LOG.India February 2012
LOG.India is the only supply-chain enterprise-user magazine in India and reaches out to large and medium enterprise and SMEs. The content covers supply chain, logistics, all aspects of transport (air, ocean and surface), material handling, warehousing, and technology.
IndIa’s LeadIng LogIstIcs MagazIne www.logisticsweek.com february 2012 Vol. 5 — no.6 INDIA `100 Sachin Vyas That Perfect Blend frOzen flaVOrS 34 How Natural Icecreams puts its offerings together. anil tandon Sachin Vyas, VP – Sales & Distribution and anil tandon, VP – Operations (asia), tata Global beverages, have seamlessly integrated their functions with brilliant results. Page 22 CheCk my flOw: How to find a contraint in a system and how to empower it....14 On the ball: Critical lessons on building an agile and responsive supply chain...20 PaV wOw: A sacks-to-kitchen story on the supply-chain of Jumboking vada pav.....46 Warehouses & Industrial Buildings of 2,00,000 sqft. under construction available at Chakan, Pune (Outside Octroi Limits). eDITORIAL > What’s New “T o be or not to be, that is the question,” said the Prince of Denmark, in Shakespeare’s classic play, Hamlet. “To change or not to change,” that was our question in Log.india and ‘change’ has been the all-important quotient and the deciding factor for us. Embodying this spirit, a couple of years ago Log.india took the plunge and irrevocably switched to cover stories on ‘user’ companies and their meticulously planned, often complex, sometimes difficult, but impeccably strategized, supply chain systems which have helped these companies achieve excellent results. Some of the exponential success of these companies has also rubbed off on to us for, we must say, albeit modestly, that our cover stories have received plaudits beyond our wildest expectations from our readers! For more than two years the companies that we have covered have been among the most prominent and distinguished with immeasurable success to their credit in the logistics sector. We believe that our unraveling of complex supply-chain methods has been treated as valuable learnings by the industry and have illuminated the streams of thought which have woven together these intricate business systems. For instance, Dr Goldratt’s Theory of Constraints which has helped many companies in streamlining their operations, has been dealt with at length in several issues of our magazine and cleared the air about a complicated business process. Log.india has also shed light on other areas in the logistics industry which have repeatedly sought attention. Our story on a faulty Public Distribution System, which has failed to deliver food security to the poorest of the poor and the most marginalized sections of our society, has become a reference point for many of industry’s thought leaders. Equally, we have focused on the grave lacunae in the country’s infrastructure, its shambolic cold chains and the dire need for increased automation and superior warehousing. But the change has to be constant! So beginning with the last issue, we have begun to reveal how companies put together their well-known products like Woodland shoes or as in this issue, Jumboking’s vada pavs and the delicious Natural Icecreams. We have traced the supply chain of these entrepreneurs, their humble beginnings and then the explosion of growth—a success story gummed up by hard work, bright ideas and the aggressive, animal spirit of a do-or-die entrepreneur! Equally, we are also carrying a page on a bouquet of various applications that can be downloaded on your mobile which can help you with logistics tracking, inventory management, bills of lading, quotes for your shipments, tracking shipments, et al. We have just stepped on to a new road and await your feedback, so we can bring bigger and better stories to your table. Happy reading! Pamela Cheema, email@example.com www.twitter.com/logisisticsweek www.facebook.com/logisticsweek INDIA | February 2012 | www.logisticsweek.com 5 Contents 8 AnAlysis 34 FeAture Managing Fuel Costs Inside Scoop Logistics players need to draw out better contracts with their clients so that sudden fuel costs do not put them on the backfoot. From one outlet to 99 franchises, Natural Icecreams has grown tremendously. So what's their secret? 12 upshot Valuable Takeaways Two events caught our eye - The Asia Manufacturing Supply Chain Summit, and DSIMS hosted its first Supply Chain Conclave. 14 GoldrAtt Market Is The Constraint The Theory of Constraints states that any constraints in business can be managed effectively so that they do not hinder progress. 20 Column 34 Building An Agile Supply Chain Building a supply chain has more to it than just creating resources. It has to be agile. 46 Instant Nirvana The supply chain of Jumboking is simple yet meticulously planned out. Dheeraj Gupta, MD, Jumboking, is the only supply chain employee of the company. 22 Cover story A Perfect Brew Tata Global Beverages Ltd has tweaked its supply chain to perfection without losing its essence. 46 6 22 FebruAry 2012 52 Storage And Material Handling The choice of Storage and Material Handling Systems is crucial as it can impact efficiency and response time in a warehouse. ADVeRtIseRs InDex Vodafone ............................................................. 3 Vijay Logistics ...................................................... 4 Gandhi Automation ............................................... 9 Tata Blue Scope Steel..........................................13 Schaefer Systems International Pvt Ltd ...............17 Mahindra Logistics ..............................................19 Karaikal Port Pvt. Ltd ......................................... 33 Safexpress ......................................................... 41 Greenearth Translogistics .................................. 51 BLR Logistiks (I) Ltd ........................................... 65 Swisslog India .................................................... BC Manforce Trucks Pvt Ltd.................................... IBC Vinar Systems ................................................... IFC JAnuAry 2012 IndIa’s Lead Ing 52 LOgIstIcs MagazIne www.logisti csweek.com JanuaryOctob 2011 Vol. 2012 er vol. 5 — No.2 October 2010 5 — no.5 | Vol. 4 – No.2 CSCMP l Specia44 IN INDDIA IA 100 ``100 ` 100 Pg. ation Educec Sp ial Pg.38 62 pAnorAmA Method In Motion Behin Books, Journals, Blogs, Technology, C-Profile, and Mobile Apps - a look at what's new in and for the supply chain industry. d Organized Chaos COLOR OF amit mukherj ee, Vicepresident (iT and sup ply chain) and group cio deployed exem at rpg, has plary supplychain stra tegies at spe ncer‘s retail >> page 34 anshuman Singh, Md & ceo, Futu chain Solu re Supply tions the ScM strat limited, gives an over egies of the view of Future Grou TElEcom p. logisTics 20 low page 22 GET 66 events Movem SET, entGO of teleco 38 m netwo The true rk story equipm of ent supply opens achain windo w oftion educa oppor tunity in India. ShapinG up Brawn 18 How Woodland’s come together products from scratch A list of forthcoming events in February. INDIA | INNOVATION Jayakumar Krishnasw amy, AkzoNobe head, is mana l’s SCM ging a 24x7 supply-chain. how he plans adopTioN Here’s NEgmplis to acco 24 lEcThEd it. OLD Why WMS ORD still ER: How auto waTErways not have enougdoes 44 Page 16 THE FORE h HAN cos manage serviceIndia logisti is ignorin takers in IndiaIGN cs for phase D: How FDI in g inland d-out model PRO-LIFE Retail waterw s...08 would SCM: Amid ays own logisti India’s all the din around peril changate its Food Secu cs...25 green logistics, rity and ScM some practic Supply Jane : The bill is noble al wisdom...30 : The percentage , but do we have the supply-cha of women execs turn oF inve in...10 in corporate ntory: Scruti supply-chain.... nizing ways to 16 improve invent ory turns.....60 February 2012 | www.logisticsweek.com 7 < news analysis Train of ThoughT The difference between people who succeed and those who don’t is that some players are making huge investments in the back-end, and others repeat mistakes as the earlier dotcoms bust. — Ravi Vora, VP (Marketing), Flipkart in an interview with Hindustan Times talking about e-commerce growing as a serious business in India since 2007-08. We are focusing right now on the supply chain relating to the agri sector. We have invested over $750 million in India. SME’s and agriculture takes precedence before other sectors. I don’t think the Indian state has shown itself good at developing and owning ports that reduce logistics costs. The larger Indian MNCs are much better placed to develop efficient ports. — lars H. Thunell, eVP and CeO at International Finance Corporation in an interview with NDTV about microfinance plan to aid the poor states in India. — a. Janardhana Rao, Managing Director of indian Ports association on Shipping Ministry’s alterations in its plans for setting up a special purpose vehicle. I am confident that we will complete 3,000 kms of new network by taking up 600 kms per year. —Union Minister of state for Railways K H Muniyappa on plans to increase railway network in Bangalore by another 2,200 kms at a cost of `3,000 crore in the next five years. Managing Fuel Costs The constant increase in prices of diesel is a setback to transportation companies. Clients too, are not willing to relent in terms of renegotiating contracts, says Sujay Jha. O ver the last few years, the Indian companies have crossed several bridges to bring logistical integration across various chains. The government has made huge investments and this has brought about growth in the transportation sector that has enabled us to bring infrastructure at par with China and other South East Asian countries. But some things continue to remain incongruent, and this is mainly related to fuel cost economics. Development of infrastructure plays a critical role in building a robust logistics network. Consider from the perspective of surface transport. Good roads can dramatically improve transportation speed and increase productivity in 8 INDIA | It is necessary to ensure that each kilo mile improvement in road infrastructure will improve cost per ton of weight carried by the lorry. terms of freight ton kilometers ratio. In fact, it is necessary to ensure that each kilo mile improvement in road infrastructure will improve cost per ton of weight carried by the lorry, thus bringing about an improvement in fuel mileage ratio. But an increase in fuel price that does not commensurate with an improvement in the condition of roads can deeply affect the logistics players who number thousands in our country. Weigh the data available in February 2012 | www.logisticsweek.com any public domain of the increase in diesel price for the last year. Prices of diesel, the only fuel used by trucks or transporters, have increased by almost 16 percent. How can 3PL companies already battling shrinking margins prevent profits falling further? The cost centre for 3PLs is nearly always linked to fuel price. Take the case of trans- Counting The Cost Delhi Kolkata Mumbai Chennai 8-Jul-11 40.91 43.74 45.28 43.95 1-Jul-11 40.91 43.74 45.99 43.95 25-Jun-11 41.12 43.57 45.84 43.8 2-Nov-10 37.75 40.06 42.06 40.16 8-Sep-10 37.75 40.02 42.06 40.16 26-Jun-10 40.1 39.94 41.98 40.07 1-Apr-10 38.1 37.99 39.88 38.05 1-Feb-10 35.47 37.73 39.6 37.78 26 27 28 April, 2012 India Expo Centre, Greater Noida India's Largest Show On Logistics Industry! During India Warehousing Show, SCZ will showcase 3PL/4PL companies, freight forwarders, logistics parks, warehouses, ports & dry ports, container train operators, supply chain consultants, shipping and logistics companies in front of top user companies visiting the exhibition. More information on www.IndiaWarehousingShow.com Gold Sponsor Foundation Partner Co-located events Supporting Associations Magazine Partner W WW WW W WW WW IPPTA Contact Us: Mohit Budhija 91-9999689225 Siddharth Narain 91-9971600355 Email: firstname.lastname@example.org Email: email@example.com porting goods by road from Delhi to Mumbai on a nine-ton truck. The cost could be anywhere from `20,000 to `25,000. An increase in hike of fuel will upset this price. What would help a 3PL offset this hit to its margins would be a back-toback contracting model, so that any increase in prices during contracts will not affect profit margins. In the case of no back-toback arrangements with the client, the 3PL company generally bears the brunt. As clients generally are prone to refuse any extra payment, contracts too avoid such arrangements. For instance, the price of diesel went up eight times in the last two years. It is also not possible to modify contracts midway. Usually, both the client and the 3PL will agree on a weighted What would help a 3PL offset a hit to margins would be a back-to-back contracting model so that any increase in prices will not affect profit margins. average cost of fuel and fix rates according to mean average rates. Moreover, the client has a safety net, but the 3PL is generally left out of a scientific matrix or is prone to belowthe-belt negotiations that could harm profitability. In the last couple of years, going by the data available of top logistics companies, we see low profitability across most 3PL companies. For example Gati with revenue of `757 crore saw a net profit of `15 crore i.e. 1.98 percent, while TCI with `1,760 crore revenue saw a net profit of `51 crore (2.89 percent). Established logistics companies need to take innovative measures to ensure profitability and adopt radical methods of transportation. In India, the ownership pattern of trucks shows that drivers own the largest proportion of trucks in the industry. There ought to be a change in the ownership pattern on building up an asset based value return model. Large investments need to be made to bring in best-ofclass vehicles that have good interiors, to ensure comfort of drivers driving long distances. Technology can play an impor- INDIA | tant role in ensuring a mechanism to control fuel pilferage. An integrated GPS with fuel sensors, can ensure a noncorruptible environment which will help both client and third party logistics players. A lot has been said and debated on the jugar system of innovation. GPS is one such technology that has been killed by the client as well as third party. A robust technological environment can bring in change in the transportation industry from the cost economics perspective, especially in terms of asset tracking and fuel optimization mechanism. The government, industry and the transportation sector should get together to bring in the required change for the use of innovative systems to ensure minimization of the effect of fuel hikes. February 2012 | www.logisticsweek.com 11 < upshot Valuable Takeaways Panel discussion at AMSCS at Taj Lands End, Mumbai. T he first Asia Manufacturing Supply Chain Summit (AMSCS) was held on January 23-24, 2012 at Taj Lands End, Mumbai. Over 200 professionals from the supply chain and manufacturing industry attended the summit. About 45 speakers spoke on various topics like Qual- ity Management, Procurement and Sourcing Strategies, Building Agile Supply Chains With Flexible Manufacturing, Supply Chain Strategies to address Distribution Challenges in India, etc. The speakers at the conference were top executives from compa- nies like Colgate Palmolive India, Mahindra & Mahindra, Essar Steel, Titan Industries, Reliance Life Sciences, Blue Star, ITC, PricewaterhouseCoopers, Indian Oil, Watson Pharma, etc. An exhibition was also held at the summit where topline companies like Safexpress, Arshiya International, Allcargo Logistics, Gandhi Automation, TCI Supply Chain Solutions, etc. featured their services. On the evening of January 23, a highly educative interactive session was held between the speakers and various attendees to seamlessly discuss various aspects of the logistics industry over fine wine and food. The second edition of AMSCS will be held in January 2013. Date: January 23-24, 2012 Event: Asia Manufacturing Supply Chain Summit (AMSCS) Organizer: Kamikaze B2B Media Venue: Taj Lands End, Mumbai sharing the Winning Formula D urgadevi Saraf College of Management Studies (DSIMS), Malad, hosted its first Supply Chain Conclave on 19th-20th January, 2012. The theme of the conclave was â€œCelebrating successâ€?. The conclave was attended by eminent guests and well known professionals from the industry. Dr. Mahendra Singh (Executive Director, Massachusetts Institute of Technology, MIT Global SCALE Network), as the keynote speaker shared his knowledge on supply chain. The eminent speakers included Mr. Pradeep Chechani, Business Head and VP, Wadhawan Group Mr. B.B. Singh, Head Tata Kisan Kendra, Tata Chemicals, Mr. Kalpesh Pathak, VP SCM, 12 INDIA | Fiat India Ltd. and many more celebrated names like Lt. Col. Vijay Nair, Head Supply Chain, of the very popular Hyper City, Mr. Prem Verma, CEO, Tata Motors Distribution Company Ltd. Mr Prakash Menon, Ex-Director Supply Chain, Myer Ltd. (Australia). Students from IIM Lucknow, IIM Kozhikode, NMIMS, FMS Delhi, Sterling Institute, NITIE, Amrita School of Business, too, participated at the event. The two-day event was inaugurated by Professor Piyush Shah, DSIMS, followed by an inaugural speech by Dr. Rakesh Singh, Director, DSIMS and Chairman ISCM (Institute of Supply Chain Management). The focus of the conclave was on the rural February 2012 | www.logisticsweek.com supply-chain and the future of supply chain in India, with regards to collaboration between the vendor, private and public companies partnership. The highlight of the conclave was interaction of students with the farmers who form an integral part of the rural supply-chain in India. The grass root level interaction with them exposed the students to firsthand experience on the field. 