LOG.India August 2010

August 2010 Vol. 3 - No.11 Rs 100 Germany Bulgaria Middle Eastw

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INDIA

WHO NEEDS LSPS 62The thriving pharma sector has little use for LSPs. Why so?

ATLAS CHUGGED 52Why project logistics in India is a domain of select players

SERVING FRESH 30Designing supply chains to ensure product freshness

Dell India’s supply-chain team led by General Manager MR Sundaresan is empowering the giant PC maker’s intensifi ed market drive >>

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I N D I A’ S N O.1 LO G I S T I C S M AG A Z I N E

Dell India’s supply-chain team led by Dell India’s supply-chain team led by General Manager MR Sundaresan is General Manager MR Sundaresan is empowering the giant PC makerempowering the giant PC makerintensifi ed market drive >>intensifi ed market drive >>

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5INDIA| August 2010 | www.logisticsweek.com

Recently a reader wrote in, seeking career advice. The reader, Rahul, is a fresh management graduate and has been working with a 3PL for the last few months in the areas of warehousing and transportation. Rahul said that he intends to pursue a career in the warehousing sector and

wanted to be sure if the sector is as lucrative as is being projected in the media. And he added that my answer would be critical to him since he is a bit nervous whether he is making a right career choice or not.

Firstly, Rahul wanted to know the future of warehousing in India. This is a question that has launched a thousand reports. One of them, a Cushman and Wakefield report published in 2008 put the sector size at $20 billion and projected a growth rate of 35 to 40 percent to expand the size to $55-billion by 2010-11. But considering that 2008 was an insane year and most projections made during the year caused a lot of heartache to companies and analysts alike, I would be very conservative about these estimates. Personally, one should be happy pursuing a career in a $30-35 billion (by very modest estimates) industry if I am happy making a career in the $13 billion media and entertainment industry.

About future prospects, Rahul wanted to know which factors will positively impact the growth of warehousing. I am an optimist, but my job demands that I’d rather err on the side of caution, so I would

look at negatives first. Thankfully, the two biggest areas of concern – infrastructure and policy – have shown an incredible improvement in the

recent past, what with Kamal Nath showing good results on the ground. And as I write this, the GST roadmap has become clearer with the Centre and the states arriving at a consensus – apparently it will be in place by April next year. Hurrah!

That said, there are myriad issues that still have the sector by the scruff of the neck. To name a few, Indian Railways is going painfully slow on reforms; agriculture, which accounts for more than half of the logistics business in the country is slow and highly unorganized; speaking of unorganized industry, outsourced warehousing itself is fragmented, with a major chunk managed by small, unskilled players – but that could be a boon in disguise.

But I will admit that the positives outweigh the negatives. The industrial sector – automotive, cement, electronics, etc. – as well as retail (expected to soar with multi-brand FDI) is doing very well. More than anything else, the Indian consumer is becoming demanding by day – an excellent thing. A demanding consumer puts pressure on last-mile delivery, which galvanizes distribution and spurs warehousing growth.

That was the macro-view, but it wouldn’t do proper justice to Rahul’s question. Even though he didn’t ask me about his career path, my answer wouldn’t be complete without it. So I turned to someone who is in the thick of things. CSCMP India Roundtable President and Philips India Regional Manager, Anshuman Neil Basu, who has worked in the field of logistics for 15 years (he was with DIESL in its formative years) and warehousing has been a key part of his responsibilities. I asked him what should be an ideal career path (discounting variables like competence, etc.) for a warehousing professional.

Rahul wrote in the mail that he is working in the areas of transportation and warehousing and he wants to be in the “operations department of a modern warehouse for the coming two years” to strengthen his fundamentals.

Basu says that the idea of slugging it out to learn the basics for 2-3 years is a good move, however, along the way it is very important for one to learn other aspects of supply-chain such as demand forecasting, procurement, product cycle – skills that will be of huge import once he moves up the ladder. Rahul can do this by enrolling in short-term courses or joining a peer group. Moreover, says Basu, if one can choose the warehouse type, it’d be better if one works in a WMS environment.

Where should Rahul aim to work eventually – a 3PL or a user – in terms of learning and compensation? Overall, there isn’t a huge difference, apparently. There is a caveat though. Basu says that working with a user at the initial stage of one’s career wouldn’t give one enough exposure to diverse functions and sectors, since a user company could be dealing with a limited product portfolio.

Now comes the important part – money. For which I asked around and since no one wanted to be quoted on the subject, I could come up with only a hint of the picture, but I reckon it can help. I am told that a fresh management graduate can start in warehousing as a trainee with a salary ranging from Rs 3 to 5 lakh per year depending on the B-school level. At a warehouse-manager level, which could come in the next 4 to 8 years or more (depending on competence and opportunities), he could draw somewhere around Rs 10 to 15 lakh per annum. Thereon, he could go on to head the logistics operations for a company or head a 3PL for which eye-popping salaries are not unheard of and nowadays, logistics heads even get a place on company boards.

Hope that helps.

A Question of Choice

Aanand [email protected]

Aanand PandeyEditor

Contents

Cover StoryPull 'n DriveDell’s smooth scale-up in India, for a good part, can be traced back to its carefully built local supply-chain capabilities at its manufacturing facility in Sriperumbudur, led by General Manager MR Sundaresan.

UPSHotFor a Shorter Supply Chain CycleThree events were the hallmark of the month as they shed light on the need for integration between suppliers and retail/manufacturers, and the advantages of outsourcing logistics.

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event rePortFuture sCM trendsFrost & Sullivan hosted a workshop on future supply chain strategies in Bengaluru.

INDIA| August 2010 | www.logisticsweek.com6

30 FeatUreFresh off the ChainWell-planned supply chain architecture will ensure product freshness which, in turn, will increase sales.

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24 ColUmnto Automate or not?Warehouses should automate wisely and after careful deliberation.

46 INDIA | July 2009 | www.log-india.com

< WAREHOUSING

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INDIA| August 2010 | www.logisticsweek.com 7

aUGUSt 2010

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AUGUST 2010

FeatUreFreight Hike Impacts IndustryIn the wake of the price rise in petrol and petroleum products, industry has hiked freight rates to unjustifiable levels.

ADVeRtIseR InDeXArham Logiparc .......................................................BC

Bar Code India ..........................................................11

Capricorn Logistics ................................................. 59

DHL Express ........................................................... IFC

Drive India Enetrprise Solutions .............................. IBC

Drive India Enetrprise Solutions (Appointment Ad) .. 59

Exide Industrial.........................................................17

Green Earth Translogistics ........................................ 9

Hormann India ......................................................... 35

Indelox Services .......................................................13

Institute Of Supply Chain ......................................... 41

Jay Euipment ............................................................19

Kairali Resort ........................................................... 43

Knapp AG .................................................................. 3

Knapp AG Case Study.............................................. 65

Nilkamal BITO Storage Systems ...............................15

Round the Clock Logistics ....................................... 45

Safexpress .............................................................. 25

SCM Logistics World 2010 ...................................... 49

Sujan Shipping and Clearing .................................... 23

Supply Chain & Procurement Fraud Management ... 51

5th Southern Asia Ports, Logistics

and Shipping 2010 .................................................. 57

Uniworld Logistics ................................................... 27

Vijay Logistics ........................................................... 4

July 2010 Vol. 3 - No.10 Rs 100Germany Bulgaria Middle East

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INDIA

FUEL SUPPLY 46Exploring oil-and-gas upstream and midstream supply-chain biz

BACKING UP 32How reverse supply chain can make or break a company’s position in the market

VITAMIN M 26Few realize the role maintenance plays in transporters’ profit margins

The HyperCity supply-chain team led by Lt Col. Vijay Nair (Retd) is putting up an inspired show >>

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EYES FRONT


JUne 2010 52

Moving MountainsThe project logistics market brings with it risks and benefits. With India's growth plans, the sector is all set to expand in a really big way.

news 08

Potential encapsulatedManufacture of drugs has taken rapid steps forward, yet pharma giants have not shown the same keenness in their distribution network. In a LSPs-dependent age, how is cost-effectiveness faring against the need for world-class supply?

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INDIA| August 2010 | www.logisticsweek.com

Grit and diligence pay off at 2010 F&S Asia Pacifi c Best Practices Award

A t the annual 2010 Frost & Sullivan Asia Pacif ic Best Practices Awards,

the global research & con-sulting f irm honored exem-plary corporations within three categories, namely, healthcare, industrial tech-nologies and transportation & logistics industries from the region.

Held at the Interconti-nental Hotel, Singapore, on July 8, 2010, the awards, held for the third consecu-tive year, recognized market performance along with best practices within Singapore, south-east Asia and the Asia Pacif ic region.

Frost & Sullivan has 18 cat-egories of awards in each sec-tor. Companies have to meet certain parameters. If no company meets the criteria, an award is not presented.

Companies nominated for the awards have to undergo an exhaustive methodology that takes into account the plan-ning and execution of prod-uct launches, strategic alli-ances, distribution strategies, technological innovations, customer service, and merg-ers and acquisitions. Crucial marketing factors such as leadership, strategy, service, innovation, and development are also a part of the method-

ology. Moreover, it helps if the companies have developed a successful business plan and

excelled in the competitive global marketplace.

Recognizing the outstand-

Damco, AP Moller, Maersk, DIESL, TCS, Mahindra & Mahindra, Gippsland Aeronatutics Australia, Aerostaff, Agility..... ................12

Hellmann Healthcare Logistics, Cool Logistics, Indian Railways....................................14

Steel Strips Wheels Ltd, Tata Motors, Eicher, Ashok Leyland, Vizag Seaport Private Ltd, Gammon Infra, Lastin Holdings, Bharat Petroleum Corporation, Jawaharlal Nehru Port Trust.........................16

opeRaTIVe InDeX*

*Key entities mentioned in the news section

Jurong Port, Manhattan Associates and Keppel Logistics bagged awards in the transportation and logistics category

There are no performance targets to be met (by the Planning

Commission)…It is easy to be an armchair advisor.

— kamal nathunion minister for road

transport & Highways,speaking at a conference on ‘Public Private Partnership in

State Highways’ last month

TRAIN OF THOUGHT

Very early on they (GMR) were keen to give the terminal an Indian context and infuse it with Indian values. The basic positioning we created for the terminal was “Expressive India.

— amit Gulati, Head, Incubis consultants,

who along with Landor Associates shaped the artistic choices and

settled upon the idea of the hands at the Indira Gandhi International

Airport’s T3

If you are allowing FDI, do it in a calibrated fashion because it is politically sensitive and link it (with) up some caveat from creating some back-end infrastructure.

— thomas varghese,ceo, aditya Birla retail

and president-retail, cII,on the kind of cap in FDI one can contemplate and sourcing limits

from Indian markets itself

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ing contribution to their re-spective industries, Frost & Sullivan’s partner Nitin Bhat said that though the recipi-ents from the three industries operate in different business sectors, they have all weath-ered the toughest economic climate. A dedication to fo-cus on business fundamen-tals, make business models f lexible, continuous innova-tion and focus on talent man-agement that has allowed the award recipients to continue to grow their businesses.

On the opportunities in healthcare despite the chal-lenges faced by participants in 2009, Rhenu Bhuller, Glo-bal Vice-President, pharma-ceuticals/biotech from Frost & Sullivan said that the com-panies honored are those that have taken the lead in 2009 and took opportunities rather than worked reactive-

ly. They set their foresight on a long term game plan and see the Asia Pacif ic region as an important part of their global organization. In the healthcare space specif ical-ly, technology is the enabler that moves the industry for-ward. This is applicable from the early stage drug discov-ery and clinical research up till hospital systems and recording of medical infor-mation at the physician or patient levels. Organiza-tions that have succeeded are pioneers in their f ield, and

will play an important role in contributing to the dou-ble digit growth seen by the healthcare sector in the Asia Pacif ic region.

Summarizing the success of the recipients from the transportation & logistics sec-tor, Gopal R, Vice-President for Transportation & Logistics Practice, Asia Pacifi c at Frost & Sullivan said that 2009 was a challenging year for the trans-portation and logistics indus-try in Asia as logistics expen-ditures declined.

But there have been some remarkable performance from transportation and logistics companies that weathered the storm and emerged stronger.

A common factor among all the award recipients is their outstanding commit-ment to clients. All of them had reacted quickly to ac-

commodate their customers’ needs and preference.

Though broadly termed as the industrial technologies sector, coming from niche operational space – semi-conductor, biometrics, solar energy and chemical produc-tion – the recipients from these areas were highly com-mended by Satish Lele, vice-president of the Industrial Technologies practice at Frost & Sullivan. The indus-trial sector is a key driver of manufacturing activity and economic progress. It also is the single largest contribu-tor to improvements in pro-ductivity and innovation. A number of companies in this sector smartly used this pe-riod of uncertainty to invest in process, technology and research which now gives them the edge as the econo-my improves.

estImated spend In road sector By 2015 would Be $90 BIllIon

A dedication to focus on business fundamentals and continuous innovation stood in good stead for the award recipients

category award recipientIndustrial technologies

Market Penetration Leadership Award in the Solar PV Systems Market SolarGy Pte Ltd

Technology Innovation Award in the Semiconductor Services Market Frontken Corporation Berhad

RFID Software Developer and System Integrator CBS Technology Berhad

Product Differentiation Excellence Award in the Biometrics Market RCG Holdings Ltd

Penetration Leadership Award for Contactless Smartcards Convergence Octopus Cards Ltd

Healthcare

Innovation Award for Amino Acid Production Aminologics

Medical Imaging Product Innovation Time Medical Holdings Company Ltd

Hospital Information Systems Company iSOFT

Medical Imaging Company Philips Healthcare

Contract Research Organization Company Quintiles

transportation & logistics

Domestic Logistics Service Provider Keppel Logistics Pte Ltd

Marine Software Provider BASS Software Ltd

Multi-Purpose Terminal Operator Jurong Port

Warehouse Management System Provider Manhattan Associates

Logistics Park Developer Ascendas REIT

roll of Honor

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Company news

Damco invests in the India-Africa trade lane Mumbai

The AP Moller/Maersk group’s logistics branch,

Damco, is increasing its focus on the growing India-Africa trade lane. Damco has created a dedicated India-Africa trade lane team to offer innovative solutions for its customers who are moving cargo between these two markets.

Damco has a network of 50 offices across 30 countries in Africa and 17 offices in India. Combined, Damco has over 1,000 experienced employees

in these two markets. The new India-Africa trade lane team in Damco will focus on offering its customers customized so-lutions through this large net-work of offices. The team will manage ocean freight (dry and refrigerated), airfreight, cargo insurance, CFS warehousing, trucking, customs clearance and supply chain management.

The company also offers an advantage of door-to-door shipments to Africa using its Through Bill of Lading (TBLs).

DIESL executes Rs 100-cr tech upgradeMumbai

M&M to enter aerospace supply chainMumbai

DIESL (Drive India Enterprise Solutions Ltd) has gone live

with the first phase implemen-tation of the Rs 100 crore tech-nology upgrade plan. DIESL, roped in TCS (Tata Consultancy Services) for the Import-Export Management Software mod-ule for its ILS (International Logistics Solutions) division. The software, Connect Interna-tional, will make the company

the first freight forwarder to implement a Distribution Man-agement tool, which was earlier used only by shipping lines.

The software can manage the data of 30,000 pin codes covering 7,000 towns mapped on the system as a master for locations data. It is capable of remote access via web and includes features like sales projection management, on-

line quote management, ship-ment life cycle visibility, sales performance management, and credit management. The software can also generate documents like HBL, freight & cargo manifest, cargo arrival notice, etc.

