With the advent of large players in retail space there will be enhanced focus on improvements in supply chain. Modernization of supply chain and infrastructure is imminent as large players compete to minimize costs and gain cost leadership in the market. Some of the key investment areas include:

• Sorting, grading and pack-housing near the source of production to reduce loss of quality and quantity at the time of harvesting
  
  
• Transportation (refrigerated / temperate controlled trucks; and network to manage distribution / re-distribution)
  
  
• Distribution centers
  
  
• Ripening chambers / food processing / repacking

The investors in the above areas will not be retailers but third parties specializing in such activities. Unless there is a strong, big front end (retail), the back end investments will not happen. Snowman Foods, with Mitsubishi, tried it many years ago but lost a lot of money since they could not find enough retail customers to take advantage of their logistics back-end service they had put up.

With leading players like Reliance, Bharti-Walmart and Aditya Birla group focused on growing substantially through Food & Grocery (F&G) formats, the process of storing, transporting and displaying food at appropriate temperatures will gain more significance. The expected heavy investment in cold chains and pack-houses is likely to spur a spectacular growth in the air-conditioning and refrigeration markets in India.

Similarly, warehousing is about to witness a transformation as distribution from warehouses becomes more centralized with elimination of different distribution layers and goods sourced directly from central warehouses to the final consumer.

Logistics, particularly transportation, will be another focus area for large players. Till now considered a ‘non value adding” activity, logistics is poised to gain a significant value driver for top retailers as they jostle to squeeze every penny out of the value chain using logistics as a core area for attaining competitive advantage through reduction of wastages, lowering of inventory holding costs in warehouses and stores, and offering competitive edge in bringing merchandise to the consumer in the most “timely” manner. Taking example of Reliance who has been the foremost to take steps in this direction – it has inducted 35-40 tonner cargo aircrafts to transport fruits, vegetables and flowers from warehouses to retail outlets across the country offering it advantages related to time where it now has the competitive edge to transport pineapples purchased in bulk at a mere 25 paise a piece in North-East to all retail stores across the country.