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Tel.: +9120 6674 2000 Fax: +9120 6674 2001 Website: www.tatabluescope-bs.com Email: firstname.lastname@example.org Oil & Gas Automobile < The eNAble Flow SerieS Market Is the Constraint According to the Theory of Constraints, any constraints in business can be managed effectively so that they do not hinder progress, notes Prabhakar Mahadevan. D Prabhakar Mahadevan, Goldratt Consulting, Regional Director, India region r. Goldratt, as is well-known, invented the concepts of the Theory of Constraints (TOC) and discussed them in his popular book, The Goal in the 1980s. The Goal dealt with the application of TOC concepts in the manufacturing world and also unfolded the powerful concepts of ‘5 focussing steps’ which will be discussed in this article. Subsequently, Dr. Goldratt authored several books that dealt with business improvement in the last three decades; during which, he also repositioned the nature of constraints as the context of business kept changing over time. Understanding Constraints Recently we were interacting with the top management team of a mid-sized engineering company. As a part of our endeavour, we were analysing the reality of the business as perceived by the management team. The managers were reacting to a fundamental question, ‘what are the factors that are holding your company back from achieving far better results?’. There were several ‘constraints’ cited such as ‘suppliers don’t deliver material on time, customers don’t pay on time, manufacturing doesn’t produce parts as per schedule, cash is insufficient to run the day to day business’–the list was endless. Based on our experience, these responses are typical, irrespective of the nature of the company. Frequently, people blame these issues as constraints to progress. In the TOC world, these issues are termed as the ‘undesirable effects’ that we encounter in reality. These are merely effects (symptoms) and not the cause by themselves. A constraint in TOC’s perspective is the entity that 14 INDIA | February 2012 | www.logisticsweek.com limits the global performance (goal units) of the system. A company is akin to a system; therefore the constraint is the entity that limits the business performance (sales, profits etc). Constraint(s) are not to be confused with mundane obstacles; on the contrary, constraints are highly strategic in nature, to the extent, that if we are able to extract more from the constraint, it directly delivers more money to the company. This is why constraints are termed as ‘leveraging points’ in TOC with a positive connotation. Stability and Growth—The Key Needs An organisation has two very important needs for its continued existence—stability and growth. There has to be a conscious system and culture within the company to accomplish these needs in an ongoing manner. All the strategic steps that the company pursues must have its logical link to the above specified needs. However, in practice we observe that many companies are pursuing strategies and supporting actions that are endangering at least one of the needs and thereby the supporting actions are in conflict with each other. Let us evaluate this with a real life example. A large FMCG company decided to increase its market share of a certain category of products in a particular region, and initiated all the actions necessary to create suitable infrastructure to support this objective, for example, it decided to set up a regional warehouse to stock its products with the aim to improve its product availability and service levels. This was a conscious decision by the company as the need is to support long-term growth to improve market share of their products in the respective region. However, a few months down the line, when sentiments were not upbeat (such as lower economic indicators), it decided to close down the warehouse in order to control its cost. These two actions, (opening the warehouse and closing it down), seem to be diametrically opposite and in conflict with each other. It is evident that conflicting actions lead to consuming the company’s resources and this has led to several undesirable business implications. The Theory of Constraints advocates a simple, yet robust process of ongoing improvement that eliminates the above conflict and enables the company to accomplish the needs of stability and growth together. It is important to note that the aforesaid conflict is eliminated because, the proposed process ensures that the same actions contribute both to growth and to stability, thereby complementing each other, rather than provoking conflicting actions. Five Focussing Steps (Process of on-going improvements –POOGI): 1. IDENTIFY the system’s constraint(s). 2. Decide how to EXPLOIT (make the most out of ) the constraint(s). 3. SUBORDINATE everything to the above decisions. 4. ELEVATE—Find/invest in additional capacity or alternatives. 5. WARNING! If, at any time, in a previous step a constraint has been broken, go back to Step 1. The above process can be well-understood with the simple example of a mechanical chain (connected by links). The weakest link, (identify the constraint), determines the strength of the chain and to improve the overall strength of the chain, the weakest link needs to be further strengthened (second step of the five focussing steps). Hence all action should be focused upon improving the performance of the weakest link. There can be only one constraint in any given system and it is also essential that our actions ensure (by design) that the non-constraint’s only job is to ensure that the constraint is effectively served and is not in conf lict with it. Application of the five focussing steps ensures that the constraint’s available capacity is fully exploited (capacity wastages are removed) before capacity enhancement is considered. Further capacity additions are always aligned with increased demand to ensure investments are less risky. (Readers of this article are requested to read The Goal for full appreciation of the five focussing steps). internal Constraints When the available capacity of a production stage (resource/work centre) is less than the demand imposed on it, we have an active internal constraint. The very first step would be to be aware of such active constraints. Constraints disrupt flow in the shop floor and cause work in the process to pile up, increase manufacturing lead time and delay shipments to customers. During the early 1980s, it was a supply constrained environment and the topic of internal constraints was so relevant. In order to improve the situation then, Dr. Goldratt focussed his attention on the manufacturing world to enable flow on the shop floor. Using the five focussing steps of TOC, he evolved a robust logistical system, (Drum-Buffer-Rope), which he explains vividly in the book The Goal. Applying the second step of the five focussing steps ensures that the constraint capacity is fully exploited (scheduling work evolving Context of Constraints The context of constraints has been undergoing sweeping changes in the last few decades; the changes were contextually relevant and have been an essential part of the evolution of the TOC body of knowledge. INDIA | February 2012 | www.logisticsweek.com 15 < The eNAble Flow SerieS orders with correct priority, ensuring a bank of work orders before constraint to prevent work starvation, ensuring that the constraint is working on the parts that have been verified for quality, planning for manpower during breaks, etc.). Very often, the exploitation step alone releases a significant amount of otherwise masked capacity. The core logic of Drum-Buffer-Rope (DBR) revolves around controlling the rate at which work is released to the shop floor after aligning the constraint capacity to demand, initiating a shop floor culture that operates as per global priorities (in managing work orders), and putting in place a process that instils ongoing improvement to analyse/improve the causes for deviation. In the manufacturing environment where the DBR process was implemented, companies experienced quick and significant results in terms of 30 percent - 50 percent reduction in manufacturA few decades ago, quality ing lead times, 30 percent-50 percent reduction in work in was a significant need terms of process inventory of the market, but many and more than 95 percent oncompanies were unable to time delivery performance. It simultaneously exposed acquire the quality culture significant capacity. All these instantly. translated into significant gains for the company’s bottom line. These benefits came quite fast and contributed significantly to the short-term (stability) performance of these companies. The companies were able to deliver their products to their customers as per the delivery schedule (and therefore fire fighting due to non-adherence to delivery schedules was eliminated) and a significant amount of investment, otherwise stuck as inventories, was released. While the stability (short-term) aspect of the company’s performance was well-addressed, the growth aspect needed attention. Since abundant capacity was exposed, many companies which implemented DBR utilized the benefit to downsize their workforce as they were unable to find other productive ways of using it. Retrenching manpower caused instability (as it takes a long time to regain skilled manpower) within the companies’ various operations and drained significant management capacity to streamline the issues arising from it. Customer is King, Market is The Constraint During the 1990s and later, the situation reversed from a supplier-driven market to a customer-driven market, as several suppliers entered the fray and customers started imposing stringent expectations. In order to secure ongoing business, it was evident that merely offering good 16 INDIA | February 2012 | www.logisticsweek.com quality products at the right price was insufficient. It was clear that the companies were compelled to start focussing on how their association would add value to their customers’ business and hence they started developing their internal capabilities to do it. Re-aligning company strategies by making the market, ‘the constraint’, was the only way out. Now re-applying TOC’s five focussing steps as explained previously with the market as the constraint, exploiting the constraint (second step of the five focussing steps), would mean that the company needs to improve its new customer conversation rates, (hit rates) and gain more business share from existing customers. When competition is intense and at par (in terms of offering the right product, at the right quality, at the right price etc), gaining more business would be feasible only when the company is able to fulfil a very important need of its customer base and that too, only if the company can streamline its own operations (core capability). A few decades ago, quality was a significant need of the market, but many companies were unable to acquire the quality culture instantly. The Japanese auto companies seized this opportunity by offering PPM service levels of quality by realigning the perspective towards quality in their operations and the market swung in their favour. Of course, over a period of time competition caught up and closed this window of opportunity. It took at least a decade for most companies to bridge this gap. No more can quality act as a decisive edge or as a special offering to customers; it is a mandatory need to stay in the business. Therefore, in order to exploit the market further, companies needed to identify yet another window of opportunity in their respective markets and also develop the inherent capability to address this opportunity. For example, the companies that have implemented DBR, have gained significant improvement in operations (such as consistent 95 percent on-time deliveries), to the extent that it can capitalize on this capability with potential clients to support on-going growth. It is important to note that unreliability in delivery is a major challenge in several industries (typically in Made-to-Order and Engineer-to-Order environments). By developing the internal capability to supply on time and by targeting customers who are desperately in need of it, the company can get significant additional business in various markets. It is very important to note that by subordinating (third step of the five focussing steps) to the market constraint, not only does the company need to undergo several paradigm shifts across Non-compliant to new OHS regulations Inefficient warehouse planning Non-compliant to new OHS regulations Outdated storage systems Inefficient warehouse planning Labour intensive Outdated storage operation systems Unableintensive to meet KPI Labour operation Lack ofto local support Unable meet KPI Poor of use of available Lack local support headroom Infinite Logistics Infinite Solutions Logistics Solutions Too many in piece picking operations Poor use oferror available headroom Non-compliant to piece FEM safety standards Too many error in picking operations Non-compliant to FEM safety standards Schaefer Provides You With The Logistics Success Formula. Schaefer Provides You With The Logistics Success Formula. 