Information Technology in Retail Pharmacies Term Paper

Information Technology in Retail Pharmacies - Term Paper Example The reason is the lack of exposure and experience. These problems can be easily resolved by incorporating development plan and strategies. Information technology is one of the fastest growing fields. The changes and the advancements in the technology contribute to the advantages and the popularity of information technology. Information technology is implemented in almost all types of industries and this helps in the improvement and development of the organization in which it is implemented. Though there are various advantages in the information technology, it poses certain problems to some of the industries. Retail pharmacies are one among the industries that faces more problems with the intervention of information technology. The retail pharmacies face problems with the implementation of information technology. (Fisher, 2006).Generally information technology is considered to be a savior in most of the organizations. In retail pharmacies it does not fare well due to its complex procedures and operations. There are various problems are faced right from the beginning of the operation till the report generation. The problems include input of information, output, billing issues, insurance verification and other competencies. These competencies include training problems and dispensing problems. These problems can be resolved by implementing simple procedures and systems and it will yield better results when compared to the complex procedures of the information technology. Problems in Input of Information The input is one of the major parts in any operation and the procedure must be kept simple. The information in a pharmacy will include the name of the medicine, the date of manufacture and the date of expiry and the name of the manufacturing company. The information technology and its advancement include various features in a single system which complicates the input procedure. This acts as a great disadvantage to the pharmacists and they find it difficult to operate the system. Information technology is not easy to implement and most of the pharmacies still follow the manual processing. Due to the intervention of information technology the process in the retail pharmacies have become easier in certain cases and has also become difficult for the ones who lack knowledge. (Fisher, 2006). Though information technology has improved the status of pharmacies, the reluctance to update to the system leaves them at problems. The pharmacists find it difficult to enter the information regarding the medicines and it takes more time for them to correctly enter the complete details pertaining to a particular medicine. Output ProblemsThe output is the important part of any process and the procedure to gain the output should be kept simple. With the intervention of information technology the process of obtaining an output has become easier. The output of retail pharmacies may be the list of medicines available or the stock available in the pharmacies. The retail pharmacies keep track of the medicines available with them and they have to make a note of the left over stock. The inventory process is made simpler by the information technology but the lack of experience makes it a tedious process. The traditional process of maintaining a manual record of the medicines seems easier instead of checking the system for each and every medicine. Thus creating an

Research Paper Example | Topics and Well Written Essays - 1000 words

Research Paper Example This depicts that instructors are not utilizing appropriate mechanisms to enhance knowledge comprehension and retention, as well as the techniques that stimulate learners’ interest in academics. This dissertation scrutinizes the quandary of academic reforms, the various facets that it possesses, as well as some of the suggested modifications (Futrell, p. 1). Varied individuals suggest differing resolutions to the problem of academic restructuring in America. Additionally, there have been innumerable transformations of the current structure of American education since instigation. The main quandary is defining the perfect system of organizing and delivering of knowledge in academic institutions. This quandary is because of having varied ideologies on education from reformists, as well as scholars. In addition, politicians also add to the misunderstanding that surrounds defining the ideal structure of education that is worth implementing. Most politicians voice what they perceiv e as the anticipation of voters. Therefore, it is also debatable whether it is appropriate to embrace their ideologies. Moreover, there is a universal conviction in the global community, which is extremely beneficial, that education is an imperative resource that is crucial to participate in life’s triumphs. ... Furthermore, there is immense significance in defining the ideal structure of an academic system to settle the quandary of educational modification with a vivid objective in mind. Moreover, modifying education is transforming the manner of depiction of information to learners. Thus, it is the obligation of educationalists and policy creators to determine the ideal mechanism to convey information to learners, as well as the appropriate amount of information at every level of academics. Additionally, it is crucial to comprehend that modification of a single strategy that, in turn, affects a single facet of education does not amount in an ideal academic structure. However, it is also extremely intricate to suggest that there is one individual or committee that can create an ideal academic structure. Criticisms will always arise, but it is significant to create an academic structure that optimally integrates the most productive strategies. Moreover, there are reformists who raise the iss ue of implementation of multicultural mechanism of education. However, there is also a quandary in defining an academic structure that is multicultural. The advocates of this ideology have some scopes of interest such as open-mindedness, ethics amongst other ideologies. The suggestion of educational modification with regard to multiculturalism in America commenced in the 1960’s. This was due the surfacing of public rights associations, but the coining of the terminology â€Å"multicultural academics† had not occurred. The basis for multicultural structure of academics was the ideology that it was necessary for the U.S to revisit its endeavour of educating diverse affiliations. Moreover, in this epoch,

Lean Principles in Construction

Lean Principles in Construction Executive Summary Toyota is a name that when seen brings an image of high quality, durability, cost/fuel efficient and best value for money in the car industry. The reason for such a high standard is that Toyota Production System has Pioneered and Implemented Lean Principles in Production system. These principles didnt have the effect immediately in the start but at the last stages, it proved to have a greater worth for it. By implementation of Lean Theories and Philosophy, Toyota had got rid of much wasteful activities using Just In Time approach. The understudy report consists of the Implementation of Lean Principles on a Construction Project which was significantly delayed due to lack of managerial qualities. The Client built a new Head office to shift all the activities from the previous offices in to the new one, but a delay to all activities was observed. It has been analyzed that the construction companies fail to give proper time to the initial Pre-Design and Design Phases and are more reluctant towards starting their construction. The current method of working of the company is mapped and explained with the possible issues and problems are being enlisted. The Design Build approach of Procurement was appraised and further improvements have been suggested. The second part of the report consists of the major and applicable Lean Principles and how they can be implemented in Construction Projects. This not only reduces the wasteful activities but also prove to be cost efficient as mapped. Lastly some merits of Lean Implementation on the construction project have been enlisted and conclusions are drawn. NEW HEAD OFFICE OF COMMERCIAL BANK OF KUWAIT (CBK) Introduction The Commercial Bank of Kuwait is a well known Bank in Kuwait having its roots back in 1960s. It began with a simple minded policy from just a small part of the property with the aim to handle the financial burden on the main bank of Kuwait; the National Bank of Kuwait. Being an old player in the country, the CBK decided to shift its old head office to the new location as the old building had many issues like less working space creating hurdles in modernizing the banking facilities. The old office was in the region of Maidan Hawally which is considerably famous for foreigners living in the region. The new head office of CBK is in the Centre of Kuwait i.e. Kuwait City which is the economic hub of overall State of Kuwait. In this project, Commercial Bank of Kuwait was the main funding source. The Project began in January 2007 and the construction of the Bank lasted till March 2009. Although the project was expected to be completed by June 2008 whereas only the construction phase had jus t finished till March 2009 and the final building being handed over by September 2009. The study of the project indicated that the Project was not only delayed yet was significantly over budgeted. The Project was approximately 30 % over budget and 15 months delayed. Moreover not only these issues affected the project but too many changes by the client were also a reason for the delay. The delay in the completion of the CBK Project was due to two reasons. One being that the Chief Executive Officer of the CBK resigned due to some personal issues with Managing Director of the Bank and the other reason was due to the Financial Crunch throughout the globe. These two reasons caused changes in the project after a long halt to the construction till the new CEO was assigned as the requirements of the project were altered accordingly. Therefore only one person cannot be held responsible for the overall delay caused in the CBK Project. According to Tucker (1998), a high level of management in Construction is very much essential for smooth flow of project. Thus it can be said that there were flaws in the design phase of the project and the lack of good management resulted in overall failed on-time delivery of the project. The Procurement method of the project was Design Build keeping in view the needs and outcomes of the project. The Client (CBK itself) had future plans for further development which all seemed to be left in vain of further initiation due to such a mess created. There fore the Client took keen interest to map the overall processes of the project in order to learn the flaws that delayed the Project so as to further smoothen up its activities. Working Philosophy in the CBK Project Being appointed as an Assistant Project Manager by the Client (Commercial Bank of Kuwait), the task allocated was to analyze the overall performance of the CBK Headquarters project and prepare a report to learn the flaws and outcomes of the project. Such an exercise was done in order to generate preventive measures so that future projects may not be delayed much. The report consists of a comprehensive analysis of methodology used for the Development of Headquarter of CBK and the maximum emphasize is given to the changes in the design i.e. the overall management of the design. The first step taken into consideration is the feasibility report or the outline of the project which is the first process in a project. A detailed approach in investigation is taken therefore, the Contractor (Ahmadiah Contracting-Kuwait), the team of Client (CBK), stakeholders and other parties involved in the project were consulted. All the processes are shown are Appendix 1. Method of Procurement The method of procurement in this project was Design and Build. It is very much necessary to understand what this approach is by analyzing the method. From the clients point of view, the success of the project is nearly decided by choosing appropriate method of procurement in the beginning. The common layout of the system can be seen in the figure below. Fig.2 indicates that this system is very much suited for clients who typically pass their risk to the contractor and a close coordination is developed between the design and the contractor team. This enables to synchronize the time, cost and quality of the project in the true sense of good project management perspective. As the cost is pretty much decided in the beginning, the client is confident that all the further process is smoothen up. But the point to be concerned is that all teams should have proper knowledge of design and build approach. Mostly clients which have Design Build approach new into their project end up with the sentence that the contractor has made a lot of money out of this project. This can be true only if the client finds that the things mentioned in the proposal are not same as they should have been. According to Morledge et.al (2006), client should be in notice that: * Design and Build method may change the formal aspect of most of the parties involved throughout the project. * The contractual accountability of the involved parties can change according to the environment and need of the project. Therefore according to Morledge et.al (2006), the client should study the procurement route to be selected from the technical, financial and legal angle, well in advance before the commencement of the bidding stage. By this not only the client but also the other stakeholders involved in the project can proceed safely which having loose much money. From the explained context it can be seen that before initiating any step into the start of the project, if the client spends some time in understanding the possible pros and cons of the selection of procurement method, much discrepancies can be tackled easily. Moreover, the early involvement of the clients design team can lend a helping hand to the client in correct decision making. This type of activity seems to be very scarce in the CBK Project. Processes of CBK Project The working of the CBK Project can be seen in the form of a process map with each activity corresponding to a task. It can be seen that the working standard of the overall project is in the form of a three phase Design Build method. The three phases can be as: a. Pre-Tender Phase b. Tendering Phase c. Implementation Phase The three phases of the project are mapped as processes and sub processes and the roles of different parties involved in the overall project are elaborated (Appendix -1). This exercise enables to understand the whole process easily. Detailed Analysis of Processes The main processes of the New Headquarters of Commercial Bank of Kuwait are discussed as follows:  § Concept of the Project The Chief Executive of Commercial Bank of Kuwait had a vision towards modernization in the country and the Bank it self. Therefore in order to compete the competitive banks in Kuwait the decision was taken to develop a state of the art building which will serve as an headquarter and economic backbone for the organization. Modernization was in the sense that latest high performance computers with ultra high-tech security were to be operated in the building.  § Financial Issues The Commercial Bank of Kuwait being the client as well as the funding authority finalized the concept of the project in order to have a brief overview of required budget of the project. For this, closed group meetings and seminars were arranged in order to clear any queries in the mind of the staff of the bank.  § Planning Phase The top management of the Commercial Bank of Kuwait was keen to modernize its new headquarters. For this to happen, special sessions were arranged in collaboration with Ministry of Planning, Kuwait and State Bank of Kuwait. International Banks like Barclays and HSBC were taken as role model and one model being finalized for the future development. This was a good step as to bring Western standards into an Arab Country.  § Consultant Team The consultant team (Al-Injaz Architects and Engineers) selected by the client was through competition and the team selected was an experienced one in modern construction.  § Feasibility Report A feasibility report was made in order to study the potential outcomes of the project and what could be the difficulties faced by the teams.  § Integrating Clients Objective The Consultant team enlisted the requirements of the client and steps were taken to meet the clients goals. Mainly the clients focus was a state of the art modern building and the whole project to be finished quickly without compromising Quality Standards. Therefore quality standards were also a must for the client. Through critical analysis of the data, the consultant team came out with the Design Build approach of procurement.  § Design Phase The consultant team started their work in the perspective of Design Build approach so that the tendering process can take place on time. Initial plan setup, architectural designs along with structural designs, cost estimation; all were done right on time.  § Project Documents The Projects brief long with all the details of the project including deadline of the project, estimated cost, drawings and plan etc are documented.  § Document Review The first document review meeting was held in which the top management of the CBK took part. All the project documents were critically analyzed and the Chief Executive and Chairman of Commercial Bank of Kuwait were briefed by the Project Manager about the findings of the report. It was decided that the design of the bank was little more luxurious as per the standard set and was exceeding the budget. So minor changes were made and final documents were setup.  § Tendering Process After finalizing the Project documents, pre-qualification of contractors was done and tenders were called for the development of New Headquarters of Commercial Bank of Kuwait. This was done by the Bidding Committee assigned by the Client which was in close contact with the client during the tendering process.  § Bidding Documents Confidential bidding documents were received before the deadline and handed over to the client.  § Bid Evaluation The client selected the contractor with the lowest bid and consulted the consultant team and the project management team in order to approve the bid. Upon the approval from the teams, the client approved the Contractor (Ahmadiah Contracting, Kuwait) and informed the bidding committee.  § Contract Sign The Bidding Committee arranged a contract signing session in which the contract was signed between the two parties. It was assured that the detailed design would start immediately and the project would be finished on time and in budget.  § Initial Design The design team of the Contractor (Ahmadiah) started the initial design of the development of New Headquarters of Commercial Bank of Kuwait. The consultant team and the project manager of the client were also involved in this phase and regular meetings with the client were taking place. During this phase proper site survey and investigation was done and the design aspects were altered accordingly.  § Interior Design The interior designing of the CBK was given much more importance in order to meet the quality standards set by the client. The other reason was to meet the maximum security levels of the requirements of the project.  § Provision for restaurant In order to serve the employees of the CBK, it was mentioned in the objectives of the client to provide the catering service to the staff so that at lunch time, the staff can enjoy the atmosphere and have a chat and meeting at the same time along with lunch.  § Design Proposal After finalizing the initial design of the CBK, a design proposal was prepared along with the time and cost estimates for approval from the Client.  § Final Review The client, consultant team and the project manager set up a meeting in order to critically analyze the proposal and upon approval from the client, the contractor proceeds further.  § Final Design Plan Layout Once the proposal was finalized, the design team of the contractor started to work on the detailed and comprehensive design of the project. The HVAC, electrical works, the building services including CCTV arrangements, the infrastructure of the building, all were done according to the sub-contractors co-ordination. The final layout of what is to be developed appeared on drawing charts and Auto-Cad drawing were prepared. The Step wise proceedings of the design phase of the CBK project starting from the Clients input and ending at the Contractors output can be seen in the Fig.3.  § Final Agreement With slight alterations in design and requirement by the client, the contract was review and the construction phase was to be started.  § Construction Phase The first step of the construction phase was the site acquisition, construction of temporary offices for the staff as well as design team. For this to happen the sub-contractors were put on job and the heavy construction machinery was brought on site.  § Final Drawings Implemented on Site With the start of working on the construction site, the first step was to excavate the area to be constructed upon. The construction phase started to be as smooth as predicted.  § Time Quality Checks The project manager of the client (CBK) had frequent visits to the site which resulted in strict control over the time and quality issues. A few incidents took place in which the contractor was not up to the mark as stated in the detailed drawing specifications. For instance, the project manager managed to have a look at the steel standards adopted and found that in the beams, low quality steel was used and was further sent for testing in the laboratory. The overall view of the working of the teams in the CBK Project can be seen in Fig.3.  § Documentation and Review A very important aspect of the CBK project was that every thing was documented and latest computer software such as Primavera was used on the site. The Clients project manager had an access to it. Some clashes went up due to delay in the project beyond the critical path which was referred to the client. Possible Issues with the Current Method of Working Different types of issues arose during the project life cycle that lead to certain unexpected failures during the project. Following table enlists the main issues: The above mentioned issues were found to have a significant impact on the working of the CBK project. The need of the future and to be successful in the field of construction is by analyzing the short comings of previously done processes. To enhance the working and construction processes by the client in the future, the forth coming recommendations in the form of Lean perspective in construction have been defined. All the working can be seen in Appendix -1. ENHANCED WAY OF HANDLING COMMERCIAL BANK OF KUWAIT PROJECT Introduction to Lean According to Egan (1998) and Latham (1994), the construction industry has changed significantly in the past decade, especially the UKs construction industry. Much emphasis is now given to improve the construction industry by analysis the working methodology of the industry. By analyzing, one can rectify the short comings and further improve that to make a win-win situation. According to Koskela (1997), construction industry cannot be a regarded as a â€Å"rich cultured† industry, because the way of doing work, the procedures and outcomes are nearly same as they were years ago. To improve this, the construction industry had to be linked with production and manufacturing industry. The reason is that although the end product of both the industries is entirely different, yet if the working principles of both industries are studied, they can be regarded as identical. According to Egbu (2010) and Towill (1997), construction industry can be regarded as a manufacturing industry. If we look at the production or manufacturing industry, for instance a car industry, the end product is a car, which was the project of the factory (Muhlemann et al., 1992). In construction industry, the end product is a building, house, a dam etc, which is the project for the construction factory/industry. Taking this, approach, Koskela (2000) introduced Lean principles in construction industrys perspective. He argued that the manufacturing industry has set of production theories which when applied to the construction industry, the results can be significant. When seen the time-line of the car manufacturing industry, for instance, we can see that the car manufacturing has changed drastically over the past century. The reason being that the working principles adopted by production industry has polished itself over time again and again, when such principle be defined and impl emented on construction industry, the end product can be enhanced (Koskela, 1992). Lean thinking is the concept put forward by Womack and Daniel (1996) in which he describes to think every possible aspect in a leaner way. Thus by minimizing single repetitive step can be a step forward towards implementing lean in our daily life. Lean production system was adopted and implemented by Toyota Production System through out its time-line of production activities. Liker (1998) recognizes Toyota as the pioneers of lean principles which have brought a revolution in its production activities for more than a century. This is done by proper planning the supply chain activities, minimizing the wasteful activities, etc. By the introduction of 5S technique, Kanban and others, Toyota has flourished significantly in the production industry, whereas, the construction industry is far away from these concepts. Summary of 14 points as set by Toyota Production System and enlisted by Liker (2004), are as follows: 1. Base Your Management Decisions on a Long-Term Philosophy, Even at the Expense of Short-Term Financial Goals. 2. Create Continuous Process Flow to Bring Problems to the Surface. 3. Use â€Å"Pull† System to Avoid Overproduction. 4. Level Out the Workload (Heijunka). 5. Build a Culture of Stopping to Fix Problems, to Get Quality Right for the First Time. 6. Standardizes Tasks are the Foundation for Continuous Improvement and Employee Empowerment. 7. Use Visual Controls so no Problems are Hidden. 8. Use Only Reliable, Thoroughly Tested Technology That Serves your People and Processes. 9. Grow Leaders who Thoroughly Understand the Work, Live the Philosophy, and Take it to Others. 10. Develop Exceptional People and Teams who Follow your Companys Philosophy. 11. Respect Your Extended Network of Partners and Suppliers by Challenging Them and Helping them Improve. 12. Go and See for Yourself to Thoroughly Understand the Situation (Genchi Genbutsu). 13. Make Decisions Slowly by Consensus, Thoroughly Considering All options; Implement Decisions Rapidly (Nemawashi). 14. Become a Learning Organization Through Relentless Reflection (Hansei) and Continuous Improvement (Kaizen). Thus by closely looking and understanding the above mentioned principles, we can judge that how successful a company can be when adopted such principles. By using Kanban, much of the waste can be removed. The fact is to carefully see and analyse the company performance and take out the shortcomings. Integrating Lean with the CBK Project Construction industry is now in a phase of adapting new procedures and methods for its improvement and to increase its efficiency. This can easily be done by integrating lean philosophy in the construction industry (Jorgensen and Emmitt, 2008 2009). Liker (2004) has condensed the above enlisted 14 key principles of Toyota Production System into 4 main categories/sections according to their nature. These are: 1. Long-Term Philosophy 2. Selection of Right Process 3. People and Parners development can lead to value generation 4. Gradually problem solving These 14 points of Toyota Production System are very well condensed in the above mentioned four points. When thinking about construction, Long-term philosophy can very much help in implementation of lean principles. According to Arbulu and Zabelle (2006), to standardize work it is very much necessary to follow a guideline. The five stages vision, skills, incentives, resources and action plan can be idealized according to the CBK Project. Thinking Lean while keeping in view these 5 stages can very well prove to be successful in the project. Vision Defining a vision is the first step towards the start of a project. These not only assist in the further journey, but also remove any questions that may arise in the overall team in the project. This exercise was found to be completely during the construction of New Head office of Central Bank of Kuwait Project because everything was mixed and jumbled up during the last stages of the project. Defining a vision thus give a road map towards success and the vision is usually giving for the next couple of years, which elaborates the broad thing of the company in front of others. Only thing that matters is the top management team to be strong to take decisions which lacked through out the CBK Project. Skills Skills come first after a vision is set. In fact a vision cannot be defined without the proper knowledge of the skills that a company possesses. In order to be successful in implementation of Lean in the construction industry, the company has to design or upgrade its staff development program. Thus skills very much distinguishes between the current adopted working methodology with the new working method i.e.; Lean. Furthermore, proper knowledge of the companies profile is also very beneficial in perusing successful projects. Although the staff of the CBK Project is very much skilled yet some lack in understanding of basics in construction industry is found, for instance the top management dealing first time with the Design Build procurement method. Incentive Incentives are good in the sense that they keep the workers at work motivated. The incentives can be in the form of money or by applauding someones good work, this make the worker feel happing. To implement lean into the construction industry is something to make a great change into the system, thus by introducing incentives can encourage workers at work and be happy to work and accept the change. Resources Resources can be regarded as the backbone of a project. Insufficient resources and funds may load to a halt during a project. In order to smoothen the working and progress of the project, it should be made assure well in advance that there are enough funds to support the working. The financial crunch appeared during the construction of the CBK project which significantly halted the progress of construction activities. Action Plan Like setting up a clear vision right in the start of the project, a good action plan is also equally important as a right action plan sets up guidelines for the project team. Working on the correct action plan, incorporates any unsubstantial changes and alterations in a project. A good action plan cannot be seen in the CBK project which lead to some unwanted results in the last stages of the project. Improvement by Implementation of Lean Principles The 14 principles of Lean Production system used by Toyota Production System and stated by Liker (2004) are being implemented into the CBK Project which gives a more Leaner and good value of money look to the project. Not only the cost of the overall project is properly utilized but also it is a quicker approach Womack and Daniel (2005). The enlisted problems in the CBK Project (as stated in the start) can be resolved using the Lean Principles. Following are the Lean principles directly implemented to the improvement of CBK Project. 1. Long-Term Philosophy The long term philosophy in the context of lean can be explained as: I. Base Your Management Decisions on Long-Term Philosophy Long term philosophy gives a plate form for an organization to initialize the start of future prospects. Long term approaches are usually declared in the form of upcoming 5, 10, 15 or 20 years in which it is clearly briefed about the future plans of the organization. Commercial Bank of Kuwait should introduce this approach right from the start of future projects. This will enhance the managerial skills of the organization and an approach to solve all the problems will be upgraded (Carroll, 2002) and hence shown in Fig.4 after application. 