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10/21/2013
1
Daniel Castle
Vice President – Operational
Excellence
Tata Quality Management Services
Strategic Success in India
Background on India
• One of the world’s fastest growing economies
• Huge Western influence
• 2nd most populated country
• high demand for products and services
• Vast pool of talented professionals
• English language competency
• Openness towards foreign brands
• However, low competition – relative absence of foreign brands
• Government support towards FDI
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2
It’s a Mixed Bag
• Changing socio-economic demographics
• State-specific legal and compliance regulations
• Changing demands and rising customer expectations
• Huge distances to be traversed
• High attrition rates in the corporate sector
• Significant political influences
• Bribery and corruption
Logistics Challenges
in India
Infrastructure
Regulations
Fragmented Industry
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Ports Heavy congestion at major ports – higher vessel turnaround time
Inefficient handling
Long waiting time
Airports Congestion at main airports
Inefficient handling resulting in pilferage / damage
High cost of alternate arrangements (prices quoted
by individual loaders)
Railways Choked rail network and resultant lower speeds
Transportation delays and cost overruns
Dedicated freight corridors planned
Roads Do not support the axle weight of the trucks and
cause roads to crack / cave in
Bad road quality – low speeds, accidents
and high maintenance costs of vehicles
Warehousing Very few logistics parks, no space in urban areas, poor maintenance
Infrastructural Challenges
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Logistics Challenges in India
Regulation Challenges
Laws -
various Acts
Land
reforms, Special
Economic Zones
(SEZ), etc.
Bribes/
corruption
Octroi /
Customs
Goods and
Services Tax (GST)
Dominated by unorganized players
Weak vendor management
Non leveraged IT infrastructure
Operational inefficiencies resulting in high operating costs
Presence of operations in risk-prone areas like North East and Jammu
& Kashmir
The Good News is…
• Significant investments have been approved for major infrastructure projects
like the Delhi-Mumbai freight corridor, new railway set-ups, better road
networks and airports
• To increase competence in the sector, the government has introduced private
sector participation, especially in the Ports sector
• In order to liberalize railway services, the government opened its doors of
container business to private parties
• Warehousing Industry moving towards sophistication
• Share of organized retail is expected to increase from 5% (current) to 24% by
2020
• Robust campus recruitment programs both at graduate and post-graduate
levels
• Advanced levels of technology support like Track & Trace, Warehouse- and
Transportation-Management Systems
• Implementation of Goods and Services Tax (GST) expected to be imminent
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In such a scenario, 3PL service providers
may…
• Negotiate and re-negotiate contracts better
• Optimize Loads
• Schedule routes more efficiently
• Implement IT / automated processes
• Save on logistics related communication
• Optimize / reduce Manpower costs
• Etc.
Outsourcing Logistics ..
now a Global Trend
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India vs. USA & China
GDP
Logistics
Cost
(% GDP)
Logistics
Cost
3PL
Revenue
(%
Logistics
Cost)
3PL
Revenue
USA 15,060 8.5% 1,282 10.4% 134
India 1,843 13.0% 240 5.7% 14
China 6,989 18.1% 1,265 7.0% 89
Logistics Cost vs. GDP and
Third Party Logistics Revenues vs. Logistics Cost
(2011 – USD Billion)
Indian logistics vs. other countries
Small Medium Large
Low
Med
ium
Hig
h
Size of Economy
Str
engt
h of
Log
istic
s S
ecto
r
Source: World Bank, KPMG Analysis (2010)
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Decoding the ‘Logistics Outsourcing’DilemmaWhen, where and why does one engage a 3PL Company?
The Supply Chain
Every day we do our best to
manage all this, to keep our
customers and bosses happy.
And everything is in motion, all
the time – inventory, people
and resources
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8
Supply Chain Management (SCM):
The New Focus Area for the CEO
• Supply chain management is now a hot topic in the board room
• CXOs want to know details about supply chain design
• They are aware of the availability of outsourced partners both on
the supply and order fulfillment sides
• Can supply chain be a strategic enabler?
Wish list of every SCM Head
• Year-on-year reduced operating costs and resources
• More value-adds
• Optimal inventory
• Least loss, scrap and unsold inventory
• Reduction in SCM Costs as a % of Sales
• Stable partner and scalability on demand
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Hidden costs across the supply chain
• CFA-based operations – Sustainability issues
• Blocked capital – Excess pre- and post-production inventory
• Sales returns – Double transportation, packing and
handling unsynchronized transportation and warehouse
management
• Unorganized partner – Low operating costs, long term risks
“To outsource or not to outsource….”