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Ltd. www.ssi-schaefer.in Unit No. 504 “Powai Plaza” Hiranandani Business Park, Powai, Mumbai : 400 076 Phone +91 / 22 / 6111 4700/710 Schaefer International Pvt. Ltd. Fax +91Systems / 22 / 6111 4777 Unit No. 504 “Powai Plaza” Hiranandani Business Park, eMail email@example.com Powai, Mumbai : 400 076 Phone +91 / 22 / 6111 4700/710 Fax +91 / 22 / 6111 4777 eMail firstname.lastname@example.org Schaefer_Formula 5_LOG_216x270mm.indd 1 Schaefer_Formula 5_LOG_216x270mm.indd 1 12/8/2010 12:35:09 PM 12/8/2010 12:35:09 PM < The eNAble Flow SerieS many functional silos, but it also gains the ability to induce paradigm shifts into the customer’s ways of evaluating suppliers (shift from the cost consideration to value consideration). Different markets may have different needs and therefore identifying decisive needs and ways to effectively capitalize upon them may vary based on circumstances. When convincing offers are made which fulfil significant needs of the customer, the probability of securing more customer orders are high. As companies start receiving more orders from its customers, internal constraints begin to surface. The subsequent steps in the five focussing steps need to be applied in a timely manner, to open up internal capacity in alignment with incoming demand. Management Attention As Constraint If we perceive organisations as a pyramid, top management sits right on top of this pyramid. Merely by listing the various tasks that senior management needs to manage and oversee, versus their available span of at- 18 INDIA | February 2012 | www.logisticsweek.com tention (capacity), would instantly qualify this to be an active constraint. The company’s performance is a direct derivative of where management is focussing and spending most of its energies. Management attention should be prudently put to use (exploitation) on worthwhile things that contribute to both stability and the long- term growth of the company. If we analyse the nature of tasks which hog the attention of a management team, one would realise that it is skewed towards managing current operations, (stability) rather than future growth. Deeper introspection would reveal that most of these tasks arise out of ‘fires’ (fire fighting and emergencies). Typically, fires are caused due to the gap between authority and responsibility within an organisation. Often, we find that mid-level managers are inadequately empowered and find themselves stuck in a dilemma when they face realities which deviate from set processes. These ‘fires’ consume senior management’s attention, eventually turning it into an active constraint. Management attention as a constraint curtails the growth of the company and can devastate the business. By prudently managing management capacity, the other constraints are more effectively aligned. To effectively exploit management attention, we need to have prudent processes (what we can term the clock), that has global optima (for example company sales, profits etc.) as the prime objective, authority and responsibility lines clearly levelled and relative role clarities within the organisation clearly drafted. The Theory of Constraints offers an array of process tools which help in conflict resolution, evolve breakthrough solutions and organise solutions in a logical form. For example, the ‘Strategy and Tactics tree’ is one of TOC’s process tools which enable a company to organise its processes in a logical form, so that everyone within the company is able to understand and adhere to it. At any given time all the three forms of constraints discussed above may co-exist in most business realities, while management attention would be the prime constraint of all. With the TOC body of knowledge exponentially expanding in recent decades, structured methods are now available to deal with management attention; being the most critical constraint, dealing with it automatically aligns the other forms (resource and market) of constraints. When the management realizes where to put its focus and gains the knowhow of dealing with the market and resource constraints, sound business results are a sure shot outcome, with stability and growth getting their due proportion as well. Ready toOccupy Occupy Available on Lease Ready Ready totoOccupy - Available --Available onon Lease Lease Logistics Park Offers: Logistics Logistics Park Park Offers: Offers: Total Warehousing Capacity ofmore more than 10Lacs Lacs Sq. Total Total Warehousing Warehousing Capacity Capacity of of more than than 1010 Lacs Sq.Sq. Ft FtFt Ready tooccupy occupy Build upfacility facility Lacs Sq. Ft. to to occupy / Build / /Build upup facility 1 Lacs 11Lacs Sq.Sq. Ft.Ft. 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High High Site: Khasra No. 80, 81, 82, Shivmadka, Village-Gumgaon, Site: Site: Khasra Khasra No.No. 80,80, 81,81, & 82, &&82, Shivmadka, Shivmadka, Village-Gumgaon, Village-Gumgaon, Tahsil-Hingna, District-Nagpur(MS), India Tahsil-Hingna, Tahsil-Hingna, District-Nagpur(MS), District-Nagpur(MS), India India Ofﬁce: Sheikh Fida AliSultan Sultan Ali,Lohaoli, Lohaoli, Itwari, Ofﬁce: Ofﬁce: Sheikh Sheikh Fida Fida Ali Ali Sultan Ali,Ali, Lohaoli, Itwari, Itwari, Nagpur (MS) 440002 Tel0712-2763079 0712-2763079 Nagpur Nagpur (MS) (MS) – 440002 ––440002 TelTel 0712-2763079 Email: email@example.com firstname.lastname@example.org Email: Email: email@example.com firstname.lastname@example.org & email@example.com &&firstname.lastname@example.org Contact Contact Contact usus atusatat Zafeer Ahmed +91-9372636510 Najmuddin Fidvi Zafeer Zafeer Ahmed Ahmed +91-9372636510 +91-9372636510 & Najmuddin &&Najmuddin Fidvi Fidvi +91-9373102959 +91-9373102959 +91-9373102959 &http://oclp.in http://oclp.in && http://oclp.in < Column Building An Agile And Responsive Supply Chain G lobalization has led to interdependencies in business thereby limiting our ability to accurately forecast, be it business performance or raw material. Volatility is here to stay. A similar trend is occurring across products. Product life cycles are shortening due to fast changes in technology and competitive market pressures. Overall, business is now less predictable than earlier and this trend is likely to continue. The ability to respond rapidly to unpreAshu Khanna, dictable demands is the characteristic of an Founder of Valyou agile and responsive supply chain. An agConsultants ile supply chain extends beyond the traditional model of planning and logistics and it integrates across the business from customers to vendors. Home Truths About Supply Chain Inherent simplicity is in my mind the best way to explain supply chain principles. Before enumerating on how to go about building an agile supply chain, I would like to share two simple concepts: a) Forecast accuracy and lead time: Our ability to forecast accurately reduces as the lead time increases, for example, a weather prediction for the next day is more accurate than that for the coming week b) Demand variation in the supply chain constantly improves as we move upstream: A retailer’s forecast accuracy would be significantly lower than that of a distributor, as the forecast inaccuracy of multiple retailers associated with a single distributor cancel each other out. (It is interesting to note that most companies stock their highest levels of inventory (STR) at retail, where the accuracy is the lowest, resulting in reduced optimization of retailer’s working capital!). Let us discuss the principles that can be used to build an agile supply chain. Principles Of Building An Agile And Responsive SCM: 1.0 Supply chain demand and not forecast lead. 2.0 Lower Inventory across the supply chain (including distributor inventory). 3.0 Performance indicators which contribute to growth 20 INDIA | February 2012 | www.logisticsweek.com and the bottom line. Creating An Agile And Responsive Supply Chain: 1.0 Creating a demand lead supply chain: A demand lead supply chain ‘replenishes’ stock across all nodes of the business i.e. from vendors to distributors. The two basic principles of replenishment are: (a) Replenishing stock to ‘Actual Demand’and not forecast across the supply chain. (b) Storing stock at upstream nodes in the supply chain (Upstream nodes are prone to lower demand variation as aggregation cancels out the demand variation). How Does A Replenishment System Work? The replenishment system aims at replenishing stocks based on inventory norms to the depots rather than servicing forecasts. The system runs contrary to the popular perception that factories are duty bound to service the forecast across depots, irrespective of the depot selling lower than the plan. The factory uses defined inventory norms to deploy stock at the depots on a daily basis based on the ACTUAL SALE of an SKU and similarly, the warehouses use the above principle to deploy stock to the distributors. In order to store stock upstream in the supply chain, it is imperative to have a central warehouse which acts as a decoupling agent for demand variation between the depots and the factory. This system is followed across the supply chain from vendors to distributors. 2.0 Creating lower Inventory across the supply chain A supply chain can be responsive ONLY if the inventory in the system is low. A responsive supply chain can respond to faster implementation of new products in the market, faster implementation of price changes which impact the bottom line. This minimizes damage on account of slow moving and non-moving products. Inventory is a function of three key components: n Demand Variation: Inventory is directly proportional to demand variation. n Lead time: The higher the lead time, the higher the need for inventory. n Stocking Points: The higher the number of stock points, the higher the overall inventory in the system. Measure Traditional Customer Service Value Fill at Depot Inventory Inventory in Business Manufacturing Tons Produced per month Agile Value and Range Fill at Distributor Inventory of Business +Distributor Reduction in changeover time Cost Freight + Warehousing Freight+Warehousing+Waste (Inter-depot transfer, Detention) Distributor Health NA Distributor ROI and attrition Demand Variation Reduction: The inventory in the system can be reduced by following the replenishment process. The storage of stock, from the depot towards the factory (central warehouse), where the impact of demand variation was significantly lower due to aggregation, benefits. In simple terminology, if you analyse the Forecast Accuracy of an SKU at an all-India level vis-a-vis at a depot level, the accuracy is significantly higher at the all-India level. This is because the underselling and over-selling at depots cancel each other out at an all-India level. Lead Time Reduction: Lead time reduction can be achieved in more than one way. A responsive way is to increase the replenishment frequency. This has the added advantage of visibility of Real-time Demand to the distributors, thereby reducing the distributor inventory to less than two-three days in metro towns. This significantly increases ‘availability at the distributor’ and also his return-on-investment, making him an interested partner in your growth. Another way is to create manufacturing flexibility for faster changeovers (SMED), or standardize packing materials. (When buying a packet of your favorite chips, do see how a packing box has been standardized!). Reducing stocking points in the supply chain: Earlier, it was common practice to open warehouses with no cost benefit analysis. With the availability of technology and better infrastructure, it is imperative to do a cost benefit analysis and optimize the network. The benefits of lower inventory and improved availability vis-a-vis the freight cost needs to be worked out by the business. 3.0 Key Performance Indicators: “What gets measured gets done” and “performance measures drive behavior” are well-known principles. Here is a comparison of some of the indicators versus a traditional supply chain model. (See Table). There is one significant benefit when the business moves to a Demand Lead system and that is the liberation of time for the sales force. This process cuts away the ‘Primary Negotiation Process with distributors’. In a traditional supply chain scenario, a salesman spends approximately 25 percent-30 percent of his time ‘negotiating a sale.’ If this time is reduced by half, the business has added 15 percent more productive salesmen, as they now spend their time in the market and not with their distributors. Therefore building an agile and responsive supply chain is all about ‘listening and responding to the marketplace’ and driving ‘performance and behavior’ collaboratively across the business. Frequently Asked Questions Q: Won’t freight costs go up in the replenishment model? A: Freight costs may go up, but the total delivered costs will come down i.e. reduced inventory and reduced waste (inter-depot freight cost reduction, detention) and space reduction, along with improved availability, will lead to top-line growth. Q: If my distributor lowers his inventory level, he may use the money to reinvest in other businesses? A: The replenishment process gives business an outstanding opportunity to create a cycle between the distributor and the business. It frees up the distributor’s working capital and that capital can be reinvested in the company’s business by increasing the range of SKUs that the distributor keeps with him. This gives the opportunity to increase topline for both and hence there is a significant increase in ROI for the distributor for the same inventory. This keeps him interested! Do a simple math of how many SKUs your business produces and how many a distributor keeps of the total no of those SKUs! Q: What are the mistakes that businesses make? A : As traditional supply chain was not based on replenishment, here are some common mindsets that come in the way: 1. Factories have always been designed to manufacture, NOT STORE, so investing in space at the factory is an issue. 2. Visibility of total delivered cost. Almost all businesses can measure their ‘logistics costs’, but very few can measure the the total delivered cost and the causals for the cost. For example, replenishment leads to reduction in obsolescence and improved availability, but if businesses cannot establish this relationship, it becomes hard to invest in the concept. Ashu Khanna is the founder of VALYOU CONSULTANTS . He is a procurement and supply chain domain specialist with over 20 years of Indian and international experience at Cadbury and Marico . He is also a trained Oliver Wight S&OP specialist and is a columnist in various magazines. He can be reached at email@example.com. INDIA | February 2012 | www.logisticsweek.com 21 < cover story Sachin VyaS, Vice-PreSident – SaleS & diStribution 22 INDIA | February 2012 | www.logisticsweek.com anil tandon, Vice-PreSident – oPerationS (aSia) Photos: Krishanu Chatterjee A Potent Brew Anil Tandon, Vice-President – Operations (Asia), and Sachin Vyas, Vice-President – Sales & Distribution, have SLAs drawn out with each other promising complete attention to the supply-chain. F our years ago when Tata Tea (the name was changed to Tata Global Beverages Ltd in 2010) launched its Jaago Re advertisement blitzkrieg, it captured the hearts of millions, and became a catalyst for social awakening. In great simplicity and much thought, the advertisement focused on social responsibility portraying a cup of tea that wakes up people to one that ‘awakens’ their conscience. Since I had communicated to Anil Tandon, Vice-President -Operations (Asia), Tata Global Beverages Ltd (TGBL) and Sachin Vyas, Vice-President – Sales and Distribution, TGBL, that it would be the first time we (Log.India) have come in close contact to understand the supply-chain of tea manufacturing, they suggested that a trip to the factory would be apt and instructional. The aroma that enveloped us as we entered the factory continued throughout our talk. It also brought out the essence of a supply-chain that has been tweaked over the years to get that perfect mix. Both Mr. Tandon and Mr. Vyas joined Tata Global Beverages Ltd after completing their education and have spent over two decades. That is not surprising. As one of India’s most beloved company, and a company highly respected for it employeefriendliness which its stalwarts define stands by three things: loyalty, trust and integrity. Built on these are the relationships which benefit the society as well in a profitable way. These can also be seen in its supplychain where the company has worked with suppliers and dealers for years, even after roping in new ones. A Fresh start As the world’s second largest branded tea player, introducing packaged tea and reaching the homes of consumers was driven by its visionary leadership in the 1980s. Mr. Vyas says, “Since the time of our joining, in the past 25 years, we have witnessed the journey from being restricted to plantations (production) and selling in bulk through auction houses (from where it is picked up by numerous tea manufacturers and exporters) to a global beverages company having opera- tions across five continents and expanding in multiple categories. The transformation started when the top management developed on having our own tea brand and infusing competition in the Indian market. The supply-chain for Tata Global Beverages begins from the plantations (tea gardens). “Let me tell you about Assam.” says Mr. Tandon. “Green leaf is harvested once a week. They are then transported to the factories located close to the plantations. The idea of setting up factories was to save on logistics cost at the first level.” tata Global beverages: a Few Stats n n n n n n n n n n n n Plantation locations: Assam, West Bengal, Kerala Revenue (2011-12): Rs 1700 crore Manufacturing plants: 12 plants (11 locations) Number of supply chain employees: 40-odd Number of distributors: 4,000 Number of warehouses: 40+ Number of SKUs: 300 LSPs: 40 Inventory Turn Ratio: 1.5 Technology Providers: SAP, Sequoia, Planvisage Local suppliers: 20 Global Suppliers: 4 INDIA | February 2012 | www.logisticsweek.com 23 < cover story While dust tea sells well in south India, northern India prefer bolder tea-leaves. 