2. Process Improvement The process improvement section of the Lean principles consists of following aspects: II. Create Continuous Process Flow to Bring Problems to the Surface This principle of Lean suggests that the working criteria of the company should be such that it is running smoothly, fast and in an accurate manner. In this way any problem that arises during the process, may be handled quite easily. This principle can be implemented in the design and the planning phase as it removes many problems which are caused by starting different activities at same time. Such exercise was completely missing in the CBK Project. Multiple tasks were started at the same time, which lead to misunderstandings in the project. Smooth flow of work was least found and by implementing this technique the smooth flow of work can be seen. III. Use â€Å"Pull† System Pull system helps to reduce the un-necessary work that is done during the project. The use of pull system can be used in the pre-project and pre-construction phases during the design phases as this will help to control the time lapsed between the completion of the drawings and the designing. Un-necessary meetings and suggestions were found during the execution of the Pre-Tender phase whose burden, the overall project planning had to face. By introducing Pull system, much waste full activities can be overcome. IV. Level out the Workload The workers at work shouldnt be overburdened at any time of the project. This not only applies to the Labor but also to the Design Team. When it comes to the labor, it should be taken care off that every labor has equal work allocated to him and work load should be calculated according to the time available. Similarly the Design team should be Lean Principles in Construction Lean Principles in Construction Executive Summary Toyota is a name that when seen brings an image of high quality, durability, cost/fuel efficient and best value for money in the car industry. The reason for such a high standard is that Toyota Production System has Pioneered and Implemented Lean Principles in Production system. These principles didnt have the effect immediately in the start but at the last stages, it proved to have a greater worth for it. By implementation of Lean Theories and Philosophy, Toyota had got rid of much wasteful activities using Just In Time approach. The understudy report consists of the Implementation of Lean Principles on a Construction Project which was significantly delayed due to lack of managerial qualities. The Client built a new Head office to shift all the activities from the previous offices in to the new one, but a delay to all activities was observed. It has been analyzed that the construction companies fail to give proper time to the initial Pre-Design and Design Phases and are more reluctant towards starting their construction. The current method of working of the company is mapped and explained with the possible issues and problems are being enlisted. The Design Build approach of Procurement was appraised and further improvements have been suggested. The second part of the report consists of the major and applicable Lean Principles and how they can be implemented in Construction Projects. This not only reduces the wasteful activities but also prove to be cost efficient as mapped. Lastly some merits of Lean Implementation on the construction project have been enlisted and conclusions are drawn. NEW HEAD OFFICE OF COMMERCIAL BANK OF KUWAIT (CBK) Introduction The Commercial Bank of Kuwait is a well known Bank in Kuwait having its roots back in 1960s. It began with a simple minded policy from just a small part of the property with the aim to handle the financial burden on the main bank of Kuwait; the National Bank of Kuwait. Being an old player in the country, the CBK decided to shift its old head office to the new location as the old building had many issues like less working space creating hurdles in modernizing the banking facilities. The old office was in the region of Maidan Hawally which is considerably famous for foreigners living in the region. The new head office of CBK is in the Centre of Kuwait i.e. Kuwait City which is the economic hub of overall State of Kuwait. In this project, Commercial Bank of Kuwait was the main funding source. The Project began in January 2007 and the construction of the Bank lasted till March 2009. Although the project was expected to be completed by June 2008 whereas only the construction phase had jus t finished till March 2009 and the final building being handed over by September 2009. The study of the project indicated that the Project was not only delayed yet was significantly over budgeted. The Project was approximately 30 % over budget and 15 months delayed. Moreover not only these issues affected the project but too many changes by the client were also a reason for the delay. The delay in the completion of the CBK Project was due to two reasons. One being that the Chief Executive Officer of the CBK resigned due to some personal issues with Managing Director of the Bank and the other reason was due to the Financial Crunch throughout the globe. These two reasons caused changes in the project after a long halt to the construction till the new CEO was assigned as the requirements of the project were altered accordingly. Therefore only one person cannot be held responsible for the overall delay caused in the CBK Project. According to Tucker (1998), a high level of management in Construction is very much essential for smooth flow of project. Thus it can be said that there were flaws in the design phase of the project and the lack of good management resulted in overall failed on-time delivery of the project. The Procurement method of the project was Design Build keeping in view the needs and outcomes of the project. The Client (CBK itself) had future plans for further development which all seemed to be left in vain of further initiation due to such a mess created. There fore the Client took keen interest to map the overall processes of the project in order to learn the flaws that delayed the Project so as to further smoothen up its activities. Working Philosophy in the CBK Project Being appointed as an Assistant Project Manager by the Client (Commercial Bank of Kuwait), the task allocated was to analyze the overall performance of the CBK Headquarters project and prepare a report to learn the flaws and outcomes of the project. Such an exercise was done in order to generate preventive measures so that future projects may not be delayed much. The report consists of a comprehensive analysis of methodology used for the Development of Headquarter of CBK and the maximum emphasize is given to the changes in the design i.e. the overall management of the design. The first step taken into consideration is the feasibility report or the outline of the project which is the first process in a project. A detailed approach in investigation is taken therefore, the Contractor (Ahmadiah Contracting-Kuwait), the team of Client (CBK), stakeholders and other parties involved in the project were consulted. All the processes are shown are Appendix 1. Method of Procurement The method of procurement in this project was Design and Build. It is very much necessary to understand what this approach is by analyzing the method. From the clients point of view, the success of the project is nearly decided by choosing appropriate method of procurement in the beginning. The common layout of the system can be seen in the figure below. Fig.2 indicates that this system is very much suited for clients who typically pass their risk to the contractor and a close coordination is developed between the design and the contractor team. This enables to synchronize the time, cost and quality of the project in the true sense of good project management perspective. As the cost is pretty much decided in the beginning, the client is confident that all the further process is smoothen up. But the point to be concerned is that all teams should have proper knowledge of design and build approach. Mostly clients which have Design Build approach new into their project end up with the sentence that the contractor has made a lot of money out of this project. This can be true only if the client finds that the things mentioned in the proposal are not same as they should have been. According to Morledge et.al (2006), client should be in notice that: * Design and Build method may change the formal aspect of most of the parties involved throughout the project. * The contractual accountability of the involved parties can change according to the environment and need of the project. Therefore according to Morledge et.al (2006), the client should study the procurement route to be selected from the technical, financial and legal angle, well in advance before the commencement of the bidding stage. By this not only the client but also the other stakeholders involved in the project can proceed safely which having loose much money. From the explained context it can be seen that before initiating any step into the start of the project, if the client spends some time in understanding the possible pros and cons of the selection of procurement method, much discrepancies can be tackled easily. Moreover, the early involvement of the clients design team can lend a helping hand to the client in correct decision making. This type of activity seems to be very scarce in the CBK Project. Processes of CBK Project The working of the CBK Project can be seen in the form of a process map with each activity corresponding to a task. It can be seen that the working standard of the overall project is in the form of a three phase Design Build method. The three phases can be as: a. Pre-Tender Phase b. Tendering Phase c. Implementation Phase The three phases of the project are mapped as processes and sub processes and the roles of different parties involved in the overall project are elaborated (Appendix -1). This exercise enables to understand the whole process easily. Detailed Analysis of Processes The main processes of the New Headquarters of Commercial Bank of Kuwait are discussed as follows:  § Concept of the Project The Chief Executive of Commercial Bank of Kuwait had a vision towards modernization in the country and the Bank it self. Therefore in order to compete the competitive banks in Kuwait the decision was taken to develop a state of the art building which will serve as an headquarter and economic backbone for the organization. Modernization was in the sense that latest high performance computers with ultra high-tech security were to be operated in the building.  § Financial Issues The Commercial Bank of Kuwait being the client as well as the funding authority finalized the concept of the project in order to have a brief overview of required budget of the project. For this, closed group meetings and seminars were arranged in order to clear any queries in the mind of the staff of the bank.  § Planning Phase The top management of the Commercial Bank of Kuwait was keen to modernize its new headquarters. For this to happen, special sessions were arranged in collaboration with Ministry of Planning, Kuwait and State Bank of Kuwait. International Banks like Barclays and HSBC were taken as role model and one model being finalized for the future development. This was a good step as to bring Western standards into an Arab Country.  § Consultant Team The consultant team (Al-Injaz Architects and Engineers) selected by the client was through competition and the team selected was an experienced one in modern construction.  § Feasibility Report A feasibility report was made in order to study the potential outcomes of the project and what could be the difficulties faced by the teams.  § Integrating Clients Objective The Consultant team enlisted the requirements of the client and steps were taken to meet the clients goals. Mainly the clients focus was a state of the art modern building and the whole project to be finished quickly without compromising Quality Standards. Therefore quality standards were also a must for the client. Through critical analysis of the data, the consultant team came out with the Design Build approach of procurement.  § Design Phase The consultant team started their work in the perspective of Design Build approach so that the tendering process can take place on time. Initial plan setup, architectural designs along with structural designs, cost estimation; all were done right on time.  § Project Documents The Projects brief long with all the details of the project including deadline of the project, estimated cost, drawings and plan etc are documented.  § Document Review The first document review meeting was held in which the top management of the CBK took part. All the project documents were critically analyzed and the Chief Executive and Chairman of Commercial Bank of Kuwait were briefed by the Project Manager about the findings of the report. It was decided that the design of the bank was little more luxurious as per the standard set and was exceeding the budget. So minor changes were made and final documents were setup.  § Tendering Process After finalizing the Project documents, pre-qualification of contractors was done and tenders were called for the development of New Headquarters of Commercial Bank of Kuwait. This was done by the Bidding Committee assigned by the Client which was in close contact with the client during the tendering process.  § Bidding Documents Confidential bidding documents were received before the deadline and handed over to the client.  § Bid Evaluation The client selected the contractor with the lowest bid and consulted the consultant team and the project management team in order to approve the bid. Upon the approval from the teams, the client approved the Contractor (Ahmadiah Contracting, Kuwait) and informed the bidding committee.  § Contract Sign The Bidding Committee arranged a contract signing session in which the contract was signed between the two parties. It was assured that the detailed design would start immediately and the project would be finished on time and in budget.  § Initial Design The design team of the Contractor (Ahmadiah) started the initial design of the development of New Headquarters of Commercial Bank of Kuwait. The consultant team and the project manager of the client were also involved in this phase and regular meetings with the client were taking place. During this phase proper site survey and investigation was done and the design aspects were altered accordingly.  § Interior Design The interior designing of the CBK was given much more importance in order to meet the quality standards set by the client. The other reason was to meet the maximum security levels of the requirements of the project.  § Provision for restaurant In order to serve the employees of the CBK, it was mentioned in the objectives of the client to provide the catering service to the staff so that at lunch time, the staff can enjoy the atmosphere and have a chat and meeting at the same time along with lunch.  § Design Proposal After finalizing the initial design of the CBK, a design proposal was prepared along with the time and cost estimates for approval from the Client.  § Final Review The client, consultant team and the project manager set up a meeting in order to critically analyze the proposal and upon approval from the client, the contractor proceeds further.  § Final Design Plan Layout Once the proposal was finalized, the design team of the contractor started to work on the detailed and comprehensive design of the project. The HVAC, electrical works, the building services including CCTV arrangements, the infrastructure of the building, all were done according to the sub-contractors co-ordination. The final layout of what is to be developed appeared on drawing charts and Auto-Cad drawing were prepared. The Step wise proceedings of the design phase of the CBK project starting from the Clients input and ending at the Contractors output can be seen in the Fig.3.  § Final Agreement With slight alterations in design and requirement by the client, the contract was review and the construction phase was to be started.  § Construction Phase The first step of the construction phase was the site acquisition, construction of temporary offices for the staff as well as design team. For this to happen the sub-contractors were put on job and the heavy construction machinery was brought on site.  § Final Drawings Implemented on Site With the start of working on the construction site, the first step was to excavate the area to be constructed upon. The construction phase started to be as smooth as predicted.  § Time Quality Checks The project manager of the client (CBK) had frequent visits to the site which resulted in strict control over the time and quality issues. A few incidents took place in which the contractor was not up to the mark as stated in the detailed drawing specifications. For instance, the project manager managed to have a look at the steel standards adopted and found that in the beams, low quality steel was used and was further sent for testing in the laboratory. The overall view of the working of the teams in the CBK Project can be seen in Fig.3.  § Documentation and Review A very important aspect of the CBK project was that every thing was documented and latest computer software such as Primavera was used on the site. The Clients project manager had an access to it. Some clashes went up due to delay in the project beyond the critical path which was referred to the client. Possible Issues with the Current Method of Working Different types of issues arose during the project life cycle that lead to certain unexpected failures during the project. Following table enlists the main issues: The above mentioned issues were found to have a significant impact on the working of the CBK project. The need of the future and to be successful in the field of construction is by analyzing the short comings of previously done processes. To enhance the working and construction processes by the client in the future, the forth coming recommendations in the form of Lean perspective in construction have been defined. All the working can be seen in Appendix -1. ENHANCED WAY OF HANDLING COMMERCIAL BANK OF KUWAIT PROJECT Introduction to Lean According to Egan (1998) and Latham (1994), the construction industry has changed significantly in the past decade, especially the UKs construction industry. Much emphasis is now given to improve the construction industry by analysis the working methodology of the industry. By analyzing, one can rectify the short comings and further improve that to make a win-win situation. According to Koskela (1997), construction industry cannot be a regarded as a â€Å"rich cultured† industry, because the way of doing work, the procedures and outcomes are nearly same as they were years ago. To improve this, the construction industry had to be linked with production and manufacturing industry. The reason is that although the end product of both the industries is entirely different, yet if the working principles of both industries are studied, they can be regarded as identical. According to Egbu (2010) and Towill (1997), construction industry can be regarded as a manufacturing industry. If we look at the production or manufacturing industry, for instance a car industry, the end product is a car, which was the project of the factory (Muhlemann et al., 1992). In construction industry, the end product is a building, house, a dam etc, which is the project for the construction factory/industry. Taking this, approach, Koskela (2000) introduced Lean principles in construction industrys perspective. He argued that the manufacturing industry has set of production theories which when applied to the construction industry, the results can be significant. When seen the time-line of the car manufacturing industry, for instance, we can see that the car manufacturing has changed drastically over the past century. The reason being that the working principles adopted by production industry has polished itself over time again and again, when such principle be defined and impl emented on construction industry, the end product can be enhanced (Koskela, 1992). Lean thinking is the concept put forward by Womack and Daniel (1996) in which he describes to think every possible aspect in a leaner way. Thus by minimizing single repetitive step can be a step forward towards implementing lean in our daily life. Lean production system was adopted and implemented by Toyota Production System through out its time-line of production activities. Liker (1998) recognizes Toyota as the pioneers of lean principles which have brought a revolution in its production activities for more than a century. This is done by proper planning the supply chain activities, minimizing the wasteful activities, etc. By the introduction of 5S technique, Kanban and others, Toyota has flourished significantly in the production industry, whereas, the construction industry is far away from these concepts. Summary of 14 points as set by Toyota Production System and enlisted by Liker (2004), are as follows: 1. Base Your Management Decisions on a Long-Term Philosophy, Even at the Expense of Short-Term Financial Goals. 2. Create Continuous Process Flow to Bring Problems to the Surface. 3. Use â€Å"Pull† System to Avoid Overproduction. 4. Level Out the Workload (Heijunka). 5. Build a Culture of Stopping to Fix Problems, to Get Quality Right for the First Time. 6. Standardizes Tasks are the Foundation for Continuous Improvement and Employee Empowerment. 7. Use Visual Controls so no Problems are Hidden. 8. Use Only Reliable, Thoroughly Tested Technology That Serves your People and Processes. 9. Grow Leaders who Thoroughly Understand the Work, Live the Philosophy, and Take it to Others. 10. Develop Exceptional People and Teams who Follow your Companys Philosophy. 11. Respect Your Extended Network of Partners and Suppliers by Challenging Them and Helping them Improve. 12. Go and See for Yourself to Thoroughly Understand the Situation (Genchi Genbutsu). 13. Make Decisions Slowly by Consensus, Thoroughly Considering All options; Implement Decisions Rapidly (Nemawashi). 14. Become a Learning Organization Through Relentless Reflection (Hansei) and Continuous Improvement (Kaizen). Thus by closely looking and understanding the above mentioned principles, we can judge that how successful a company can be when adopted such principles. By using Kanban, much of the waste can be removed. The fact is to carefully see and analyse the company performance and take out the shortcomings. Integrating Lean with the CBK Project Construction industry is now in a phase of adapting new procedures and methods for its improvement and to increase its efficiency. This can easily be done by integrating lean philosophy in the construction industry (Jorgensen and Emmitt, 2008 2009). Liker (2004) has condensed the above enlisted 14 key principles of Toyota Production System into 4 main categories/sections according to their nature. These are: 1. Long-Term Philosophy 2. Selection of Right Process 3. People and Parners development can lead to value generation 4. Gradually problem solving These 14 points of Toyota Production System are very well condensed in the above mentioned four points. When thinking about construction, Long-term philosophy can very much help in implementation of lean principles. According to Arbulu and Zabelle (2006), to standardize work it is very much necessary to follow a guideline. The five stages vision, skills, incentives, resources and action plan can be idealized according to the CBK Project. Thinking Lean while keeping in view these 5 stages can very well prove to be successful in the project. Vision Defining a vision is the first step towards the start of a project. These not only assist in the further journey, but also remove any questions that may arise in the overall team in the project. This exercise was found to be completely during the construction of New Head office of Central Bank of Kuwait Project because everything was mixed and jumbled up during the last stages of the project. Defining a vision thus give a road map towards success and the vision is usually giving for the next couple of years, which elaborates the broad thing of the company in front of others. Only thing that matters is the top management team to be strong to take decisions which lacked through out the CBK Project. Skills Skills come first after a vision is set. In fact a vision cannot be defined without the proper knowledge of the skills that a company possesses. In order to be successful in implementation of Lean in the construction industry, the company has to design or upgrade its staff development program. Thus skills very much distinguishes between the current adopted working methodology with the new working method i.e.; Lean. Furthermore, proper knowledge of the companies profile is also very beneficial in perusing successful projects. Although the staff of the CBK Project is very much skilled yet some lack in understanding of basics in construction industry is found, for instance the top management dealing first time with the Design Build procurement method. Incentive Incentives are good in the sense that they keep the workers at work motivated. The incentives can be in the form of money or by applauding someones good work, this make the worker feel happing. To implement lean into the construction industry is something to make a great change into the system, thus by introducing incentives can encourage workers at work and be happy to work and accept the change. Resources Resources can be regarded as the backbone of a project. Insufficient resources and funds may load to a halt during a project. In order to smoothen the working and progress of the project, it should be made assure well in advance that there are enough funds to support the working. The financial crunch appeared during the construction of the CBK project which significantly halted the progress of construction activities. Action Plan Like setting up a clear vision right in the start of the project, a good action plan is also equally important as a right action plan sets up guidelines for the project team. Working on the correct action plan, incorporates any unsubstantial changes and alterations in a project. A good action plan cannot be seen in the CBK project which lead to some unwanted results in the last stages of the project. Improvement by Implementation of Lean Principles The 14 principles of Lean Production system used by Toyota Production System and stated by Liker (2004) are being implemented into the CBK Project which gives a more Leaner and good value of money look to the project. Not only the cost of the overall project is properly utilized but also it is a quicker approach Womack and Daniel (2005). The enlisted problems in the CBK Project (as stated in the start) can be resolved using the Lean Principles. Following are the Lean principles directly implemented to the improvement of CBK Project. 1. Long-Term Philosophy The long term philosophy in the context of lean can be explained as: I. Base Your Management Decisions on Long-Term Philosophy Long term philosophy gives a plate form for an organization to initialize the start of future prospects. Long term approaches are usually declared in the form of upcoming 5, 10, 15 or 20 years in which it is clearly briefed about the future plans of the organization. Commercial Bank of Kuwait should introduce this approach right from the start of future projects. This will enhance the managerial skills of the organization and an approach to solve all the problems will be upgraded (Carroll, 2002) and hence shown in Fig.4 after application. 2. Process Improvement The process improvement section of the Lean principles consists of following aspects: II. Create Continuous Process Flow to Bring Problems to the Surface This principle of Lean suggests that the working criteria of the company should be such that it is running smoothly, fast and in an accurate manner. In this way any problem that arises during the process, may be handled quite easily. This principle can be implemented in the design and the planning phase as it removes many problems which are caused by starting different activities at same time. Such exercise was completely missing in the CBK Project. Multiple tasks were started at the same time, which lead to misunderstandings in the project. Smooth flow of work was least found and by implementing this technique the smooth flow of work can be seen. III. Use â€Å"Pull† System Pull system helps to reduce the un-necessary work that is done during the project. The use of pull system can be used in the pre-project and pre-construction phases during the design phases as this will help to control the time lapsed between the completion of the drawings and the designing. Un-necessary meetings and suggestions were found during the execution of the Pre-Tender phase whose burden, the overall project planning had to face. By introducing Pull system, much waste full activities can be overcome. IV. Level out the Workload The workers at work shouldnt be overburdened at any time of the project. This not only applies to the Labor but also to the Design Team. When it comes to the labor, it should be taken care off that every labor has equal work allocated to him and work load should be calculated according to the time available. Similarly the Design team should be

The Minimum Wage Essay -- Minimum Wage Research Paper

"The minimum wage is something that F.D.R. put in place a long time ago during the Great Depression. I don't think it worked then. It didn't solve any problems then and it hasn't solved any problems in 50 years." -- John Raese For many years it has been a matter of conventional wisdom among economists that the minimum wage causes fewer jobs to exist than would be the case without it. This is simply a matter of price theory, taught in every economics textbook, requiring no elaborate analysis to justify. Were this not the case, there would be no logical reason why the minimum wage could not be set at $10, $100, or $1 million per hour. Historically, defenders of the minimum wage have not disputed the dis-employment effects of the minimum wage, but argued that on balance the working poor were better off. In other words, the higher incomes of those with jobs offset the lower incomes of those without jobs, as a result of the minimum wage l "levitan". Now, President Obama is advancing the novel economic theory that modest increases in the minimum wage will have no impact whatsoever on employment. This proposition is based entirely on the work of three economists: David Card and Alan Krueger of Princeton, and Lawrence Katz of Harvard. Their studies of increases in the minimum wage in California, Texas and New Jersey apparently found no loss of jobs among fast food restaurants that were surveyed before and after the increase [ l "card-92b", l "krueger", and l "katz". While it is not yet clear why Card, Katz and Krueger got the results that they did, it is clear that their findings are directly contrary to virtually every empirical study ever done on the minimum wage. These studies were exhaustively surveyed by the Minimum Wage Study Commission, which concluded that a 10% increase in the minimum wage reduced teenage employment by 1% to 3%. The following survey of the academic research on the minimum wage is designed to give nonspecialists a sense of just how isolated the Card, Krueger and Katz studies are. It will also indicate that the minimum wage has wide-ranging negative effects that go beyond unemployment. For example, higher minimum wages encourage employers to cut back on training, thus depriving low wage workers of an important means of long-term advancement, in return for a small increase in current income. For many workers this is a very ... ...g (1996), " `Who Gets What' from Minimum Wage Hikes," Industrial and Labor Relations Review 49 (April): 547-52.  ·Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  ------, and T. A. Finegan (1989), "The Minimum Wage and the Poor: The End of a Relationship," Journal of Policy Analysis and Management 8 (Winter): 53-71. 23w  ·Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Card, D., and A. Krueger (1995), Myth and Measurement (Princeton, N.J.: Princeton University Press).  ·Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Deere, D., K. M. Murphy and F. Welch (1995), "Employment and the 1990-1991 Minimum Wage Hike," American Economic Review Papers and Proceedings 85 (May): 232-37.  ·Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Gramlich, E. (1976), "Impact of Minimum Wages on Other Wages, Employment, and Family Incomes," Brookings Papers on Economic Activity 2: 409-51.  ·Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Lang, K. (1994), "The Effect of Minimum Wage Laws on the Distribution of Employment: Theory and Evidence," Working Paper, Boston University.  ·Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Neumark, D., and W. Wascher (1995), "The Effects of Minimum Wages on Teenage Employment and Enrollment: Evidence from Matched CPS Surveys," NBER Working Paper No. 5092, April.  ·Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Smith, R., and B. Vavrichek (1992), "The Wage Mobility of Minimum Wage Workers," Industrial and Labor Relations Review 46 (October): 82-88.