Connect International is completely integrated with the existing SAP systems and can schedule auto MIS to clients.

Mahindra Group, which recently completed the

acquisition of two Austral-ian companies, Gippsland Aeronautics and Aerostaff, expects to penetrate into the global aerospace supply-chain with leading players in aerospace.

At the company’s annual

general meeting, it announced it intention of foraying into the aerospace sector to penetrate the global aerospace supply-chain as a credible registered manufacturer of components and assemblies.

Mahindra & Mahindra ac-quired majority stakes in Gipps-land Aeronautics Australia and

Aerostaff Australia recently.Gippsland makes eight

seater, ten seater and fourteen seater aircraft that are sold in more than 32 countries.

Aerostaff is a maker of aero-space components and assem-blies for global aerospace origi-nal equipment manufacturers (OEMs) in Victoria state.

IndIa Imported over 1.5 mIllIon tons of coal In one week alone In july 2010

Damco’s team will offer tailor-made solutions to reach key African markets

agility is logistics provider for new Zealand olympic CommitteeWellington

Agility has announced its appointment as the offi-

cial logistics provider for the New Zealand Olympic Com-mittee (NZOC).

The partnership agree-ment means that Agility will be responsible for handling the logistics requirements for New Zealand teams compet-ing in events such as the Com-monwealth Games in Delhi this year through the London Olympic Games in 2012.

As well as helping New Zea-land teams to compete at the Olympic and Commonwealth Games, Agility will also assist other elite teams competing at the Paralympics and Youth Olympic Games. The agree-ment will run through the end of 2012.

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Hellmann Healthcare launches temperature controlled packaging solutionChennai

Hellmann Healthcare Logis-tics, the new vertical solu-

tion of Hellmann Worldwide Logistics, has teamed up with temperature controlled pack-aging specialists, Cool Logis-tics India Pvt. Ltd, to develop a specialist solution for its airfreight services from and within India.

Pharmaceutical supply chains have become more com-plex over recent years due to a focus on globalization and outsourcing strategies by many multinational pharmaceutical companies. Companies look actively at opportunities for growth in emerging markets and this has had a direct impact on their supply chains, namely

longer lead times whereby con-signments are handled by a number of stakeholders, across multiple regions with variable ambient temperatures.

These primary distribu-tions are a signifi cant risk to the manufacturer as they tend to be higher in volume, both in shipment size as well as in monetary terms than second-ary distribution.

With temperatures reach-ing up to 50 degree Celsius in the summer and a lack of temperature controlled hold-ing and storage facilities avail-able, maintaining tempera-ture at 2-8 degree Celsius and 15-25 degree Celsius is one of the biggest challenges in In-

japan Has offered a loan of rs 88-cr to Help BuIld mum-del dedIcated freIGHt corrIdor

dia and the choice of the right packaging is an integral part of the pharmaceutical supply chain strategy. It is for this reason that Hellmann Health-care has consulted with Cool Logistics to introduce a new, locally manufactured passive temperature controlled pack-aging solution.

Cool Logistics will wait for

clients to supply them with a profi le of where their consign-ment is leaving from and going to. They will then simulate this situation in one of their test chambers to test the packag-ing solution will maintain its correct temperature.

As part of the end-to-end supply chain solution, HHL offers customers in the phar-maceutical, biotechnology and medical device sectors; transport management, ware-housing services and inven-tory management, value added services, purchase order man-agement, packaging solutions, cold chain management and international, regional and lo-cal distribution.

Rlys June freight loading fl at; revenue up 7 pc New Delhi

While the freight loading of Indian Railways was

almost f lat in June this year against June 2009, it regis-tered about seven percent growth in freight revenues during the period.

The Railways moved 79.94 million tons of goods (up 0.47 percent year-on-year) and earned Rs 4,870-crore revenue (up 7 percent y-o-y) in June.

The revenue growth was supported by commodities including coal, iron ore, ce-ment, food grain, fertilizer and mineral oil.

In net ton kilometer

(NTKM) terms — a parameter that measures the through-put — Railways registered growth for coal, cement, fer-tilizers, food grains, domes-tic movement of iron ore and coal movement to steel plants. NTKM measures the com-bined effect of change in load-ing and distance. But, there was a signif icant dip move-ment of iron ore exports and container traff ic.

The Railways earned 96 per-cent more by moving one ton of iron ore meant exports for one kilometer in June this year against June 2009. This could

RaILways

Moving less, earning more seems to have worked for the Railways

be due to a mix of increase in fare, handling and other sup-plementary charges.

Similarly, the Indian Rail-

ways earned about 22 percent more by moving one ton of goods in containers for one km during the period.

Maintaining storage temperature at 2-8 degree C is one of the biggest challenge in India

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Ports may have to pay traders for delay due to congestion New Delhi

The Government is consid-ering a proposal wherein

ports may have to pay a penalty to traders in case their cargo gets delayed due to congestion at the ports. The proposal was a part of several suggestions made by an inter-ministerial task force to suggest ways to reduce the transaction costs for traders.

Transaction costs include time and money spent by trad-ers in complying with govern-ment norms on foreign trade. Ports like JNPT and Chennai levy a congestion charge on shippers. The shippers, in turn, pass it on to the traders. In effect, the traders are bear-ing the cost of congestion at ports. Transaction costs in In-dia are as high as 8-10 per cent

of the total trade value.Indian exports become ex-

pensive due to high transaction costs hurting their competi-tiveness in international mar-kets. Bringing the transaction costs down to around 3 per-cent is expected to help India achieve global standards.

In ports in Denmark, only three percent of the total ship-ments are examined by the authorities as the trust fac-tor there is high. On the other hand, in Indian ports, over 10 percent of the total shipments is examined leading to inordi-nate delays.

SSWL sets up Rs 140-cr wheel rim plant in JamshedpurJamshedpur

Chandigarh-based Steel Strips Wheels Ltd (SSWL)

brought its third steel wheel-rim manufacturing unit in the country under production with the inauguration of its initial one million pieces per annum capacity plant.

It is located near the Tata Motors plant here on a 9-acre plot. The Jamshedpur facility will supply to Tata Motors, Eich-er, Ashok Leyland and will also export to Germany and Japan.

Using latest technology the unit has been able to reduce the weight of each wheel rim go-ing into a truck by around 1.5 kg, which would help reduce the overall weight of the HCV,

which in turn would help re-duce carbon dioxide emission to that extent.

Having invested around Rs 140 crore in the unit, the compa-ny plans to upgrade its present capacity to two million pieces within two years.

SSWL today has an overall capacity to produce around 11 million wheel rim pieces per annum at its three units, which would go up to around 15 mil-lion by June 2011.

poRT

auto component sector eXports estImated to Be $3.2 Bn In 2009-10: acma report

The company plans to upgrade its present capacity to two million pieces within two years

Inordinate delays at ports have been

hurting traders dearly

Vizag seaport to invest Rs 150 cr in bulk material handling facilityHyderabad

Vizag Seaport Private Ltd (VSPL) will invest Rs 150

crore in developing a bulk material handling facility near the Visakhapatnam Port in Andhra Pradesh.

The company has been allocated 50 acres of land by the port. The facility will mainly handle coking coal and gypsum.

Its promoters, Gammon Infra and Lastin Holdings, will raise the necessary funds through the debt-equity route. VSPL had invested Rs 370 crore so far for the existing facility of two berths spread over a 70 acre area, which is on a 30-year lease from the Visakhapatnam Port.

BpCL sets up bunkering facility at Kochi portKochi

Bharat Petroleum Corpo-ration Ltd has commis-

sioned its international bun-kering facilities at the Kochi port to offer international bunkering of furnace oil at competitive rates.

The fi rst exclusive inter-national bunkering terminal of BPCL was inaugurated at the JNPT in May. The com-pany is commissioning a dedicated barge loading jetty at their Irumpanam instal-lation shortly to cater to the coastal vessels at Kochi.

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Industry EventsEastern promises

strengthening Retail Chains

Drive India Enterprise Solutions Ltd. (DIESL) organized a round-

table conference at The Park Hotel in Kolkata on July 15, 2010. The confer-ence was part of ‘Captains of Logis-tics’ series - with the first of multi-city roundtable conferences by leaders from the industry from respective re-gions contemplating the various chal-lenges faced by the logistics arena.

The inaugural chapter, which was held in Kolkata, discussed the follow-ing topics:l Kolkata: The Emerging supply

chain, & Logistics Hub of Eastern India

l Logistics OutsourcingThe first topic dealt with under-

standing Kolkata and its significance as a fast emerging supply chain and logistics hub. The state needs an uplift of the SC & logistics facilities to catch

up with the rapidly changing business scenario, and deployment of modern logistics services enriched with new strategies and technologies so as to counter challenges posed by infra-structural shortcomings.

In the second topic, delegates dis-cussed the need to control and reduce supply chain costs. Organizations are considering the use of 3PLs, espe-cially for integrated transportation and warehouse management proc-esses. The use of 3PLs can yield im-portant benefits like lower logistics costs, reduction in fixed logistics as-sets, better order fill rates, increased customer service, improved logistics system responsiveness, and short-ened average order-cycle lengths and cash-to-cash cycles.

The conference was presided over by Ajay Chopra, CEO, DIESL.

Supply Chain Leadership Council (SCLC) held its annual confer-

ence on retail sourcing, supply chain & operation on July 16, 2010, at Sa-hara Star in Mumbai.

According to experts, Indian re-tail is expected to be a $400 billion market in 2010-11. Organized retail is about five percent of this market but growing at least 30-40 percent per annum as against the overall re-tail growth of 8-10 percent in India.

Discussions during the confer-ence revealed that strengthening of supply chain and sourcing channels is topping board meeting agendas.

N Sukumar, Sr VP, Reliance In-dustries said supply chains will have to shorten with the ultimate goal of retailers picking up goods from a manufacturer’s facility.

Retailers such as Hypercity, Gini

& Jony and The Loot ad-mitted to having tried outsourcing their sup-ply chain to a 3PL only to find challenges with that model. Gagan Sek-saria, Associate Direc-tor, Transportation & Logistics, KPMG sug-gested that the service 3PLs offer today has changed. This is owing to private investment that has gone into logis-tics services companies over the last 3-4 years.

Marc Dragon, Sup-ply Chain & Optimization Leader, IBM Asia Pacific stressed that cut-ting edge technology can inject cost and operational efficiencies in retail supply chains.

Date : July 15, 2010Event: 'Captains of Logistics' Organizer: DIESL Venue: The Park Hotel, Kolkata

Date : July 16, 2010Event: Retail Supply Chain Forum Organizer: Supply Chain Leadership CouncilVenue: Sahara Star, Mumbai

Delegates at Captains of Logistics discuss the need to control and reduce supply chain costs

(From l-r): Maj. Shashi Tiwari, VP-HR (Training, Admin & Distribu-tion Centre), The Loot (India); Harish Mehta, CFO, Giny & Jony; PV Sheshadri, Head (Warehousing Operations), Future Supply Chain Solutions; Ravinder Bajaj, Head (SCM & Strategy), AFL Logistics; and Lt Col Vijay Nair, GM (Supply Chain), HyperCity Retail (India)

18 INDIA| August 2010 | www.logisticsweek.com

Keep It MovingWith India in the wake of be-

coming a global automotive hub, industry leaders from the field of logistics, automotive manu-facturing as well as auto ancillary manufacturers are seeking ways of how India can rise to become a truly global player in the automotive sec-tor. In this light, the Confederation of Indian Industry (CII) - Institute of Logistics organized “Auto SCM 2010” in Chennai on the 14th and 15th of July 2010.

R Dinesh, Joint Managing Direc-tor, TVS Sons, chaired the event.

Speaking on the potential India possesses to excel in the logistics sec-tor, the speakers and members of the audience shared views on the issues that come in the way of smoother and faster cargo movement with an eye-ball on achieving logistical efficiency.

B Sriram, Associate Director, Ernst & Young, discussed the chang-

es one can expect with the arrival of goods and services tax (GST) and how it will influence the automotive sector and supply chains.

Bill Oliver, VP (Automotive), Global Customer Solutions at DHL Asia Pacif ic, spoke on the sig-nif icance of the automotive com-ponent industry to India and its position of being a vital link that can make or break an automotive supply chain.

Other speakers shed light on the need for integration between sup-pliers and manufacturers, tack-ling issues with health of goods during transit, and the need for a well-designed and eff icient infra-structure. Last, but not the least, speakers stressed the need for transparent and time saving leg-islations that would greatly help in improving the overall logistics scenario in India.

Date : July 14 and 15, 2010Event: Auto SCM, 2010 Organizer: CII – Institute of Logistics Venue: Hotel Le Royal Meredien, Chennai

Auto SCM 2010 by CII Institute of Logitstics, held at the Hotel Le Royal Meredien, Chennai


< EVENT REPORT

Future SCM TrendsFrost & Sullivan conducted a workshop on supply chain strategies for the future. Pamela Cheema gives a ring-side view

Date : July 14-16, 2010Event: Frost & Sullivan, Future Supply Chain Strategies, A Frost & Sullivan Executive Strategy Workshop Organizer: Frost & Sullivan, Venue: The Golden Palms Hotel and Spa, Bangalore

Frost & Sullivan, India, con-ducted a meticulously or-ganised workshop on ‘Fu-

ture Supply Chain Strategies’ from July 14 to July 16 at the sumptuous Golden Palms Hotel and Spa, Ban-galore. The workshop had excel-lent and focused presentations from key industry f igures at the event. With India ascending the growth curve and indeed being one of the drivers of the global econo-my along with China, the Indian logistics industry needs, in par-ticular, to ref ine its supply chain parameters to be productive and internationally competitive.

The workshop was declared open and the delegates welcomed by Anand Rangachary, Managing Director, Frost & Sullivan. The f irst

presentation of the day, which was Frost & Sullivan’s perspective on the supply chain strategies which should be followed in future by In-dian corporates, was delivered by V G Ramakrishnan, Senior Director, transportation and logistics, Frost & Sullivan. He pointed out that the cost of logistics operations in India was inordinately high in comparison with developed coun-


tries due to inadequate infrastruc-ture, lack of a well-structured and uniform tax structure and an industry which has remained per-ennially fragmented. He stated that the Indian logistics industry would attain substantial revenues of $132.35 billion by 2015 with a CAGR of 9.9 percent. He ana-lysed that the impediments in the growth of the industry were poor

infrastructure and the domination of unorganised companies.

Key DriversHowever, the key drivers of the in-dustry in future could be the rising complexity of globalised supply chains, the improved capabilities of Indian LSPs and the demand for multimodal transportation services. He noted that technology and the

swift development of infrastructure would provide a plethora of oppor-tunities for growth for 3PL provid-ers. In a survey conducted by Frost & Sullivan in 2009, 80 percent of the respondents believed that technol-ogy would catalyse growth while 78 percent cited the construction of logistics parks as an aid to growth.

Ramakrishnan was emphatic that while key industries in the

Howard James

Scott, Chief

Supply Chain

Management

Officer, GATI

delivers his

presentation


< EVENT REPORT

Sanjiv Kathuria, Director, Sales & Marketing, TNT India

VG Ramakrishnan, Senior Director, Transportation and Logistics,

Frost & Sullivan

American market and is valued at $311.8 billion, with the Asia/Africa/Australia market pegged at $90.8 billion. By 2015 Parikh expected a larger number of MNCs nibbling away at the pharmaceutical pie, with 35 percent foreign corporates and 64 percent domestic players in the market.

