Until 2013, the global food giant KFC had a fragmented backend distribution, and it was around that time the top management realised it would be an impediment for its growth plans in India.
Supply chain costs, too, were not optimised and there were several opportunities waiting to be tapped. But the chain wanted to focus its core activity – serving delicious and famous KFC chicken and other products to the customer. Therefore, an integrated approach was what the company opted for.
Over the years, the eating habits and lifestyles of people embracing the Western culture has fuelled the growth and expansion of the restaurant industry in India, followed by the innovations in cold chain segment by logistic providers, helping them deliver fresh and finest ingredients on the table.
With the growing number of food chains and the love for food in India, cold chain companies like ColdEX, Crystal Logistics, Gati Kausar by Gati Supply Chain, Future Logistics, JIFPL and Snowman are eyeing at a bigger market share, targeting somewhere between 20-25 per cent in next two years. And as cold chain logistics has become an excellent business fuel for brands, Burger King, Subway, Krispy Kreme, Joost Juice, Sbarro, KFC, Domino’s and five-star chains like ITC and Taj Group of Hotels are seeing a reduction in their losses from 10-22 per cent to 5-7 per cent.
Building an effective supply chain
Food wastage can be a result of multiple factors in the supply chain. At a broader level, an important one would be inappropriate conditions for movement of products. Cold chain integration from point of processing to point of sale needs to be addressed at the infrastructural level – wherein pre-cooling chambers are erected at the farm level, to conserve harvest shelf life and freshness – and thereafter transportation, processing, storage and last mile distribution, where conditions should be conducive to preserve products.
Then at the planning level, the consumption should be monitored closely so that the products are not only available at the right place and time, but also in quantities ensuring demand and supply gap is optimal. Although things at the planning level have progressed manifold in the last several years, with the availability of several advanced tools, the former still seems to be a challenge.
“An effective supply chain can only ride on a platform wherein variables involved become more predictable and controllable. Each year, the country achieves bumper wheat production, but a substantial chunk is lost or wasted simply because we do not have storage available to preserve the produce. It is an irony that while we talk of food security on one hand, little is done to ensure that infrastructure is created to achieve it,” shares Rahul Mathur, VP- Business Excellence and Operations, ColdEX which has helped QSR chains like KFC and Burger King in getting the best inventory while launching their brand in India.
Sharing his view on the same, Akhil Puri, CEO, JIFPL, one of the largest cold chain providers to restaurants like the Subway, Krispy Kreme and Nando’s suggests, “We need to ensure that the government support is there in not just developing the infrastructure, but also in operating them and ensuring that there is a pricing mechanism in which probably a subsidy could work, and location advantages that could reduce the logistic cost.”
Challenges faced by the restaurants
The main problem that the restaurant industry faces in India today is a dearth of good infrastructure to store the product and a lack of skilled manpower that can reduce the inventory losses while dealing with the supply chain issues.
Take for instance KFC, whose supply chain costs were not optimised and so, integration was what it opted for. There were a total of 250 plus of frozen, chilled and dry products to be dealt with and in erstwhile set up; all these were being managed in separate legs which were not the best practice.
Moreover, the chain wanted to focus its core activity – serving the best of chicken and other products to their customers. Outsourcing legs of supply chain to the experts was the key to focusing on its core. It was also felt that the best optimisation would come if the entire end-to-end distribution of finished products was managed with minimum set of partners.
There were five distribution centres to be served, 70 vendors to be managed and products to be sent across five distribution centres in India. Outsourcing primary leg keeping a fill rate of 95 per cent was a mammoth task. And then ColdEX offered a solution to address all of the above. With a large owned fleet operating out of every nook and corner of India, ColdEX went about to create a robust and responsive ecosystem for YUM primary movement, resulting in at least 20 to 25 per cent saving in the primary leg over the previous scenario.
Commenting on the same, Akash Agarwal, CEO and Director, Crystal Logistic, which has come up with an Arctic store concept or portable cold store containers to reduce the inventory losses and is known to provide its services to global majors like McDonald’s, Domino’s and ITC shares, “Normally, we have seen that there is more than 20 per cent of damages due to water content or change in the temperature of the product and once you adopt the cold chain, it decreases up to five per cent.”
The game changer
For ages, Indian restaurants are facing the problem of supplying the ingredients of their choice because of the unavailability of proper networks and distributors, finding it difficult to bring the food products fresh from the ‘Farms to the Folks’. But the industry is seeing a better prospect of growth in the last two years, owing to cold chain providers. According to the experts, setting up an integrated cold chain supply is what the industry needs today.
“The idea of integrated supply chain in handling food is both to maintain quality as well as bring efficiency in the system. What is most helpful in supply chains is the visibility of goods enabled by the IT infrastructure. It is also about sharing of information between the manufacturer and the service provider and most importantly, it is about proper inventory control,” believes Manish Agarwal, VP of Gati, which points at Taj Group of Hotels as its major client.
The maintaining of temperature while bringing the products from farms to the restaurants is significant too. “The average temperature required to maintain the freshness of fruits and vegetable is somewhere between 12 degree centigrade to 22 degree centigrade,” points out Agarwal.
Rivoli Sinha, Founder-Director, Joost Juice Bars, who faced a difficulty in maintaining temperatures of fruits with limited shelf life, took the matter in her own hands, “I have worked a lot in delivering the best quality juices to the customers by adopting technologies like Individual Quick Freezing (IQF) and partnering with Future Logistics to deliver the product in best shape and taste.”
Investments in quality and organised supply chain will increase manifold with an increasing focus on brand protection, reliability and sustainability by brands, as an effective supply chain will not only promise the freshest delivery of their produce, but will keep their customers happy too.