Porter Five Force Analysis of Indian Food Processing Industry

Porter’s five force analysis of food processing industry| MARKETING STRATEGY| HITESH VAVAIYA| Table of Contents Acknowledgement3 Introduction of Report3 Research Objective4 Introduction of Food Processing Industry4 The History of Food Processing Industry4 Supply chain of food processing industry and factor affecting each activity5 Agriculture5 Food processing5 Indian Food Processing Industry7 History of food processing Industry in India7 Current Market Overview9 Indian Food Processing Industry Performance11Food Processing Sector overview11 Major Players of Food Processing Industry14 Indian Food Processing Companies Profiles14 Major Indian player in Food processing Industry Overview15 I. T. C LTD15 GODREJ PROFILE15 MTR Foods Limited Profile16 Parle Limited Profile17 Dabur India Limited Profile17 Analysis18 Porter Five Forces Analysis for Indian Food Processing Analysis18 Threat of Entry (high)19 Rivalry between Established Competitors (low)21 Bargaining Power of Buyers (low)23 Bargaining Power of Suppliers (low)25Threat of Substitutes (high)26 Conclusion27 Bibliography29 Acknowledgement I take the opportunity, while presenting this report and to express my gratitude to all those who afford their valuable help and time to help me to complete the project successfully. A number of people provided us their assistance, encouragement, and enthusiasm. Without them this project would not have been possible. Firstly, I would like to thank our institute IIPM and our honorable prof. partho sir for giving me such an opportunity to work on such a project. got a chance to put all our classroom theories and practices for understanding and analyzing the working of the real Indian scenario. Introduction of Report This report provides an overview of our food production and consumption system, its impacts on the environment and its vulnerability to environmental problems and resource constraints. The aim of the report is to identify any significant challenges to the future security of the food system in India that arise from environmental and resource issues, and the risks, constraints and social or political responses to these.The report also considers a range of response strategies being developed and explored at various points across the food system. The ‘food system’ includes the interdependent parts of the system that provides food for local consumption and for export. It includes all the components and processes by which food is produced (grown and/or processed), stored and distributed, delivered to end-consumers and consumed (including further processing and storage) – as well as all the processes that deal with waste along the ‘food chain’ The report covers an overview of the Indian food processing industry.The report will focus on the dynamics of the industry, the market segments, the growth of the sectors in India and what are the challenges and opportunities that the industry is facing. On the competitive la ndscape, the report lays out the major food processing companies that functions within the Indian industry and the strategies these companies are following to capture the major chunk of the market share. The concluding part of the report covers the drivers of the industry and the future Prospects of the food processing industry in India.Research Objective To analyze the market share of organized Food Processing sector compare to other unorganized Food Processing sector To study the future growth of food processing in india To study the sustainability of Indian food processing industry To study the resources and the constraints of the Indian food processing industry To study the effect of MNC’s in the Indian food processing industry To study the driving forces those are affecting Indian food processing industry Introduction of Food Processing Industry The History of Food Processing IndustryThe origin of food processing goes all the way back to ancient Egypt, yet the period of those developments seems to symbolize the history of the culture of mankind. Nowadays, bread, which is characterized by its use of the fermentation action of yeast and which uses wheat flour as its raw material, is baked all over the world. The origins of beer also go back to Babylon and Egypt in the period from 3,000 to 5,000 BC. The foundation of the modern industry was built up with the introduction of machinery and technology of new methods from Germany.Nowadays, the processed foods that are thriving in grocery shops are modern processed foods and traditional foods, but their manufacturing technology, process control and manufacturing and packaging environmental facilities have been advanced and rationalized to an incomparable extent in the last 30 years. As a result, products with high quality and uniformity are now being manufactured. This is based on the advancement of food science, and is, moreover, due to the general introduction of hygienics, applied microbiology, mechanic al engineering, chemical engineering, electronic engineering and high-polymer technology.The most remarkable developments until now have been convenient pre-cooked frozen foods, retort pouch foods and dried foods. The mass production of excellent quality processed foods without using unnecessary food additives has been made possible in the last 30 years by grading and inspecting the process materials, carrying out proper inspections of processed foods, and advances in processing technology, installation and packaging technology and materials. http://www. bisnetindia. com/bishtml/060012502441. htm Supply chain of food processing industry and factor affecting each activity AgricultureAgriculture is the process of producing food, feed, fiber and other desired products by the cultivation of certain plants and the raising of domesticated animals (livestock). The practice of agriculture is also known as â€Å"farming†, while scientists, inventors and others devoted to improving far ming methods and implements are also said to be engaged in agriculture. More people in the world are involved in agriculture as their primary economic activity than in any other, yet it only accounts for twelve percent of the world's GDP.Total agricultural trade consists of food and non- food commodities in both raw and processed forms. Classification of agricultural trade is a breakdown of agricultural trade into four components. * bulk commodities, * processed intermediate products, * fresh horticultural products, * Processed consumer goods. Over the years the share of bulk commodities in total agricultural trade has gone down. Decreased demand for bulk commodities has been compensated by the growth in intermediate processed products, which are essentially processed bulk commodities.Processed intermediate products such as vegetable oils, flour etc. The share of fresh horticultural products, i. e. products that are consumed without further processing, in total agricultural trade is nearly constant. Recent improvements in transportation technology have played a role in promoting trade of fresh products. The faster growing categories in agricultural trade are non-bulk packaged processed food products, which are marketed under different brands. Developed countries have played an important role in promoting trade in processed food products.Share of these countries in import of processed food products is more than developing countries, whereas in case of bulk commodities share of developing countries exceeds the import of developed countries. Food processing Food processing is the methods and techniques used to transform raw ingredients into food for human consumption. Food processing takes clean, harvested or slaughtered and butchered components and uses them to produce marketable food products. Consumer expenditure on processed food and drink 2001–07 (US$ billion), as shown in below ChartGraph:-1. 1 Consumer expenditure on food Sources: – Food Corp oration of India, web http://fciweb. nic/Consumerexpen/. in Whole Food processing industry in divided mainly six sectors which are as shown in figure 3 and food product cover in these sectors and shown in table 2 Figure: – 1. 3. Major sector in food processing industry Table:-1. 2 Segmenting food product according to Food processing Sector Indian Food Processing Industry History of food processing Industry in IndiaFood processing dates back to the prehistoric ages when crude processing incorporated slaughtering, fermenting, sun drying, preserving with salt, and various types of cooking (such as roasting, smoking, steaming, and oven baking). Salt-preservation was especially common for foods that constituted warrior and sailors' diets, up until the introduction of canning methods. Evidence for the existence of these methods exists in the writings of the ancient Greek , Chaldean, Egyptian and Roman civilisations as well as archaeological evidence from Europe, North and South Ame rica and Asia.These tried and tested processing techniques remained essentially the same until the advent of the industrial revolution. Examples of ready-meals also exist from pre industrial revolution times such as the Cornish pasty and the Haggis. Modern food processing technology in the 19th and 20th century was largely developed to serve military needs. In 1809 Nicolas Appert invented a vacuum bottling technique that would supply food for French troops, and this contributed to the development of tinning and then canning by Peter Durand in 1810.Although initially expensive and somewhat hazardous due to the lead used in cans, canned goods would later become a staple around the world. Pasteurization, discovered by Louis Pasteur in 1862, was a significant advance in ensuring the micro-biological safety of food. In the 20th century, World War II, the space race and the rising consumer society in developed countries (including the United States) contributed to the growth of food proce ssing with such advances as spray drying, juice concentrates, freeze drying and the introduction of artificial sweeteners, coloring agents, and preservatives such as sodium benzoate.In the late 20th century products such as dried instant soups, reconstituted fruits and juices, and self cooking meals such as MRE food ration were developed. In Western Europe and North America, the second half of the 20th century witnessed a rise in the pursuit of convenience; food processors especially marketed their products to middle-class working wives and mothers. Frozen foods (often credited to Clarence Birdseye) found their success in sales of juice concentrates and â€Å"TV dinners†.Processors utilized the perceived value of time to appeal to the postwar population, and this same appeal contributes to the success of convenience foods today. * Benefits More and more people live in the cities far away from where food is grown and produced. In many families the adults are working away from home and therefore there is little time for the preparation of food based on fresh ingredients. The food industry offers products that fulfill many different needs: From peeled potatoes that only have to be boiled at home to fully prepare ready meals that can be heated up in the microwave oven within a few minutes.Benefits of food processing include toxin removal, preservation, easing marketing and distribution tasks, and increasing food consistency. In addition, it increases seasonal availability of many foods, enables transportation of delicate perishable foods across long distances, and makes many kinds of foods safe to eat by de-activating spoilage and pathogenic micro-organisms. Modern supermarkets would not be feasible without modern food processing techniques, long voyages would not be possible, and military campaigns would be significantly more difficult and costly to execute.Modern food processing also improves the quality of life for allergists, diabetics, and other people who cannot consume some common food elements. Food processing can also add extra nutrients such as vitamins. Processed foods are often less susceptible to early spoilage than fresh foods, and are better suited for long distance transportation from the source to the consumer. Fresh materials, such as fresh produce and raw meats, are more likely to harbour pathogenic micro-organisms (e. g. Salmonella) capable of causing serious illnesses. * DrawbacksIn general, fresh food that has not been processed other than by washing and simple kitchen preparation, may be expected to contain a higher proportion of naturally occurring vitamins, fibre and minerals than the equivalent product processed by the food industry. Vitamin C for example is destroyed by heat and therefore canned fruits have a lower content of vitamin C than fresh ones. Food processing can lower the nutritional value of foods. Processed foods tend to include food additives, such as flavorings’ and texture enhancing age nts, which may have little or no nutritive value, or be unhealthy.Some preservatives added or created during processing such as nitrites or sulphites may cause adverse health effects. Processed foods often have a higher ratio of calories to other essential nutrients than unprocessed foods, a phenomenon referred to as â€Å"empty calories†. Most junk foods are processed, and fit this category. High quality and hygiene standards must be maintained to ensure consumer safety and failures to maintain adequate standards can have serious health consequences. Processing food is a very costly process, thus increasing the prices of foods products.Current Market Overview India is a country of striking contrasts and enormous ethnic, linguistic, and cultural diversity. It has a population of 1. 1 billion, and it is comprised of 28 states and seven Union Territories (under federal government rule). The states differ vastly in resources, culture, food habits, living standards, and languages . Vast disparities in per-capita income levels exist between and within India’s states. About 75 percent of the country’s people live in 550,000 villages; the rest in 200 towns and cities. There are 30 cities with a population above one million people.India has the largest number of poor, with 35 percent of the population surviving on less than $1 per day, and 80 percent of the population surviving on less than $2 per day1. Nearly 51 percent of Indians’ consumption expenditures go for food (54 percent in rural area and 42 in urban areas) 2; mostly for basic items like grains, vegetable oils, and sugar; very little goes for value added food items. In recent years, however, there has been an increased shift towards vegetables, eggs, fruits, meat, and beverages. Religion has a major influence on eating habits and, along with low purchasing power, supports a predominantly vegetarian diet.Some observers of India’s economic scene are, however, highly optimistic about consumption growth potential, and believe that rising income levels, increasing urbanization, a changing age profile (more young people), increasing consumerism, a significant rise in the number of single men and women professionals, and the availability of cheap credit will push India onto a new growth trajectory. These segments of the population are aware of quality differences, insist on world standards, and are willing to pay a premium for quality. Nonetheless, a major share of Indian consumers has to sacrifice quality for affordable prices.Potential US exporters should also bear in mind that India’s diverse agro-industrial base already offers many items at competitive prices. Results of the â€Å"Market Information Survey of Households,† conducted by the National Council of Applied Economic Research, show that the share of households in the upper middle/high income group (annual household income > Rs. 90,000, or $11,200 on purchasing power parity basis) has grown from 14% in 1989-90 to 28% in 2001-02, and is projected at 48 percent in 2009-10. Correspondingly, there has been a decline in the low-income group.Sixty-five million people are expected to enter the 20-34 year age group from 2001 to 2010. By 2025, 40 percent of Indians are expected to be urban dwellers. Structural reforms and stabilization programs during the 1990s have contributed to India’s sustained economic growth, which has been relatively strong over the past two decades, averaging 6 percent annually. Since 1996, the Indian government has gradually lifted import-licensing restrictions, which had effectively prohibited imports. On April 1, 2001, all remaining quantitative restrictions were removed, putting India in compliance with its WTO commitment.Nonetheless, the government continues to discourage imports, particularly agricultural products, with the use of high tariffs and non-tariff barriers. Import tariffs on most consumer products, although declining, are still high, ranging from 30. 