24 INDIA | The company once the world’s largest integrated tea company, now has stakes in a few subsidiary tea plantations companies across three states: Assam, West Bengal and Kerala. Its quality tea, however, comes from Assam where for efficient transit time and scale there is a tea manufacturing factory at every tea estate, as compared to south India where a cluster of tea estates share a central factory. February 2012 | www.logisticsweek.com Converting green leaf into black tea could take anywhere between 22 hours and 24 hours. “We have two types of tea – CTC and Orthodox. Black tea is packaged into 30-kg bags and then sold to auction houses or privately to large buyers, depending on the demand. Mr. Tandon says, “Since we are the largest tea manufacturer and packaged tea player in India, it goes without saying that we are one of the largest buyers at the auction also. We have created a strong template of purchase over the years. We pick up quality tea pertaining to our template,” he adds. According to Mr. Vyas, the auction is the most cost effective mode of selling tea to tea producers. All producers try to sell the tea at auctions from where it’s bought by packeters according to their requirements. Tee Off TGBL has come a long way from the days when it took over 51 tea estates of James Finlay in 1983, to now where it has entered the domain of packaged tea and created brands for different segments of society. Twenty five years ago, Brooke Bond and Lipton held a dominant share of the market, while Tata Tea’s share was less than five percent. Today, TGBL as the market leader holds nearly 20 percent market share in the Indian domestic packaged tea segment and clocked `1,700 crore revenue last fiscal. Speaking about the complexities at the plantations level, Mr. Tandon says, “As an agricultural produce, it is prey to seasonal whims. Since there is demand for exports also, the quantity of tea available to packeters at the auctions keeps varying based on exporters’ demand and those available for local production. An irregular rainfall will obviously mean a shortfall, which will bring its own complexities in terms of supply.” For TGBL, buying the right tea at the auctions is a critical factor as Mr. Tandon says, “Sourcing is a critical factor. We cannot afford to fall short because that is where our planning, demand forecasting and proactive sourcing methods come in.” Sourcing the right tea is important because of the variety in blends. Every brand has its own unique blend. There’s the fine tea or ‘tea dust’ that is popular in south India, while north and west India prefer the bolder tea-leaves. Even within these, the company has to purchase tea that goes into making its premium teas Tata Tea Gold, Tetley, Chakra Gold; the mass market – Tata Tea Premium, Kanan Devan, Gemini, and the bottomend Tata Tea Agni. High Hanging Fruit While it did not take long for TGBL to roll out production of packaged tea, there were certain inherent challenges that the new business brought. One was creating strategies to capture market share of the packaged tea segment where Unilever brands were already well ensconced, and, secondly, offering a fresh look to the kind of tea they wanted in the market so that it didn’t have a me-too kind of f lavor, says Mr. Vyas. As a Tata company, the company had to live up to the Tata brand. It also had its share of category specific challenges. From deciding the kind of tea it would sell to customers, to developing a business model unlike the one prevalent in those times, among other things. What has stood in good stead is the fact that both Mr. Tandon and Mr. Vyas have, over the INDIA | February 2012 | www.logisticsweek.com 25 < cover story Consignee agents ensure that correct SKUs move to 4,000 direct and indirect distributors. 26 INDIA | years, donned several roles from overseeing day-to-day operations at the plantations to packaging, then sales and operations and production to their current roles in the company. It is this role-playing that is helping them draw out a method to the supply-chain and to various innovations and helped the company become a pioneer. Mr. Vyas recalls the days when duty required settling down for long periods at remote locations to understand the February 2012 | www.logisticsweek.com market and create business opportunities for the company. As a product, packaged tea may not require much pitching. Customers will buy the brand and blend they are comfortable with. As a highly penetrated product, a supply-chain would involve constant movement of SKUs. Since TGBL operates 10 factories, it manages more than 40 warehouses to store raw material and finished goods. Packaged tea from the fac- tory is sent to the 40-odd consignee agents in full truckloads. TGBL has appointed consignee agents who are responsible for ensuring that correct SKUs move to more than the 4,000-odd direct and indirect distributors who are responsible for moving SKUs to the 1.6 million retailers. The appointment of consignee agents was a deviation from the norm followed by most tea companies In the 80s. Mr. Vyas says, “Manufacturers moved their goods through depots. They set up depots in every city and hired a host of people to go to the market. It also had its complications such as hiring a depot man and another for the collection of money.” This was new to the Tata culture too. While outsourcing is well-known today, TGBL adopted it some 25 years ago by outsourcing its entire distribution to consignee agents in various states. Going Places In terms of actual distribution, TGBL follows a hub-and-spoke model. It has allotted areas to its distributors so that there is concentrated effort and adequate replenishment in every area. With 300 SKUs in tow – it varies based on new pack introductions or eliminating non-selling ones/or those catering separately to urban and rural areas – the supply chain movement is aligned to consumer demand. Understanding the varying degrees of consumer preferences, the consignee agents are responsible for sending out SKUs to distributors based on demand complexity and buying pattern. As Mr. Vyas says, “We constantly gauge demand and cater to it through introduction of new packs and new brands. Consider Napean Sea Road or Malabar Hill in Mumbai which are premium location. Simultaneously, there are low-income houses too in the neighborhood. The distributor based in that five kilometer radius cannot pick up only premium brands. There are customers who buy the Rs 1 or the Rs 5 tea pack to a one kg pack.” The complexity further changes when one balances between urban and rural areas. As the urban distributors are well compensated, a slight mismatch and lack of stockholding would not cause a f lutter. It is supplying tea to the rural areas that remain a concern. “Funds are dear,” says Mr. Vyas, “Here the solution is quick delivery coupled with the right mix, although collection of money could be a problem. We can manage inefficiencies in urban areas, but not in rural because it changes the return on investment metrics for the distributor as well as the customer. Specially in our Gaon Chalo initiative where our partners are NGOs and rural youth, it becomes all the more critical.” Village Voice The rural supply chain is TGBL’s pride. Under Gaon Chalo, the company works with NGOs to create livelihood, opportunities, and entrepreneurship among rural youth. What TGBL has done is ensure that that every village within most states is tended to. It has created opportunities for the villager in most villages to stock and supply tea in those villages. So he makes money. He also attends to warehousing and thus becomes a micro dealer. This is where demand forecasting and technology play a crucial role. Mr. Tandon says, “We manage our operations with Sales & Operational Planning (S&OP). Applying S&OP helps align the strategy of the enterprise with the operations in terms of what the enterprise is doing on a daily basis. All our depots are connected centrally to S&OP. The system allows the sales managers of our four zones to effortlessly upload demand every fortnight on to the system. Another job it accomplishes is stocktaking of each and every SKU at the depots every 15 days and replenishment on a daily basis. “ seeing Far Since most sales and supply-chain personnel are constantly on the move or based at remote location, technology is the critical enabling force that helps them forecast and replenish accurately. Mr. Vyas says, “Forecasting is a constant process and has a bucket life of 15 days as far as production is concerned. Replenishment occurs because all our warehouses, dealers and C&Fs are networked on our SAP.” The visibility offered by SAP helps the company arrive at the production needs, the delivery dates, and SKUs in the warehouse, and stocks with distributors. TGBL installed the SAP system for its consignee agents and others in the supply-chain. This has helped them know about stock in hand, and know INDIA | February 2012 | www.logisticsweek.com 27 < cover story Tools like Sequoia help in accounting, collections, sales force automation, and vendor management. 28 INDIA | about stock that needs to be dispatched and the location. Stocks are dispatched on first-in-first-out (FIFO) basis. Mr. Vyas prides his company’s efforts of the smooth deployment of the new software. “I have seen companies struggle through IT adoption and sometimes even revert to the old software because of their failure to switch. We were on to the SAP system from Day One. We fixed a date and seamlessly moved to the SAP system February 2012 | www.logisticsweek.com without a hitch. Our secret was a full functioning cross-functional team who worked for a year on nothing else but getting the SAP system to work,” says Mr. Vyas with a quiet pride. Forecasting takes several shapes. The long-term forecasting is an 18-month horizon executed by the central team. The shorter forecasts of three months are done by the sales managers of the four zones who report to the central team in Bangalore. Then there are the 15-day forecasts for production purposes and another monthly forecast for stocks and sales. Since procurement of tea and packing material has a certain amount of lead time, TGBL adheres to a three-month rolling forecast based on output at its various factories, tea and non-tea procurement (packing material) and logistics. Using all the packages designed by SAP, TGBL also designs inventory norms. Mr. Tandon says, “We use Sequoia and other tools, that help us with accounting, collections, sales force automation, and vendor management. Over and above, it also helps the sales people at various depots to overwrite the stock, if need be, to what the software is saying. Besides the rolling forecast that gets a 15 day bucket and SAP to capture primary sale, TGBL has deployed business intelligence software to track redistribution. For the big stockists, it has MERP to capture actual redistribution and sales and is visible to the sales and distribution team. The compilation of primary and secondary data through the company’s internal system aids in understanding the flow of processes. Meanwhile, TGBL is adopting mobile-based technologies to connect distributors to communicate information on a fortnightly or a weekly basis to and relate it to the office in Bangalore. running costs TGBL uses road transport – right from carrying black tea from auctions to warehouses and full truckloads of packaged tea from the warehouse to the distributors. Mr. Tandon says, “Rail is an expensive deal for us. Looking at it city-wise, it does not make sense to use rail when a truckload will do. Most depots run one or two daily.” It draws up six-monthly contracts with transporters that are most often renewed and uses e-auctions and negotiations to allow the same and some new transporters to bid again for a fresh contract. Dinesh of Shree Ranka Transports, a Bangalore based transporter who oversees Bangalore and Hyderabad for TGBL, says, “We make two runs on a daily basis to various destinations beginning with Bangalore and Hyderabad. When you have a global company as your client, it is worthwhile to do transportation business, which is otherwise a torment.” Over the years, the company has consistently persisted to reduce supply-chain costs, while trying to add the green factor. What is important to the company is maintaining a cost based model for procurement, production and distributors. In terms of packing material, the guarantee of higher volumes involuntarily gets the company a discount. Packing materials are sourced from SEZs. Earlier, TGBL transported black tea in jute bags and it was the cost factor that made it move to cartons, and later on to poly woven sacks. Another endeavor that the company supply-chain staff contrives is rethinking travel distances and ways to reduce it further each time. Its freight costs are one of the lowest, says Mr. Tandon. He is also ready to challenge anyone if they can get lower freight rates or packing material rates than the one TGBL has. Although it is often suggested that tea is best before 12 months, the product per se does not go bad. There could be some loss of aroma. In order to retain the aroma, the company tGBL believes in a cost-based model for procurement, production, and distribution, rather than a quotations based one. tried innovative methods of locking it in. It has also been given awards for this. TGBL was the first to introduce poly packs for the black tea. In 2006, it bagged the Asia Star award for the one kg packet that had a zip lock on top and a flat bottom. In yet another time, it was given an award for the Tata Tea life pouch. The company was also the first to pack tea at the plantation itself. So it reduced lead time from the plantation to the factory to the packet to two days from the earlier 45 days to three months. It did this by setting up packaging units on the plantations itself. So while they have come a long way from the plantation days, there is much work remaining. For starters, they looked around the Bangalore factory and with a deep sigh wished they owned the land on which the factory sits, so that they could plan without any hitches. INDIA | February 2012 | www.logisticsweek.com 29 March 15, 2012 l InterContinental The LaLit l Mumbai (INDIA) LogisticsWeek Supply Chain 2.0 Summit March 15, 2012, Mumbai Theme: Exploring new frontiers of Excellence 9.00am – 9.30am : Registration 9:30am – 10:00am : Opening Ceremony Track 1 : 10:00am – 10:30 am Presentation: On Exploring New frontiers of Excellence Presenter: Analyst Track 2: 10:30am – 11:15am Panel Discussion: Supply Chain 2012 – What next? 11:15am – 11:30am - Tea Break Track 3: 11:30am – 12:00pm Presentation: Supply Chain performance markers – Now & Hence Track 4: 12:00pm – 12:45pm Panel Discussion: The Right Mix – Distribution 2.0 12:45pm to 1:45pm: Lunch Break Track 5: 01:45pm – 02:30pm The Big Debate: Option 1: Who will pay for value? Users or 3PL. Option 2: What price quality? Track 6: 02:30pm – 02:45pm Release of the Salary Guide by Logistics Executive followed by Daryl Jude Presentation. Track 7: 02:45pm – 03:30pm Presentation: Finding & Retaining Talent 03:30pm – 03:45 - Tea Break Track 8: 03:45pm – 04:25pm Presentation: Transformation through Supply Chain Track 9: 04:25pm – 05:10pm Panel Discussion: Warehousing Excellence LIKELY SpEaKErS Supply