Relationship between Logistics Cost and Relative Firm Efficiency in Indian Food Processing Sector

Abstract

Logistics plays an important role in determining the profits for a business enterprise through a dual influence on revenues and costs. Logistics are considered critical in the growth and performance of the food processing sector. The present study was undertaken to examine the relative performance of food processing units in India on the basis of logistics cost. Data Envelopment Analysis (DEA) was used to study the relative performance and the set considered for analysis consisted of 32 food processing units with the period of analysis covering 5 years from 2007-2011. Results indicate that no food processing unit was efficient throughout the period of analysis. Logistic regression results indicate that with a unit increase in logistics cost likelihood of the firm being efficient decreased 0.642 times. The results of the study underline the criticality of logistics management in the context of the food processing sector in India. For improving firm efficiency, it is imperative for Indian food processing companies to ensure efficiency in logistics operations.