SOUTHEAST UNIVERSITYSchool of Business Studies

OPERATION MANAGEMENTASSIGNMENTOPERATIONS OF KARWAN BAZAAR VEGETABLES MARKET

SUBMITTED BYName SHAFIUL AZAM SIDDIQUI SHOHIDUZZAMAN MD AKHTAR HOSSAIN CHOWDHURY MD. MAHABUL ALAM MUHAMMED HOSSIN UDDIN ID 2011010005262 2011010005254 2011010005247 2011010005276 2011010005274

MBA (FRIDAY), 5TH BATCH, 3RD SEMISTER, SECTION H

SUBMITTED TO AHMED SHOYEB IQBAL

Course Instructor School of Business Studies SOUTHEAST UNIVERSITY DHAKA

16 January, 2011 The Honble Course Teacher S. M. Salahuddin International Business School of Business Studies Southeast University, Dhaka Bangladesh Subject: Submission of Assignment on Differences in Ethical Standards and International Businesses

Dear Sir,It is my pleasure to submit herewith an assignment on Differences in Ethical Standards and International Businesses for your kind perusal. I have accomplished the assignment in accordance with the discussion and the data collected from internet (website) and I have obtained the all informations & explanations which are to the best of my knowledge necessary for the purposes of the assignment. I have enjoyed preparing the report because it provided us the opportunity to gather more knowledge about Differences in Ethical Standards and International Businesses. Thanking you; Yours most obedient,

Shafiul Azam Siddiqui ID: 2011 01000 5262

OPERATIONS OF KARWAN BAZAAR VEGETABLES MARKET

Introduction Kawran Bazaar is the biggest and most famous wholesale general market in Dhaka City. All kinds of vegetables, fish, rice and other commodities are supplied to the small markets from here. At the end of eighteenth century Kawran Singh, a Marwari merchant, first established the bazaar. It was later extended and developed into 1255 stores, of which 55 are owned by Dhaka City Corporation. Also there are hundreds of small temporary shops in and around the market. There is no holiday in this market, which operates 24 hours a day. Early morning is the peak hour for the wholesale and fish markets. Starting at 12 A.M, all night the vegetables and goods come from around the country. Many trucks and pick-ups carry and bring commodities here from different places. The gathering of clients becomes concentrated in the early morning, around 4-7 Oclock, when the small markets open. The market has separate blocks for wholesale trade in fish, vegetables and rice. The wholesale market has a daily revenue of 50 million Bangladeshi taka.

Hypothesis This paper has been prepared under the perspective of SUPPLY CHAIN MANAGEMENT system in particular to vegetable market of Kawran Bazaar. This paper will highlight the various aspects of this vegetable market, supply system, price of daily vegetable commodities, their market share, reasons for price hike, comparison with international market and whether superstores can play effective role in keeping the price of the vegetables reasonable and stable in Bangladesh.

Methodology This paper has been prepared basing on various data collected from related persons in the vegetables market both wholesale and retail sellers. Some information has been obtained from newspapers and various websites. Location of the Study Area: Kawran Bazaar is located in between of Farmgate and Bangla Motor area. It has Panthapath on its south and Shaheed Tazuddin Sharani on the west. Offices of many government agencies, autonomous bodies and big companies are now located in the area surrounding the market. Pan Pacific Hotel Sonargaon is located at one end of the market.

Fig : Location of Kawran Bazaar

Main Selling Commodities of Kawran Bazar Context Vegetable Kawran Bazaar operates as the main hub of vegetables supply. Every kind of vegetables are traded here, among them the major winter vegetables are : Cabbage White Radish

Cauliflower

Hyacinth bean

Tomato

Bottle gourd

Eggplant

Carrot

Major summer vegetables are :

Pumpkin

Okra

Bitter gourd

Yard-long bean

Teasel gourd

Spinach

Ribbed gourd

Red Spinach

Ash gourd

Contribution Of The Main Selling Items On Total Commodities: The percentages of the main selling items in terms of vegetables on total commodities are given below.

Percentage of Selling Vegetable Commodities

Red Spinach, 8% Spinach , 7% Yard-long bean, 1% Okra, 2% Ash gourd, 2% Ribbed gourd, 2% Teasel gourd, 2% Cabbage, 7% Cauliflower, 8% Tomato, 9%

Bitter gourd, 8% Pumpkin, 6% Carrot, 8% Bottle gourd , 9%

Eggplant, 8% White Radish, 7% Hyacinth bean, 6%

Legend

Cabbage Bottle gourd Ash gourd

Cauliflower Carrot Okra

Tomato Eggplant Pumpkin Bitter gourd Yard-long bean Spinach

White Radish Teasel gourd Red Spinach

Hyacinth bean Ribbed gourd

Few Findings Regarding Price Aspects of the Vegetable Commodities

Information on every kind was gathered, starting from daily prices at various levels, other expenditures incurred, changes of hand in the process, comparison of prices within last few years, price variation among markets in the capital etc. The findings of all these data are explained subsequently. The relative prices of last few years are shown below. Though various related expenditures like fuel, transportation and others have increased but the price of vegetables in general didnt rise accordingly. Further explained below:

COMPARATIVE MARKET PRICE

Ser.