Globally, India ranks third in terms of volume in the pharma mar-ket and the industry is expected to grow at 12 percent till 2015. Foreign Direct Investment is expected to touch over $21 billion by 2015. Since the expenditure on health care is expected to surge from 7 percent of the GDP to 13 percent by 2015, the pharmaceutical industry foresees a bright future for itself. Parikh ex-pected diverse opportunities in the spheres of biotech, clinical trials, contract manufacturing and cold chains, but deplored “the fact there is no single window clearance for supply chain in the country, industry is concentrated in just a few states like Maharashtra, Gujarat and And-hra Pradesh and there is still no uni-form tax structure in the country.”

Trends in RetailSupply chain trends in retail and FMCG were delineated by Amit

Mukherjee, Vice President, SCM and IT, RPG Spencer’s Retail. Mukher-jee stated that India had reclaimed her top spot in retail in AT Kear-ney’s eighth annual Global Retail Development Index (GRDI), 2009, as “the most attractive emerging market for investment in the retail sector.” Retail has a substantial 29 percent of India’s GDP and after agriculture, is the country’s second largest employer.

But despite the ever-increasing opportunities in the retail sec-tor, Mukherjee bemoaned the re-straints that are limiting the sec-tor’s growth such as unaffordable and poor supply of real estate, mul-tiple licences and clearances for es-tablishing a business, supply chain bottlenecks in distribution and logistics, an acute lack of skilled manpower, etc.

He strongly emphasised that with competing businesses an ef-f icient and well-defined supply chain could result in a lucrative en-terprise. Supply chain strategists should locate their DCs and logis-tics hubs correctly, ensure timely information, cash f low and a f lex-ible supply chain organisation which is also collaborative with other business functions and trad-

country are growing at 15percent-20 percent every year, there still exist certain fundamental issues in the industry which need to be resolved, like the very basic issue of consid-ering logistics the core function of an industry.

End-user PerspectiveAfter Ramakrishnan’s lucid pres-entation, Dimple Parikh, Head of Logistics, Lupin Pharmaceuticals, provided the end-user’s perspec-tive in supply chain trends. The largest global market size in phar-maceuticals exists in the north

Supply chain strategists should locate their DCs and logistics hubs correctly, ensure timely information, cash flow and a flexible supply chain organisation

Office: A 58& 59, 2nd Floor, Electronic Sadan-1, MIDC Mahape, Navi Mumbai- 400710.

Tele: +91 22 67698900, Fax: +91 22 27612008email: [email protected]

l Custom Clearance viz. Import & Re-export of supply / support vessels, equipment, machinery & spares consumables. l Vessel Agency (Inward & Outward Clearance) l Crew Sign-on / off (Customs & Immigration Clearance) l Supply of Deck Stores, Engine Stores & Provision Supplies. l Crew Repatriation & Travel Arrangements. l

Arranging NED Passes in case of operations with ONGC. l Arranging berths at both Inner anchorage & alongside.

l Essentiality Certificate (EC) for supply vessel, equipments&machinery. l Ministry of Defence (MOD) clearance l NSC (Naval Security Clearance) l Ministry Of Home

Affairs (MOHA) clearance for Expatriates l Specified Period License (SPL) from Directorate General of Shipping for vessels. l Obtaining Approval on towing plan

from IRS

ArrAnging StAtutory CleArAnCeS

S U J A NSHIPPING & CLEARING PVT. LTD.

our SerViCeS


< EVENT REPORT

ing partners. They must steer clear of crippling supply chain bottle-necks like absence of cold chains, poor storage facilities and trans-portation methods and also ensure that information technology is in place for both front-end and back-end functions. He also strongly supported GST and FDI “as they will both signif icantly impact the way business is being done in the country and are welcome in the re-tail industry.”

LSPs vs New SCM TrendsThe preparedness of logistics serv-ice providers in an emerging envi-ronment of redefined supply chain strategies was provided by two sig-nificant LSPs, GATI and TNT In-dia, with GATI giving the domestic perspective and TNT India putting forth a peroration of the interna-tional perspective.

Howard James Scott, Chief Sup-ply Chain Management officer, GATI, spoke expansively about the Indian logistics industry and emerging trends. He stated that the logistics market is expected to grow by more than 20 percent over the next three years, when foreign logistics competitors are also ex-pected to enter the market. With increasing growth, customers today are also more demanding, expect-ing reliability of service, reach and transit speed and price competitive-ness from their LSPs.

Scott urged LSPs to institute structural changes within their organisations such as seamless integration through IT, dynamic product response parameters and a reshuffle of their organisations so that they encompass air and ocean freight along with freight forward-ing. He foresaw sweeping changes

A panel discussion moderated by Anand Rangachary

Anand Rangachary, Managing Director,

Frost & Sullivan


< EVENT REPORT

in the service portfolios of LSPs in the future, with greater involvement of LSPs in manufacturing processes, back office support to end users and high-end operational analytics.

Sanjiv Kathuria, Director, Sales and Marketing, TNT India, agreed with Scott that radical changes were imminent in the logistics sector. In the future, he expected the contours of the business to change with lower operating expenses, reliable order fulfilment and greater visibility on product flow for end customers. He believed that supply chains would

become smarter, be more informa-tion driven, supply decision support tools and be more connected to ena-ble multi-partner collaborative plat-forms for suppliers, customers and service providers which would lead to integrated forecasting, orders and point-of-sale.

He was convinced that in a fast-changing world, industry responses must be equally swift. It was his be-lief that in the future the logistics industry would shift to lower cost, but high growth areas. Customers would buy smaller devices, selling prices would decline and product life cycles would shorten. “Other factors that will impact supply chain are economic, demographic, ecological, regulatory and technological issues which will radically transform sup-ply chain,” said Kathuria. “The sup-ply chain architecture of the future will have multi-partner information models, collaborative intelligent warehouses, collaborative transport and seamless service logistics.”

Core IssuesDuring the workshop, two panel dis-cussions on July 15th and July 16th respectively, brought to the fore various core issues of the industry which were discussed threadbare in debates peppered with liveliness and candour. Both discussions were moderated by Anand Rangachary, Managing Director, Frost & Sulli-van. Interestingly, in the first panel discussion on July 15, Prem Kumar Verma, CEO, Tata Motors Distribu-tion Company Limited, disclosed that there is an acute scarcity of well-trained truck drivers. Between 2010-2018 the logistics sector re-quires 18 lakh truck drivers, a cru-cial need which is unlikely to be easily filled “because no driver’s son wants to be a truck driver,” remarked Verma. “For more recruits, we have to make this look like a decent job. There should also be more training schools to improve the situation.”

Gautam Dembla, Director, Spear Logistics, f layed the poor infrastructure in the country. In particular, he lambasted the poor capacity of Indian ports pointing out that “the government needs to build over-capacity at our ports. Several of India’s largest ports can’t handle 1/10 of what Singa-pore does.”

During the panel discussion on July 16, green logistics emerged as a major area of concern with most panellists underscoring its crucial importance. Startlingly, end-users are equally in favour of green logis-tics. Also, corporates will save sub-stantial sums of money by adopting such eco-friendly measures.

The Frost & Sullivan strategy workshop ended on July 16 on a breezy, cloudy day in Bangalore, the city which has that quality of je ne sais quoi. The workshop discussed innovative strategies and solutions which industry could assimilate and catalyse its success in a fast changing world.

Dimple Parikh, Head of Logistics,

Lupin Pharmaceuticals

Amit Mukherjee, Vice President

SCM and IT, RPG Spencer's Retail

Between 2010-2018 the logistics sector requires 18 lakh truck drivers, a crucial need which is unlikely to be easily filled

#225, ST Bed Extn., 5th Main, Koramangala, 4th Block,

Bangalore 560034, India.Tel : +91 80 40833366 www.uniworld-losgistics.com


< Column


< WAREHOUSING

28

< Column

ATo Automate or Not

Padmini Pagadala General Manager, TPG Consulting, Mumbai

Most warehouses would like to automate extensively, but be judicious, advises Padmini Pagadala

As A student when I first walked into a Wal-Mart distribution Centre in the united states and saw 32 miles of conveyor belts carrying cases under one roof, I just could not under-stand the need for such extensive automation. I wondered how all the miles of conveyor belts running overhead, the control systems and the automated sorters could possibly make any economic sense. Having landed as a fresh graduate from India, I just did not have the background or the experience to be able to fathom such a scale of automation.

today, as I walk into several warehouse fa-cilities in India, I realize there seems to be an obsession about automation even in facilities that are less than 50,000 sq ft. there seems to be a general belief that once a machine (attached to a computer) replaces a human being, then all is bliss. I have heard many a warehouse manager mention that he would like certain operations entirely automated, not just mechanised.

Why automate?this made me wonder that is automation re-ally a panacea for all the ills and the lacunae of a warehouse facility? Automation with all its con-sistency, efficiency and reliability is not a magic potion. there are times when automation makes sense and there are the times when we are better off going the manual way.

the most commonly mentioned reason to automate is the payback from labour savings achieved with such equipment. When I was talk-ing to the warehouse manager of a popular retail chain in europe, he told me that each process in the warehouse would be evaluated as a candidate for automation. If the payback for automation turned out to be four years or less, then the proc-ess was automated. I was told that in the us, op-erations will get automated if the payback takes around two years.

the path to automation should be taken ju-diciously, as in europe where the average ware-

Source: ww

w.cirrelt.ca/m

hmultim

ediabank/



< WAREHOUSING

house employee earns about 30,000 euros a year or in the us where they are making $25,000 a year and hence the savings that accrue to the company from mechanisation are justified. But in India the average warehouse associate makes just Rs.8,000 a month, if he is lucky. Labour savings are hard to use as a justification here.

necessary automationBut, there are situations where automation makes sense even in a country where the warehouse workers make a tenth of the developed world’s workers’ wages. I remem-ber the conversation I had with a leader of a major Indian business conglomerate. He said that most of his Western consultants always talked about payback when it came to automation and hence would only recommend manual sys-tems for his factories in India. He mentioned that in almost every case, three years after the consultants left, he would be forced to rip out the manual systems and automate any-way - for the sake of accuracy.

Accuracy can be a huge incentive to move towards an automated solution. there is no way a team of humans can compete with a computer or a robot when it comes to accu-racy and consistency over a very long period of time.

Also, in a country like ours where one needs to convince about 10-15 farmers in order to acquire a plot size of even 50 acres, the lack of availability of land could be a compel-ling reason to automate. not just here, but even in europe, rising land prices are forcing warehouses to go higher up. Warehouses that are 20 m - 30 m high are not uncommon and high bay storage with Automatic storage and Retrieval systems (As/Rs) naturally become the only means to oper-ate at such heights. Lack of land availability could be a ma-jor reason to go for automation.

Another reason when one should automate is when the scale of operations is huge. Consider a process that in itself is least likely to be prone to errors. neither is there any pay-back on the automation, nor is there any threat to accuracy. In such a case, if you have a large scale operation where you have to manage more than 100 people under one roof then suddenly, you are not running a warehouse anymore. You are simply managing a “war force”!

Once the workforce you have to manage goes beyond 100 people, it is not an easy task to manage them. In some situations it would be better to automate some or all of the processes than try to manage the task manually. Imagine

a sortation activity. You have to sort out 100k cases to 200 locations or pallets in eight hours. You can do this manu-ally, but the number of people involved creates immense congestion and management challenges. Possibly, the feasible option would be to employ a sorter to do the task.

Labour laws may also swing the situation towards auto-mation. Again, as in europe, labour laws make it very dif-ficult to hire or fire people with much flexibility.

Panacea for all ills? But once you have automation in place, is everything achieved? the biggest oversight with automation is to as-sume that it will manage itself. Consider the case of au-tomatic sorters. Assume you bought a sorter that had a capacity to sort 20,000 units in an hour. In order to get the automated sorter to perform at its said speed, you need to be able to feed 20,000 units into the system for every hour. In order to do this, you still need to have a workforce that can pick (in batches) and induct 20,000 units in an hour.

Automation has a lot of benefits. It is efficient, consist-ent and accurate. But automation is not the solution for eve-ry situation. the primary goal needs to be defined before automating. there are also some processes that cannot be automated. It is no use trying to retrofit automation or even mechanization, for that matter, for such processes.

Once automation is installed, a yearly overhaul is man-datory whether the machinery is giving trouble or not. the capacity of automation needs to be thought out very care-fully too. It is one thing to be able to add more robotic arms to an As/Rs, but it is almost impossible to increase the ca-pacity of sorters. All of us have our wish lists. Automation in your facility should be a result of a wise choice and not a mere wish list item.

29

AS/RS Racks under construction

A cross belt sorter at a warehouse

The author can be reached at [email protected].

< Feature

30

Fresh off the Chain


Efficient supply chain design will ensure product freshness, says Nitin Agarwal

With increasing customer awareness and competi-tion, companies are under

great pressure to improve product freshness, especially in the case of food products. Moreover, with an increasing array of products avail-able on the shelf and reduced brand loyalty, freshness is an important dif-ferentiator to increase product sales.

Freshness for a food product is defined by the time the product

takes to reach the retail shelf from the time of production. It comprises of the following:

It is critical for companies to design their supply chain in such a manner that fresh products are available on the shelf. Companies need to identify the levers for fresh-ness and have a customized supply chain strategy for different catego-ries of products, depending on the shelf life of various products. And

it is imperative to design the supply chain for freshness right at the prod-uct development stage itself.

Product FreshnessThe entire supply chain design right from production to the manner in which material is supplied to the retailer from the distributor affects product freshness. From the sup-ply chain design it is possible to as-certain the major factors impacting


Freshness Build-up

product freshness which remain al-most the same across companies and are as follows:

High Production or trans-portation Batch SizeIt is common practice in companies to optimize the production batch size and minimize the number of production changeovers to reduce the production cost. Typically, for slow moving SKUs a lot of companies produce monthly re-quirements in one production run.

A production run has a huge im-pact on pipeline design and freshness of product as the entire production batch adds to the existing pipeline of the product (average of cycle inventory

+ safety inventory). For example, a production batch size of 30 days in ad-dition to the pipeline stock of 40 days would imply that the system stock increases to 70 days. The last CFC in the system will get consumed after 70 days if the sales happen as per the forecast and the norms are properly followed. On the other hand, had the production batch size been 10 days, the freshness would have been limited to 50 days thus resulting in fresher stock and lower obsolescence.

The transportation lot size from factory to depot plays a similar role in product freshness. Most of the food processing plants do not have suffi cient storage space and hence

stocks are pushed downstream. As a result, companies send a lot of material to depots resulting in un-balanced inventory at the depots and higher pipeline stock and lower product freshness. Thus creating suffi cient storage space upstream, preferably at the plant itself, im-proves inventory deployment and product freshness.

High Planning response timePlanning response time here indi-cates the forecast process frequency and the production planning process which governs the reaction time of the supply chain to market changes.

For companies having a monthly frequency for production planning, any changes in market trends are not adjusted within the month, thus resulting in the pipeline build-up on the basis of the original forecast

Plant StockManufacturing batch size safety stock at the plant

Depot in-transit + Depot stockTransit stock between plant and depots transporta-tion lot size from plant to depot safety stock at the depot

Distribution StockTransit stock between depots and distributor billing lot size to the distributor safety stock at the distributor

+

+

Plant

Depot

Distributor

Retailor

Factors Impacting Product Freshness

High Producction Batch sizes (esp. for slow moving SKUs)

Long Distribution network Low forecast

Accuraqcy Indiscipline in last mile connectivity

Low FMFO Adherance

High Planning Response

Times

High Inventory & Loss of Freshness

Inventory Buildup for monthly bucket

Inventory Build up for weekly bucket

Sales Plan

Sales PlanActual Sales

Actual Sales

Inventory depletion for monthly bucket, could result in stock out

Inventory depletion for weekly bucket is limited

W1 W1W2 W2W3 W3W4 W4

Impact of Forecasting on Inventory Build-up


< Feature

when volumes have increased and probably new manufacturing sites have also been introduced, com-panies still continue to follow the same networks to distribute their products to the market. As a result, inventory gets blocked at each level in the supply chain and the products’ freshness gets adversely affected.

