Exercise: Distribution of Fruits and vegetable (F&V) in Retail Chains • You are

Question

Exercise: Distribution of Fruits and vegetable (F&V) in Retail Chains

• You are setting up a chain or retail stores to sell fresh Fruits & Vegetables in top 10 cities in India

• Task : Identify stages in distribution network and the role played by each.
• Intermediate activities to be performed
– Cleaning, Sorting, Grading, Packing, labeling
• Perishable product : Freshness is key determinant.
• Retail stores – located around residential areas. Convenient shopping – within 2 km.

Products
Locally Procured : APMC markets, Direct from farmers, Local Mandis , Fresh vegetables
Nationally procured : National Level Markets Fruits, Potatoes / Onions

Explanation / Answer

Basically there are three types of distribution channels.

1.       Product is directly transferred form the producer to consumer

Producer to consumer

2.       Product is transferred to retailer and then to consumer

Producer to retailer to consumer

3.       Product is transferred to wholesaler, wholesaler transfers to retailer, retailer transfers to consumer

Producer to wholesaler to retailer to consumer

4.       Producer transfers to agent, agent transfers to wholesaler, wholesaler transfers to retailer, and finally retailer transfers to consumer

Product to agent to wholesaler to retailer to consumer

In the scenario given, the retail chain of stores will be operating in ten different locations in India. Basically, the type of distribution to be chosen depends on the type and availability of products. There are two categories of products given in the question.

1.       The first category of products is locally produced fresh fruits and vegetables directly from the farmers, which are transferred directly to the retailer and then to the customer. The type of distribution apt for this category is when the product is transferred to the retailer and then to the consumer.

Producer to retailer to consumer

Producer- local farmers of vegetables and fruits who produces them. Upon plucking from the farms, they are sorted to remove the spoiled, shapeless fruits (they have a set standard for shape and size) and vegetables. They are then cleaned by the farmers and their workers, graded according to the quality and then packed according to shapes and quality. Finally, the produces are labelled for sales.

Retailer- The retailer gives orders to the farmers through online or thorough their purchase department. The retailer buys in bulk quantity, specifies the quantity required, makes a bargain or quote and finally purchases the fruits and vegetables.

Consumer- The fruits and vegetables are finally reached to consumers; this is the best possible distribution chain for a retailer. Since the producers are locally placed, it reaches the hands of the consumers fresh within short time.

2.       The second category of products are nationally procured fruits, potatoes and onions.

The distribution network is

Producer to wholesaler to retailer to consumer

They are two intermediaries between the producer and the consumer. Here, the price is increased in each phase as the intermediaries adds their costs to the final price.

Producer- farmers from different areas of India. After plucking the produces which are again fruits, potatoes, onions, they are first sorted based on the standard size, shape, spoiled or not. After sorting, they are cleaned, graded, packed and labelled by the farmers.

Wholesaler: The producer sells the products to the wholesaler, at a price. The produces are transferred by the farmer, after receiving orders from the wholesalers who are also operating locally. The products are very fresh in this stage. The price at which the farmers sold to the wholesaler, must be the least in this distribution chain.

Retailer: The retailer after quoting with other wholesalers, contacts one particular wholesaler. After much bargaining with various wholesalers, the retailers make a deal with the wholesaler based on certain conditions. The retailer sends order to the wholesaler for a bulk purchase of fruits, potatoes and onions. The retailer sends the purchase order, specifying the quantity. The produces are sold at a much higher price, than the previous stage. The produces are reached in the retail chains, within 3-4 days.

Consumer: The consumer finally buys the products, which are sold at the highest price in the chain. The retailer includes all the costs incurred transportation etc., and finally the produces are sold at a much higher price than the previous stages.

When the distribution chains are the shortest, the price of the products are least.

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