Items

2006 (Avg)

2008 (Avg) 40-50 150-155 16-17 45-50 55-56 18-20 35-40

2009 (Avg) 30-40 100-110 20-24 35-40 35-36 32-34 30-32

2011 (Avg) 55-65 170-180 14-16 35-40 25-30 20-24 45-48

1. 2. 3. 4. 5. 6. 7.

Green Chilly Red Chilly Potato Garlic (BD) Onion (BD) Onion (Indian) Garlic (Indian)

40-45 150-160 22-24 95-100 18-19 16-17 70-75

C O M P A R A T IV E M A R K E T P R IC E

G a rlic (In d ia n)

O n io n (In d ia n)

O n io n (B D ) 2011 Items 2009 G a rlic (B D ) 2008 2006

P o ta to

R e d C h illy

G re en C h illy 0 50 100 T a ka 1 50 200

Main Supply Network For Kawran Bazar Kawran Bazzar has the supply of product from all over the country. But the main networks are shown below :

Vegetables Distribution Chain For Kawran Bazzar

The distribution channel for the vegetable marketing in Kawran Bazzar were identified as below :

FARME R

WHOLESALERS

MIDDLEMEN

RETAILERS

CONSUMER

FIG : Supply Chain for Vegetable In Kawran Bazzar

Reasons For Price Increase in Bangladesh The different vendors at all the level have got their own reasoning as to why they have or rather been bound to increase the prices. But no one could justify with adequate logic and mathematical calculations. Few common reasons are : a. b. c. Price increase in seed and fertilizer. Diesel price increase. Diesel plays a vital role in irrigation system. The wholesalers claimed that the transportation cost has increased which affects the overall price. d. Finally, the most unpleasant reason behind the hidden cost is CHADABAZI or extortion at different levels. Both the transport employees associations and even law enforcing agencies are also involved. Every year the government is giving adequate subsidies of fertilizer and diesel prices for farmers. And again the increase in transportation cost is not that much proportionate to the fuel price hike. But all these government steps could bring .hardly any change in the price hike

How The Cheap Turns Costly Commodity prices bear volatile characteristics that have no particular feature. They can change several times in a day and pass through some steps to get their final shape. Growers prefer to farm commodities in rural areas to make best use of soil fertility. The price circle starts here and gets rolling. The green vegetables or commodities are sold at cheap rates from the growers' field. But this price triples or sometimes quadruples, for which, any single factor is not .responsible Transportation A wholesaler pays in two phases to transport the goods: inside the market and outside the market. Mojibur Rahman, manager of Chowdhury Banijjyalaya in Kawran Bazar, said he spent around Tk 3 to Tk 3.5 in transportation costs to bring a kilogram of pointed gourd to the kitchen market from the grower's garden in Jhinaidah. We also have to pay to carry the products to our shop inside the market, he added. Rahman pays around Tk 30 to laborers to load and unload a 6-maund sack of pointed gourd, while it can go up to Tk 80 in case of a 20.maund sack Waste

Kitchen market products are more sensitive than other daily essentials. A delay in sales or the excessive use of water can spoil the items. Sellers lose around 10 .percent of commodities before preparing the produce for sales

Sellers sprinkle water to give vegetables a fresh look. But that actually is not good for us, as it's not possible to sell our total buy in a day, said Md Malek, a retail vegetable shop owner at the Kawran Bazar kitchen market. He also added As a day progresses, the rate at which vegetables spoil goes up. We have to .raise the price to minimize losses Storage charges and Koyeli Storehouse owners charge different rates to hoard goods. Mojibur Rahman of Kawran Bazar takes Tk 3-3.5 a night to store every 5 kilogram of snake beans from wholesalers as trucks laden with such commodities appear at night. Industry insiders call a storehouse owner and 'Aratdar' and the rate, 'Aratdari'. The rate to .store a 20-maund pack of pointed gourd is Tk 300 This sector bears another kind of commission -- Koyeli. At most times, a steady rate is maintained and it goes into the aratdar's pockets. Retailers pay in this case. Koyeli for every 5 kilogram of papaya, brinjal and ridge gourd stands at around Tk 3 in almost all markets in Dhaka. Rice has the lowest commission, Tk .0.30 a kilogram

Barek Mollah, a fruit retailer at Kawran Bazar, said he paid the commission at a rate of 10 percent, which is also the same for some vegetables like cabbage, cauliflower and sweet pumpkin. Only a few commodities, like potato, onion, garlic .and ginger, enjoy Koyeli-free business