Hence it is very critical to have the right distribution network in place. Companies have started de-layering their network and defi ning proper in-ventory norms to ensure that the prod-uct hits the retail shelf at the earliest. Companies also look at the option of distributing manufacturing, depend-ing on the capital intensive nature of the product and the availability of raw material along with the fi scal benefi ts provided by state governments.

The other possibility, which is gaining momentum in the FMCG sector, is to by-pass distributors only in the case of physical product movements or to convert distributor stock areas as transshipment points for route deliveries, especially in metros, delivering or replenishing stocks directly based on retail de-mand. Already, companies which have embarked on this initiative have started seeing benefi ts in terms of increased sales, reduced inven-tory, reduced obsolescence and the

ability to make changes faster, be-sides other benefi ts.

Low Forecast accuracyWith more SKUs being introduced every day and customers becoming more demanding, it is really tough to predict what companies should sell. The problem gets aggravated when forecasting estimates hap-pen at the most granular level, as customer behaviour may vary from month on month, but at an overall depot level, the forecasting should be much more accurate.

An important business aspect is to look at an opportunity for SKU rationalization which helps the com-pany to focus on high selling brands. Companies also look at having dif-ferent strategies for fast moving products and slow moving products, as forecasting makes sense only for fast moving products and the slow moving ones can be replenished on the basis of the minimum-maximum levels set for them.

Another practice is to forecast at a macro level (all India SKU / depot SKU) to ensure more forecast accu-racy and better deployment of stock from plant to depots. Companies should also strive to make the fore-casting cycle shorter as it helps to forecast closer to the point of con-

xxx xxxxxxx

Low Forecast Accuracy

Unbalance Inventory Excess Production

Over forecasting

lead to excess inventory

Under forecasting

leading stock outs and loss

of sales

Result in Maldistribution

Impact of low forecast accuracy on supply chain

Manual intervention for depot dispatches

Right order not generated due

to historical data inaccuracyManual

intervention for dispatch

from depot to distributor

Distributor/sales team anticipating

more/less sales vs forecast

Manual orders to ensure

truck load formation

Stock pushing for faster

liquidation

and hence mal-distribution and high pipeline in most cases.

Companies have resorted to fre-quent forecast correction in addition to weekly production plan revisions, especially for short shelf life prod-ucts. This really helps to produce as per market requirement and also improves the availability of products where sales have picked up.

Long Distribution NetworkTypically when business volumes were low, companies started distrib-uting products through a layer of networks including Central Distri-bution Centres, Regional Distribu-tion Centres and depots resulting in a multi-layered network. Today even

FIFO non adherence at

distributor

FIFO violation at

factory

FMFOviolation at

factory

Low FMFO Adherence across the supply chain

Low FMFO adherence at various stages in SC

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FUEL SUPPLY 46Exploring oil-and-gas upstream and midstream supply-chain biz

BACKING UP 32How reverse supply chain can make or break a company’s position in the market

VITAMIN M 26Few realize the role maintenance plays in transporters’ profit margins

The HyperCity supply-chain team led by Lt Col. Vijay Nair (Retd) is putting up an inspired show >>

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• Need for Mechanization at Indian ports

• Draft Constraints (which hinder entry of

large vessels to most major ports)

• The Policy Conundrum

• Regulatory Issues (The TAMP Factor)

• Labor Management at Ports

• PPP: Challenges and Opportunities

• Major and Non-Major ports: Lessons to

be Learned

• Epilogue

warehousing

HANDBOOK

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• Need for Mechanization at Indian ports

• Draft Constraints (which hinder entry of

• The Policy Conundrum

• Regulatory Issues (The TAMP Factor)

• Labor Management at Ports

• PPP: Challenges and Opportunities

• Major and Non-Major ports: Lessons to

• Epilogue

warehousing

HANDBOOK

Coming Soon!

Ports of India HANDBOOK

JNPT MaTerial HaNdliNg? gaTeway TerMiNal iNTerNaTioNal

PrivaTe liMiTed iNdia gaTeway TerMiNal PrivaTe liMiTed PSa

SiCal TerMiNalS liMiTed CHeNNai CoNTaiNer PrivaTe lMiTed

viSakHaPaTNaM MuNdra PorT kriSHNaPaTNaM PorT kolkaTa PorT

MuMbai PorT abg kaNdla PorT MarMugao PorT New MaNgalore

koCHi PorTkaraikal PorT digHi PorT dHaMra PorT PiPavav PorT

Haldia PorT ParadiP goa TuTiCoriN JNPT MaTerial HaNdliNg?

gaTeway TerMiNal iNTerNaTioNal PrivaTe liMiTed iNdia gaTeway

TerMiNal PrivaTe liMiTed PSa SiCal TerMiNalS liMiTed CHeNNai

CoNTaiNer PrivaTe lMiTed viSakHaPaTNaM MuNdra PorT

kriSHNaPaTNaM PorT kolkaTa PorT MuMbai PorT abg kaNdla PorT

MarMugao PorT New MaNgalore koCHi PorTkaraikal PorT digHi

PorT dHaMra PorT PiPavav PorT Haldia PorT ParadiP goa TuTiCoriN

JNPT MaTerial HaNdliNg? gaTeway TerMiNal iNTerNaTioNal

PrivaTe liMiTed iNdia gaTeway TerMiNal PrivaTe liMiTed PSa

SiCal TerMiNalS liMiTed CHeNNai CoNTaiNer PrivaTe lMiTed

viSakHaPaTNaM MuNdra PorT kriSHNaPaTNaM PorT kolkaTa PorT

MuMbai PorT abg kaNdla PorT MarMugao PorT New MaNgalore

koCHi PorTkaraikal PorT digHi PorT dHaMra PorT PiPavav PorT

Haldia PorT ParadiP goa TuTiCoriN

The handbook looks into all the issues related to the major Indian ports with experts’ views of a roadmap to possible solutions for ports

infrastructure and performance excellence. The main topics to be covered will be:

LOG.India and Logisticsweek present you ‘Roadmap to Performance Excellence’, a

Handbook on Indian Ports.


sumption and reduced inventory in cases of over-forecast-ing and better availability of products in case of under-forecasting (often resulting in increased sales)

Low FMFO adherenceNon-adherence of FMFO (first manufactured first out) at any level in the supply chain results in accumulation of old-er stock at respective nodes. The accumulated stock at vari-ous nodes is either sent to the lower node for liquidation, hence impacting product freshness or finally is declared as obsolete stock and then damaged as per company policy.

Inventory management at batch level is of the utmost importance at the depot and the distributor, as products with shorter shelf life are sensitive to product freshness for their sales and customer perception.

Indiscipline in Last Mile ConnectivityLast mile connectivity refers to the movement of products from the depot to the distributor and then from the dis-tributor to the retailer. Typically companies have a fixed schedule to service distributors. Most companies work on the continuous replenishment concept, supplying distrib-utors as per the forecast and inventory norms. Compa-nies resort to a lot of manual intervention in replenishing distributors due to a lot of reasons like irregular supplies from factories, credit availability, forecast correction, etc.

Manual intervention consumes considerable amount of time of the sales team and also corrupts data history thus making it difficult for the system to operate efficiently.

The actual order from the retailers is not captured in most cases as the sales person takes orders only for SKUs which are in stock at the distributor. With time, such SKUs are phased out from the system and hence no fore-cast is generated with no supplies from the factory, thus resulting in lost sales. Proper order capturing and servic-ing of demands from the depots is critical to ensure avail-ability of product.

For low selling products, one primary pack itself is two-three months of requirement for the distributor. Since companies follow the policy of billing in primary packs, the distributors end up blocking high working capital in low selling SKUs which also impacts product freshness for such SKUs. Companies either need to look at redesigning the pack size for such SKUs or do bulk break at the depots and unit billing with regard to distributors.

Thus it is of the utmost importance to diagnose the problems which are adversely impacting product fresh-ness for the respective company and then have a plan in place to address the same. All the issues need to be ad-dressed collectively to have the desired product freshness and give quality to the final customer.

Doors for Home and Industry

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The author is Market Segment Leader, FMCG, Miebach Consulting. He can be reached at [email protected].

< Cover Story

36

Pull 'N Drive



dell India's supply-chain team led by General Manager MR Sundaresan is empowering the giant PC maker's intense market drive. By Aanand Pandey


< Cover Story

and eZones stores, etc. Also, Dell India has been fast shoring up its ex-clusive retail presence. Dell’s website shows a total of 37 exclusive stores in the metros and the Tier1 and Tier2 cities in India.

The $53-billion computer maker’s fresh retail entrée owes its origins to CEO Michael Dell’s customer-outreach strategy, something he has been working on ever since he retook the charge in January 2007.

Onlookers attribute Dell’s seem-ingly imminent turnaround to its sharpened customer focus, and the fact that the strategy is supported amply by one of its mainstays – Dell’s fabled supply-chain efficiency. This year, Dell figured among the top five in the AMR Supply Chain Top 25 glo-bal rankings, with the report noting that “Dell remains a highly respected supply chain player”.

Unsurprisingly, Dell’s smooth scale-up in India, for a good part, can be traced back to its carefully built local supply-chain capabilities. Leading the India supply-chain team is Dell India General Manager MR Sundaresan, who has been with the company for the last five years – with more than three years at the helm of manufacturing and delivery opera-tions.

It could be happy coincidence, but much in line with Michael Dell’s strategy, Sundaresan comes with a strong grounding in supply-chain from the consumer-goods side – an industry that breathes market ori-entation. Prior to Dell, Sundaresan headed supply-chain for Whirlpool in India. Then, Sundaresan is ex-HUL (now Unilever) – an exalted club that could be the consumer-goods equiva-lent of Freemasonry.

Supply-Chain opsDell India’s Sriperumbudur plant began commercial production on July 30, 2007. At the time of open-ing, according to media reports, the plant had a capacity of 4 lakh units.

xxx xxxxxxx

This little anecdote could glad-den the hearts of India’s eco-nomic planners, no matter

how briefly. Towards the end of our three-

hour drive from Chennai to Dell In-dia’s sprawling, lush green 50-acre Sriperumbudur manufacturing site – nestled quietly between factories of giant MNCs of the likes of Samsung and Nokia , we lost our way. And just when we were a couple of wrong turns away from giving up, our cell-phones having lost all contact with the mechanized world , we got help from unexpected quarters. A local woman laborer at a roadside shanty, having overheard ‘Dell’ from our frantic requests to passersby, signal-ed to us that we’ve strayed miles from the facility. And her eyes lit up as she gave us the exact location, right down to the last turn, in allegretto Tamil.

The reasons behind the old wom-an’s heartwarming smile could be many (one of which could be Dell’s sustainability initiative. More about that later), but the fact is that Dell is increasingly being heard and seen at new places. And reclaiming some. Recently, International Data Corpo-ration (IDC) reported that Dell, with a strong 19.1 percent growth, has re-claimed the second spot from Acer in the second quarter of 2010 (2Q2010). Buoyed with strong growth in Asia Pacific and Latin America, Dell seems to be closing in on the market leader HP as well.

Dell grew 19 percent in overall unit-shipments year-on-year (2Q09-2Q10) compared to the 12.3 percent. Incidentally, HP dislodged Dell from the number one spot in 2006.

Speaking of new places, Dell Inc.’s computers are being seen of late at prominent retail stores worldwide. Starting 2007, Dell began showcas-ing products at prominent retail out-lets such as Wal-Mart, Britain’s Tesco stores and China’s Gomes stores – its Indian subsidiary followed suit two years ago with placements at Croma

MR SundaReSan, General Manager, dell India


Globally, we have realized that a lot of consumers want to touch and feel a product

before they buy it, more so in the emerging markets

like India

According to the company, the current capacity of the plant is 10 lakh units per annum.

“This (Sriperumbudur) facility predominantly fulfills the India demand. We also have started exporting products from this place to parts of Middle East,” says Sundaresan. A high proportion of production comprises made-to-order products. The plant sources components from all parts of the world, and completes the units – desktops, laptops and servers, among others – as per the customer orders.

Expectedly, the direct sales model gives Dell’s supply-chain the much-celebrated edge. “The made-to-order model gives us the benefit of knowing what exactly the customer wants. We would be the first to understand what the changes in the market are – we are the fastest to have our products reach our customers,” Sundare-san says. “Additionally, as we continue to build a robust channel ecosystem, we have successfully extended many of the benefits of our customized model to our channel partners, helping their profitability and offering them a unique advantage.”

All the components from suppliers are stored as Ven-dor-Managed Inventory (VMI) in the Supplier Logistics Center (SLC) facility, which is situated close to the main Sriperumbudur plant and is managed by the Singapore-headquartered 3PL, the YCH Group. As the Dell manu-facturing team receives the customer order, it accordingly pulls the specified inventory from the SLC. The title of the material is transferred to Dell only the material is pulled from the SLC. “Inside the factory we don’t have more than four hours of raw materials inventory at any point in time,” Sundaresan says.

The manufacturing team then assembles the hard-ware, loads the software as per the customer requirement, tests it, and ships it. “We have logistics service providers (LSPs) who then pick up the goods from here and take them to the customer location,” he adds.

40

< Cover Story


3PL DeliverablesYCH and DHL are Dell’s two logistics service providers in the country. YCH manages the SLC that houses all the raw material as VMI from the suppli-er. Based on the kit pull orders, YCH supplies the material just-in-time di-rectly to the line.

YCH India CEO Balaji V informed Log.India, “We have a state-of-the-art, TAPA ‘A’ security and LEED cer-tifi ed green facility of over 250,000 sq ft of built up area, where we oper-ate VMI with a process we terms as Intribution.”

YCH also provides seamless visibil-ity to Dell and its suppliers by provid-ing them real time Inventory visibility and inventory reports. YCH’s last-mile delivery capability created for Dell is termed as Intrabution. YCH has dedi-cated teams managing Dell deliveries both in terms of physical delivery and in terms of managing information pre- and post-delivery operations. “The mechanism deployed ensures to-tal visibility to both customers and to our operations through its complete delivery cycle,” said Balaji.

On its part, DHL provides 3PL services to Dell India at various lev-els. The DHL Global Forwarding (DGF) provides service to Dell India in the area of imports, exports and customs clearance for the latter’s air and ocean freight shipments. DGF freights the raw materials from vari-ous Dell vendors to the Sriperumbu-dur plant. The fi nished desktops are exported by DGF to their hub in Mid-dle East markets by ocean freight.

“DHL Supply Chain (DSC) provides customized warehouse management services to Dell India, supported by IT infrastructure for inventory man-agement,” said Jyoti Row Kavi, Direc-tor - Corporate Communications & Sustainability, DHL Lemuir Logistics. DSC also provides transportation services for last mile delivery.

As the domestic arm of DHL, Blue Dart handles the local distribution (within India) for Dell.

Blue Dart makes last mile distri-bution for Dell that includes deliver-ies to individual customers (B2C). According to Ketan Kulkarni, Vice President and Head – Marketing, Corporate Communications and Sus-tainability, Blue Dart Express, this particular service is unique to Dell in India which meets the latter’s specifi c requirements, one of which is pre-alerting the consumers before deliv-ery allowing for his convenience.