Chain Heads and Top Consultants from the following Companies Tata Motors Mahindra & Mahindra Jindal Powers Tata Global Beverages Logistics Executives Goldratt Consulting < FeATURE Photo: Ramlath Kavil INSIDE SCOOP Srinivas Kamath, Director, Kamaths Ourtimes Pvt. Ltd. and Girish Pai, Retail Head, Natural Icecreams assert that the use of fresh ingredients and no added preservatives makes Natural superior to other ice creams in the market. Anuja Abraham reports. D (L-R) Srinivas Kamath, Director, Kamaths Ourtimes Pvt. Ltd., Girish Pai, Retail Head , Natural Icecreams, R.S Kamath, Founder of Natural Icecreams and CMD, Kamaths Ourtimes Pvt. Ltd. oes your humble neighborhood matka kulfi bring back good memories? Now imagine fresh fruits mixed with kulfi. Kamaths Ourtimes Icecreams Pvt. Ltd. made it a reality back in the 80s, by starting the first ever ice cream parlor in Mumbai with a concept of serving fresh fruits infused in ice cream. Natural Icecreams had a humble beginning in 1984, when RS Kamath decided to separate from his brotherâ€™s business (Gokul Ice Cream). He set up his pav bhaji-cum-ice cream shop in the Juhu Vile Parle Development Scheme, Mumbai. In the f irst year of business itself, he ceased serving pav bhaji, tea and coffee and concentrated on his expertise in making ice cream. Kamathâ€™s father was a fruit seller in Mangalore. Through him, he understood the shelf life and nuances of fresh fruits. By assisting his brother in the ice cream business, he learnt the art of making ice cream. His decision to experiment with fruits and ice cream was thus a natural INDIA | February 2012 | www.logisticsweek.com 35 < FeATURe outcome of his learning experience alongside his father and brother. Soon, he let his imagination run riot and his delectable and scrumptious creations became the talk of the town within a few months of setting up the store. The First Dollop Natural’s first outlet at Juhu was also the makeshift unit for processing fruits. It was word-of-mouth publicity that led throngs of people to flock to the ice cream parlor. Soon the 300 sq. ft. store could not accommodate the growing demand and in 1994, the Kamaths moved production to a 1,000 sq. ft. factory at Mira Road to cater to the increased number of Natural franchise outlets that had opened up in Mumbai around the same time. The demand further increased with time. And the Mira Road facility was not sufficient. In 1999-2000, they again shifted operations to a 4,000 sq. ft. Kandivali-Charkop unit. Year 2008 saw Natural franchises sprout outside Maharashtra. The company found that it needed a bigger and more lasting place for its operations. Last year, the company bought a 25,000 sq. ft. unit close to their previous factory and got the machinery churning. This factory manufactures ice cream based on demand garnered from the 100-odd Natural ice cream outlets across India. In their far-sightedness, the company has ready machinery to produce 20 tons per day. It presently manufactures only 10-12 tons per day. Farm To Factory What is unique about Natural Icecreams is the use of only three ingredients to make its ice creams: milk, sugar and fruits. The only exception to fruits will be the dry 36 INDIA | February 2012 | www.logisticsweek.com fruits or chocolates, depending on the flavor. The fruits are bought from the Agriculture Produce Market Committee (APMC) at Vashi. “That’s a law we have to abide with,” says Srinivas Kamath, second generation entrepreneur and son of RS Kamath. “We cannot buy directly from the farmers. But we go to the finest sources of fresh fruits and place our requirements. The farmers, then, find a vendor or a middleman and the fruits are sold to us through the APMC market.” The company orders the fruits from well-known sources and buys them through the APMC. The finest sitaphal (custard apple) is sourced from Saswad, the mangoes from Ratnagiri, strawberries from Mahabaleshwar and kala jamun (Java Plum) from Sawantwadi. Jackfruits are sourced from Kerala and Pollachi, a town near Coimbatore, Tamil Nadu. The lychees are sourced from Muzzafarnagar and Dehra Dun. Orders for seasonal fruits are placed anticipating the demand for the season. “Jackfruits are available only during April-May. When we allot a 15 ton batch, we specify the quantity of fruits for each fruit,” explains Mr. Kamath. Procurement of fruits at most times is not according to expectations. For instance, it is imperative that tender coconut be rich in malai. “But out of every 10, only three or four are of any use to us,” says Girish Pai, Retail Head, Natural Icecreams, who oversees the distribution and supply-chain aspects. “One can be assured of quality when the quantity of supplies are small. But when there are 1,000 coconuts to be supplied, the vendor who alone knows our requirement will sometimes overlook it,” laments Mr. Pai. But the woes are not restricted to coconuts alone. Suppliers often need to be given exhaustive specifications on the correct way of packing and delivering fruits. If they fail to adhere to the criteria, the fruits are not accepted. Citing an example, Mr. Pai says that earlier vendors would dump sitaphals in lots into a truck. This led to damaged goods being delivered. “So we specified that we will accept only properly stacked trays of 30 sitaphals per tray. Else, we reject the orders.” Mr Kamath adds, “We are willing to pay more, but cannot risk damaging the fruits, as it compro- mises the quality of ice creams.” The archaic APMC law demands that delivery of fruits from the market to the destination use the transportation services of the APMC transporters. “Then we had to look at training their transporters and vendors to ensure correct sorting of fruits before delivery,” says Mr Pai. “We are not just makers and distributors of ice-cream, but even the fruits are processed at the plant here,” says Mr. Kamath. All the processes like cutting, peeling and canning of fruits are done inhouse. The company has converted its family farmhouse at Adyar in Mangalore into a small processing unit to process tougher fruits like coconuts, pineapple and jackfruits. Cut, Chop, Peel Natural has a wide assortment of fruit flavors that promise to indulge every fickle tastebud in town. Their much-talked-about custard apple flavor is unique to their shop. “Ice cream makers ignore the fruit in spite of its sweetness because it takes a lot of hard work to deseed custard apples,” explains Mr. Kamath. “Earlier, to de-seed 50 kgs of custard apple would take eight people working for eight hours. Now we have brought in machinery to extract half a ton of pulp within Workers manually fill in each ice cream tub before sending it to the Spiral Freezer. INDIA | February 2012 | www.logisticsweek.com 37 < FeATURe two hours by involving just two or three people.” Natural offers 22 lip-smacking flavors that include seasonal fruits, dry fruits, cocoa and nuts. The company-customized machinery aids in processing a variety of fruits. Smaller fruits like chickoos, mangoes are peeled. Watermelons are peeled and de-seeded, etc. Seasonal fruits are ordered a month in advance before their arrival in the market. They are cut, peeled, canned and kept in storage for three to six months, depending on the demand. The canned fruits are preserved using vacuumed process technology. They also devised a method to overcome storage problems. “We do not have enough space to store the coconut malai. Hence, we tell the Mangalore unit to supply us in bulk in insulated boxes, in a frozen condition.” The frozen malai is stored at the Savla cold storage at Turbhe, Navi Mumbai. The cold storage has been functional for the past three-four months and charges a nominal fee of `2 per kg. The Savla storage dispatches the malai in the desired quantity as and when notified. The Real Milk Run The key ingredient that goes into making an ice cream is milk. Natural ice cream is made out of buffalo milk. The company sources the milk from a single vendor. “We helped this farmer set up his tabela (dairy farm) at Igatpuri. Our requirement varies from 15,000 to 20,000 liters of milk daily,” discloses Mr. Kamath. “Our ice cream A glass display at the Natural’s head office exhibits the antiquated appliances used to produce ice cream at the Juhu outlet in the initial days. 38 INDIA | February 2012 | www.logisticsweek.com consists of 60 percent milk and the fat percentage varies from 10-12 percent. Sourcing from a sole vendor ensures consistency in quality.” The milk arrives at the unit in different consignments twice a day. It is then stored in three large vats having a capacity of 5,000 liters each. From there, it is passed into the evaporator for boiling. Intense boiling evaporates all the water leaving behind a thick, sweet mixture rabdi. “The key difference be- tween Natural and other ice creams is that we boil the milk naturally to remove water content,” reveals Mr. Pai. “Comparatively, other commercialized ice cream brands add milk powder or fat to sweeten the milk.” Use of fresh dairy milk is also the key reason for Natural ice-cream’s short shelf-life of just ten days. The boiled milk is then mixed with fruits in the Continuous Freezer. The creamy ice cream is formed at -4° C which is then filled into plastic tubs manually. The coding machine then prints the batch number and manufacturing details on the tubs. The ice cream boxes move on a conveyor belt towards a Spiral Freezer. “The Spiral Freezer is our USP. The ice cream that goes in at -4° C comes out at -18° C in an hour. Earlier, we used to keep the ice cream in blast freezers for about eight hours for it to set. The Spiral Freezers have increased our production, saved us space and a batch of ice cream is ready to be dispatched the next day,” says Mr. Pai with a quiet pride. The spiral freezer can freeze around 4,000 containers, i.e. 2,000 kg per hour. The ice cream boxes that roll out of the freezer is rock solid and is immediately shifted to the cold storage. Natural has a single manufacturing line that works for all flavors. It prepares each flavor in batches to fulfill the requirements of its various outlets, before moving on to another flavor. The company has connected all its 100 outlets through ERP. The franchise stores place their orders through the ERP system. The store owner fills in a requisition form with the quantity required and a dispatch date on behalf of the manufacturing unit. The ice-cream will reach the store owner 24 hours from the dispatch date. In summer, demand for ice cream grows 20-30 percent. So production could go up to 15 tons. “We cannot jump from ten to 20 tons overnight as we have to take care of other resources as well,” explains Mr. Kamath. “We sell whatever we produce irrespective of the demand.” Old School Supply A constant woe with most manufacturers is the dearth of an efficient cold chain in India. “There is little or no cold chain system in place to ensure that farm produce reaches the factory in a span of few hours,” states Mr. Kamath. As it is with untrained labor who mishandle goods, Natural too suffers the wastage of raw materials. Even while supplying the finished product to the franchisees, the company relies on local transporters and not on cold chain specialists. “We cannot rely on cold logistics to transport ice cream in their reefers as they will have to open the door 30 times if there are 30 stops, resulting We cannot jump from ten to 20 tons overnight as we have to take care of other resources as well. But we sell whatever we produce irrespective of the demand. — Srinivas Kamath Director, Kamaths Ourtimes Pvt. Ltd. in the loss of temperature within the van,” says Mr. Pai. The Kamaths believe in conservative logistics and supply ice cream in thermocol corrugated boxes filled with dry ice. “For every 20 kilos of ice cream, we use four-five kilos of dry ice,” says Mr. Pai. The ignorance of transporters adds to their misery. “We have had to deal with transporters who reject such shipments presuming the presence of harmful chemicals that could harm or cripple them if they come in contact with it,” says Mr. Pai. Dry ice releases CO2 gas when it comes into contact with air. “But we are careful to affix ‘Danger’ stickers on boxes to dissuade workers from mishandling it,” adds Mr. Pai. INDIA | February 2012 | www.logisticsweek.com 39 < FeATURe Perishable food items are not insured in India. Hence, we have little or no choice but to incur the loss in case of an accident. — Girish Pai, Retail Head, Natural Icecreams The government does not make much provision for the safe passage of perishable goods in India. “If any of our trucks meet with an accident, it is likely that goods may be damaged. But with no laws in place for recovery of perishable food items, we cannot claim compensation,” says Mr. Pai. “We have no choice but to bear the loss.” The need of the hour is good logistics. A cold chain is not helpful in transporting fruits as fruits require different temperatures to thrive in. “What we need is transportation of perishables in well-controlled/ ambient temperature,” says Mr. Kamath. “Mangoes need heat to ripen, while custard apples require ambient temperature that helps it hoard its juiciness. Pineapples and papayas cannot be transported in the same vehicle because they require different temperatures.” First In, First Out Kamath Ourtimes stores milk in 40 INDIA | February 2012 | www.logisticsweek.com large vats and fruits in a ripening chamber before sending them for processing. The plastic packing materials are ordered from Daman. The exact requirement for every week is ordered a month in advance. The supplier delivers the packing material every Saturday. The same applies for corrugated boxes and labels which are supplied every 15 days. “We place a requisition of six lakhs containers per month. The supplier knows our demand and fulfils our requirements in the ascending order every week. One lakh in the first week, 1.5 lakh in the second week and so on,” elucidates Mr. Pai. Wouldn’t it be tempting for middlemen to take a snack out of the box while transporting the goods? But Mr. Pai strictly refutes the idea. He claims there has never been shrinkage due to pilferage. “We work in tandem with our transporter,” states Mr. Pai. “Every ice cream box dispatched from the unit is accounted for.” exploring New Territories The Juhu ice cream parlor is family/company-owned. The remaining 99 stores in India are franchises. The maximum outlets are based in Maharashtra, nearly 7580 stores. In the last two years, they have expanded to other cities: Jaipur, Goa, Mangalore, Bangalore and Hyderabad. Road is the preferred mode of transport for distributing ice cream within Maharashtra. For outlets outside Maharashtra, ice cream is packed in insulated corrugated boxes and sent by train. “We have tie-ups with airlines too, in case of emergencies,” says Mr. Kamath. How does one explain an emergency when it comes to ice-cream? “Think of a scenario where a newly opened store sells a certain quantity of ice cream on day one and there is a complete sell-out on day two. Under such circumstances, the outlets have to be refilled immediately and hence, are transported by air planes,” elucidates Mr. Kamath. Cherry On The Top Presently, 80 percent of their unit is automated. “The present unit can cater to 50-100 more outlets in the coming years,” says Mr. Kamath. “But we are working on introducing new machinery to assist in automatic filling. Automatic filling machines will help us supply to 100-200 more outlets, more than the present set capacity.” Natural Icecreams came into existence with a humble investment of `3,00,000. Today, the company is grossing huge profits and has a healthy and respectable bottomline just by selling ice creams round-the-year. This fiscal, the company’s turnover was `40 crore, the retail turnover was `60 crore. “Now our targets for the company and the retail are `60 crore and `90 crore respectively for the next year,” says Mr. Pai. Natural Icecreams has survived and flourished in Mumbai for almost three decades now. Two years ago, for the first time, the company sought out franchises in neighboring states so as to establish a national identity for their fresh fruits flavor as against what international competitors have to offer. And this is just the beginning of more expansions to come. VECTURA STACKER CRANES VECTURA – GIVING YOU THE OPTIONS Swisslog offers complete AS/RS solutions consisting of well-proven and high quality Vectura Stacker cranes and ProMove pallet conveyors. With an AS/RS system you can save substantial amounts on cost for land and get a perfect and gentle handling of your pallet bound goods. AS/RS is the future of professional goods distribution. 