and around Delhi; names such as Haiko and Radhakrishna Foodland are Mumbaicentric; while Adani is Ahmedabad-centric. Industry topography in India is such that spreading presence across cities is a tough call. As pointed out by many experts, organised food and grocery retailing chains going national requires significant investments. Retailing within this sector is not just about the front-end, but involves complex supply chain and logistics issues as well.

The trend and mindset of the present retailer chains in India can be best understood by studying FoodWorld as an example, which came in first in the food and grocery retailing sector. The chain has no plans to venture beyond the Southern region just yet. Current plans are to focus on the Southern markets and achieve saturation. The intention is that by 2005, they could look at the other regions. We will look more into it in detail in later part of this report.

Subhiksha, a Chennai based discount chain, too wants to be the principal store of purchase for at least 40 per cent of all consumers living within 500-750 meters of the store, that is, within walking distance. This makes the point very clear that the strategy among most existing retail chains of various formats is to completely saturate the markets where they are already established players and then move on to virtually untouched areas where the challenge of sourcing resources and extending their supply chain model to best suit the size and expanse of the market would be a challenging task.

Meanwhile, the RPG group plans to take its new formats such as Giant Hypermarkets national over the next three years. Grocery is a large component of this format, but not the only one. To elaborate on the hurdles of going pan-Indian, fundamentally, the way a basic grocery retailing model works is that the high set-up costs in terms of setting up buying/ distribution infrastructure is gradually amortised over a larger number of stores.

Given that organised retail has been registering growth rates of approximately 40 per cent over the last three years, it is expected to grow to about Rs 35,000 crore in 2005, and close to Rs 70,000 crore in 2010. If projections were to be made considering the current trends in food retailing in India, some years down the line, food and grocery stores will become dominating trade partners for the food industry, which, in turn, will be forced to offer special discounts and trade terms for them to get the shelf space in such stores.
Also, once established, in-store label brands will become a real threat to the industry as manufacturers will have to compete with the store label brands that are generally very price-competitive. As for the spread geographically, strong chances stand that the major chains would spread to the next grade of cities in the country over the next 5 years or so and then progressively start covering every corner of the country. Most chains have already started developing their own unique supply chains that would suit their needs precisely. Replicating the success stories of the big names of the Western nations may still be a distant dream for Indian food and grocery retailers, but at least the winds are blowing in the direction of growth.

Food retail

Food dominates the shopping basket in India. The US$ 6.1 billion Indian foods industry, which forms 44 per cent of the entire FMCG sales, is growing at 9 per cent and has set the growth agenda for modern trade formats. Since nearly 60 per cent of the average Indian grocery basket comprises non-branded items, the branded food industry is homing in on converting Indian consumers to branded food.

Meat Retail

The present level of various types of meat and poultry products is estimated to be about 2.3 million tonnes as per the FAO's estimate. However, the estimates of the Indian statisticians are about 1.4 million tonnes per year. This difference of estimates between FAO and Indian statisticians is perhaps due to slaughter of animals and processing of meat outside the recognized slaughter houses. Approximately 70% of the Indian population consumes meat and/ or poultry products. The growth rate of meat is estimated to be about 10%.

Of the total production, the percentage of meat produced from different sources are: cattle and buffaloes - 40%; Sheep and goat - 26%; poultry 17%; pig - 16%; and others - 1%.However, slaughter rates in relation to the population of the animals are: 1.45% in case of cattle; 3.45% In case of buffaloes; 32.5% In case of sheep; 35.58% in case of of goat; 26.21% In case of pigs. The poultry meat production Is gaining ground in the country.

Indian Railways

Indian Railways

Indian Railways, a historical legacy, are a vital force in our economy. The first railway on Indian sub-continent ran from Bombay to Thane on 16th April 1853. Fourteen railway carriages carried about 400 guests from Bombay to Thane covering a distance of 21 miles. Since then there has been no looking back. It is interesting to note that though the railways were introduced to facilitate the commercial interest of the British it played an important role in unifying the country.

Railways are ideally suited for long distance travel and movement of bulk commodities. Regarded better than road transport in terms of energy efficiency, land use, environment impact and safety it is always in forefront during national emergency.