Both YCH and DHL provide servic-es to Dell for reverse logistics as well.

technology ProvidersGlobally, Dell’s direct and real-time connect with customers and seam-less collaboration with suppliers give the company an edge in meet-ing customer demand while keeping the inventory low. And much of this capability hinges on information technology. Dell has a large IT devel-opment team that creates the web-enabled collaborative environment. For specifi c supply-chain functions, Dell use a large number of IT tools off the shelf. “However, most of the integration work we do within the company. Al the tools are fairly web-enabled, easily integrated with the suppliers’ side,” says Sundaresan.

Dell India declined to give the names of specifi c IT tools, but glo-bally, the company has been using i2 SCM solutions that integrate fore-casting, planning and execution with visibility across the supply-chain, according to industry white papers. Oracle’s database solutions and busi-ness suites also form a key part of Dell’s IT infrastructure as per the re-ports.

Dell India uses Radio-Frequency Identifi cation Technology, but within the factory operations to keep track of products, informs Sundaresan.

Demand and Fulfi llmentA Businessweek article published last year described how Michael Dell, in order to give top managers better

Inside the factory we don’t have more than four hours of raw materials inventory

at any point in time

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< Cover Story

42

client-response flexibility, decided to restructure the business in 2007 into four customer groupings: consum-ers, corporations, small and midsize businesses (SMB), and governments and educational buyers. The model has remained the same in India. And it seems to be working. According to industry reports, Dell India’s recent success can be attributed to its strong recent performance in the consumer, SMB and education segments.

Early this year, when Dell India crossed the $1billion-revenue mark, sector observers credited company’s success to its multi-channel strat-egy that has allowed the company to reach newer markets and customers.

For one, the retail strategy seems to be paying dividends. “Globally, we have realized that a lot of con-sumers want to touch and feel a product before they buy it, more so in the emerging markets like India,” Sundaresan says.

“In India we are in the retail space for the last two years. We are avail-able in all kinds of retail formats. We have presence in all the top markets – Tiers 1, 2 and 3 cities through the IT retail channel. We also have kiosks at a number of retail outlets where con-sumers can place the order online.” The consumer can also pick a Dell product off the shelf at these points but there he will get only a fixed con-figuration.

As for Dell’s forte – Internet sales – the company has been whipping up demand through constant mes-saging through B2C media. Result: Expected, rapid increase in demand. So how is Dell India able to forecast and manage demand? For the chan-nel route, Sundaresan says, “We talk regularly to our customers – directly, online and through our partners. This offers us tremendous insights as well as data to figure out the demand patterns for direct as well as indirect sales.” By media accounts, channel partners contribute 22 percent to Dell’s global revenue. The company

has 4,000 partners in the APJ (Asia Pa-cific Japan) region.

Dell’s build-to-order route, on the other hand, gives it a lead over others when it comes to demand forecasting. The advantage is two-fold.

“One is, we are able to see market changes quickly and prepare our sup-ply-chain accordingly – for example, I can go and prepare my LCD vendors, seeing a surge in LCD demand. For example. I am able to ready my sup-ply chain the quickest and secure the changes in the marketplace,” Sunda-resan says.

The other advantage is that Dell is able to shape demand based on its knowledge of its inventory. “Our direct relationship with the customer helps us in responding to inventory surplus issues, where we are able to offer such inventory with better pricing or with a faster delivery time,” he says.

Dell manages its supplier relation-ships globally, since most of them are vey large companies. Accordingly, Dell’s regional arms convert the de-mand forecast to a supplier forecast, based on the respective production plans. The forecast is shared seam-lessly through the Internet with its global suppliers.

Dell’s suppliers are responsible for ensuring that they maintain a pre-de-fined level of inventory. “Once we pull the material for production, they re-plenish it. We segregate the contract-ing in commerce versus transaction and data – transaction and fulfillment is managed both at the regional level and the local level,” he says.

Ergo, the Bullwhip effect is the least in Dell’s case.

Cost optimizationDell India ships millions of products in a year, and errors, no matter how marginal, could add to the cost. To reduce errors, the local supply-chain team has made an innovative use of low-cost automation – all the products being shipped out of the facility have barcode scanners that have the order

numbers as well as the customer de-tails. “When we send the products out of the factory, we scan them and give the scanned info to our LSPs. These scanners are integrated with the ERP,” Sundaresan says. “At every part of the supply chain, we expect the LSPs to have track and trace. So the customer is aware at any point where his product is.”

Over the last few years, Dell India has moved to control costs on several fronts.

For the inbound supply-chain, the team has progressively moved from air to sea. For a majority of industry players, it was the recent recession that prompted this shift. The Dell In-dia team, however, had long been on it, beginning much before the reces-sion. This has also helped the team forecast better since ocean lead times are much more.

The supply-chain team also uti-

DHL Supply Chain (DSC) provides customized warehouse management services to Dell India, supported by IT infrastructure for inventory management”

— Jyoti Row Kavi, Director - Corporate Communications &

Sustainability, DHL Lemuir Logistics


< Cover Story

lized the scaling up of India busi-ness to reduce the warehousing costs for all the nodes. “With more scale, we could negotiate much bet-ter with the LSPs,” Sundaresan says.

Within the manufacturing facili-ty, the team has been able to harness the benefits of scale in better utiliz-ing its fixed costs.

When the Sriperumbudur facil-ity commenced three years ago, it ran single-shift operations as it was enough to meet the entire India de-mand. Today, the facility is running two production shifts, thus improv-ing asset-utilization metrics.

The third area is that of outbound logistics. In order to meet customer expectations, Dell India was doing air deliveries as well as surface deliver-ies. Over a period of time, it has been able to do reduce the number of air deliveries and increase the number of surface deliveries – committing the latter to tighter delivery times to meet the high expectations a customer has

from Dell. This strategy has resulted in huge cost savings over time.

Fourthly, Dell India has local-ized a lot of materials that it had to import -- packaging material, user manuals, for instance, are made lo-cally now, informs Sundaresan.

the Next Big thingDell India’s next big strategic push on the manufacturing front would be to attract big suppliers so the lat-ter set up bases in India. Among oth-er things, its fruition would depend on how Dell grows its India demand and is able to scale up its operations in India but will have to be led by the government policies that will shape the PC industry and drive deeper, larger growth in the country.

Sundaresan gives Malaysia as an example, where Dell started small, only to grow tenfold and attract a host of its suppliers to the country.

In India, Dell is working with the government in this area. “The government is an important partner in this endeavor of ours. Dell along with the Manufacturers’ Association for Information Technology (MAIT) is involved in discussion with the government in that how do we col-laboratively convince suppliers in China, Malaysia, Taiwan to say to set up the supplier base here,” he says.

Evidently, Dell India’s business is on a fast uptick but for suppliers to set up base in India, there are big-ger issues at play that are out of Dell India’s purview. Sundaresan cites logistics cost, transaction costs and infrastructure as the three big chal-lenges in the way. “The transaction cost is still high in terms of paper-work because of low level of automa-tion. The government also needs to make the business environment more conducive in comparison with other countries,” he says.

reducing e-WasteAlong with Nokia, Dell reportedly leads the efforts made by global

electronic goods producers to re-duce e-waste, particularly in the developing world. “We partner with companies at the global level – who have a proven track record of managing e-waste,” Sundaresan informs us.

Dell’s e-waste program is di-vided into two parts –consumer and commercial. For the first part, Dell offer a free pickup to its cus-tomers. The commercial part is the when where Dell offers it at a fee for non-Dell PCs as well. On the con-sumer front, not only does Dell of-fer free recycling to its consumers, but it also launched the Dell Go-Green campaign that incentivizes consumers that opt for recycling through discounts on future Dell purchases.

Not All for ProfitUnbeknown to many, Dell was the f irst computer maker that announced – and implemented ahead of schedule in August 2008 – its plan of going carbon neutral through a series of initiatives to reduce energy consumption and reduce carbon emission.

On the social-responsibility front, Dell is working towards imparting education to the youth through a program called Dell YouthConnect. It is working with the about nine different NGO’s in the country to prepare a generation of young people across the country (and globe) to connect to a more promising tomorrow by bridging the technology gap and unleash-ing their potential through various educational initiatives. Worldwide, Dell is known to lead the global companies (according to a Technol-ogy Business Research 2009 report on CSR) in renewable energy use as well as its integration of sustain-ability with local businesses – that should mean many more cheerful villagers pointing in Dell’s direc-tion, we hope.

DHL Supply Chain (DSC) provides customized warehouse management services to Dell India, supported by IT infrastructure for inventory management”

— Balaji V CEO, YCH India


< feature

46

Despite the hike in prices of petrol and petroleum products, industry’s newly increased freight rates are unjustified argues Vishwas Udgirkar


When the government de-controlled the price of petrol on June 25th 2010

and simultaneously proposed a par-tial decontrol of diesel by making it costlier by Rs 2 per litre, the Indian Foundation of Transport Research and Training (IFTRT) rightly sug-gested that freight rates and truck rentals should rise by almost fi ve percent in keeping with the newly legislated rates. But industry and its apex body, All India Motor Trans-port Congress (AIMTC), insisted that freight rates should rise by ten percent to 15 percent. Thereafter, freight rates did increase and settle at wholly unjustifi ed rates, above fi ve percent. These price increases are not sustainable in the long-term and not in the best long-term interests of the economy or industry.

The share of road transport has risen (by 2009-10) from 20 percent of passenger traffi c and 11 percent of freight traffi c in the 1950s to 80 percent and 60 percent, respective-ly. Road transport is an important segment in the Indian transport sector, with a 4.5 per cent share of the GDP in 2005-06. During the fi rst fi ve years of this decade, the annual average growth in the road transport sector was at 9.5 percent compared to that of the national GDP at 6.5 percent.

Salient features A sustained CAGR of around 11 per-cent is the most salient feature of the Indian transport sector. The In-dian four-wheeler vehicle fl eet has been dominated by personal vehi-cles and the share of goods vehicles has come down sharply from over 25 percent in 1951 to around fi ve percent in 2004. This shows a de-creased suffi ciency of public trans-port as well as the need for an ena-bling framework to build up large scale goods transport enterprises from public and private players.

The Indian 3PL services market

(which is a fraction of the total lo-gistics market in India) is negligible when compared to the 50 percent slice of the market the same servic-es have in developed countries. The sector has not been able to attract enough FDI as well. The investment in transport infrastructure has been around seven per cent, where-as that in all transport and logistics services (1.9 percent logistics and trading, 0.65 percent sea transport, 0.20 percent air transport) has been quite low.

Market regulation The main concerns of foreign play-ers are the market structure and regulation. The Indian road trans-port and logistics market is highly fragmented and unorganized. The private sector which comprises in-dividual operators has a dominat-ing presence in the fi eld of road transportation. Their share in public transport is over 70 percent and in goods transport is nearly 100 per-cent. The rest of the public, in the main the commuters who avail the services of around 70 nationalized passenger transport bodies formed under Road Transport Corporation Act 1950, are likely to be shielded from erratic price hikes. From the FDI perspective, there are numerous regulatory stipulations on several

kinds of investments in this sector. The absence of healthy competition, adequate investments, policy incen-tives, and the profi teering tenden-cies of the players are subjecting the transport service consumers to such unjustifi ed hikes.

As such the transport and logis-tics costs (excluding transport in-frastructure) in India are 13 percent of the GDP, as against around 7 per-cent in developed countries, which itself shows the level of productiv-ity, effi ciency, competence, and competition in the Indian logistics sector. Looking at the weight of fuel cost in operating costs (at around 60 percent), then the weight of op-erating costs in truck rentals and lastly, the weight of truck rentals in the total transport cost, a hike of around 4 percent-5percent was jus-tifi able on this occasion.

Hike Impacts economyThe disproportionate hike has im-pacted the general economy in vari-ous ways such as reduced economic activity, increase in the prices of goods (over and above the change in fuel cost), higher infl ation, etc. For the transport and logistics industry, the increase in price would mean contraction in demand, substitution of service, entry of new players (es-pecially logistics MNCs) in a major

170

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

160

150

140

130

120

110

Road Freight Index RFI (2003-2007)


< feature

routes. TCIL computes Road Freight Index (RFI) as weighted average freight rates compiled across various routes. The RFI graph here shows the steep increase in freights in the last few years.

radical ChangesHowever, these developments have not gone unnoticed by the govern-ment. The proposed National Road Transport Policy by the Thangraj Committee suggests radical changes in the transport sector, in-cluding pricing of transport servic-es. It recommends constitution of a Road Transport Regulator which

will be empowered to f ix price bands for different kinds of trans-port services. The promulgation of such regulation may not be on the priority agenda of the government now, but repeated disproportion-ate hikes by transporters may pre-cipitate such regulation.

The petroleum product pric-ing regime in India is undergoing gradual reforms and the road trans-port industry must react to them cautiously and not hastily. The day when diesel prices will be free mar-ket prices is quite far away. Though internationally price revisions hap-

pen daily, weekly, etc. the decon-trol notifi cation says that further increases will be made in consulta-tion with the government, with an additional provision for the govern-ment to intervene when prices are volatile and high.

This implies that the private sector again will not be very sure of a level playing fi eld in selling products. The government OMCs will be protected by budgetary or off-budget support and the private companies will have to close their operations, as in the past, when prices swell. This will harm the en-try and healthy competition from private companies.

anomalies in Oil SectorThere are several anomalies in the Indian oil sector. The cost prices computed by the OMCs are mate-rially inf lated. Whereas only 70 percent of the crude volume is ac-tually imported, an assumption of 100 percent of products at higher custom duties is made. There are several notional price build-up factors. Additionally, when one takes into account factors such as redundant retail infrastructure, cross-subsidies amongst prod-ucts and complete absence of ef-f icient private competition, these prices turn out to be even higher. (Remember that during the re-cent crude oil price spike, when OMCs started computing under-recoveries from $55 per bbl, RIL closed operations when the price shot over $90 per bbl when loss minimization could not work. Under-recoveries are not account-ing losses or cash losses but they are losses with respect to these notional price build-ups and hence provide a good cushion to OMCs).

With a level playing fi eld be-ing provided, there will be enough competition in the oil sector and the transporters will be expected to show fl exibility in changing the

way with competitive and qualitative service options, resorting to provi-sions of competition and consumer protection regulations by users, increased tendency to use in-house transport, bidding for transport contracts, supply chain optimiza-tion efforts resulting in less busi-ness for transporters, etc.

If at some stage logistics be-comes very critical in deciding the competitiveness of a product, the small and medium manufacturers (the lobby hit hardest by this hike) will come up with an innovative solution such as cooperative trans-port. What encourages this think-

ing is the fact that historically, be it a fuel price rise (such as the one in April 2008), tyre price rise, toll road commissioning, a sea-sonal peak of transport demand, or something that results in cost/compliance or risk to the transport industry, the freight hikes have been more than reasonable.

The very nature of the Indian market makes it diffi cult to compute and maintain the freight indices, let alone predicting the future freight rate. The Transport Corporation of India Limited computes the Indian road freight index (IRFI) on select

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< feature

service charges in both directions with uniform discipline.

Another issue in oil sector re-forms is the high level of dispar-ity in the price of petrol and diesel. Internationally diesel is sold at the same (actually a little more, if we speak about most of the developed countries) prices. In the event of to-tal decontrol of diesel prices, (which is currently around 20-25 percent cheaper than totally decontrolled or levelly priced petrol all over the country), the impact on transport

costs will be very severe even if we assume that the transport industry reacts reasonably. Diesel price re-form is a complex issue and will re-quire the government’s best experi-ence in managing such reforms. But the transport and logistics industry must start embracing the practices followed internationally so that they can work in the petrol-diesel price parity arena.