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WHAT A MODERN CONVEYOR SYSTEM MUST BE It must be based on a set of standard components and modules to ensure reliability. It must be configurable to accommodate different load sizes, weights, speed requirements etc. It must have systems for easy and flexible generation of layouts from a complete set of conveyor elements. The system must be cost effective to build, assemble, test, deliver, install and commission. And most importantly for the user - it must be functional, easy to live with, easy to maintain, totally reliable and competitive. This is a ProMove conveyor system. < Feature Instant Dheeraj Gupta, Managing Director, Jumboking Foods Pvt. Ltd, explains the apparently simple supply chain of Jumboking vada pavs. Pritha Dey finds out how he manages it single-handedly. Photo: Ramlath Kavil 46 INDIA | February 2012 | www.logisticsweek.com INDIA | February 2012 | www.logisticsweek.com 47 < Feature “Do not go where the path may lead, go instead where there is no path and leave a trail.” -Ralph Waldo Emerson D heeraj Gupta, Managing Director, Jumboking Foods Pvt. Ltd. chose to do just that. He opted for a tough path, a path hard to tread, but very close to his heart. Back in 2001, he did not have role models to look up to when he set out to organize the Indian food segment in his then limited capacity. Now, others can follow his example. Mumbaikars, whose staple snack is vada pav, would take to a Jumboking vada pav as a fish takes to water. It all looks like an easy runaway success story. But, Mr. Gupta says, “Now, in hindsight, it looks like from day one Jumboking was a success. But for the first six months people thought that I was wasting my education.” Mr. Gupta has a degree in Hotel Management from the Institute of Hotel Management(IHM) Mumbai, and an MBA in SCM HRD from Symbiosis, Pune, with a specialization in finance. He wanted to organize and develop the Indian food sector to its fullest potential. The Quick Service Restaurant segment, he says, was largely unorganized, “may be because the people who were doing the business were not educated enough and the people who were educated enough, or, the children of the people who were in the food business, did not see much glamour in it.” take off Coming from a family which was into the food business for three generations, the obvious famchoice was to join the fam ily business. But Mr. Gupta chose to pursue Jumbok Jumboking, something which he wanted to do. He was fortunate enough to have the freedom to pursue his 48 INDIA | February 2012 | www.logisticsweek.com heart’s desire and thus were laid the foundations of Jumboking. Jumboking was started with a small capital from a 100 sq. ft. stall outside Malad station, Mumbai. The location was prime and rent-free. Mr. Gupta also had a central kitchen available to his advantage as it was producing food products for the other family businesses as well. “I could leverage on the advantages that I had and start at a marginal cost,” adds Mr. Gupta. For the first year, Jumboking was sold from one store alone. Now, about six and a half lakh units are sold every month out of 41 stores, of which 34 are in Mumbai. So that is about 20,000-22,000 units every day. “We recently served our 90 millionth Jumboking,” beams Mr. Gupta. Mr. Gupta, with time, has gained a fair idea of the number of vada pavs sold every day. He explains: “This business is predictable because the food segment we cater to is not subject to impulse purchase, where sales could shoot up suddenly.” The business is pretty uniform 365 days of the year, albeit with minor fluctuations of ten percent in the bottomline, which happen due to seasonal variations. For example, in the month of May most colleges remain closed and as students are a major source of business, sales in the stores around colleges may come down by about 20 percent. an austere Supply Chain The task of manufacturing thousands of units and supplying them to the stores could appear daunting. But Mr. Gupta says, “Our supply chain is simple.” Jumboking has one central kitchen, Novel Exports, which spans 10,000 sq. ft. and is located in Vasai (east), Thane district. Two bakeries, in Thane and Vasai, supply bread to the stores in Mumbai. Bread being perishable in nature, has a shelf life of 48 hours from the time of manufacture. So, by the time it reaches the stores, it is already 12 hours old, explains Mr. Gupta. “We have to calculate shelf life from the time it emerges from the oven.” For the stores in Bangalore and Gujarat, the company collaborates with reputed local bakeries. The bread route is one part of the supply chain. The other two parts, i.e. frozen and ambient supplies, are taken care of by the distribution centre (DC) based in Powai. Ambient supplies comprise packing material such as wrappers and carry bags, which are not perishable in nature. Hence these things are supplied to the stores once a month. The paper supplier, who supplies all the paper products, drops ten lakh units of wrappers at the Powai DC in one delivery. Similarly, the DC receives oil from Kamani and besan from Samrat. The DC aggregates all the orders from the stores and after consolidation, delivers to six stores Knowing Jumboking No. of outlets in Mumbai 34 No. of outlets in Aurangabad 2 (upcoming) No. of outlets in Bangalore 4 No. of outlets in Gujarat 4 No. of LSPs 1- Coldstar No. of warehouses 2 No. of products 8 frozen / bread / 10 packaging items No. of vada pavs sold every day, on an average 20,000 units No. of people employed 15 (head office)/stores – 60/franchises–60 No. of DCs 2 Number of core suppliers 3 SC employees 1 every day. “The more complicated and important part is the frozen supplies. About 80 percent of everything that goes into making the products comes from the frozen supplies of the central kitchen. The frozen patty has a shelf life of six months and it is going to be fresher than the patty one would get at any other stall,” says Mr. Gupta confidently. Freshness of the patty is ensured by retaining the boiled potato at 100°C from whence the patties are formed. It is immediately stored in a blast freezer and the temperature is brought down to below five degrees in under an hour and then further to -18°C. So there is little chance of any form of bacterial growth to take place. All this has to be done within the hour. It is common knowledge that food kept at a temperature of 5°C to 60°C for more than four hours can cause it to decay. Once the temperature of -18°C is achieved, care is taken to ensure it does not drop further till the time the patty is put in the fryer. So holding the supplies in frozen form in the DC, then transporting it in a reefer van to the store and having a deep freezer at the store for holding the product at -18°C till an order is placed—this whole process is crucial in keeping the freshness of food intact. While frying, the patty goes straight from -18°C to 180°C and it is served within a maximum time of five minutes. In contrast, the masala for the vada pav made by streetside vendors is for the entire day. They store it at 35°C, a matrix in which bacteria could thrive. However, it is not the resilience of the customers that prevents them from falling ill, but the fact that the vendor again fries the vada at 160-180°C for five to seven minutes. Mr. Gupta jokes, “So you have a vada pav with a million dead bacteria in it.” Low Margins Jumboking’s current operations require them to maintain low margins because their food costs are almost 48 percent. Mr. Gupta says, “You have pizza chains operating at a food cost of 25 to 30 percent. That makes it easier for them to afford advertising costs and other expenses. We follow a strategy of lower pricing and most of our advertising is word of mouth.” The supply chain cost is `3 per kg in Mumbai. As a strategic decision, Jumboking has decided to limit its operations largely to Mumbai only. The company has spent so much time in Mumbai that currently the monthly frozen material produced and distributed is 50 tons a month. So now, when the volume is pretty high, a supply chain cost of `3 per kg can be sustained. In Bangalore, the monthly requirement is only 2.5 tons. The material is taken from Mumbai to Bangalore, wherein the company has partnered with Coldstar. So Coldstar transports material from Novel Exports and stocks it at the DC in Bangalore. Three tons of material are moved every month to Bangalore. Delivery to Bangalore stores is scheduled once a week. The cost of transporting goods from the central kitchen to Bangalore is about `10 per kg and to the stores another `5 per kg. So, the cost of supplying Bangalore stores is `15 per kg. “We have to add another four or five stores in Bangalore to reduce the cost,” says Mr. Gupta. The company’s objective is to achieve an average supply chain cost of `10 per kg pan India. Mr. Gupta is a strong supporter of franchising. “Our product is very simple and it can be franchised,” he opines. He explains that there are a lot of control points whereby the product cannot be tampered with. He gives an example of a dosa chain. From a given quantity of batter, a vendor can make ten or 15 dosas. But, for a vada pav, a vendor cannot break the bread or the patty. So, at any given We are following a strategy of lower pricing and we want the advertising to happen more through word of mouth. — Dheeraj Gupta, Managing Director, Jumboking Foods Pvt. Ltd. point, the company knows the exact sale of a franchise. Outsourcing Its SCM Jumboking’s entire supply chain, comprising the central kitchen and the store franchises, is outsourced. Snowman and Coldstar are the cold chain companies that Jumboking is working with at present. Jumboking intends to open 100 stores by August 2013. But, Mr. Gupta plans to stay with the same suppliers. “The current guys have got the capacity and it is best that we continue with them as the bigger the volume of orders they get, the better price they will be able to give us, or, the more they will be able to invest in equipment to make the product better,” justifies Mr. Gupta. The bakeries have also assured Mr Gupta that the day Jumboking starts ordering more than 30,000 breads a day from them, they will invest in equipment which will cut the bread and send it to the stores and thus save manual labor. He INDIA | February 2012 | www.logisticsweek.com 49 < Feature adds that “In terms of partnership, we have to understand that if the bakery has to invest more money, they would need the volume to justify that investment.” Discontinuity Of Supplies Every start-up ab initio has ‘shortage’ issues. “In Bangalore, for the first one month we had those issues,” says Mr. Gupta. But a maximum of 100 days is sufficient to gauge market requirements. However, certain hiccups may occur in supply chain processes. For example, bread has to be manufactured every day. “But one day there was a power failure at our bakery in Thane due to a total power failure in the entire Thane region. We had a tough time because we needed the ovens to be working as we try to manufacture as close to delivery time as possible. 50 INDIA | February 2012 | www.logisticsweek.com So, the deliveries did get delayed a bit,” says Mr. Gupta. A store is expected to carry not more than 10-20 percent of excess stock. Provision is made for that much because if a customer wishes to purchase 50 vada pavs, he should not be refused due to unavailability of stock. In the last ten years, there have hardly been two or three instances where stores were unable to fulfill an order because of lack of stock. New Ventures Mr. Gupta sounds pretty content with the menu of Jumboking and says, “We will do variations within the vada pav. We feel vada pav alone has a huge potential. From our data, more than 20 lakh units of vada pav are sold each day in Mumbai city alone.” That’s a huge market and Jumboking sells only 20,000-22,000 vada pavs which constitutes just one percent of the market. So Mr. Gupta does not feel the need to add new products. “I would rather spend time and energy in getting at least 50 percent of the market to have a Jumboking,” he adds. To make that happen, more stores have to be established. Mumbai can accommodate at least 300 stores, while Jumboking has only 34 stores as of now. Getting techie Jumboking uses software by Pace Automation to link all its stores. The order gets directly punched into the system, it is received by the kitchen which gets to know that a store has placed an order which will be fulfilled the next day. Jumboking plans to expand and increase its present outlets by more than double in 2012. With plans of expansion in place, Jumboking can confidently look forward to a brighter and better future. PAN India Warehousing (3PL/4PL) Reverse Logistics Primary & Secondary Transportation In-transit Damage Reduction Solutions Partnership in Road Safety Programs Logistics BPO Logistics Staffing Services Logistics Consultancy & Training Audits & Benchmarking E-04, Devashree Garden, Rutu Park Service Road, Majiwada Naka, Thane (W) â€“ 400601. Maharashtra Contacts : (+91) 99879 22244/9820761645 E-mail: firstname.lastname@example.org < Special Supplement Storage and Material Handling Systems The choice of Storage and Material Handling Systems is crucial as it can impact efficiency and response time in a warehouse says Padmini Pagadala. T he term Material Handling Equipment (MHE) or Systems is often used somewhat loosely to refer to three types of assets in a warehouse: storage equipment, vehicles and mechanization. Storage methods are often based on the cubic feet of a given item that may be stored in a given location of that storage method or mode. For items that require a great deal of physical space there are pallet storage methods. For items that require a few cartons to be stored in the warehouse there are different case storage methods. For very small items that do not require a full case on hand (e.g. jewelry), there are piece or very small part storage methods. Finally, for unusually shaped parts 52 INDIA | February 2012 | www.logisticsweek.com such as pipes, carpets or cables, there are storage methods that are specially designed for just those items, but since these are somewhat industry specific, we will confine the discussion to the more generic pallet, case, and piece storage methods. The choice of a storage method is important. It can impact the labor efficiency and response time of a warehouse and even more importantly for Indiaâ€”the size of the warehouse. But in India labor is inexpensive relative to the cost of material handling equipment, so the central issue around the choice of a storage method usually is the amount of land you will need to store your produce in one particular storage method versus another. Source: Author Land is hard to find in India and it is expensive. If you need to store 25,000 cases of books you could put them on book shelves (a case storage mode), or you could put them on pallets and store them in back-to-back standard pallet racks (a pallet storage mode). In conclusion, by choosing the proper storage mode you save almost 80 percent of the square footage that you need to purchase! Beyond the size of the warehouse, the amount of labor needed in the facility, and the response time of the facility, the choice of a storage method should also consider some of the following less important issues: The volumes of the received materials vis-Ă -vis that of the dispatch materials. n Integrity and security of inventory. n Personnel safety. n Degree of flexibility desired for different uses of a warehouse. n The frequency of dispatches. n The skill levels of workers and equipment operators. Now an elaboration on the common types of storage and handling systems in use in warehouses today. n palletised Storage methods The pallet is the most common unit load used in warehouses. Most pallets are wooden, but nowadays they are also made of plastic or metal. As for the dimensions of the pallet, the International Organisation of Standardisation has sanctioned six pallet dimensions, however, companies around the world use different types of dimensions. Overall, the nature of this system depends on the type of the product, the throughput levels, inventory holdings, the width of the doorways, aisle areas, and the overall requirement of the supply chain. There are many alternative methods to store pallets. These methods INDIA | February 2012 | www.logisticsweek.com 53 < Special Supplement The most basic method that one can use to store pallets is just putting them on the floor and stacking them on top of one another. 