Indian railways, the largest rail network in Asia and the world's second largest under one management are also credited with having a multi gauge and multi traction system.

The track kilometers in Broad Gauge (1676 mm) are 86, 526 kms, Meter Gauge (1000 mm) are 18, 529 kms and Narrow Gauge (762/610 mm) are 3,651 kms. Of the total route of 63,028 kms, 16,001 kms are electrified.

The railways have 7566 Locomotives, 37, 840 Coaching Vehicles, 222, 147 Freight Wagons, 6853 Stations, 300 Yards, 2300 Good sheds, 700 Repair Shops, and 1.54 million Work Force. Indian Railways runs around 11,000 Trains everyday, of which 7,000 are Passenger Trains.

For administrative convenience Indian Railways is primarily divided into 16 zones:

Interesting Facts about Indian Railways

Shortest Station Name: Ib near Jharsuguda on the Howrah-Nagpur main line (South Eastern Railway).

Longest Station Name: Venkatanarasimharajuvariapeta often prefixed with Sri. on the Arakkonam-Renigunta section of the Southern Railway.

Longest run (time): The Himsagar Express running between Jammu Tawi and Kanyakumari, It covers its route of 3751km in 74 hours and 55 minutes.

Longest run for daily train: The Kerala Express has daily service and covers 3054 km in its run (in 42.5 hours).

Longest non-stop run (distance): The Trivandrum Rajdhani does not have a technical halt at Ratlam and, therefore, travels non-stop between Vadodara and Kota (528km), covering the stretch in about 6.5 hours.

Trains with no commercial halts en route: Sampoorna Kranti Exp, Howrah Rajdhani, Bombay Rajdhani, Pragati Exp and Pune Shatabdi

Shortest runs: Nagpur - Ajni has scheduled services that are just 3km in distance. This is mainly a service for crew to travel from Nagpur station to the workshop at Ajni.

Highest number of halts: Mail and Express trains [3/99] The Howrah-Amritsar Exp. leads in this category with 115 halts.

Busiest Station: Lucknow which caters to as many as 64 trains per day.

Stations straddling state lines: Navapur is a station that is half in Maharashtra and half in Gujarat. Bhawani Mandi station, on the Shamgarh-Kota section of the Bombay-Delhi line is half in Madhya Pradesh and half in Rajasthan.

Station with all the three gauges: Siliguri station.

Airline and Airport Logistic handling

Airlines and Airports

The first commercial flight in India was made on February 18, 1911, when a French pilot Monseigneur Piguet flew airmails from Allahabad to Naini, covering a distance of about 10 km in as many minutes.

In 1996-97,

• India has 8 international airports
• There are four major metros
• There are 85 domestic airports
• Major airports handle over 90% of the international traffic along with 40% of the domestic traffic

In 2004-05,

• India has 15 international airports
• Total passenger traffic handled by Indian airports is over 60 million.
• There are four major metros
• There are 87 domestic airports
• Private sector participation is also allowed in airport modernization, ground services, and aircraft manufacture.

The Airport Authority of India (AAI) manages total 122 Airports in the country, which include 11 International Airports, 94 domestic airports and 28 civil enclaves. Top 5 airports in the country handle 70% of the passenger traffic of which Delhi and Mumbai together alone account for 50%. Passenger and cargo traffic has growth at an average of about 9% over the last 10 years

Traffic at Indian airports is growing rapidly:

Currently Airports Authority of India (AAI) is the primary operating agency of airports in India

Fleet-wise also Indian carriers are quite small. Air India has a total fleet size of 33 aircraft; Indian Airlines is somewhat larger, being the size of Singapore Airlines with 62 aircraft. Alliance Air, a wholly owned subsidiary of Indian Airlines has 14 aircraft. Among the private airlines Jet Airways has 41 aircraft, Sahara 19 and Deccan Air 5.

Airfares in India are among the highest in the world.

To the extent that airlines cannot use the least cost combinations of aircraft types to carry passengers and freight, the costs of operating existing networks are higher than they otherwise might be (technical inefficiency). Further, they may be prevented from flying the optimum sized and configured network (allocative inefficiency). Thus, costs may be reduced as airlines are able to operate the right aircraft at the right frequencies on an existing route.