Globally, the supplies of petro-leum will be not able to keep pace with its demand due to rapid eco-nomic growth, especially in emerg-ing markets like China and India. Hitherto range bound prices of crude observed for over a century are now showing a more than usual steep northward trend. The move-ment of the average monthly price of an Indian basket of crude oil in the world market from US$ 36 per barrel in May 2004 to US$133 per barrel in

July 2008, (now hovering around US $ 70 per barrel), is a clear indication of the same.

unreasonable expectationsIndia, which has 75 percent depend-ence on imported crude, bears a huge brunt of this price rise. The Indian government is expected to protect consumers from “sudden oil price shocks”. However, it is unrea-sonable to expect that the govern-ment should perpetually bear loss-es, especially when prices remain at higher levels for a sustained amount of time. The magnitude of petrole-um subsidies at the prevalent crude prices will seriously jeopardize the other developmental objectives of the government. The petroleum product price (and market) reforms were long overdue in India and suf-fered due to an absence of political will. The government has shown considerable courage in acting on these issues and it is a welcome step in the right direction.

Globally oil regimes can be di-vided into oil-taxing and oil-sub-sidizing regimes. India is an oil-taxing regime. Oil related taxes and duties at central and state levels, extra levies for the transport sec-tor’s development, dividends from oil PSUs and profit sharing in up-stream segments constitute a ma-jor share of government revenues. The dependence of the government on oil sector revenues cannot be altered, at least in the foresee-able future. If this macro-economic premise is a given, then the gov-ernment is bound to work towards reforms in transport service pric-ing, especially when it makes a case of profiteering.

the futureWhat are we going to see in the future? Crude oil prices are deter-mined by international equations of demand and supply, while oil sector taxation is dictated by larg-

The author is the Executive Director, Trans-port & Logistics, at PricewaterhouseCoopers. He can be reached at [email protected]

er macro-economic constraints. To safeguard the interests of consum-ers of the transport service which constitutes the overriding objec-tive of the government, it will look at opportunities in controlling the domestic transport industry. Come another crude oil price spike (or plateau), followed by another hyper reaction by the transport in-dustry and it may mark the begin-ning of the transport service price control regime.

Transport price regulation will not be an easy ball game. Look-ing for non-price regulatory meas-ures, selection of the services to be brought under the scope of such price regulations, deciding the cost and profit structure of several types of players and the routes on which the controls will be applicable, the services on which the prices will be controlled, the price bands, the pe-riodicity of their revision etc., will remain key issues. Another impor-tant issue will be the enforcement of these regulations, as the transport deals take place directly between two private parties and monitoring the compliance of the regulation will be difficult.

Across the world, public trans-port (other than air transport in most cases), is well within the am-bit of price regulation as it is mostly public owned. The experiment of price control in the transport service may be attempted in India, but will not achieve its objectives for several reasons. On one hand, the govern-ment should tinker with its oil rev-enue philosophy and on the other hand, it should undertake measures to discipline the transport industry especially through inducing higher competition and enabling the crea-tion of mega-players who guide the market course.

It is unreasonable to expect that the government should perpetually bear losses, especially when prices remain at higher levels for a sustained amount of time

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The logistics of ultra-sized cargo still remains the speciality of a select few. Frewin Francis sheds light on some of the challenges

Project logisticsMoving Mountains

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52


Moving Mountains


< Feature

ning with 120 wheels underneath and being pulled by a combined pow-er equal to about 1,200 horsepower!

The huge cargo was an instance of project logistics or project cargo-for-warding. The cargo handled in such projects is usually oversized, fragile, of high value and requires specialized lifting, handling and transportation equipment. Here, every assignment requires a different combination and poses a new challenge.

Special expertiseThe cargo to be handled in such projects requires special equipment and expertise, different from the rest of the logistics and freight-forwarding industry, where the containers, cranes, trailers and lifting equipment etc. have been standardized. Hence project cargo is considered a niche area into which only formidable players with experience venture. Since its challeng-ing and uniquely rewarding, it has im-mense scope in the country especially today, when infrastructure and core industries are beginning to boom.

At the outset, the aspirants must prepare themselves for some of the challenges that project cargo entails. Depending on the final location, for example, project-cargo assignments involve many challenges, some of which include overcoming harsh cli-matic conditions. In some cases, the military, armed personnel and security teams accompany the cargo as it moves through remote or hostile areas. In other instances, the topography itself presents obstacles to the transporta-tion of goods and equipment. For ex-ample, a river might have to be dredged prior to a heavy shipment via a barge.

A step-by-step planning of cargo movement is required. That would involve, identifying and calculating the risk of critical components. It also includes careful identification of the right handling equipment and the right selection of highly trained and experienced manpower.

The handling of project cargo is done by a variety of equipment. The lifting of such cargo is done by heavy lift cranes such as board cranes. The cargo can be carried by air with the help of airlifters like the Boeing C-17 and the Antonov AN 124. By road, specially designed multi-axle trailers with one prime mover, or in some cases, multiple prime movers or flatbed trucks are employed and by water, heavy lift ships, tug or barges are used. In India, the cargo is often lifted off a ship or from a cargo air-craft onto multi-axle trailers, from where it is transported by land and at times moved through inland water-ways using self-propelled barges or a combination of barges and tugs.

Facing ChallengesIn terms of movement, among the challenges faced is the availability of infrastructure to move project cargo quickly and efficiently. This could be the availability of ports where ves-sels carrying cargo can berth or the availability of loading and un-loading equipment for handling cargo. The The Antonov AN 225 freighter aircraft

Not so long ago, a friend, now the logistics manager of a reputed Indian MNC, then

a gawky student at a German uni-versity, had his first brush with the enormity of project logistics. During a pleasant drive through the German countryside on a balmy afternoon, he was stopped in his tracks by a road-block that lay ahead of him, and traf-fic soon began piling up behind him. After a few minutes he saw the big-gest thing he had ever seen move by road, a huge gas turbine — close to six meters in width — crawling like a giant caterpillar on the road.

Our logistics-manager-to-be stepped out of the car and asked the men in charge of the vehicle specifics about the cargo. They told him that it that it was the world’s biggest gas turbine, weighing around 500 tons, capable of generating around 400 megawatts of power. The turbine was being hauled by a 20-axle trailer and being driven by two prime movers, one to pull the cargo and the other to push it forward. The cargo was run-

18 | April 2009 | www.log-india.com

< SPECIAL

Panalpina has the project for

Delhi Metro Rail Corporation

(DMRC) which will go on till

2010

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Who will survive?M Gopinath, head-transport op-

erations, Lee & Muirhead Pvt. informs that the number of ODC movers has gone up to almost 40 now. He says, with so many players in the market, it is the cash-rich companies who will survive. He feels that project cargo movers should look at investing more in equipment to prepare for the future, “If later this year there is a whole rush of cargo then they should be prepared to handle the reversed supply-demand situation.”

It appears that the global com-panies that conduct business across countries will be able to survive be-cause of their reach. They will have an upper hand in bagging projects from MNCs, when compared to their Indian counterparts. Talking about survival tactics, Amin says, “Only players with a global network and sound financial capacity will see it through.”

Service providers that saw a de-cent business in the past two years are banking on upcoming projects.

Narayan says, “Companies who have been in the business for long with ad-equate equipment have better chances

of survival. We will see quite a few new ones shutting shops.”

It seems that service providers that have previous years’ projects with a long execution period will sail through this period without much worry. “If there is a company that has more signed-up projects of the previous years then today, their execution cost will be very

competitive as compared to the rates decided earlier and they will make a profit. They will see a reverse trend, that is, when everyone is doing badly, they will have an increased profitabil-ity,” explains Varghese.

The year aheadThough the current situation is

bad for project cargo movers, it is the coming time that will be a deciding factor for their survival. Their busi-ness relies heavily on improved market conditions. People in the industry are hopeful that the market will become better by the end of the current finan-cial year and are also hopeful that new projects will commence by next year. Varghese says, “Our business is to-tally dependant on the new upcoming projects. If the market is good, we will find business.”

It will not be surprising to see more of small and medium-sized cargo movers combining with the promi-nent players in the industry for better service and ultimately for survival.

“Only players with global network and sound

financial capacity will be the ones to see it

through.”

- Sharmila Amin, South Asia area head, Panprojects, Panalpina World

Transport India Pvt. Ltd

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RNI No. MAHENG/2007/23777 l Registration No.MH/MR/South-279/2008-10Allowed to post at Patrika Channel Sorting Office G.P.O. Mumbai - 400001 Date of mailing: 5th of every month issue

72

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< Feature

infrastructure suitability of roads and bridges should also be checked for the conveyance of such cargo. In countries that have achieved logistics efficiency, like Germany, Australia, Canada, the UK etc., well- designed and smooth roads ensure that vehi-cles ply at a pre-calculated speed sans interruptions or slowdowns.

But in India, where road transpor-tation accounts for more than 60% of inland transportation of goods

and roads and highways carry 40% of freight, bad roads pose one of the biggest challenges. Developed coun-tries also make optimum use of rail, inland waterways and roads, either exclusively or in combination, to en-sure the timely delivery of cargo. In India, however, rail infrastructure is shoddy and with the full potential of inland waterways yet to be tapped, the setting up of temporary infra-structure like jetties or bridges may

be necessary for safe, precise and ef-ficient movement of such cargo.

Slow movement of cargo due to bad road conditions, red-tape and delay in government clearances, coupled with unreliable power sup-ply and slow banking transactions, make it difficult for exporters to meet the deadlines for their international customers. To expedite shipments, they have to book their cargo as air-freight, rather than sea freight, which adds to the cost of shipments making them uncompetitive in international markets. Moreover, many large ship-ping liners avoid Indian ports due to long turnaround times. Hence many Indian exporters have to resort to transshipments at ports such as Sin-gapore, Dubai and Colombo, which in turn add to the cost of shipments and also delays delivery.

A commonly used lifting eqipment - Board crane

A multi axle trailer used by Kuehne + Nagel

The Indian logistics industry is growing at 20 percent vis-à-vis the average world logistics industry growth of 10 percent. Since the organized sector accounts for merely 1 percent of the annual logistics cost, there is immense potential for growth of the sector.”

— Sharmila Amin, Head of Pan Projects,

Panalpina

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– K

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< Feature

58

On February 4, 2009, the master of MV “Beluga Intonation”, Johan Buysse

and his crew tackled a truly ambitious task in the port of the Japanese city of Yokohama, the loading of a super heavy 736 ton reactor. The challenging lift needed elaborate pre-planning and high accuracy because other cargo limited space on the weather deck. In the port of Masan, South Korea, the vessel had already loaded three plant components for the chemical industry, a 71- metre re-fining column, a 58-metre recovery col-umn and a 30- metre long saturator. All three items weighed between 229 and 350 tons.

The lift in Yokohama started around 10 am in the morning. A small barge with a 35-metre long reactor moored along-side the multipurpose heavy-lift project carrier. Due to the extreme torsion which impact vessels during a lift of such dimensions, strict safety regulations had to be applied. Only team members ac-tively involved in the operation – the cap-tain, chief officer, cargo superintendent and two crane drivers – stayed on board.

Tons of ballast water kept the vessel in balance. “The most critical point dur-ing the whole process is when the cargo passes the ship’s rail. This is the most unstable moment because the cargo passes the highest point and the centre of gravity of the vessel is the highest as well,” explains Roberto Frigeni, director of the Beluga Transport Engineering, who was on site to support the team. “Due to the limited space on the deck we could not take advantage of much room to swing the reactor and had to place it pre-cisely in the designated position.” Then steel mats were spread to reduce the enormous point load impacting the hatch cov-ers of the vessel through the cargo.

Due to excellent plan-ning and cooperative effort the super heavy- lift was successfully

concluded. Subsequent to lashing and fixing the valuable freight on the deck, the vessel was prepared for sailing. After leaving the port area, MV “Beluga Intonation” set course 228° and headed for Singapore, her first and only stop on the way to the port of destination in India.

Case Study

The board cranes lift the reactor onto the MV Beluga Into-nation. The recurring enormous torsion forces made strict safety regulations necessary.

The 35 metres long reactor was loaded by the board cranes ex barge to the multipurpose heavy-lift project carrier.

The 35 metres long reactor was loaded by the board cranes ex barge to the multipurpose heavy-lift project carrier2.

Beluga team loading of 736 ton reactor from Ishikawajima Heavy Industries, Japan to India

Source – B

eluga-Group

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< Feature

Safety IssuesWhile transporting large cargo by sea, ensuring the safety of the crew, ship, cargo and equipment is criti-cal. All possible risks that may lead to injuries, illnesses, accidents or damages must be assessed before shipment. This also includes pro-tection of the environment where the cargo is being transported. As a member state under the IMO (In-ternational Maritime Organization), headquartered in London, India is expected to comply with the ISM and ISPS (International Safety Manage-ment) and (International Ship and Port Facility Security) laws respec-tively, which prevent environmen-tal pollution. Indian ships are also checked for ISO 9000 and ISO 14000 to ensure that the ships are at par with other vessels sailing under the same regulatory body.

Other challenges involve providing complete turn-key services from door to work-site, including managing quot-ing processes, expediting purchase or-

ders, warehousing, insurance, customs clearance and trade documentation.

There are also many regula-tory permissions that need to be acquired prior to any project cargo movement. These include multiple road permits, permission for han-dling and lifting equipment and documentation required from mul-tiple authorities for the movement of the cargo. Special care must be taken to ensure that there is no dam-age caused to roads, electrical cables and other civilian infrastructure.

Since the cargo must be transport-ed inland by road, it must be done in a manner where there are no safety or environmental threats to civilians or surroundings. In most cases such cargo is moved at night.

Scope of Business For most countries, logistics costs vary between 9 percent and 20 percent of the GDP. Logistics costs in India are estimated at 14 percent of the GDP, which translates into US $140 billion,

assuming the GDP of India to be slightly over $1trillion. Of this, almost 99 percent can be attributed to the unorganized sector (such as the owners of less than five trucks, small warehouse op-erators, customs bro-kers, freight forward-ers, etc.), and a little more than 1 percent, i.e. approximately $1.5 billion, is contributed by the organized sec-tor. However, the in-dustry is growing at a fast pace and if India can bring down its logistics cost from 14 percent to 9 percent of the GDP, savings of approximately $50 bil-lion will be realized at the current GDP level.

With the 11th five-year plan and the government’s intense focus on massive infrastructure projects and heavy infusions of investment in defence, oil and natural gas and in-creasing the capacity of power gen-eration in the country, more complex, critical and invaluable machinery and installations will be transported to and from India.

However, no regulatory body has so far been set up in the country to streamline the process of project cargo movement. Indian firms in the project cargo segment are faced by challenges unique to the region in terms of cultur-al, regional and bureaucratic practices. There is a dire need to establish laws to reduce wastage of time and increase efficiency in the business.

enter the ringIndian project cargo managers re-quire familiarity with procedures, need to have easy access to officials

Through 11th 5-year plan, government of India is focussed to take Infrastructure spend to new levels and this will ask for higher demand for projects logistics support

— T.G.Ramalingam , CEO- Projects Logistics,

Allcargo Global Logistics Limited

Project Cargo: Hot Spots

Source – Planning Commission


potential of this sector and have estab-lished logistics divisions.

Large express cargo and courier companies such as Transport Cor-poration of India (TCI) and Blue Dart have also started logistics operations. These companies enjoy the advantage of already having a large asset base and an all-India distribution network.