54 INDIA | differ on how efficiently they use space and the type of equipment that is required to putaway and pick the pallets out of the storage mode. n Block Stacking: The most basic method that one can use to store pallets is just putting them on the floor and stacking them on top of one another. This works fine when you have lots of pallets of the same item and the product is such that it can be stacked without damaging the product. Even when the latter Source: Author February 2012 | www.logisticsweek.com requirement cannot be satisfied, stacking fames may be purchased that will let you stack pallets of products that are not normally stackable. Owing to their sheer volumes and throughput, baby diapers are mostly stored on the floor. This ensures maximum utilisation of space. n Selective Pallet Rack: The workhorse of pallet storage methods is the Selective Pallet Rack. This method is used in situations where you only need to store a few pallets of a given item. With this method a rack structure is constructed of beams and supports that allow you to store pallets on top of one another. The rack structure is organized so that each â€œbayâ€? can store two pallets side by side, one deep. There are variations of this structure that are popular in Europe where you can store three pallets side by side to achieve even higher storage density and reduce square footage needed further, but this rack is a little more expen- sive due to the greater strength of steel needed. n Double Deep Selective Pallet Rack: In most situations where a small percentage of the SKUs require two to four pallets you will use Selective Pallet Racks even for those items; however, if you have a large population of items that need two to four pallets, Double Deep selective Pallet Rack might need to be considered. This method allows you to store four pallets per bay, i.e. two lanes side by side that are each two pallets deep. This method is less expensive per pallet stored than the more common one-deep variety, but it does require special material handling equipment to access that costs more. Guidelines for the horizontal and vertical spacing of the nonmechanized racking components to give safe access to the pallets are given by codes of practice issued by international associations, such as the Federation Europeenne de la Manutention (FEM) and the Storage Equipment Manufacturers Association (SEMA). n Automated Storage and Retrieval Systems(AS/RS) Of late, this type of system has gained popularity in modern, sophisticated warehouses in India, since it makes excellent use of floor area and delivers very high level of throughput. An AS/RS system is essentially a specially designed selective pallet rack system that uses a robot (called a “crane”) to putaway and retrieve pallets stored within the rack structure. The advantage of these systems in India is that the square footage required can go down even further because the robots can reach heights of 90 ft. or greater, whereas the vehicles used to access standard selective pallet rack can reach heights of only 30 ft. The aisles required are also much narrower for robots than for conventional vehicles. Thus with an AS/RS you can reduce your space needs 75 percent in some sit- uations over that needed for selective pallet rack. Of course, this equipment is quite expensive. Cranes alone can run over $250,000 USD. Cranes that can switch aisles cost even more. The number of cranes required is dictated by your peak hourly throughput. There are also other disadvantages. If you suddenly discover you need to store cases instead of pallets, you can’t convert an AS/ RS used for pallet storage to storing cases without an enormous amount of time and money. You should think about this seriously if you work in the unpredictable, maturing Indian marketplace. Also, some thought needs to be taken to safeguard power to such systems. When the power goes out to an AS/ RS, the robots stop working and the warehouse activity essentially comes to a grinding halt. This could be a real hindrance to using such systems in some areas within the subcontinent. AS/RS racks do have an advantage over conventional racks in areas of large seismic activity. Rack supported structures such as that used by an AS/RS is cheaper to construct and outfit for seismic zones than conventional storage and building space. case Storage methods For situations where you need to store a few cases of a given item, there are two primary alternatives: shelving and decked pallet rack. n Shelving: Shelving is the primary method for storing individual Savings Space With Pallet Racking Method Total Cases to Store Cases / Unit No. of Units Needed Units That May be Stacked Overhead Total Units Needed Square Aisles Total Foot / ReSquare Unit quired Feet Needed Bin Shelving 25,000 10 2,500 0 2,500 20 4 55,000 Pallet Rack 25,000 25 1,000 4 250 20.25 12 6,563 INDIA | February 2012 | www.logisticsweek.com 55 < Special Supplement cases. This is especially true in picking operations that use carts to pick small orders consisting of multiple different pieces going into a mixedSKU outbound container. Shelving comes in two varieties: open shelving with no back or sides and closed or bin shelving that has steel sides. Shelving has the advantage that you do not need a vehicle to access the cases since they are all accessible from the floor. n Decked Rack: If you have a large quantity of cases that need to be stored (e.g. thousands of SKUs each requiring a few cases) then 56 INDIA | February 2012 | www.logisticsweek.com you may want to consider a decked rack. With decked rack, you essentially take a standard selective pallet rack and place plywood or steel mesh across each bay. You can then place cartons (usually one to two cartons deep) on this â€œdeckâ€? and pick from it using a vehicle called an Order Picker Truck. (see below) The advantage of this method over Shelving is that you can take the storage much higher, i.e. 30 ft. instead of the standard 5 ft. high shelving units. While the aisle space required for decked rack is almost double that of shelving, the increased height allows you to save over 50 percent of the square footage needed. n Carousels store cases on shelves or in tote containers, which are mounted on a giant revolving chain. Carousels are good when you are storing very small parts in small quantities and hence the ratio of picks-to-putaways is very, very high. The applicability in India may be limited due to the low cost of labor making it hard to justify this equipment. n A Miniload is an AS/RS which uses trays or drawers stored in a gi- Source: Author < Special Supplement ant rack structure. Cases can be stored on these trays or the contents of the cases poured out and separated inside each drawer for really small items. unusual Storage methods Pallets are used in a majority of warehouses. However, products which are too small or longâ€” such as nuts and bolts, paper reams, electronic items, steel bars, tyres, drums or or garments (hangers)â€”require different, non-palletised type of storage and handling solutions. Different systems are used to move a pallet in a warehouse. They range from manual to mechanised equipment. 58 INDIA | February 2012 | www.logisticsweek.com In addition, items such as wood, carpets, tyres, steel rods need special storage and handling systems such as cantilever racking, block storage, etc. The upper-end apparel industry also requires its own unique storage method: garment on hanger. This method involves rails like those used in dry cleaners to store suits after being pressed. This method is exclusively used for garments that come with hangers. material Handling Vehicles Different systems are used to move a pallet in a warehouse. They range from manual to mechanised equipment. The following describe a few of the common types: n Pallet Jacks: Also known as pallet truck, this equipment has two forks that fit into the slots of a pallet and lift the load off the floor. There are two types of pallet jacks: Manual and Powered pallet (battery-operated) jacks or trucks. It is also worth noting that powered pallet jacks come in different lengths. There are double length and even triple-length powered pallet jacks that allow you to transport two or three pallets at a time. This can reduce the equipment investment needed in sites that have lots of pallets travelling from the same origin to the same destination, e.g. between receiving and an AS/RS. n Forklifts: The other system is the articulated counterbalanced forklift truck, which carries the load ahead of the front wheel, which can tip the truck over, nose first. Hence, a counterbalance weight, along with the engine and the batteries, is fitted at the far backend in order to stabilise the truck. They cannot operate in narrow aisles due to an extended rear and consequent wide-turning area. n Reach Trucks that have manoeuvreable masts and double-reach trucks are used to place pallets or retrieve them n Order Picker Trucks are used to haul the picker up so that he may pick cases from higher levels of the rack without having to bring the pallet down n Automated guided vehicles (AGVs). As the name suggests, AGVs are driverless. Trucks are controlled by remote computers. At some modern facilities, AGVs also interface with other handling systems such as conveyors. mechanization n Conveyors. A common sight at manufacturing plants (and airports, used by passengers to retrieve luggage), conveyors are of many types, the simplest one being the gravityroller conveyor which is inclined at a slight angle. Then there are powered containers. Conveyor systems are used to move goods between two points, as short-term buffers to hold material and for sortation. n Diverts: If conveyors are the super-highways of the warehouse where cartons flow from point A to point B, diverts are the off-ramps from the conveyor super highway. They are used to get a carton to change direction and follow a different path on a different conveyor. There are different types of diverts that are chosen based on the size of the product, the speed at which the carton is travelling, and the nature of the product (i.e. if it is fragile). n Sorters: Sorters are used when you have a large number of nearby destinations to which you want the cartons sorted. Carton sorters are very common at the shipping dock where they are used to sort the cartons down a “lane” leading to a specific dock door. There are many different types of carton sorters: shoe sorters, tilt tray, etc. There are also Unit Sorters which can be used to sort individual units into shipping cartons. These are common in retail and high volume businesses. There are lots of different types of unit sorters as well, i.e. tilt tray, bomb bay, cross-belt, etc. Do We need Sophisticated mHe? While automation within the production process has lowered costs, similar mechanisation in India has not yet taken place in warehousing. Effective material handling is central to a successful warehouse business and it is this understanding which underscores the huge importance being given to the warehousing business in India in recent years. With cheap labour available in abundance in the country, India has traditionally relied on manual labour for warehouse operations. But this method has severe limitations; it is difficult to manually use all available storage space in a warehouse. The use of manual labour can also result in damaged goods and injuries to warehouse personnel. Automation or for that matter, even the use of sophisticated MHE such as the Order Picker Truck (the ‘Man Up’ Truck) may not be seen as being cost effective in India owing to this. But one needs to keep in mind the accuracy that only an automated system can generate. Greater volumes and order complexity will drive the need for automation in India, but more importantly, the accentuated need for accuracy of shipping will drive automation to become a necessity. the Way to Go The stark difference between the developed more mature warehouses of the West and our country is the understanding of the ‘Return on Investment.’ In India, somehow, capital costs are still paid more attention to. In the process, there are precious operational costs laid waste, given away every year in the form of inefficiencies, inaccurate shipments and in fulfilling short orders. effective material handling is central to a successful warehouse business and it underscores the huge importance being given to the warehousing business in india in recent years. The good news is that the warehousing sector has seen the entry of big players in recent times. Much attention is being paid to modernise facilities in the genuine understanding that modernising and getting organised are the ways to become cost efficient. With recent developments, there is ample reason and enthusiasm to elieve that we understand the need of the hour and are looking forward to a warehouse revolution in the making. The author can be reached at email@example.com. INDIA | February 2012 | www.logisticsweek.com 59 < panorama Off the shelf Re-designing Retail T he retail environment has evolved rapidly in the past few decades, with the retailing industry and its placement and design of "brick-and-mortar" locations changing with evolving demographics, shopping behavior, transportation options and a desire in recent years for more unique shopping environments. Written by a leading expert, this is a guide to planning for retail development for urban planners, urban designers and architects. Robert Gibbs has popped the hood and taken apart the engine of commercial design and development, showing us each an individual part and explaining fit, form and function. The book includes an overview of the history of retail design, a look at retail and merchandising trends, and principles for current retail developments. principles of Urban retail planning and Development By Robert Gibbs Publisher: Wiley Price: `4,000.30 No Thanks, I'm Just Looking ‘N o Thanks, I'm Just Looking’ gives one the inside scoop on how to skyrocket one’s selling career with a system of easy-to-learn practical money-making steps. By saving countless hours of trial-and-error experience, readers will be able to focus on the things that really work. Considered to be retail guru Harry J. Friedman's personal collection of proven selling techniques, No Thanks, I'm Just Looking includes all the tips and humorous anecdotes that have made him retail's most sought after consultant. The book delivers the tricks of the trade from an international retail authority, Friedman being the most heavily attended speaker on retail selling and operational management in the world. These groundbreaking high-performance training systems have been used by more than 500,000 retailers, from small independent ones to the likes of Neiman Marcus, Cartier, Billabong, La-Z-Boy and Godiva, to routinely deliver more sales. Friedman created the number one retail sales and management system used by more retailers than any other system of its kind in the world. The book will provide access to proven techniques that will help increase sales and elevate the performance levels of the sales team. no Thanks, I'm Just Looking: Sales Techniques For Turning