In addition, prices go up because wholesalers have to pay the illegal tolls and guards to bring the produce to Dhaka. Sometimes, buyers have to wait with their goods at the point of purchase due to a lack of means of transportation, a nonfavorable weather condition or any other problem. In this case, buyers deploy a guard with payment to take care of the essentials. This is almost equivalent to the transportation cost. In addition, there are illegal tolls that make the kitchen market goods more pungent. These two are not common always but can be .substantial Import is another option but goods need to be brought from further away and .there is the risk of greater waste and higher expenses The selling price of the commodities are fixed by adding all these expenditures with the amount buyers pay to the growers, - Monir Miya, a commodity importer .in Shyambazar .This is how a Tk 22-25 kilogram of vegetable is sold for Tk 80 in supermarkets

Prices go up another level when the goods reach the retailer's shop, as a retailer profits by around 30 percent. Too many hands are there. Everyone makes the highest possible profit. And we are only a part of the show, said Malek, the .retailer in this market

Modern Supply Chain System For Fresh Products

In today's modern societies, consumers are demanding and are used to have access to fresh produce any time and at any place, no matter if it is a large supermarket, a small corner shop, a street market or in a restaurant. To secure and offer a diverse range of fresh, tasty and high quality fruit and vegetables the way from farm to fork is consequently not as short and simple as it is often thought to be. Ramon Rey, President of Freshfel Europe, explains: Consumers often consider fresh fruit and vegetables as traditional and raw products coming directly from producers. As they are unprocessed, paradoxically consumers consider these products to be too expensive, and fail to perceive any added value brought by the chain. Consumers seem to be prepared to pay for processing costs, marketing and packaging costs when purchasing other foodstuffs, but questioning these costs for fresh produce. There is an imminent need for the fresh produce sector to better communicate that the story is not so simple and that behind the product there is a specialized, professional and dedicated supply chain to best serve consumers. Few related diagram of an ideal modern supply system are given below : Fig : 1

Fig : 2

To explain the modern supply chain system in brief, we will take the examples from Australia which has established its remarkable credibility in this aspects.

The major chains Woolworths: Woolworths is Australias largest grocery retailer and the

second largest private sector employer with 1,460 Australia-wide stores staffed by over 110,000 employees. Its supermarkets account for over 81,000 of its employees. Woolworths is also involved in general merchandising through various discount stores.

Woolworths is Australian-owned with over 91 per cent being ordinary Australian shareholders. It has no connection with similarly named overseas groups

Coles

Coles, along with Bi-Lo, forms the grocery division of Coles Myer, which is Australias largest private sector employer with 150,000 staff. Coles has 410 stores and employs 53,500, whereas Bi-Lo employs 11,795 people in its 156 stores. Coles Myer is a market participant in both traditional and discount department stores, liquor retailing, fast food outlets and womens fashion stores. Coles Myer is Australian-owned with more than 320,000 shareholders, and trades Australia-wide.

Franklins

Franklins is a no frills food retailer and regards itself as the leading modern day discounter. It employs over 25,000 staff in 270 supermarkets and 30 Liquor Save outlets, with operations in New South Wales, Victoria, Queensland and South Australia. Franklins has recently moved to convert many of its retail stores into full-service supermarkets, with a significant offering of fresh produce. Franklins is owned by Hong Kong-incorporated Dairy Farm International, which has supermarkets and other retail outlets throughout Asia and Australia. Major Chains Supermarkets in Australia

The independent retailers

Independent retailers make up the remainder of the retail grocery sector. The independents vary in size from small corner stores to full-size supermarkets. Many independents operate almost entirely in what are called banner groups, which are supplied by a wholesaler, but wholly owned, in most cases, by the independent retailer. The stores operating within a banner group typically present a common face or image to the public. They consist of similarly-sized shops, each carrying a similar product range, and backed by common signage, shared advertising and promotional funding, and coordinated pricing (for example, the pricing of specials). They cooperate, often very closely, with a particular wholesaler, seeking to match the economies of scale in purchasing and other efficiencies in distribution, which are available to the vertically integrated major chains. The IGA banner group is the most notable, with three distinct supermarket categories based on size. Most banner groups operate within their home State, with a few operating nationally.

The main representative body of the independent supermarket sector is the National Association of Retail Grocers of Australia (NARGA). NARGA is a confederation of State-based independent retailer organizations and directly represents around 7,300 small and independent retailers employing around 97,500 staff. Of these, the supermarket and grocery stores sector consists of 4,850 Australia-wide stores.