Cost ImperativesThe cost of entering the project cargo segment is proportional to the size of cargo handled. The costs could vary, depending on the strategy one adopts to start the project cargo division. Such a division would require invest-ment in competent personnel who can manage operations across vari-ous locations. It would also require the opening up of offices in key areas across the world, either directly or through an agent to oversee smooth movement of operations.

Choosing to be asset heavy, can be quite capital intensive as it would require a lot of capital investment. A player interested in providing onshore services then would be required to invest in a fleet of vehicles of various capacities to cater to various require-ments. Similarly, if one is interested in providing waterway solutions then investments in barges and tugs will be required. A project cargo player can also be asset light and sub-lease such equipment. In such a scenario, oper-ating costs can also be reduced.

However, there is a lack of trust and awareness among Indian ship-pers with regard to outsourcing lo-gistics. The volume of outsourcing by Indian shippers is presently very low (10 percent), compared to developed countries (50 percent and sometimes as high as 80 percent). The unwilling-ness to outsource logistics may be at-tributed to scepticism about its pos-sible benefits, perceived risk, losing control of sensitive organizational information and vested interests in keeping logistics activities in-house.

But the Indian markets have their

and good foresight in planning and execution which will ensure timely delivery of consignments. The job also demands a lot of technical sup-port. Since goods are usually directly or indirectly related to mechanical, civil or electrical engineering, good teams of engineers are also required.

Project cargo managers should also have an extensive network of contacts with key industry service providers. Over-dimensional cargo needs non-standardized vessels, equipment and transport facilities to undertake complete door-to-door movement. To do this, the project cargo manager needs a good network of contacts in the industry where he can arrange such facilities at quick notice. Since handling equipment is non-standard, it needs to be made-to- order in many cases. A novice could face problems in timely access to cranes or trailers, leading to delays which could result in losses.

Indian freight forwarders also face stiff competition from multi-national freight forwarders for international freight movement. MNCs, because of their size and op-erations in many countries, are able to offer low freight rates and extend credit for long periods. However, India has its own share of project logistics pioneers. Founded in 1916, J. M. Baxi & Co. is one of the oldest shipping agencies in India. Some of the other big players in the In-dian market are L&T who are also involved in project logistics assign-ments of moving their own turn-key projects within the country as well as to global locations.

Some other notable project logis-tics specialists like Urmila Project Service of Ardeshir B.Cursetjee & Sons Limited, Lift & Shift India Pvt. Ltd. and the Resham Singh Group have been the pioneers of project logistics in India long before foreign players entered the market. Many large Indian corporates such as Tata and Reliance Industries have been attracted by the

own set of strengths too. There is ready availability of skilled labor and the climate conditions are favorable to project cargo movement, as most of the country is not subject to drastic weather conditions.

So, whether its pipes, trucks, rail cars, complete or dismantled factory facilities, the gamut of project cargo is enormous. Like a double-edged sword, it’s risky as well as lucrative. The projects often feature a long range of parallel or successive ship-ments as well as a great variety of cargo in one shipment. In some cas-es, one project might take months or years if a customer needs the goods on time at different parts of the world. But with the business being exceptionally lucrative and infra-structure projects lined up amount-ing to values of 12 digit figures, let’s gets these behemoths moving!

A project-cargo player can also be asset light and can get access to equipments through sub- leasing them. In such a scenario it will be less capital intensive.”

— Lars Sorensen , Regional Manager, Damco

(South Asia)

— With inputs from Damco, Allcargo Group,

Lift & Shift and Panalpina

Most Indian pharma companies manage their own complex supply chain. However, the dangers of product damage and the threat of disrepute is compelling the industry to seek out LSPs, says Jayashree Mendes

< feature

INDIA| July 2010 | www.logisticsweek.com62

When the recession af-fected the world, two sectors managed to

avert the crisis – food and pharma. You cannot do without either.

In the case of pharma, a McK-insey report brought out in No-vember 2009 paints a bright pic-ture ahead. The $20 billion Indian pharmaceutical industry is ex-pected it to grow at a compounded annual growth rate (CAGR) of 14-15 percent to touch $40 billion by 2015.

The Indian pharmaceutical in-dustry exports to more than 200 countries, including about 60 high-ly regulated markets, but it also caters to every nook and corner of the country. So it is surprising that an industry this size transports and sells its products largely with-out the professional touch of end-to-end logistics service providers.

Potential Potential Potential EncapsulatedEncapsulatedEncapsulated

INDIA| July 2010 | www.logisticsweek.com 63

Hold of the PastExplaining the pharma sector’s de-cision to largely manage its supply chain, Jeevan Raosahib, Managing Di-rector, Indelox Service Pvt Ltd, a third-party logistics management company, says, “It is incredible that such a huge industry juggles manufacturing and shipment of active pharmaceutical in-gredients (API), drugs, biotech prod-ucts and medical devices on its own. Even today, most companies abstain from using the services of logistics service providers (LSPs). Little won-der then, the Indian pharmaceutical industry is lacking in world-class best practices of supply chain manage-ment.”

The rapid growth of technol-

ogy seen in the manufacture of drugs does not refl ect in its supply chain. At a time when other manufactur-ing companies have realized the effectiveness of roping in logistics companies, the pharma industry with critical speed-to-market relies on the traditional method of supply chain - clearing & forwarding (C&F) agents. Defending the supply chain policies of pharma companies, Mas-ud Shaikh, Head (Distribution & Lo-gistics), Alembic, a pharmaceutical company based out of Gujarat, says, “Pharma companies spend large amounts of money on research and development (R&D) and manufac-turing. Hence they are wary of hiring logistics players and adding to costs.

n The industry is expected to touch $40 billion by 2015n Mostly C&F agents and stockists handle the entire

supply chainn Agents offer value-added services such as region

forecast and trendsn Advantage of LSPs is the correct transport of

sensitive materialsn Profi tability is positively impacted when bringing in

LSPs

Highlights

Because costs are already huge, lo-gistics would mean an additional 3-4 percent in costs. So they prefer to work with C&F agents who are spread out in rural and remote locations.”

The C&F agents manage stock maintenance for the companies and forward stock keeping units (SKUs) to the stockists on request. Compa-nies retain one to three C&F agents in each state. Hence a company may have a total of 30-40 C&F agents across the country.

The C&F agents also act as vigilant agents. Most companies that Log.In-dia spoke to say agents also offer a re-gion forecast. He reports trends and potential in cities, while taking care of inventory and scheduling from the central stock point of the company. Manufacturers get an idea of what drugs are selling in a particular loca-tion. Like any other industry, phar-maceuticals are prone to frequent and sudden demand and supply mod-ifi cations. Taking note of the changes need an eye for detail and picked up so that stocks can be sent as per re-quirement to that region.

So would not LSPs be in a better position to offer the same services

< feature

INDIA| July 2010 | www.logisticsweek.com64

and more? Shaikh says, “The supply chain of pharma is highly complex. But the margins are high. This is a big lure for small agents. Besides, as agents they don’t need to invest as many people, resources, investments as an organized 3PL.”

Sensitive MaterialsThe current distribution method throws up various questions with regard to movement of temperature sensitive materials. This is especially true for biotech products, pre-filled syringes, and some drugs that require careful climate management during transit. Dimple Parikh, Head (Logis-tics), Lupin Limited, one of the top pharmaceutical companies in India, says, “Drugs and medical devices can-not be treated like any other material. Personal supervision is required dur-ing movement of each box. Many a times by the time the box reaches the

stockist, the drugs are corrupted.” Taking this further, Sanjiv Kathu-

ria, Director (Sales & Marketing), TNT India Pvt Ltd., a Bengaluru-based logistics service provider, says, “C&F agents are not the right people to be given charge of an entire supply chain of critical materials. Specifical-ly in the case of cold chain distribu-tion, they cannot provide for a supe-rior reach of temperature controlled drug distribution. Certain vaccines and oncology trials in India demand cold chain distribution infrastruc-ture as these products move under 2-8 degrees Celsius. For other drugs it is necessary to have a controlled ambient movement (15 to 25 Deg C) from normal ambient.”

The absence of LSPs or 3PL players throws up infrastructure challenges for the companies. Land and air con-nections to interior locations are usu-ally poor and could delay delivery of

life-saving drugs within a stipulated time frame. Shaikh says, “C&F agents are not equipped with proper storage infrastructure and the right vehicles to support transportation. This could mean poor hygiene and exposure to outside elements. Moreover, C&F agents are not equipped with IT in-frastructure to support visibility of products in the supply chain in case of inventory management, recalls, destruction, etc.”

Kathuria adds, “Pharma drugs and equipment require advanced freezer and refrigeration systems and sophisticated temperature monitor-ing systems that include alarms in case equipment falls outside accept-able temperature ranges.”

Signs of LifeCompanies such as Novartis, Johnson & Johnson, and Actavis, among oth-ers, have realized the importance of using the services of organized LSPs. According to a spokesperson at Act-avis, “Experienced 3PL providers bring

Pharma companies work on nominal budgets and are wary of adding logistics costs to their spiraling costs

— Masud ShaikhHead (Distribution & Logistics),

Alembic Pharmaceuticals

Logistics plays a critical role in pharmaceuticals, especially in the case of sensitive and life science products. Some of the well-known pharmaceutical logistics players in the Indian industry are TNT, Caliper Integrated Services, Indelox, World Courier, Hellmann Logistics, among others.Pharma logistics players must invest in cold chain and tracking technologies. Crucial to pharma products is maintaining the quality or the potency of the drug till it reaches the consumer. So the LSP must have the required infrastructure of unique packaging method such as Thermo Pack which is used for storing chilled samples that requires a controlled temperature of 2-8 degrees Celsius up to 96 hours. The logistics provider also has to provide cold solutions for products that require temperature of -40 degree Celsius for at least 20 hours.

The packaging activities for pharma products require trained and dedicated staff unlike other types of products. A slight deviation in handling during transportation

can cause degradation of the drug. This is especially true in a geographically diverse country like India with extreme climates with its multilayered distribution channel. At every level, there are associations comprising of stockists or retailers that decide on the products that are in demand in a particular region. The long channel of distribution, which is also inclined to see high rate of counterfeit products seeping into the market, makes it mandatory for a company to make all its stock keeping units (SKUs) available at all levels at all times.

IT adoption in logistics is another imperative. Pharmaceutical companies and logistics companies have realized that to improve distribution and keep inventories at optimum levels there is a need for integrated solutions in SCM. So adoption of technologies like SAP and RFID can help trace and track stock, while providing for liquidation when required, and streamlining interconnectivity between manufacturing facilities, warehouses, and CFAs across states.

LSP role In Pharmaceuticals

Imprint Feature

Warehouse Automation at HEFAGRA SpainIn order to hold its leading role on the Spanish pharmaceutical market and to ensure highest quality and reliability in service, Hefagra, a cooperative of 700 pharmacies in Granada (Spain), responded to the call of time, realizing a new distribution centre with cutting edge technology.

The focus was on implementing an innovative all-in-one solution with a maximum degree of automation and increasing the speed of serv-ices. The construction of the new building for the distribution centre in a high-risk earthquake area was an especially challenging aspect. Due to the solid relationship from past projects, Hefagra entrusted KNAPP with the realization of its new distribution centre.

The high-performance KiSoft WMS (Warehouse Management System) is the core of the logistics solution, conducting the three-line stacker crane Smart-Storage System in the goods-in area, the goods-to-man storage and picking system OSR ShuttleTM as well as all automatic and semi-au-tomatic picking solutions within the warehouse. KNAPP rendered the en-tire scope of services, from technology up to warehouse management and con-trol software.

Monitoring with KiSoft i-POINTWith the visualisation software pack-age KiSoft i-POINT, Hefagra can switch on and off, monitor and op-erate the entire warehouse as well as individual areas. The warehouse is displayed authentically in one or more images visualizing the control units within the entire facility.

Goods-inDuring the goods-in process, the Warehouse Management System registers expiry dates and lot IDs and each product is automatically allo-cated a storage location after the goods have been checked. Registra-tion of the lot ID ensures the complete traceability of all pharmaceuticals from producer to consumer.

DetrashingAll products which are destined for storage in the automatic con-tainer storage system or in the OSR ShuttleTM are transferred from their original packaging to storage bins suggested by the KNAPP WMS and automatically supplied by the sys-tem. In this process the barcode of the storage bin is allocated to the product information.

High-bay racking system for containersThe high-bay racking system with a length of 100 metres was realised with a Smart-Storage-System. The storage locations are operated via

three stacker cranes which are re-sponsible for storage and retrieval, replenishment of products and reor-ganisation within the system.

Order processingThe automatically started picking container is transported to the re-quested picking areas upon alloca-tion to the order. To reduce the transit times, areas which are not relevant for the order are simply passed by.

Automatic order processing with central belt autopickerSome 75 percent of all order lines are processed in the central belt autopicker area of more than 100-metre length. Three lines of stacker cranes automatically re-plenish the 4,680 autopicker chan-nels of the SDA and TDA. Fast and medium moving products are

processed with the oft proven au-topickers SDA, TDA and LMS.

Manual picking In the manual stations, products are picked from the flow rack using RF terminals. The staff receives informa-tion via radio frequency which is dis-played on the hand-held terminal. OSR ShuttleTM pickingThe OSR ShuttleTM principle makes it possible to achieve an especially high picking performance in the most ergonomic and efficient way. Pick-to-Light displays show the po-sition and quantity of goods to be picked while the Put-to-Light indica-

tors mark the container which is to receive the products. Pick-to-BeltExtremely fast-moving products and products which cannot be supplied in containers are picked directly from the pallet storage area or flow racks in a process controlled by the KNAPP WMS. The ship-ping labels are then at-tached and the products transported to the dis-patch area on the Pick-to-Belt system.

Goods-outThe completed containers are au-tomatically addressed, receive shipping documents, are sealed, strapped and diverted to the dis-patch area. The conveyor system ensures that the transport contain-ers are grouped according to their destinations and sorted according to route, thus reducing the intervals between routes by 30 percent. The customer’s benefitWith the rapid, trouble-free and ac-curate provision of requested prod-ucts, Hefagra has succeeded in further strengthening its position on the Spanish market for pharmaceu-tical distribution. The warehouse of 20,000 sqm at the Granada location meets every single one of the cus-tomer’s requirements.


< feature

backup strategy,” adds Raosahib. Established and documented

Standard Operating Procedures (SOP) for handling, storing and transport-ing pharma and biotechnology prod-ucts and materials should be made use of. The LSP should have a detailed disaster recovery plan that documents the internal procedures for crisis situations such as natural disasters, threats or other emergencies.

Long-term BenefitsManufacturers need to ensure that their drug reaches customers with uncompromised quality. An LSP can help manufacturers retain control over a multilayered distribution sys-tem, while offering a well-managed cold-chain management process.

It is only now that most pharma companies are realizing the impor-tance of an effective distribution system. Coping with the challenges of streamlining the systems in India will ultimately benefit the patient and the healthcare system..

on board facilities and equipment that are designed to follow the require-ments of the pharma industry. Their advanced tracking and reporting sys-tems help bring to attention products that could have expired or compro-mised on due to improper storage and handling. They also offer visibility and control of stored materials with so-phisticated inventory management.”

A 3PL player equipped to handle pharmaceuticals will have the right people, systems and technology in place. Kathuria says, “The 3PL play-ers conditioned to handle pharma will employ staff with specialized training and knowledge required to handle valuable and sensitive pharmaceutical and biotechnology materials. An inex-perienced supply chain management can lead to losses of millions of rupees and endanger consumer safety. Other issues could be brand erosion due to counterfeiting, theft and diversion.”

