March 2010

RFID: A Facilitator for Public Distribution System

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With a network of more than 4.99 lakh fair price shops (FPS), distributing annually products worth more than Rs. 33,000 crore, the public distribution system (PDS) in India is perhaps the largest distribution network of its type in the world. PDS promises basic food to over 330 million poor people living in India. Though PDS provides benefits to a vast majority of the Indian population, its performance is questionable in the grounds of efficiency and effectiveness. PDS supply chain failed to achieve its prime objectives due to the malpractices, mismanagement, corruption, black market and anti social elements. However, the shortfalls of the PDS supply chain can be overcome by the Information and Communication Technologies (ICT) such as on line communications, Global Positioning Systems (GPS) and radio frequency identification (RFID).

Introduction

Public distribution system (PDS), a major instrument of the Indian government’s economic policy, procure and distributes major commodities such as wheat, rice, sugar and kerosene to a large number of people living in India through Fair Price Shops (FPS). It also ensures the availability of food to the general public at affordable price. It helps in eradicating poverty and intends to serve as a safety net for the 330 million Indian poor people, who are nutritionally at risk. PDS is one of the largest supply chain networks in the world with 4.99 lakh Fair Price Shops (FPS) and is operated under the joint responsibility of the central and the state government.

PDS supply chain: An overview

PDS supply chain consists of several central and state government bodies, private industries, farmers, warehouses and transportation agencies. Central and state government is responsible for procurement, storage, transportation and distribution of products. Issuing ration cards and distributing food items to the end consumers through fair price shops (FPSs) are responsibility of the state government. Though the PDS supply chain provides food to vast majority of the Indian population, we should accept the fact that the whole chain is exploited by mismanagement, corruption and anti-social elements. Corruption is well rooted and spreaded along the whole PDS supply chain. The chain of corruption in PDS begins at the procurement stage itself. Some of the produce that is procured by the government for the public distribution finds its way into the open/ black market. Though enough produce are procured and distributed by PDS, the beneficiaries often find difficulties in getting what they are entitled to. This mismanagement and corruption is the indicator of inefficiency in PDS supply chain and distribution systems. Long supply chain and the large number of intermediaries’ involvement in the PDS is another reason for inefficiency and corruption. When the produce moves at each stage of PDS supply chain, there is a higher opportunity/chance for mismanagement, corruption, wastage and poor quality products. It was estimated that total value of corruption in PDS is Rs. 358crores/ year. Differences in distribution and subsidy systems followed by the state governments encourage trafficking of produce between states. Subsidised rice policy (Rs.1/ kg) announced by the Tamil Nadu state government encourages the trafficking of rice to the neighboring states; Kerala, Karnataka, Pondichary and Andhra Pradesh. Indian government and general public is longing for solutions to control the above mentioned malfunctions. The use of advanced ICT could help PDS to curtail.

Technological Advancement and PDS Supply Chain

Technological advancement and major break through in (ICT provide huge opportunities for streamlining supply chain processes and minimizing mismanagement and corruption. Organisations’ are increasingly using ICT to facilitate supply chain processes, to maintain relationships with supply chain partners and to satisfy customer needs and wants effectively and efficiently. It is surprising that the utilisation of ICT by the Indian central and state government bodies is negligible compared to other developed and developing nations. However, Indian government bodies are recognising the use and importance of ICT and consider implementing such systems in PDS supply chain. Maharastra state government is pioneer in the initiative and collaborated with Spanco to computerize PDS supply chain. The project is expected to complete in the year 2012. The project use locationing technology such as GPS to identify and monitor the movement of the produce and streamline PDS activities. Research indicates that the combination of  RFID and GPS technologies help organisations’ to streamline supply chain processes. RFD is considered as one time solution to all supply chain related problems.

How RFID works?

 RFID system includes tag, reader software and a computer. Tag consists of barcode, antenna and a small chip to store data and information. Tags are designed to attach with product lots. Reader usually attached with a mobile computer and is used to communicate and read the data and information presented in RFID tags. Reader sends a radio signal that is received by all tags present in the radio frequency field tuned to that frequency. Tags receive the signal emitted from the reader via antennas and respond by transmitting stored data. RFID reader receives the tag signal via its antenna, decodes it and transfers the data to the computer system through a cable or wireless connection. Tags can hold many types of data, including a serial number, date of procurement, location, product variety, product quality and even the moisture content of produce. RFID tags can be either read-only or read-write. Data and information can be loaded in read-only tags at the point of procurement or at the warehouse. Data and information available in the read-write tags can be revised thousands of times. At each stages of the PDS supply chain, data and information can be modified and updated.  At the delivery point (fair price shops), tags can be collected back for reuse.

