Supply Chain Management – The weakest link in India’s ambitious National Food Security Bill

The recent National Food Security Bill 2013 which was passed by way of an Ordinance in the parliament is no small feat undertaken by the Government of India. This bill promises subsidized food grains to nearly 68% of India’s 1.2 Billion population at a cost of nearly USD 4 Billion!

The bill aims to provide quality food grains and nutritional security, to under privileged children, women and poorer sections of the society, at affordable prices. Indeed a very noble and ambitious plan.

While the bill may face regulatory challenges, the real challenges that will affect the effectiveness of the initiative lie elsewhere.  A lot of infrastructure, storage and distribution issues will have to be addressed on a war footing by the government. Some of the specific logistics problems the government will have to deal with are:

• Procurement of food grains
• Fair price purchase from farmers
• Storage
• Quality Assurance
• Distribution Network
• Pilferage and Leakages
• Accurate forecasting of Demand and Supply
• Managing the Supply Chain

The Government will also have to deal with another set of problems such as Minimum Support Price (MSP) of food grains, poverty categorization of citizens, alterations to be brought in the existing Public Distribution System (PDS), irregularities, corruption, grievances redress, and vigilance committees. However, in this article we shall specifically look into logistic issues highlighted above and throw some light on what the government should do to address these on priority.

1. Freight Infrastructure and Connectivity

   New multi-modal hubs connected by roads, rails and waterways will have to be developed for timely supply of food grains from excess producing regions, to far flung consuming regions, in rural and urban India.

   Dedicated rail lines and fast track highway roads will need to be assigned for this purpose so that food grains reach on time and in good condition. Dedicated rail lines and waterways will in fact help the government in reducing logistics cost, a policy followed by leading nations of the world like USA and China. This will ensure seamless flow of food grains from hubs to warehouses to trucks to spokes to PDS shops to the ultimate consumers, the Below Poverty Line (BPL) population.

   The government will have to look at a Public Private Partnership (PPP) model and invite private investors to add momentum to this pressing need and also ensure this proposal makes business sense to the private investors. Wooing investment into freight infrastructure sector with attractive returns will be a win-win situation for both, India and the Investors.

2. Construction of Scientific Warehousing and Logistics Parks

   Modern scientific warehouses and multi-modal Logistic parks will have to be developed by the government for this purpose. These Warehouses and Logistic Parks will need to be connected by Rail, Road, Waterways and Air. Lot of planning and design will need to be done, keeping in mind the future storage and connectivity requirement.

   Green warehouses will need to be built which will consume very little electricity for internal lighting and air circulation. Existing facilities up-gradation will need to be undertaken to get more out of the existing setup. Optimal space utilization, movement of units within the warehouses and parks, parking and dispatch bays setup, super flat flooring for vertical space utilization, assigning space for different warehouse activities, warehouse safety etc. will require intrinsic planning.

   Processes such as fumigation and audit will need to be clearly defined to ensure food grains stay for longer and quality is maintained across warehouses. The government is doing many things for this sector but more than double the current logistics budget needs to be channelized for logistics infrastructure development to meet the growing demand in the coming decade. Even this may not suffice.

3. Intelligent Supply Chain software systems

   Intelligent Supply Chain software applications, which talk to each another, will be the key for successful implementation of the proposed National Food Security Bill 2013. All other infrastructure projects and processes can be successfully executed and monitored with the help of right information technology infrastructure. A robust and scalable software system will aid the government in taking key decisions such as:

   • Manage payments for purchase based on the negotiable warehouse receipt or similar instruments
   • Fix Minimum Support Price for purchase of food grains from farmers
   • Forecast Demand and Supply
   • Fix selling price of food grains based on production and stock data information
   • Manage subsidy allocations received from the centre
   • Storage Planning and optimization
   • Dispatch Planning and execution to get timely last mile reach
   • Conduct regular quality audit

A National Integrated Logistics policy will certainly need to have precedence if National Food Security Bill 2013 is to be successfully executed and sustained.

How PALMS Intelligent Supply Chain system would fit into the overall logistics strategy?

PALMS Warehouse Management System has been successfully implemented at large companies and institutes for managing inventory lying across multiple locations over a web browser. A government institute can attain great value from implementing such robust and extensible system.

A robust supply chain solution can help address the key concerns of inventory availability, optimization, and time to dispatch. Correct prediction can be done using the PALMS forecasting module so that procurement and dispatch are more data driven based on previous trends, stock in hand, food grains ordered, seasonality and future demand expected.

Such a system can help the government maintain optimal inventory levels, take critical decision like when to import or export food grains, drastically reduce pilferage and set a process which reduces manual vigilance to a great extent.

In conclusion, infrastructure and systems need to be in place rapidly along with production plans, to make the food security bill affordable and effective. With wastage of 50% of the production on one hand and a big undernourished populace on the other hand, the food security bill can easily become an albatross around the neck without remedial measures in place. The weakest link needs to be addressed now, before our taxpayer’s money rots somewhere.

Article by: Sanjay Kikla, Director (Sales), Technoforte Software Pvt. Ltd.