Supply chain management is an integrated approach which synchronises a series of processes involved in business management starting from raw material procurement to product delivery and customer feedback collection (Oliver and Webber, 1982; Hewitt, 1994; Brimer, 1995; Cooper, 1997; Pirim et al., 2014). Mainly in developing countries it is the food sector that significantly contributes to the GNP (Girma Gebrensenbet,Techane Bosona;2012)
India is one of the largest emerging economies in the world and in response to rapid urbanisation, increasing population, price competitiveness and changing consumer preferences the Indian poultry industry has been transforming at a rapid rate from organised small scale backyard farming into large scale organised farming(R.Karthikeyan et al. 2013,p.39).
In this essay I will outline why the Indian market is most suitable for an Egg Industry and will explore the feasibility of manufacturing eggs with respect to the Indian market.Secondly,I will be analysing the vertical integration in the supply chain of eggs and how it is a feasible option.Also,I will be assessing the operational and financial aspects of manufacturing eggs in the Indian market by exploring on value chain and supplier relationships.
It is due to the increase of eggitarians in India the annual consumption has seen a rise of 8-10% annually and the poultry industry in India represents a major success story and has made a quantum leap to become as a dynamic industry.It is mainly due to change in lifestyles and awareness towards fitness more Indian consumers are opting for a more nutritional and protein rich diet.(S. Nallusamy et al. 2015,p.57).Due to these reasons it is a suitable environment and right conditions for the egg (Appendix 2)business to grow in the Indian market.
As eggs are a perishable commodity the focus of concern is to have a successful supply chain that is less complex and sustainable that not only caters scale efficiency but also meet demands at the right times and this success depends on the sustaining feature of vertical integration and development of cold chains(Subrata Mitra et al. 2005,p.3). The poultry industry is focusing on vertical integration as it gives a scope for maintaining quality along with consistency which ultimately leads to standardization,improve bargaining power and achieve economies of scale(Jon Hellin et al. 2015,p.153).The poultry industry in India is being adopted at a fast rate with a good growth rate in which consumer preferences shift from traditional process to branded products a shift that enables poultry integrates to expand market reach and scale of operations and hence improve upon market capitalisation(R.Karthikeyan et al. 2013,p.39).
Sustainability of any business depends on strategically well designed supply chain management by incorporating all the members of supply chain at different levels (Gardner and Cooper, 2003; Carter and Easton, 2011).The localised production of eggs will be done through vertical integration system.This will involve the following operations:
RAW MATERIALS: Contract with local commercial, small and medium scale poultry farmers for breeding of hens with added investment in quality flock and feed.
PRODUCTION: Collection,Grading is done by experienced contractual poultry farmers and expert brand strategists.
SORTING AND PACKAGING:Eggs are sorted according to their batch size by experts and experienced poultry farmers.
TRANSPORTATION:Eggs are shipped from farmers to the next links in the value chain in refrigerated trucks either hired or owned by the farmers.
EGG MARKETERS:Brand managers or agents market the eggs to create their demand.
MARKET LOGISTICS:Eggs reach wholesalers, retailers at the right time with minimal damage.
END CONSUMER:Customers enjoy our fresh, high quality eggs.
The value chain(Appendix 2)is adopted using vertical integration. There is free flow of information as the chain to reduce bull-whip effect and is simple in it's structure. It is due to the combination of vertical integration and marketing strategies which will lower the cost of production, consumer prices and marketing margins.This dynamic shift to vertical Integration from Traditional supply chain has paved way a for commodity branding of poultry products.(R.Karthikeyean e.t al,2013, p.39)
If we look at the supplier relationship we have multiple sources i.e the poultry farmers on contractual basis where we trust each other for best quality at fair prices and their expert knowledge for grading and sorting purposes and work along with commercial poultry farmers to gain advantage in the market share.
In terms of operations of the firm there will be a requirement of an indoor area a shelter place where the small contractual farmers will work equipped with egg incubators and hatchers.Although it takes 21 days for eggs to hatch by setting up 1/3 of our setting capacity and due to continuous incubation it will take place in 7 days and the maximum time that will be taken by the eggs to reach to the retailers will be 72 hours.(Surehatch 2018)
In terms of financial aspects of the firm the egg will be set at a price of Rs3.00 as the market price is the same(Shayan Shom e.t al,2011,p.).The 32,000 capacity egg hatcher will require 8640 chicks and is priced at $24,065 (Surehatch 2018) and a 15,000 egg incubator costs $1216 per set.The major expense is in the hiring of poultry farmers and brand strategists.
However, there are certain risks such as outbreak of bird flu which can cause culling of poultry, scrapping of orders and it can lead to price rise.Secondly, there can be shortage of raw materials due to natural calamity.Thirdly, prices of raw materials required for the nutritional value of the flock is increasing which can further rise the price of eggs(Indian Council Of Food and Agriculture,2010-2016).Lastly, financial challenges are in hiring contractual poultry farmers who have expertise knowledge and as many experts are not available they are a significant expense for the firm.Despite all the risks and challenges the Indian commercial poultry sector is growing at an annual rate of 18.6%.Also 80% eggs are targeted to only 30% urban India which leaves a vast ground untapped.(Pradan 2010)There is a huge scope for the egg business to grow as many grounds are not yet explored and because of huge market and large consumer base the scope is not at all limited.
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