Though PDS provides benefits to a vast majority of the Indian population, its performance is questionable in the grounds of efficiency and effectiveness. PDS supply chain failed to achieve its prime objectives due to the malpractices, mismanagement, corruption, black market and anti social elements.

RFID application to PDS

The effective use and implementation of RFID in PDS can facilitate PDS supply chain and promise eradicating mismanagement, corruption, trafficking, theft and anti social elements. RFID provides highly accurate and detailed information by capturing the data and information at each stage of the supply chain, automatically. It also improves the safety and efficiency of the food supply chain. RFID helps PDS supply chain in collecting the data and information about the produce procured and distributed (when the grain was harvested and procured, how long the grain was kept in warehouse, packaging and transportation details and point of sale information). The collected data and information will be stored in small RFID tags, which are adjoined with the produce lots. Locationing technology such as GPS can also be combined with RFID technology to automatically track and record the information regarding the field where the produce was picked, when and where it was transported and the current location of the produce. This also helps in reducing theft and trafficking.

RFID chips store real time data and information. Food Corporation of India (FCI) is solely responsible for procuring food produce for PDS. When procuring food produce from the farmers, FCI should take initiatives to store information and data in RFID tags. Information and data regarding date of purchase, quantity purchased, product variety, moisture content, product quality, nutrient contents etc should be entered in RFID tags. The stored information will automatically passes to the next stage of the supply chain through RFID tags and facilitate the efficiency and effectiveness of supply chain process.  For example, information on moisture content of the produce helps the warehouse managers to take appropriate actions before storing the product. When transport the procured food produce to warehouse, the tag reader fitted in the warehouse conveyer belt separate food produce lots based on moisture content, quality and variety. It helps the warehouse manager to follow appropriate warehousing practices to the produce. It was estimated that about 9% of the procured food grains spoiled or wasted in FCI warehouses due to the improper handling and storage system. By using RFID, FCI can automate warehousing systems and procedures and avoid spoilages and wastages.

Another major problem faced by PDS is the supply of tainted and expired food produce. Beneficiaries of PDS often complained about the tainted produce and the illness caused by the spoiled food produce. By facilitating the ability of PDS and FCI to rapidly identify and remove potentially tainted food items from the supply chain, RFID can minimize the opportunity for food borne illness— and
the associated liabilities. Further, in the event of necessary recall, the serialized data and information associated with the produce lots (RFID tags), enables more narrow recall. Spoiled and infected product lots can be effectively and
effi ciently located and removed from the distribution systems. In addition, the
narrow recall procedure will eliminate the need to pull unaffected food produce from the supply chain and will reduce the costs associated with broader recalls.

Another advantage of RFID to PDS will be its ability in tracking the location of produce. The uniqueness of the Indian PDS is, the grains produced in northern part of India (Punjab) have to be distributed in southern part of India (Tamil Nadu) and vice-versa. Thus the procured food produce should undergo several stages of supply chain before reach fi nal benefi ciaries. By using RFID, sale person at the point of sale (fair price shops) can track the location of the produce and predict the date of delivery. Combined with advanced ICT we could make the information available to general public and help them in planning their visit to fair price shop at most appropriate for purchasing produces. The RFID facilitated tracking system can also be used to control traffi cking. It is evident that the food produce (rice and wheat) procured and allocated for PDS, sold in black market at a higher price and, at times, the real benefi ciaries don’t receive adequate quantity. By using GPS supported RFID tags, we can track the theft and retrieve the produce from black market. RFID and biometric based ration card may be a better alternative for traditional paper based ration cards, and it will control fake ration cards and theft. RFID will also eliminate the traditional paper based fi ling and data storage system and improve the effi ciency of civil servants working in the PDS.

It is obvious that RFID can provide enormous benefi ts to PDS and streamline PDS supply chain. It requires minimum effort from the policy makers to implement. Even though the cost associated with the implementation of RFID is high, the effi ciency and benefi ts we expected to achieve from RFID will overcome the cost in few years. \\

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