6 to 52. 2 percent. Some sensitive items, such as alcoholic beverages, poultry meat, raisins, vegetable oils, wheat, rice, etc. , attract much higher duties. Nontariff barriers include unwarranted sanitary and phytosanitary restrictions and onerous labeling requirements for pre-packaged foods.Other factors adversely affecting imports include a poorly developed infrastructure (transportation and cold chain), a predominantly unorganized retail sector, and outdated food laws. However, some positive factors are: †¢ Rising disposable income levels †¢ Increasing urbanization and exposure to Western culture †¢ Growing health consciousness among the middle class †¢ Growing consumerism †¢ Changing age profile †¢ Increasing availability of cheap consumer credit Current status of industry is shown in below table Table1. 4. Status of Food Processing Industry in IndiaSources: All India Food Processors Association http://www. aifpa/foodin dustry/. com India is a major producer of many agricultural commodities and it accounts for nine per cent of the world’s fruit production and about 11 per cent of the vegetable production. But the level of processing and value addition of fruits and vegetables is just two per cent of the total production, compared to 65 per cent in the USA, 23 per cent in China and 78 per cent in the Philippines as given in the figure below. Graph: 1. 2 food processing percentage in different country Sources: – web http://www. fmi. /worldfoodprocessed. org There is huge wastage of perishable agricultural commodities. The position in the country with regard to other products also is not very encouraging. The overall level of processing of agricultural commodities in the country is estimated at six per cent. The annual loss on account of wastage of agricultural commodities is estimated to be about Rs 50,000 crore. At present, the food processing sector employs about 13 million people dir ectly and about 35 million people indirectly. In 2006–07, food processing sector contributed about 14 per cent of manufacturing GDP with a share of Rs 2,80,000 crore.Of this, the unorganised sector accounted for more than 70 per cent of production in terms of volume and 50 per cent in terms of value. Indian Food Processing Industry Performance Market Definition The market for food processing industry is the complex in nature; it is global collective of diverse businesses that together supply much of the food energy consumed by the population. Only subsistence farmers, those who survive on what they grow, can be considered outside of the scope of the modern food processing industry. The food processing industry includes: Regulation: local, regional, national and international rules and regulations for food production and sale, including food quality and food safety, and industry lobbying activities * Research and development: food technology * Financial services insurance, cre dit * Manufacturing: processed packed food, food processing machinery and supplies, food processing construction, etc. * Food processing technology: preparation of fresh products for market, manufacture of prepared food products * Marketing: promotion of generic products (e. g. milk board), new products, public opinion, through advertising, packaging, ublic relations, etc * Wholesale and distribution: warehousing, transportation, logistics * Retail: supermarket chains and independent food stores, direct-to-consumer, restaurant, food services. Food Processing Sector overview Food processing is a large sector that covers activities such as agriculture, horticulture, plantation, animal husbandry and fisheries. It also includes other industries that use agriculture inputs for manufacturing of edible products. The Ministry of Food Processing, Government of India has defined the following segments within the Food Processing industry: †¢ Dairy, fruits & vegetable processing Grain proc essing †¢ Meat & poultry processing †¢ Fisheries †¢ Consumer foods including packaged foods, beverages and packaged drinking water. While the industry is large in terms of size, it is still at a nascent stage in terms of development. Out of the country’s total agriculture and food produce, only 2 per cent is processed. The highest share of processed food is in the Dairy sector, where 37 per cent of the total produce is processed, of which 15 per cent is processed by the organized sector. Primary food processing (packaged fruit and vegetables, milk, milled flour and rice, tea, spices, etc. ) constitutes around.Table: 2. 1 India’s food-processing sector India’s food-processing sector, though still developing, contributes 14 percent to the manufacturing GDP (5. 5 percent of aggregate GDP), produces goods worth rs. 2. 8 trillion ($64 billion), and employs 13 million people. Much of India’s food-processing industry is small-scale and involves ve ry little value addition, although in recent years several multinational food-processing companies have started operations in India. A plethora of internal restrictions, including (a) prohibition on foreign direct investment in retail, (b) prohibitions on contract farming, (c) barriers to nterstate commerce based on revenue and food security concerns, (d) some of the highest taxes on processed foods in the world, and (e) inefficient in infrastructure and marketing networks seriously constrain growth of the sector. The almost year-round availability of fresh products across the country, combined with the consumers’ preference for fresh products and freshly cooked foods has dampened demand for processed food products. The level of processing varies across segments – ranging from less than 2 percent of the production in the case of fruits and vegetables to over 90 percent in non-perishable products such as cereals and pulses.In the latter, however, processing involves ver y little value addition, and is mostly confined to grading, cleaning, milling, and packing; with negligible use of additives, preservatives, and flavors. Table: 2. 2 Level of processed food in year 2008 Product| Level of Processing (% of total production)| | OrganizedSector| UnorganizedSector 1/| Total| Fruits & vegetables| 1. 2| 0. 5| 1. 7| Milk | 15. 0| 22. 0| 37. 0| Meat| 21. 0| 0| 21. 0| Poultry| 6. 0| 0| 6. 0| Marine fisheries| 1. 7| 9. 0| 10. 7| Shrimp| 0. 4| 1. 0| 1. 4| Source: Rabobank Analysis Source: – Web http://www. nasftlevelprocessing. org/ Table 2. level of processing Forecasted â€Å"Unorganized† in fruits and vegetables includes unbranded pickles, sauces, and potato chips, but excludes processing by street vendors; â€Å"unorganized† in dairy includes processing by sweet food makers; â€Å"unorganized† in marine products includes processing by small fishermen. . At present, most inputs for the food-processing industry are sourced domestic ally, with the exception of some bulk commodities that are in short supply, such as pulses and vegetable oils, dried fruits and nuts, and small but increasing quantities of food additives and ingredients such as soy proteins, whey, and flavors and essence.India annually imports vegetable oils valued at over $2. 6 billion and pulses valued at $560 million. Imports of food ingredients were valued at $170 million in 2007/08, and include mostly spices and condiments, dairy products, cocoa products, fish and fish products, fruit juices, and other ingredients (yeasts, sauces, soft drink concentrates, flavoring materials, soy protein concentrates and isolates, etc. ). Unorganized, small players account for more than 70 percent of the industry’s output in volume and 50 percent in value terms.Most of them operate locally, add little if any value to products, and use outdated technologies. The government’s policy of reserving the food-processing sector for small-scale units, eff ective until 1991, discouraged large-scale domestic and foreign direct investment in the food-processing sector. However, following economic liberalization in 1991, the food-processing industry was opened, resulting in increased investment in this sector, both domestic and foreign.Over the last few years, several large companies, both Indian and foreign, have invested in the food-processing business in India, resulting in significant growth in this sector. Some of the major players in India’s food-processing industry are listed in this report. There are hundreds of medium-sized regional companies, some of them aspiring to emerge as national players with their own established brands, who pose some competition to large firms . The domestic organized processed-food market is expected to triple in the next 10 years from about $100 billion in FINACIAL YEAR 2004 to $310 billion in FINACIAL YEAR 2015.India aims to increase its share of world trade in this sector from 1. 7% currently ($7. 5 billion) to 3% by 2015 ($20 billion) Graph 2. 1 FMCG Market Size forecasting Sources:-web http://www. foodprocessing/marketsize/. com So here we have estimated that production of processed food is increasing linearly with respect to FMCG Market size till 2015 E ,its shows that very good potential of proceeds food in coming future. Major Players of Food Processing Industry Indian Food Processing Companies ProfilesIndian food processors may be divided into the following main categories: †¢ Large Indian companies that have their production base in India or neighboring countries (for tax-saving purposes) †¢ Multinational and joint-venture companies that have their production base in India †¢ Medium/small domestic food-processing companies with a local presence †¢ Small local players in the unorganized sector Major Indian player in Food processing Industry Overview I. T. C LTD ITC is one of India's foremost private sector companies with a market capitalisation of nearly US $ 19 billion* and a turnover of over US $ 5. 1 Billion.ITC has a diversified presence in Cigarettes, Hotels, Paperboards ; Specialty Papers, Packaging, Agribusiness, Packaged Foods ; Confectionery, Information Technology, Branded Apparel, Personal Care, Stationery, Safety Matches and other FMCG products. ITC's Agri-Business is one of India's largest exporters of agricultural products. ITC is one of the country's biggest foreign exchange earners (US $ 3. 2 billion in the last decade). The Company's ‘e-Choupal' initiative is enabling Indian agriculture significantly enhance its competitiveness by empowering Indian farmers through the power of the Internet.This transformational strategy, which has already become the subject matter of a case study at Harvard Business School, is expected to progressively create for ITC a huge rural distribution infrastructure, significantly enhancing the Company's marketing Reach. ITC's wholly owned Information Technology subsidiary, ITC InfoTech India Limited, is aggressively pursuing emerging opportunities in providing end-to-end IT solutions, including e-enabled services and business process outsourcing.ITC's production facilities and hotels have won numerous national and international awards for quality, productivity, safety and environment management systems. ITC was the first company in India to voluntarily seek a corporate governance rating. ITC employs over 25,000 people at more than 60 locations across India. The Company continuously endeavors to enhance its wealth generating capabilities in a globalizing environment to consistently reward more than 3, 78,000 shareholders, fulfill the aspirations of its stakeholders and meet societal expectations.This over-arching vision of the company is expressively captured in its corporate positioning statement. GODREJ PROFILE Started in 1897 as locks manufacturing company, the Godrej Group is today one of the most accomplished and diversified business houses in Ind ia. Godrej’s success has been driven by the company’s commitment to delivering innovation and excellence. Through the consistent application of this commitment and a century of ethical business conduct, Godrej has earned an unparalleled reputation for trust and reliability.In 1930, Godrej became the first company in the world to develop the technology to manufacture soap with vegetable oils; that spirit of innovation has continued throughout the organization’s history. Today Godrej is delivering consumers exciting innovations across a spectrum of businesses. The company’s pursuit of excellence is equally well established and enduring. In the 1944 Mumbai docks blast, Godrej safes were the only security equipment whose contents were unharmed; an equal level of product quality continues to be expected from every product bearing the Godrej brand name. Godrej management nderstands that the company’s greatest asset is the trust and faith that consumers h ave reposed in it, and recognizes that the company must continue to earn this trust. This translates to the organization delivering outstanding quality and value in everything it does. Godrej’s ethical and visionary practices have allowed the company to successfully expand into a number of businesses. Today Godrej is a leading manufacturer of goods and provider of services in a multitude of categories: home appliances, consumer durables, consumer products, industrial products, and agri products to name a few.A recent estimate suggested that 400 million people across India use at least one Godrej product every day. The group has more recently entered the real estate and information technology sectors, and management views these as avenues for enormous growth. The 6000 Crore – (US $1. 