3PL surveys show the most frequently occurring reasons to avoid outsourcing are:
Why do customers hesitate ?
Source: 3PL Annual Survey Report by Capgemini Consulting
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10
Why should companies outsource
logistics?
AVOID CAPITAL EXPENDITUREREDUCE OPERATING COSTS
FOCUS ON CORE BUSINESS
IMPROVED SERVICE LEVELS
ENHANCED ECONOMIES OF SCALEAVOID LABOUR ISSUES
How outsourcing has helped
companies in India
24.5
35.9
46.1
60.6
68.2
71.3
76
90.6
Reduced capital investment
Expansion into newer regions
Flexibility in operations
Increased inventory turns
Improved return on total assets
Improved customer satisfaction
Focus on Core Competence
Cost Reduction
% of Respondents
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Extent of logistics outsourcing
Prime reasons for logistics outsourcing
1• Avoid capital expenditure
2• Reduce operating costs
3• Increase flexibility (financial/service)
4• Focus on core business
5• Improve service
6• Lack of economies of scale in house
7• Acquire talent
8• Avoid labor issues
Contract Logistics Savings Potential
Service Description Savings Realized
Route design and optimization 10-15%
Closed loop dedicated operations 15%
Mode conversion 10-15%
Core carrier management 5-10%
Rate negotiation and audit 4-5%
Inbound consolidation 20-25%
Reverse logistics 10-15%
Distribution centre (DC) location
realignment10-12%
Reduced inventory 7-10%
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Key factors beyond price
• Scalability and flexibility
• Empowered ground operations
• Planning to address peaks and seasonality
• Simplified technologies for visibility
• Analyzed data for inventory optimization
A journey of > 140 years started in 1868
by Jamshedji Nusserwanji Tata
A tradition of Trust and Principles that puts
People before Profits
upheld by Group Chairmen such as JRD Tata
and RN Tata
THE TATA GROUP
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The group that has shaped the destiny of
India’s Progress
with
Power Telecom Steel Automobiles
THE TATA GROUP
DIESL is India’s leading integrated supply chain solutions provider
More than 165 warehouses across India
With a network connecting 7,000 towns in India
Including a North East presence covering > 85% of India’s districts
Revenues of $ 55 million
With > 4,000 people striving towards excellence
Now brings to the logistics industry the same level of trust that has won over
> 1 billion people
THE TATA GROUP
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14
Milestones
Leve
ls o
f E
volu
tion
2003-2005
‘Bootstrapping’
Set up Trading business for
Telecom Products with presence
across six States
1
Extended presence to 18 states
with business volumes touching
10 million units
2
Started Warehousing and
Value Added Services
3
2006-2008
‘Scale-up’
Created Pan India Presence and
included Distribution Services
4
Started providing end to end
solutions
5
Achieved ISO certification 9000:2001
6
Crossed Rs. 100 crores in Logistics Business Services
7
2009 onwards
‘Secure the future’
Warehousing capacity exceeds
5 million sq. ft
Achieved Rs. 200 crores in
Logistics Business Services
Castrol Award 2009 for Best CFA
operations, North India
Best 3PL company of the year
2010
Best 3PL company of the year
2011
Customer & Brand Loyalty Award
2011 in Logistics Sector
8
9
11
12
13
10
Supply chains currently managed
• Inbound logistics : Supplier to OEM stores
• Stores management and feeding the production line
• Finished goods management: Stores and open yard
• Outbound logistics: Customer order fulfillment
• Sales returns and reverse logistics
Customer’s
Customer
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Fast moving consumer durables (FMCD) sector –
leading air-conditioner and television brands
3PL:
• Outbound: Factory to regional DC
• Stock management: Regional DC
• Outbound: Regional DC to state DC
• Stock management : State DC
• Outbound: State DC to dealer network
Customer:
• FG inventory on 3PL network
• 30-day inventory across all state DCs
• 100% inventory accuracy
• Sales order fulfillment
• Milk run dealer deliveries
Mobile and Personal Computing – Market Leader
• Imports management
• National warehouse
• Stock transfer
• Regional distribution
• Last mile delivery to dealers
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Supplier Collection and Implant Stores Management
– Auto and Engineering Sectors
• Pre- and post-production inventory control
• Just in time (JIT) – Line feeding
• MHE deployment and maintenance
• SAP trained skilled manpower
• 24x7 operations on demand
SUPPLIER -1
SUPPLIER -2
SUPPLIER - 3
SUPPLIER -4
STORES JUST IN TIME