The wholesalers

Davids Limited (Davids) :

Davids, which commenced wholesaling operations

in 1935, is the largest Australian wholesaler and operates in all States and Territories, except Western Australia. Its core business has been grocery wholesaling and distribution, primarily in New South Wales, however, it also runs a number of stores of its own which are being sold as part of the restructuring initiated by owners Metro Cash and Carry Limited Metro. Davids independent retail customers range from small corner stores to full size supermarkets, which provide similar product choice as any one of the full-size major chain stores. Davids also serves independent retailers with multiple supermarkets some with up to ten stores. Davids employs around 3,500 people at 56 warehouses and around 6,600 people in its company-owned supermarkets throughout Australia. In the early 1990s, Davids considered that if it could increase its size, by joining together all of the independent wholesalers in Australia, it could attain the necessary efficiencies and volume of purchases to compete with the three major chains on an equal footing. Thus, Davids undertook a program of acquisitions of regional and State-based independent wholesalers to build itself up as a fourth force. It was considered that independent retailers could survive only if they were part of a larger group that could deliver the benefits of scale and scope in terms of buying and marketing, merchandising, store design, information technology,

signage etc. while retaining the advantages of an owner operator at the store level. Davids operates via four business channels, with a central corporate support division providing financial, information technology, merchandising and logistics services. The business groups are: Distribution/Retail: supplies groceries, meat, fruit and vegetables and general merchandise, to over 4,000 independent retailers. Cash/Carry: self-service grocery and liquor cash & carry distributor to smaller retailers and caterers. Food Service: distributor to restaurants, cafes, fast food outlets, hotels and other institutions.

Australian Independent Wholesalers (AIW)

AIW is a wholesaling division of Woolworths. It was a small regional wholesaler when acquired by Woolworths in 1996. As well as servicing Woolworths, AIW supplies independent retailers in competition with Davids. It now supplies over 300 retailers in eastern Australia previously supplied by Davids. Its fight with Davids for market share has been reported to have been vigorous.

Associated Limited (FAL) FAL is the major supplier and sole independent grocery wholesaler in Western Australia. It offers a full range of retail, financial incentives and marketing support services to FAL franchise and other independent retail customers. FAL also owns the 24-store Action Food Barns (Action) retail group, and has substantial wholesale and retail interests in New Zealand. It is the third largest retail

organization listed on the Australian Stock Exchange, and employs over 19,500 people.

Figure: Wholesaling and retailing markets for the sale of groceries, fresh products and liquor

Grocery Super Market Context USA Competition in the U.S. supermarket industry has never been greater. In addition to traditional grocers, there are now dozens of different types of retailers attempting to gain their share of the food wallet. It is estimated that shoppers spend over $500 billion annually on food in various store formats. The conventional supermarket and food/drug

combination stores typically associated with grocery shopping have lost a great part of their market share to retailers like Wal-Mart Supercenters, Sam's Club, Costco, and a variety of Dollar Stores. Convenience stores and fast food restaurants have dramatically expanded their reach into this competitive space in recent years. Alternative shopping formats continue to lure value-driven shoppers. In 2001, Wal-Mart became the largest seller in food. The supermarket industry is faced with the challenges of maintaining market share and profits while attempting new concepts and store formats in an effort to differentiate themselves from other types of retailers. Major demographic and consumer lifestyle changes have affected not only how consumers shop, but also where they choose to shop and eat their meals. Traditional supermarkets have seen a decline in how much shoppers spend and how frequently they shop in a particular store. While some supermarket operators continue to attempt to cut costs so they can offer reduced everyday prices, they find this to be a tough approach when competing with low cost operators like Wal-Mart and Costco. Superstores of Bangladesh and Their Operating system Superstore is a very much new concept in Bangladesh. In the recent past a number of superstores have grown in business in Bangladesh, for example Agora, Swapno, Meena Bazar and Nandan. Among these Meena Bazar & Swapno has the largest number of outlets all across the country. Others mainly operate in the capital. They try to keep the price reasonable and affordable than the local retailer. They have their contract growers and own transportation system. These help them to keep the price low. Moreover all the superstores can minimize wastage; especially their preservation system of perishables gives them this advantage. But these are not enough to meet the huge need of mass population. Mainly because of their limited customer base and also smaller area of operation and storage area. But again, the superstores can play a vital role in stabilizing the price in Bangladesh. Because, they can utilize their own supply chain network and by implementing the following aspects :

a.

Dedicated farmers, farm or production house for the individual super stores, which will only supply the products for the assigned store.

b.

Dedicated direct supply system of the product to the super stores bypassing the middlemen and Fariyas. This will help the super store to get the product in whole sale price.

Once the superstores establish their credibility to the mass customers, the overall market has to change their system to keep pace with them.

Conclusion Requirement for fresh vegetables are growing day by day. At the same time there are hardly any improvements in the supply chain of these products. That is why there is a big gap between the production cost and the selling price to the consumers. An effective supply management system in this aspect by the government and concerned authority can improve this situation.