5  Billion)  Godrej Group is one of India's largest professionally run private sector groups. It has a well-established presence in varied businesses ranging from foods and consumer dur ables to real estate and information technology. In 1997, Godrej completed 100 years of service to the nation. Today, the name Godrej is synonymous with Quality ; Trust.It is amongst the most admired Business Groups in India, delivering quality products and services to its customers at competitive costs. All this, with the highest international standards of customer care. MTR Foods Limited Profile MTR Foods Limited is amongst the top five processed food manufacturers in India. We manufacture, market and export a wide range of packaged foods to global markets that include USA, UK, Australia, New Zealand, Malaysia, Singapore, UAE and Oman. Starting with the legendary MTR restaurant in Bangalore, India’s silicon valley, we now offer †complete meal solutions'.Our wide range of products include ready-to-eat curries and rice, ready-to-cook gravies, frozen foods, ice cream, instant snack and dessert mixes, spices and a variety of accompaniments like pickles and papads. Our dee p understanding of culinary expectations and needs has resulted in many new and innovative products. Our investments in infrastructure and technology ensure that we can scale rapidly and bring these to market. Today, consumers across the globe count on us to bring them all-natural, wholesome and delicious food that is also convenient and no-fuss.We have also expanded our retail presence significantly: contemporary ‘Namma MTR' and MTR kiosks now serve delighted consumers across Bangalore and Chennai. Parle Limited Profile Parle Products has been India's largest manufacturer of biscuits and confectionery, for almost 80 years. Makers of the world's largest selling biscuit, Parle-G, and a host of other very popular brands, the Parle name symbolizes quality, nutrition and great taste. With a reach spanning even the remotest villages of India , the company has definitely come a very long way since its inception.Many of the Parle products – biscuits or confectioneries, are mar ket leaders in their category and have won acclaim at the Monde Selection, since 1971. With a 40% share of the total biscuit market and a 15% share of the total confectionary market in India, Parle has grown to become a multi-million dollar company. While to consumers it's a beacon of faith and trust, competitors look upon Parle as an example of marketing brilliance. Dabur India Limited Profile Dabur India Limited has marked its presence with some very significant achievements and today commands a market leadership status.Our story of success is based on dedication to nature, corporate and process hygiene, dynamic leadership and commitment to our partners and stakeholders. The results of our policies and initiatives speak for themselves. * Leading consumer goods company in India with a turnover of Rs. 2233. 72 Crore (FY07) * 2 major strategic business units (SBU) – Consumer Care Division (CCD) and Consumer Health Division (CHD) * 3 Subsidiary Group companies – Dabur Fo ods, Dabur Nepal and Dabur International and 3 step down subsidiaries of Dabur International – Asian Consumer Care in Bangladesh, African Consumer Care in Nigeria and Dabur Egypt. 13 ultra-modern manufacturing units spread around the globe * Products marketed in over 50 countries Wide and deep market penetration with 47 C;F agents, more than 5000 distributors and over 1. 5 million retail outlets all over India. CCD, dealing with FMCG Products relating to Personal Care and Health Care * Leading brands – * Dabur – The Health Care Brand * Vatika-Personal Care Brand * Anmol- Value for Money Brand * Hajmola- Tasty Digestive Brand * and Dabur Amla, Chyawanprash and Lal Dant Manjan with Rs. 00 crore turnover each * Vatika Hair Oil ; Shampoo the high growth brand * Strategic positioning of Honey as food product, leading to market leadership (over 40%) in branded honey market   * Dabur Chyawanprash the largest selling Ayurvedic medicine with over 65% market share. * Le ader in herbal digestives with 90% market share * Hajmola tablets in command with 75% market share of digestive tablets category Dabur Lal Tail tops baby massage oil market with 35% of total share. CHD (Consumer Health Division), dealing with classical Ayurvedic medicines. Has more than 250 products sold through prescriptions as well as over the counter * Major categories in traditional formulations include: – Asav Arishtas – Ras Rasayanas – Churnas – Medicated Oils * Proprietary Ayurvedic medicines developed by Dabur include: – Nature Care Isabgol – Madhuvaani – Trifgol * Division also works for promotion of Ayurveda through organised community of traditional practitioners and developing fresh batches of students Analysis Porter Five Forces Analysis for Indian Food Processing AnalysisThe Porter's 5 Forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it helps yo u understand both the strength of your current competitive position, and the strength of a position you're looking to move into. With a clear understanding of where power lies, you can take fair advantage of a situation of strength, improve a situation of weakness, and avoid taking wrong steps. This makes it an important part of your planning toolkit. Conventionally, the tool is used to identify whether new products, services or businesses have the potential to be profitable.However it can be very illuminating when used to understand the balance of power in other situations too. Threat of Entry (high) The threat of new entry is quite high: if anyone looks as if they’re making a sustained profit, new competitors can come into the industry easily, reducing profits Profitable markets that yield high returns will draw firms. The results is many new entrants, which will effectively decrease profitability. Unless the entry of new firms can be blocked by incumbents, the profit rate will fall towards a competitive level (perfect competition). Capital Requirements(low) The capital costs of getting established in an industry can be reduce because of the government subsidies provided to food processing sector. Financial disaster for most participants is that the initial setup costs of new ventures were typically very low. Startup costs are so low that individual, self-financing entrepreneurs can enter. For example, in mineral water pouch business, costs for a company are around Rs 350,000 and reaming Rs 750,000 is subsidies by Government * Economies of Scale(low)In industries that are capital or research or advertising intensive, efficiency requires large-scale operation. The problem for new entrants is that they are faced with the choice of either entering on a small scale and accepting high unit costs, or entering on a large scale and running the risk of underutilized capacity while they build up sales volume. These economies of scale have deterred entry into th e industry so that the only new entrants in recent decades have been state-supported companies the main reason or source to achieve scale economies is new product development costs.Thus, developing and launching a new product is very costly. Segment of the market for food processing Industry is very narrowly define so potential customer are very few that’s why companies are not able to achieve economies of scales. * Absolute Cost Advantages(high) Apart from economies of scale, established firms may have a cost advantage over entrants simply because they entered earlier. Absolute cost advantages often result from the acquisition or alliances of low-cost sources of raw materials. Absolute cost advantages may also result from economies of learning.Amul cost advantage in Pasteurization milk results from its early entry into this market and its ability to move down the learning curve faster than local player and then making alliances with they produce milk but marketed by the bran d name of Amul. So new enter company alliance with well establish large firm can easily enter in the company Product Differentiation (high) In an industry where products are differentiated, established firms possess the advantages of brand recognition and customer loyalty.New entrants to such markets must spend disproportionately heavily on advertising and promotion to gain levels of brand awareness and brand goodwill similar to that of established companies. One study found that, compared to early entrants, late entrants into consumer goods markets incurred additional advertising and promotional costs amounting to 2. 12 percent of sales revenue. Alternatively, the new entrant can accept a niche position in the market or can seek to compete by cutting price.And in food processing industry there are many untapped market are available, so there are good opportunity for niche marketing in food processing industry e. g. sugar free is product that only targeting diabetic person and healt h conscious person only and it having 11% growth rate annually * Access to Channels of Distribution (low) Whereas lack of brand awareness among consumers acts as a barrier to entry to new suppliers of consumer goods, a more immediate barrier for the new company is likely to be gaining distribution.Limited capacity within distribution channels (e. g. , shelf space), risk aversion by retailers, and the fixed costs associated with carrying an additional product result in retailers being reluctant to carry a new manufacturer’s product. The battle for supermarket shelf space between the major food processors (typically involving lump-sum payments to retail chains in order to reserve shelf space) means that new entrants scarcely get a look in. * Governmental and Legal Barriers(high)Some economists (Amitabha Sen) claim that the only effective barriers to entry are those created by government. In taxicabs, banking, telecommunications, and broadcasting, entry usually requires the gran ting of a license by a public authority. From medieval times to the present day, companies and favored individuals have benefited from governments granting them an exclusive right to ply a particular trade or offer a particular service. In knowledge-intensive industries, patents, copyrights, and other legally protected forms of intellectual property are major barriers to entry.Regulatory requirements and environmental and safety standards often put new entrants at a disadvantage to established firms, because compliance costs tend to weigh more heavily on newcomers . e. g. Prevention of Food Adulteration laws is not only stringent one but time consuming also. It is considered as an archaic and no industry friendly food law. It substantial varies from Codex standard. Harmonization of multiple food laws is an urgent necessity. * Retaliation (low) Barriers to entry also depend on the entrants’ expectations as to possible retaliation by established firms.Retaliation against a new entrant may take the form of aggressive price-cutting, increased advertising, sales promotion, or litigation. The major food processing company has a long history of retaliation against low-cost entrants. Parle and other budget food processing have alleged that selective price cuts by MNC and other major food processing like Britannia amounted to predatory pricing designed to prevent its entry into new routes. 8 To avoid retaliation by incumbents, new entrants may seek initial small scale entry into less visible market segments.New entered company market and targeted the small segments partly because this segment had big opportunity and large profit (niche marketing). Rivalry between Established Competitors (low) For most industries, this is the major determinant of the competitiveness of the industry. Sometimes rivals compete aggressively and sometimes rivals compete in non-price dimensions such as innovation, marketing, etc. For most industries, the major determinant of the overal l state of competition and the general level of profitability is competition among the firms within the industry.In some industries, firms compete aggressively – sometimes to the extent that prices are pushed below the level of costs and industry-wide losses are incurred. In others, price competition is muted and rivalry focuses on advertising, innovation, and other non price dimensions. Six factors play an important role in determining the nature and intensity of competition between established firms: concentration, the diversity of competitors, product differentiation, excess capacity, exit barriers, and cost conditions. * Concentration(high) Seller concentration refers to the number and size distribution of firms competing within a market.It is most commonly measured by the concentration ratio: the combined market share of the leading producers. Where a market is dominated by a small group of leading companies (an oligopoly), price competition may also be restrained, eithe r by outright collusion, or more commonly through â€Å"parallelism† of pricing decisions. Thus, in markets dominated by two companies, such as soft drinks (Coke and Pepsi), prices tend to be similar and competition focuses on advertising, promotion, and product development. Economists measure rivalry by indicators of   industry concentration.The Concentration Ratio (CR) is one such measure. The Bureau of Census periodically reports the CR for major Standard Industrial Classifications (SIC's). The CR indicates the percent of market share held by the four largest firms (CR's for the largest 8, 25, and 50 firms in an industry also are available). A high concentration ratio indicates that a high concentration of market share is held by the largest firms – the industry is concentrated. With only a few firms holding a large market share, the competitive landscape is less competitive (closer to a monopoly).A low concentration ratio indicates that the industry is characteri zed by many rivals, none of which has a significant market share. These fragmented markets are said to be competitive. The concentration ratio is not the only available measure; the trend is to define industries in terms that convey more information than distribution of market share. In food processing industry concentration ratio is high that indicate high concentration of market share is held by the largest firms like ITC (tobacco), Cadbury (chocolates) etc.As the number of firms supplying a market increases, coordination of prices becomes more difficult, and the likelihood that one firm will initiate price-cutting increases. However, despite the common observation that the elimination of a competitor typically reduces price competition, while the entry of a new competitor typically stimulates it, systematic evidence of the impact of seller concentration on profitability is surprisingly weak. Richard Schmalensee concluded that: â€Å"The relation, if any, between seller concentra tion and profitability is weak statistically and the estimated effect is usually small. * In pursuing an advantage over its rivals, a firm can choose from several competitive moves: * Changing prices – raising or lowering prices to gain a temporary advantage. * Improving product differentiation – improving features, implementing innovations in the manufacturing process and in the product itself. * Creatively using channels of distribution – using vertical integration or using a distribution channel that is novel to the industry. * Exploiting relationships with suppliers – set high quality standards and required suppliers to meet its demands for product specifications and price. Diversity of Competitors (low) The extent to which a group of firms can avoid price competition in favor of collusive pricing practices depends upon how similar they are in terms of origins, objectives, costs, and strategies. In food processing industry it is very low here firm alw ays try to compete rival strategies and there product prices e. g. coke and Pepsi, magi and top Ramon ,Amul ice cream and havmor ice cream etc * Product Differentiation The more similar the offerings among rival firms, the more willing customers are to substitute and the greater the incentive for firms to cut prices to increase sales.Where the products of rival firms are virtually indistinguishable, the product is a commodity and price is the sole basis for competition. Commodity industries such as food processing agriculture, mining, and petrochemicals tend to be plagued by price wars and low profits. By contrast, in industries where products are highly differentiated (perfumes, pharmaceuticals, restaurants, management consulting services), price competition tends to be weak, even though there may be many firms competing. ood processing industry it is very low here firm always try to compete rival strategies and there product prices because they have more or similer offering and th ere product are virtually indistinguishable e. g. coke and Pepsi, magi and top Ramon ,Amul ice cream and havmor ice cream etc * Excess Capacity and Exit Barriers Why does industry profitability tend to fall so drastically during periods of recession? The key is the balance between demand and capacity. Unused capacity encourages firms to offer price cuts to attract new business in order to spread fixed costs over a greater sales volume.Excess capacity may be cyclical (e. g. the boom–bust cycle in the semiconductor industry); it may also be part of a structural problem resulting from overinvestment and declining demand. In these latter situations, the key issue is whether excess capacity will leave the industry. Barriers to exit are costs associated with capacity leaving an industry. Where resources are durable and specialized, and where employees are entitled to job protection, barriers to exit may be substantial. Conversely, rapid demand growth creates capacity shortages that boost margins.On average, companies in growing industries earn higher profits than companies in slow growing or declining industries see figure 3. 