The correct 3PL provider can en-able drug manufacturers to realize significant financial returns. Profit-ability is enhanced by leveraging the best practices of a pharma industry

3PL partner in the following ways:*Just-in-Time (JIT) inventory lev-

els resulting from greater visibility for the stored materialsn A streamlined supply chain proc-ess that results in decreased opera-tional costsn Tighter control and better docu-mentation resulting in a reduced risk of fines and product recallsn Increased customer confidence resulting in brand loyalty and higher marginsn Enhanced focus on core business competencies resulting in greater efficiencies

There is also a general thought in the industry that the implementa-tion of goods and services tax (GST) should see pharma companies adopt the practice of going through organ-ized logistics channels as there are cost benefits.

technology useIndia’s intractable geography makes distribution of products to remote locations difficult. Technology plays a critical role. LSPs and agents need to track products accurately. Hence pharma companies utilize inventory-based bar coding or radio frequency identification (RFID) as such systems automatically scan labels and elec-tronically store the information with-out manually entering data.

RFID is superior to bar coding be-cause it does not require line-of-sight scanning, allowing inventory levels to be calculated in real time and virtually eliminating drug counterfeiting.

Other technologies are product tracking technologies such as Enter-prise Resource Planning (ERP) soft-ware and document management systems as they aid operational effi-ciencies. Companies with these tech-nologies are better equipped to provide a complete history of the handling, sta-tus, transfer and overall management of pharmaceutical and biotechnol-ogy products. “Here it is important that firms have redundant servers with data

A 3PL player equipped to handle pharmaceuticals

will have the right people, systems and technology

in place

— Sanjiv KathuriaDirector (Sales & Marketing),

TNT India

The Indian pharmaceutical industry is lacking in world-class best practices of supply chain management

— Jeevan RaosahibManaging Director,

Indelox Service

66


A Factory Approach To Lean Integration

Planning And Designing Of Airports

The authors, Schmidt and Lyle, while dis-cussing lean integration, have divided the

book into three parts. The fi rst part describes the signifi cance of lean and demonstrates how established “lean” techniques can be used to take control over the entire integration proc-ess. The book explains how well-known “inte-gration factories” leverage benefi ts of repeat-ability and continuous improvement across every step of an integration project.

The case studies in Part II show how lean integration is not a theory – but an applica-tion in a real world context. Drawing on their experience, Schmidt and Lyle bring together best management principles and measurable

The authors provide an in-depth view on airport planning and design to refl ect the

signifi cant changes that have occurred in the aviation industry.

In 2008, the commercial segment of civil aviation, consisting of more than 900 airlines and 22,000 aircraft, carried more than two bil-lion passengers and 85 million tons of cargo on more than 74 million fl ights to more than 1,700 airports in more than 180 countries world wide. The new edition includes coverage of latest aircraft, air traffi c management tech-nologies, passenger processing technologies, computer-based analytical and design mod-

Monitoring Cold Chain LogisticsLuis Ruis-Garcia while shedding light on

cold chain logistics, details how every day millions of tons of temperature-sensitive goods are produced, transported, stored and distrib-uted worldwide. Cold chain describes the series of interdependent equipment and processes employed to ensure the temperature preser-vation of perishables and other temperature-controlled products from the production to the consumption end in a safe, wholesome, and good quality state. In this framework, fi eldbus and wireless sensor technologies are entering a new phase.

development of Monitoring systems for cold chain logistics By By Luis Ruiz-GarciaPublisher: LAP Lambert Academic Publishing Price: Rs 4,000

lean Integration: An Integration Fac-tory Approach to Business Agility By John G. Schmidt and David Lyle Publisher: Addison-Wesley ProfessionalPrice: Rs 1,890

planning and design of Airports, Fifth editionBy Robert Horonjeff, Francis McKelvey, William Sproule, Seth Young Publisher: McGraw-HillPrice: Rs 5,900

OFF THE SHELF

actions for streamlining integration develop-ment and maintenance.

Part III of the book offers a prescription or "how to" guide on how lean integration can be treated as a business strategy and applied effi ciently to provide maximum business fl exibility, supporting rapid change without compromising on stability, quality, control, or effi ciency.

This book presents research studies focused in three emergent sensing technologies: Con-troller Area Network (CAN), Radio Frequency Identifi cation (RFID) and Wireless Sensor Net-works (WSN); showing real implementations for tracking and monitoring in the cold chain.

els. Guidelines are laid down for calculating runway lengths and pavement thicknesses ac-cording to international standards. The book also discusses airport security planning, en-vironmental planning and fi nancial strategies for airports.


ResouRce centeR Journals, Case Studies, Research Reports

Lean Case Study: BoeingBy Kamran Zamir, Managing Partner, Game-Change Consulting

In the early 90s Boeing realized that it isn’t enough for a company to merely cut down costs; it also needs to streamline processes while improving quality, respond quickly to customer demand and empower em-ployees while increasing profits. Boeing realized the need for lean manufacturing techniques in order to find ways to make its products competitive. Implementation of lean techniques at Boeing covers every-thing from suppliers and procurement to manufacturing and delivery.

As a result, Boeing reduced defects by 90 percent in the manufacture of the Super Hor-net, 54 percent in build time of the Apache helicopter and lowered inventory levels by 42 percent of the Boeing 737 among other things. At the Renton factory several tactics were introduced to achieve lean manufactur-ing such as value stream analysis and mobile communication systems for employees. Search Tags: Boeing, lean case study, Kamran

Optimum Ship RoutingBy George L. Hanssen and Richard W. James

In this paper, Hanssen and James describe the system developed and used by the Unit-ed States Hydrographic Office for selecting the optimum track for transoceanic cross-ings by applying long-range predictions of wind, waves and currents to a knowledge of how the routed vessel reacts to these vari-ables. Over a period of two years, over 1000 optimum ship routes were provided to one authority, with an average reduction in trav-el time of 14 hours and optimum use of fuel.Search Tags: hanssen, hydrographic, Richard, Cambridge,

routing

Inventory in Motion: A Direct Alternative to Global Fulfillment By UPS

UPS studies how logistics visionaries have talked for years about eliminating or at least reducing the role of inventory in modern supply chains. What is appealing in this vision is the reduction in logistics costs and the fulfillment cycle. Ups teach-

es how a direct to store or distribution bypass approach to global fulfillment can lead to a leaner supply chain since it will enable companies to shrink the fulfillment cycle and eliminate inventory costs. Direct-to-store can offer a good balance between fulfillment speed and logistics costs.Search Tags: inventory, motion, ups

Circle of Service WorkflowBy Qualcomm

Qaulcomm's decision to integrate its Circle of Service Workflow with dispatch systems has helped improve efficiency of its trans-port fleets. By automating functions such as load assignments, event triggers, and work process forms, Circle of Service Workflow helpsto lower operational costs, reduce er-rors made by manual entry, and improve on-time fulfillment across entire fleets. The intuitive, easy-to-use design of the in-cab interface reduces driver training time, increases visibility, and improves compli-ance on both the Mobile Computing Plat-form 100 and 200 Series.

IBM's Green supply chainBlogger: Andrew Winston, co-author of Green to Gold and author of Green Recovery Winston talks about how IBM, in its endeavor to green its supply chain, brought about a new value chain to the discussion - electronics and IT. In 2004, the company launched its own IBM Supplier Conduct Principles, which helped define the Electronics Industry Code of Conduct (EICC) standards. Back in 1998, IBM had asked suppliers to consider adopting the international green operating standards, ISO 14000.

IBM demanded that suppliers must deploy environmental management systems (EMS) to measure existing environmental impacts and establish goals to improve performance and publicly disclose their metrics and results. search tags: Andrew, Winston, ibm, hbr

turning "no" Into "Yes" In IndiaBlogger: semil shah, Management consultant and entrepreneur, san Francisco Bay AreaIn his blog, Shah talks of the challenges entrepreneurs face when setting up a venture in India, with No being a common answer one hears. The author has a solution to turn the “No”

into an “Yes” by tackling root causes of the problem.A common deterrent is Indian bureaucracy. The lack of

exposure to technology often leads to a misunderstanding of costs and benefits. To overcome this one must engage social networks to organize symposia that expose officials to the idea of a neutral setting, thereby reducing the understanding gap. search tags: semil,shah, hbr, entrepreneur, bureaucracy

nike's strategy For sustainable BusinessBlogger: nikeNike identified sustainability as a key to growth and innovation. Recognizing the impacts of declining natural resources and the need to become carbon-efficient, Nike discusses a closed-loop business model where the goal is to achieve zero waste in the supply chain and have materials that can be continuously reused. This vision is designed to drive innovatiom and sustainable business processes and models.

Nike has also launched a footwear energy efficiency program with five contract manufacturers. The result - absolute CO2 footprint was down 6 percent despite a 9 percent increase in production.search tags: nikebiz, global strategy, sustainable business

< pAnoRAMA

— Compiled by Frewin Francis

BloGospheRe lAunchpAd


new technology standard for electronic toll collection

VhA launches Application For supply chain savings In hospitals

SIMCORE has introduced PAX2SIM, a new method to evaluate performance

of airport passenger terminals. The soft-ware, with specif ications from ADPI (a pri-vate subsidiary of Aéroports de Paris Group) has been designed to be accurate and easy- to-use in the terminal, especially during peak hours.

With numerous international projects, such as PARIS CDG, Athens International Airport, Jeddah KAIA, Delhi International

Airport T3, Mulhouse Euroairport, London Heathrow T2, SIMCORE has capitalised its experience in baggage handling simula-tion, passenger terminal capacity planning and terminal operations optimization.

SIMCORE’s software can be used on a tablet PC or a PDA and are placed at 12 dif-ferent functional areas in the terminal to gather several kinds of measures such as resources, passengers, bag timing, process timing and density mapping.

VHA Inc. has teamed up with MicroStrategy, a provider of

business intelligence software, to build a mobile business intel-ligence application, VHA Data-LYNX, giving hospitals instant access to supply chain analytics data. VHA Inc., based in Texas, is a national network of not-for-profit health care organiza-tions that work together to drive maximum savings in the supply chain arena and set new levels of clinical performance.

VHA DataLYNX provides a single source for ensuring the accuracy of purchasing data and lays the groundwork for efficient supply opera-tions by synchronizing data. This service complements and integrates DataLYNX with VHA’s SupplyLYNX, allowing cleansed data to be more ac-curately analyzed and matched to existing contract opportuni-ties. As a result, the user can improve labor efficiency, con-tract management and pricing while reducing inventory and logistics costs. Mobile access to this information enables hospital executives to continu-ally monitor cost reduction efforts and drive supply chain savings. The new mobile plat-form, built using MicroStrat-egy Mobile, will enable VHA member hospitals to report, analyze, and monitor data to reveal trends and insights from handheld devices.

Toll booths on National Highways will adopt the passive RFID technology

standard – ISO 18000 6C — for electronic toll collection (ETC) system. It is based on the recommendation of a committee set up for this purpose, headed by Nandan Nilekani, Chairman, Unique Identification Authority of India (UIDAI). The recommendations have been adopted by the Highways Ministry.

In the ETC system, vehicles will have tags on their windscreens – where amounts can be pre-loaded (just like prepaid SIM cards for phones) – and when the vehicles pass through NH toll lanes with tag readers, the

toll amount would automatically get debited. This will pave the way for setting up of ETC systems across the NH network.

New Products, Technologies, Solutions lAunchpAd

sIMcoRe’s solution For Measuring terminal performance


< EVENTS

August 2010August 19-21, 2010sME Expo Logisticschennai trade & convention centreOrganized by INIS Enterprises Private Limited, the SME Expo Logistics will be held at Chennai Trade & Convention Centre. The event is a major hub for small & medium enterprises (SME) logistics and materials handling sectors. It is organized along with a two-day conference and seminar.

SME Expo - Logistics & Material Handling 2010 is aimed at providing a common platform for SMEs in the logistics arena to explore business opportuni-ties and exchange their ideas and expertise. It is an industry program to disseminate the insights into the issues and probable trends that the logistics sector is likely to face. This expo will offer an oppor-tunity to exhibit the most up-to-date trends in the logistics & material handling sectors. SME Expo – Logistics & Material Handling 2010 is a forum to determine business opportunities, confer industry’s issues, and to discover numerous technology and products in logistics and material handling.Organized by: INIS Enterprises Private LimitedTel: +91 22 28763111

August 20, 2010WiMAx indiAnew delhi Le Meridien, new delhi, indiaWiMAX India will bring together international and domestic service providers to evaluate best practice, assess business models and discuss the projected impact of WiMAX on the Indian broad-band market.

The 7th WiMax India 2010 International Conference will focus on the delivery of next genera-tion broadband services using WiMAX, 802.16x and similar proprietary standards. Speakers will discuss crucial issues of standards & interoperability; spec-trum & licensing; network optimization & frequency planning; business models; international success stories & lessons learnt from large-scale WiMAX deployments; business opportunities and threats; using WiMAX as a means of delivering broadband services to the bush; how WiMAX can complement other telecommunications offerings; costs & financ-ing; and strategies for capturing the mobile market.

Profile for exhibit include abrasives, boilers, chemicals, compressors & gas turbines, drill-ing equipment, electrical equipment, fire alarm systems, filters, gas detectors, heat exchangers, laboratory equipment, leak detection, wire control systems, tubing services, seismic surveys, refin-ery equipment, pipelines, offshore construction equipment, petrochemical products, etc.Organized by: Bharat ExhibitionsTel: 91 11 41639672/41639676

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INDIA

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August 20-23, 2010industRiAL Expo-LudHiAnApunjab trade centre, Ludhiana, indiaThis is an annual exhibition on industrial prod-ucts, technology and related services. The scope of the event covers: machine tools, material handling, transmission, chemicals, hydraulics and pneumat-ics, electrical & electronics, automobiles, plastic and packaging, textile, pumps & valves, testing & meas-uring instruments, and environment, health & safety.

Profile for exhibit includes pulleys, V-belts, gears and gearing, gas generation and gas purification plants, fasteners and clamping elements, heat treatment and supplies, testing laboratories of engi-neering products, precision engineering.Organized by: Paramount ExhibitorsTel: +91 172 2274801/2274802/2274803

August 26-29, 2010MAcHinE tooL sHoW - punEAuto cluster Exhibition centre, pune, MaharashtraPune Machine Tools 2010 will be organized in Autocluster Exhibition Centre Chinchwad, Pune. Pune Machine Tools will showcase innovations in engi-neering, machine tools, automation & automotive technology. It is designed to present the entire spec-trum of developments in the machine tools sector.

Pune Machine Tools 2010 provides an oppor-tunity to achieve quality conversation with existing and potential customers by establishing contacts and strengthening existing ones.

The show has been approved by India Trade Promotion Organization and been supported by Machine Tools Manufacturing Association.Organised by: KMG Business TechnologyTel: +91 79 32410602

August 4-6, 2010industRiAL MAintEnAncE Exponsic Exhibition center, new delhiIndustrial Maintenance Expo is a trade event dedicated to the maintenance & repairs segment of engineering and process industry in India. It will assemble leading national and international companies to display and demonstrate the latest technologies, equipments, products, services and trends in the maintenance sector. The trade fair will provide a great platform for the attendees to discover latest maintenance technology, servicing, repair, and maintenance practices and techniques for their companies. Industrial Maintenance Expo 2010 will be an event to learn about technologies and solutions and interact with the suppliers and establish new business contacts in the industry. Organised by: Confederation of Indian Industry (CII) Tel: +91 124 4014086/4014060 – 67

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RNI No. MAHENG/2007/23777 l Registration No.MH/MR/South-279/2008-10Allowed to post at Patrika Channel Sorting Office G.P.O. Mumbai - 400001 Date of mailing: 5th of every month issue

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