FINISHED GOODS
DISPATCH
B2C – Order Fulfillment – e-commerce
SUPPLIER -1
SUPPLIER -2
SUPPLIER - 3
SUPPLIER -4
CUSTOMER
� AM / PM order fulfillment within city
� Small parcel network partners
� Asset-free operations for e-commerce sector
� Scalability on demand
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Telecom
Engineering
FMCG
FMCD
Automotive
Project logistics / infrastructure
Focus Sectors
31%
62%
50%
31%
50%
19%
19%
31%
19%
19%
31%
25%
50%
44%
38%
19%
31%
38%
25%
31%
37%
0% 20% 40% 60% 80% 100%
Advanced planning and scheduling software
Transportation management system
Warehouse management system
Network planning /optimization tools
Bar coding
RFID
Distribution requirements planning software
Effectiveness
Technologies / Systems implemented
(Warehousing)
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69%
19%
44%
13%
38%
44%
38%
31%
50%
31%
31%
38%
50%
13%
13%
6%
31%
38%
25%
6%
19%
25%
12%
25%
6%
6%
25%
13%
19%
25%
31%
31%
32%
6%
0% 20% 40% 60% 80% 100%
Formally documented Logistics & Distribution strategy
Collaborative carrier management
Supply chain visibility for managing exceptions
Collaboration and integration among service providers
Differentiated logistics services for discrete customersegments
Formal returns management
Cross-docking / flow-through
Continuous-replenishment programs / management ofinventory for customers
Share real-time, electronic demand / inventory data
EffectivenessLogistics practices implemented
Success stories – International brands
in India
• “Glocalization”, Operational Efficiency
• Product superiority – Investment in invention, product development and manufacturing
• Customer Intimacy – Treating each customer as unique; Delegation to customer facing employees
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Case study:
The customer is a recent entrant to the Indian market.
Product Profile:
Their products range from small general-purpose safes for domestic use to high security
fireproof burglary-resistant safes for the retail, banking and hospitality sectors
Customer Focus Area: After-sales service.
With an all-India distribution network, services such as installation, maintenance and
customer support are provided.
Case study:
Key challenge faced by customer:
To exponentially improve the sales footprint across
India without increasing the sales and distribution
cost. To sell across the country, the customer would
have had to set up exclusive billing teams,
warehouse and secondary distribution channels, etc.
Demand from Indian 3PL:
• Pan India operations
• Integrated warehousing and distribution network
• Strong ERP
• Trustworthy partner
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Case study:Solution offered:
Consignment Sales Model: allowing the customer to easily manage inventory at customer’s geography,
invoicing the eventual consumer only when the product is actually sold
Ownership of these goods remains with the customer
3PL sells the goods on behalf of the customer
In operating terms, the following assistance is provided:
• Primary Distribution to the State warehouse where products would be sold
• Warehousing and Inventory Management
• Solutions, Tax Compliances and Financial Management
• Order Management and Last mile delivery
Case study:Final Outcome:
• Customer now can sell anywhere in the country without actually registering
themselves in each State
• Customer need NOT spend capital and effort to configure inventory in SAP
since the 3PL will handle the invoicing
• With Inventory being closer to customer, the 3PL became a key enabler to
increase speed to order fulfillment
• 3PL will collect the value of the inventory and remit to the customer, which
ensures timely collection
• Since the physical and system processes are already configured by the 3PL,
the customer now can expand anywhere across India
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Outsourcing your logistics is a smart move:
• Allows you to be MORE EFFICIENT and streamline operations
• Requires less capital expenditure and helps control COSTS
• Delivers more finely tuned SUPPLY CHAIN solutions
• Gives you the freedom to FOCUS on core competencies
• Can significantly enhance customer SATISFACTION
Success factors
�Good cultural fit
� Solid reputation
�Prompt, attentive service
�Agility and adaptability
� Lean practices
�Updated technology
�Ability to grow with you
�Geographic desirability
�Competitive pricing
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Thank you!
• questions?
• comments?
Contact information
• Daniel Castle
10/21/2013
23
Survey
www.tinyurl.com/lc3s3fm
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