4. In food processing industry it will not effect because food demand is always increase or maintain because it is directly related to population growth, and in this industry some exit barrier are working because of Government policies. Bargaining Power of Buyers (low) Also described as the market of outputs. The ability of customers to put the firm under pressure and it also affects the customer's sensitivity to price changes. Customer has enough option to switch so they have less bargaining power. The firms in an industry operate in two types of markets: in the markets for inputs and the markets for outputs. In input markets firms purchase raw materials, components, and financial and labor services. In the markets for outputs firms sell their goods and services to customers (who may be distributors, consumers, or other manufacturers). In both markets the transactions create value for both buyers and sellers.How this value is shared between them in terms of profitability depends on their relative economic power. Let us deal first with output markets. The strength of buying power that firms face from their customers depends on two sets of factors: buyers’ price sensitivity and relative bargaining power. Buyers’ Price Sensitivity (low) The extent to which buyers are sensitive to the prices charged by the firms in an industry depends on four main factors: * The greater the importance of an item as a proportion of total cost, the more sensitive buyers will be about the price they pay.Beverage manufacturers are highly sensitive to the costs of metal cans because this is one of their largest single cost items. Conversely, most companies are not sensitive to the fees charged by their auditors, since auditing costs are such a small proportion of overall company expenses. * The less differentiated the product s of the supplying industry, the more willing the buyer is to switch suppliers on the basis of price. * The more intense the competition among buyers, the greater their eagerness for price reductions from their sellers.As competition in the world food processing industry has intensified, so component suppliers are subject to greater pressures for lower prices, higher quality, and faster delivery. * The greater the importance of the industry’s product to the quality of the buyer’s product or service, the less sensitive are buyers to the prices they are charged. The buying power of necessary processed food product like suger salt etc. is limited by the critical importance of these components to the functionality of their product. Relative Bargaining Power (high)Bargaining power rests, ultimately, on refusal to deal with the other party. The balance of power between the two parties to a transaction depends on the credibility and effectiveness with which each makes this th reat. The key issue is the relative cost that each party sustains as a result of the transaction not being consummated. A second issue is each party’s expertise in leveraging its position through gamesmanship. Several factors influence the bargaining power of buyers relative to that of sellers: * Size and concentration of buyers relative to suppliers.The smaller the number of buyers and the bigger their purchases, the greater the cost of losing one. * Buyers’ information. The better informed buyers are about suppliers and their prices and costs, the better they are able to bargain.. Keeping customers ignorant of relative prices is an effective constraint on their buying power. But knowing prices is of little value if the quality of the product is unknown. It always works in food processing industry because people are not having full information about the product like k special of Kellogg which reduces the cholesterol of the consumer. Ability to integrate vertically. In refusing to deal with the other party, the alternative to finding another supplier or buyer is to do it yourself. Large food processing companies such as Heinz and Campbell Soup have reduced their dependence on the manufacturers of metal cans by manufacturing their own. The leading retail chains have increasingly displaced their suppliers’ brands with their own-brand products. Backward integration need not necessarily occur – a credible threat may suffice. Buyers are Powerful in food processing industryBuyers are concentrated – there are a few buyers with significant market share Buyers purchase a significant proportion of output – distribution of purchases or if the product is standardized Buyers possess a credible backward integration threat – can threaten to buy producing firm or rival Buyers are Weak in food processing industry Producers threaten forward integration – producer can take over own distribution/retailing Significant buyer s witching costs – products not standardized and buyer cannot easily switch to another product.Buyers are fragmented (many, different) – no buyer has any particular influence on product or price Producers supply critical portions of buyers' input – distribution of purchases Bargaining Power of Suppliers (low) Also described as market of inputs. Suppliers of raw materials, components, and services (such as expertise) to the firm can be a source of power over the firm. Suppliers may refuse to work with the firm, or e. g. charge excessively high prices for unique resources.Analysis of the determinants of relative power between the producers in an industry and their suppliers is precisely analogous to analysis of the relationship between producers and their buyers. The only difference is that it is now the firms in the industry that are the buyers and the producers of inputs that are the suppliers. The key issues are the ease with which the firms in the industry can s witch between different input suppliers and the relative bargaining power of each party. Because raw materials, emi-finished products, and components are often commodities supplied by small companies to large manufacturing companies, their suppliers usually lack bargaining power. Suppliers are not Powerful because in food processing industry Credible forward integration threat by suppliers Suppliers concentrated Significant cost to switch suppliers Customers Powerful Suppliers are Weak because in food processing industry Many competitive suppliers – product is standardized Purchase commodity products Credible backward integration threat by purchasers Concentrated purchasers Customers WeakThreat of Substitutes (high) In Porter's model, substitute products refer to products in other industries. To the economist, a threat of substitutes exists when a product's demand is affected by the price change of a substitute product. A product's price elasticity is affected by substitute p roducts – as more substitutes become available, the demand becomes more elastic since customers have more alternatives. A close substitute product constrains the ability of firms in an industry to raise prices. The competition engendered by a Threat of Substitute comes from products outside the industry.The price of aluminum beverage cans is constrained by the price of glass bottles, steel cans, and plastic containers. These containers are substitutes, yet they are not rivals in the aluminum can industry. The existence of close substitute products increases the propensity of customers to switch to alternatives in response to price increases (high elasticity of demand). * buyer propensity to substitute (high) * relative price performance of substitutes(high) * buyer switching costs (low) Pressure from Substitutes Emerges Mainly From Two Factors 1. Switching costs for customers to the substitute. . Buyer willingness to search out for substitutes. Also the threat of substitution may take four different forms, each of which we shall now discuss with reference to above factors. Substitution of need We take switching from one product (e. g. natural drink of Dabur) to another (fresh juice from local vendor or prepared at home). In this case, the buyers might be looking out for freshness and might not mind the nominal switching costs Food processing Industry will definitely remain, in one form or the other, as long as the manufacturers manufacture and consumers consume.Food processing industry does not seem to become extinct even in the future. The issue that remains to be addressed is just – what forms it keeps evolving into. Here the Substitutes of food processing industry are fresh fruits and vegetables and food as a raw material , but they are yet very well developed in India, so their threat are comparatively very high but food processing industry break the boundaries of food product availability in certain season and area that is why food industry will sustain for longer term.While the treat of substitutes typically impacts an industry through price competition, there can be other concerns in assessing the threat of substitutes. * Strategic Implications of the Five Competitive Forces Competitive environment is unattractive from the standpoint of earning good profits when * Rivalry is vigorous * Entry barriers are low and entry is likely * Competition from substitutes is strong * Suppliers and customers have considerable bargaining power Competitive environment is ideal from a profit-making standpoint when * Rivalry is moderate Entry barriers are high and no firm is likely to enter * Good substitutes do not exist * Suppliers and customers are in a weak bargaining position. But food processing industry is little bit attractive but not ideal, it gives considerable profit Because of the following point * Rivalry is moderate * Entry barriers are low and firm is likely to enter * Good have some substitutes but up to certain extant * Suppliers and customers are in a weak bargaining position Conclusion Growing Indian economy and improving lifestyles of Indians contributing in a big way to the growth.The Indian snacks market is worth around US$ 3 billion, with the organised segment taking half the market share, and has an annual growth rate of 15-20 per cent. The unorganised snacks market is worth US$ 1. 56 billion, with a growth rate of 7-8 per cent per year. There are approximately 1,000 types of snacks and another 300 types of savories being sold in the Indian market today. There is a big market for snacks in India as urban Indian consumers eat ready-made snacks 10 times more than their rural counterparts. Consumers are willing to pay a premium for both value-added private and branded products, creating immense opportunities for manufacturers and retailers. The growth of food processing sector has nearly doubled to 13. 7 per cent during the last four years. A dominant segment of the food industry, food proces sing is estimated to be worth US$ 70 billion with a 32 per cent share. It comprises agriculture, horticulture, animal husbandries, and plantation. The opportunity for growth is huge when seen against the fact that while a mere 1. per cent of food is processed in India, nearly 80 per cent of food is processed in the developed world. Significantly, processed food exports have increased from US$ 6. 98 billion in 2003-04 to US$ 20. 51 billion in 2007-08, recording a whopping 193. 83 per cent growth rate. It realise India's potential in this industry, investment target of US$ 25. 07 billion by 2015 to double India's share in global food trade from 1. 6 per cent to 3 per cent, increase processing of perishable food from 6 per cent to 20 per cent and value addition from 20 per cent to 35 per cent.At last India is all set to become the food supplier of the world. It has the cultivable land, all the seasons for production of all varieties of fruits and vegetables, well developed agribusiness system that works in its own way. There are some Factors such as rapid growth in the economy, the technological innovations, rise of families with dual incomes and the changing food habits of the population all point to the increasing need for healthy processed food. The supply chain sector is very weak with no process owner and this can spell disaster.The food supply chain needs the attention, the industry and the Government. * Reasons to Invest in Indian Food Processing Industry It is the seventh largest country, with extensive administrative structure and independent judiciary, a sound financial & infrastructural network and above all a stable and thriving democracy. Due to its diverse agro-climatic conditions, it has a wide-ranging and large raw material base suitable for food processing industries. Presently a very small percentage of these are processed into value added products.It is one of the biggest emerging markets, with over 900 million population and a 250 million stro ng middle class. * Rapid urbanization, increased literacy and rising per capita income, have all caused rapid growth and changes in demand patterns, leading to tremendous new opportunities for exploiting the large latent market. An average Indian spends about 50% of household expenditure on food items. Demand for processed/convenience food is constantly on the rise. India's comparatively cheaper workforce can be effectively utilized to setup large low cost production bases for domestic and export markets.Liberalized overall policy regime, with specific incentives for high priority food processing sector, provides a very conducive environment for investments and exports in the sector. Very good investment opportunities exist in many areas of food processing industries, the important ones being : fruit ; vegetable processing, meat, f Read also: My Ambition Is To Become a Collector