Shoppers Into Buyers By Harry J. Friedman Publisher: Wiley Price: `1,248.61 Food For Thought F ood has a fundamental position in society, ensuring health, happiness and political stability. Consequently, the management of food chains and networks is one of the most important aspects of the modern food industry. Yet food is difficult to handle with long supply chains, with a limited window for storage and handling time, and the risk of spoiling if incorrectly handled or processed. These issues can lead to logistical problems that can severely affect product quality and freshness. ‘Intelligent Agrifood Chains and Networks’ offers a timely discussion of the current state of 60 INDIA | food logistics, and indicates the major ICT problems that can occur during production, warehousing, transportation and retailing. Emphasis is given to new technologies and intelligent systems that are able to process time-dependent information, handle emergencies, and support logistics operations in food management. Intelligent agrifood Chains and networks By Michael Bourlakis (Editor), Ilias P. Vlachos (Editor), Vasileios Zeimpekis (Editor) Publisher: Wiley-Blackwell Price: `9,508.03 February 2012 | www.logisticsweek.com Subscribe to LOG.IndIa and LW India’s only magazine and newspaper providing engaging stories on SCM and logistics. IndIa’s LeadIng LOgIstIcs MagazIne www.logisticsweek.com IndIa’s LeadIng LOgIstIcs MagazIne www.logisticsweek.com INDIA zIne Maga LOgIstIcscsweek.com ng L Ing www.logisti October 2011 Vol. 5 — No.2 October 2010 | Vol. 4 – No.2 No.8 Vol. 4 — No.2 April 2011 Vol. 4 – 2010 | October A INDIA `100 ation Educecial Sp INDIA com logisTic s 20 PAGE 11 ` 100 `25 logisticsweek.com November 16–30, 2011 Editor’s Note Enfant Terrible amit mukherjee, Vicepresident (iT and supply chain) and group cio at rpg, has deployed exemplary supplychain strategies at spencer‘s retail >> page 34 waTErways 44 India is ignoring inland waterways at its own peril Cover Price By Post By Courier Online (PDF) 1 `1200 `1080 `1320 $ 50 2 `2400 `2040 `2520 $ 90 3 `3600 `2880 `3600 $ 135 low adopTio N 24 ADV NEglEcT Why WMS ERSE REA Ed doesCTIO not have still GRE N: An ineffic waTErw enoug LIGH h takersEN ays 44 ient cold-c in India T: How Ericss VALUE India hain is is on India ignori OVER COS killing ng inland is reducwater children T: An ing ways in its India...10 edited transc aty-cha its own peril suppl in carbon ript of ASC Summ footprint... it offers 18 key learni ngs...26 Bad logistics is often the cause for unhappiness and displeasure. It could be due to numerous reasons from trafﬁc snarls, to delays in paper work or some little-known regulation that could cause delays in delivery. But to the receiver, it is bad logistics. Often, when you have asked for something to be delivered at a pre-decided destination and especially if you are eagerly awaiting the delivery, nine out of ten times it will never arrive on the scheduled date. This happens so often each time I order some books/CDs/appliances. The service provider will tell you that he has made more than one trip and there was no one home. And then you get into an argument. Is ensuring prompt delivery so tough? Don’t responsible people sitting in ofﬁces take stock of goods that have arrived and those that need to be delivered? Is the infrastructure in such doldrums? Surely, they are not short-staffed. Nor do people live in such remote areas (In the movie Il Postino, a make-shift postman delivers a letter with prompt regularity to his only customer who lives on the top of a hill) where they need to search out more deliveries within the area to justify their trip. And God help you if your parcel happens to be a passport. Method In Motion Year THE Move FOOD ment CRISI of teleco S 54 Annetwo m ISB Prof. rk equip shows ment a windo ensur howopens to e food w securi of oppor ty. tunity Ms. Shagun Kapur Gogia, Director/Founder of Tuscan Ventures, has grand plans for the cold chain industry in India. `100 Pg.3 `100 Jayakumar Krishnaswamy, AkzoNobel’s SCM Britannia’s Replenishment Manager, Raviraj Rodrigues head, is managing a 24x7 supply-chain. Here’s DistributionNEglEcTEd Manager Sanjay low(right) and National how he plans to accomplish it. Page 16 Mukherjee the FMCG adopTioN 24 (left), manage the supply-chain waTErwaysof44 major the roadblocks and OLD ORDER: How clearing auto cos manage serviceIndia logistics for ensuring phased-out models...08 Why WMS stillwhile does is ignoring inland not have enough HAND: waterways at its own logistics... seamless logistics. sharp look. THE FOREIGN HowAFDI in Retail would change India’s 25 20 Page TElEcom logisTics 20 GET SET, GO 38 Movement of telecom network equipment opens The true story of supplyachain window of opportunity education in India. WALK IN THE PARK COLOR OF INNOVATION CRUNCH TIME locatio need peril WMSDstill h GOO the right Why Warehouses choosing WATCH: have enoug goes into notSTOP TElE India ES: What takers in RIGHT MOV `100 PAGE 4 cation al Edupe S ci 8 Dr Ravi Prakash Mathur, Logi stics ami Director, , Dr.herj t muk Redee, dy’sVice desc Labo- rato SCM ribes pres how iden ries Ltd., t (iTthe its supp phar and maply and ly-ch sup gian t man cha like no othe pharmagroupain cio at rpg r India in)ages company deplow loye , has n NEglEcTEd d exe . mpl chain adopTioN 24 ary supplystrategiPage es 36 In For The Long Haul Varun Dhawan, VP-Taxation, Blue Dart Express Ltd., simplifies the issues with GST that have boggled many in the logistics industry. tIcs www.logist MagazIne icsweek.co m TM hee Right od In OF COLOR PM reostith cori nption INNOVATION TElEcom logisTics 20 Interview ` 100 GET SET, GO 38 OLD ORDER: Movement of telecom Why WMS still does at spe retail ncer‘s Manager network equipment opens not >> have enough page 34 The true story of supplyTHE FOREIGN HAND: General achain window of opportunity takers in India education in India. Ed , Associate , runs a lean PRO-LIFE SCM: NEglEcT Ltd. Agarwal 44 ays ur India . 10 How Atul waTErw g inland weighs in... products hain), Dab industry ignorin 20 The over 300 low Page 24 (Supply-C way. is on its India Here’s why... at its own . ain for its ays ards. N 24 looks well stand waterw war ouse.. supply-ch adopTio does GST Bill n for a wareh to set labor TO GO: ent of m opens TOWERING Movem teleco India’sent rk equipm netwo Unravelling oppor end.tunity of to cs,wend windo alogisti October 2011 Vol. 5 — No.2 Vol. 5 — No.4 October 2010 | Vol. 4 – No.2 Ing LOgIs amit mukherjee, Vicepresident (iT and supply chain) and group cio at rpg, has deployed exemplary supplychain strategies at spencer‘s retail >> page 34 PLY LIFE SUP TElEcom 20 s 38 logisTic ABOV telecoEm IndIa’s Lead Pg.38 Method In Motion Viceherjee, chain) supply amit muk t (iT and presiden cio at rpg, has up plyand gro plary sup r‘s d exem spence deploye tegies at chain stra page 34 retail >> INDIA INDIA ` 100 December 2011 ` 100 July 2011 Vol. 4 — October No.11 2010 | Vol. 4 – No.2 Method In Motion LOG.IndIa `100 takers in India peril PRO-LIFE SCM: Amid all the din around green logistics, some practical wisdom...30 44 BIGGER PICTURE: How supply-chain hurdles dent company bottom-line...14 RETAIL LACUNAE: Retail logistics managers rue lack of standardization....30 CII SUMMIT: Highlights from arguably the biggest congregation of SCM chiefs...36 A detailed analysis of India’s logistics parks Your’s truly, Jayashree Mendes Editor, LogisticsWeek Firms Rethink Supply Chain Risks Disasters in Japan, Thailand highlight need for continuity plan Bangkok As flooding in Thailand disrupts supply chains in many industries, the event—along with Japan’s March earthquake and tsunami—is prompting many to consider aspects of supply chain risk that might have been previously overlooked, says a recent report in Business Insurance. While many expect global sourcing to become an even larger factor for businesses going forward, recent events are prompting companies to consider the geographic concentrations of suppliers, the need for backup suppliers and reengineering processes to accommodate backup components should supply chains be disrupted. With an estimated 45 percent of the world’s hard-drive production located in Thailand and flooded plants affecting production by major manufacturers such as Seagate Technology Inc. and Western Digital Inc., some analysts say the disruption could affect PC production through the first half of 2012. The flooding also has had a major impact on the auto industry, where disruptions at Thai auto manufacturing plants and parts producers reportedly is expected to result in lost production of 250,000 vehicles worldwide. Many Japanese companies relocated production to facilities in Thailand after the March earthquake and tsunami. London-based law firm Reynolds Porter Chamberlain L.L.P. said the move to Thai facilities helped many Japanese companies mitigate their losses after the Japan disaster. But many now face further losses as a result of the floods in Thailand. “The problem for insurers who provide business interruption cover to Japanese manufacturers is that they have to cover the losses stemming from the Thai flooding because so many businesses moved some or all of their supply chain there,” Daniel Saville, legal director in the reinsurance and corporate insurance department of Reynolds Porter, said in a statement. “Moving production from Japan to Thailand was “Plan B.’ The question now is whether those businesses have a “Plan C,’” he said. Source: cleveland.com Lead IndIa’s Car manufacturers across the world suffer delays as factories lie submerged. Gerry Alonso, senior VP of claims at Factory Mutual Insurance Co., noted that the “slow developing” nature of the Thai catastrophe makes it difficult to get a handle on the extent of losses. And, the duration of the flooding could exacerbate the losses. “We’ve had some clients that have been able to procure divers and go in there, but that gives you an idea of what you have.” Mr. Alonso said. “The frustrating part from a claims perspective, you can’t assess losses until the water’s gone.” William J. Montanez, director of risk management at Ace Hardware Corp. and a member of the board of the Risk & Insurance Management Society Inc., said his company hasn’t been affected by either catastrophe, though it relies on overseas suppliers. Mr. Montanez said, “At the back end, we have to look at safeguarding and how we can make it less risky to do it.” With the Thai floods raising awareness of the risk of geographical concentrations of suppliers, Linda Conrad, director of strategic business risk management at Zurich Financial Services Ltd. in New York, said her company has been working with clients to identify where suppliers and industries are concentrated. “I think this illustrates the need for better continuity plans, including backup supplier arrangements, diversifying the locations of suppliers and using different backup suppliers than competitors.” Ms. Conrad also said companies are starting to ask existing suppliers about their own continuity plans. “People are also starting to do a lot more scenario analysis, including calculating the potential impact of having to re-engineer processes if alternative components or parts don’t match the specifications.” In general, the recent supply chain disruptions are leading many companies to embrace “that resiliency mindset of: Let’s try to think through some hypotheticals and plan for this when it costs us less than when we are in a crisis,” Ms. Conrad said. “At the end of the day I think the onus that’s going to be on risk management and management in general is how can we get a preview of what the future might look like and how will we respond to it,” Mr. Montanez said. “That’s what ERM is all about.” LOG.India & LW LW Year Cover Price By Post By Courier Online (PDF) Year Cover Price By Post 1 `600 `550 `900 $ 30 1 `1800 2 `1200 `1000 `1720 $ 50 2 3 `1800 `1600 `2680 $ 75 3 Yes I am interested in the special offer for Fill in BLOCK LETTERS 3 yeares By Courier Online (PDF) `1600 `2120 $ 75 `3200 `2900 `4040 $ 135 `5400 `4100 `6030 $ 200 2 years 1 year Name:............................................................................................................Designation:................................................................................................... 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You can also subcribe for your copies online at: http//logisticsweek.com/shop/ INDIA www.logisticsweek.com Hamburg Media Pvt. Ltd., Building No.4/6, Sona Udyog, Parsi Panchayat Road (Old Nagardas Road), Andheri (East), Mumbai - 400 069 INDIA Ph: 022-61162345 Email: firstname.lastname@example.org BLogoSphere Four Ways To address multichannel Supply Chain Challenges Jim Tierney Since demand has been so volatile in the past couple of years, merchants are having a tough time determining accurate inventory levels in their retail supply chains and channels. It’s either been too high or too low. Correctly forecasting inventory levels has become a struggle for many multichannel merchants. A new study by the Aberdeen Group – titled “State of CrossChannel Retail Supply Chain Execution” – offers some tips to address those multichannel supply chain challenges. Here's four we think are of great value. n Balance multichannel and store-based logistics operations needs. Currently, 38% of merchants support shipping and fulfillment for online and call center orders using a direct-toconsumer/store delivery model. Merchandise availability (69%) and order efficiency (64%) are the top two strategies of the best-in-class when it comes to integrating disparate channels. Merchants should review and upgrade their inbound and outbound processes, distribution center models, direct-tostore or consumer, and cross-docking processes. Then they reSoUrCe CenTer A Sustainable Supply Chain In Action Peter Murray, DuPont We looked at this new venture of creating biofuels from multiple angles, including the triple bottom line and the triple top line. The triple bottom line is a term that most individuals are familiar with; it has become the standard for corporate sustainability reporting and includes people (communities, society in general, employees and consumers), planet (measurable impact on environmental performance) and profits (some indication that profit is possible from the investment of resources). The triple top line is an emerging idea that businesses that embrace sustainability as a growth driver see their reputation, revenue and investment portfolio as the top line focus areas that drive their strategy, financial performance and investment for future growth. 62 INDIA | can potentially reduce cost per unit or order handled, increase same-day shipping rate, reduce labor cost to sales, and improve overall fulfillment rates. n Integrate multichannel demand forecasts with supply chain execution. Merchants should adopt unit-level demand forecasting unified for all business units and channels. This date should be aligned with promotions management, assortment mix, and inventory allocation processes. This will ensure shelflevel replenishment and in-stock focus. According to the study, 61% of merchants lack this capability. n Create visibility toward unit level inventory with suppliers. Nearly 70% of merchants surveyed are not using enterprisewide visibility tools to determine upstream and downstream unitlevel availability. Merchants should focus on multi-user, multiwarehouse inventory flow processes and enablers – particularly important in the area of inbound product flow. n Align supply chain execution metrics. It is critical to align merchant and supplier metrics so that both groups are using the same standards to gauge success. The most important metrics should be lead times and inventory service levels. http://bit.ly/yMHJFS Journals, Case studies, Research Reports At DuPont we leverage our knowledge and experience with developing Life Cycle Analyses for products into ways to improve sustainable performance along the supply chain. This includes energy use, greenhouse gas performance, land and water use as well as safe operating and environmental regulation compliance performance. DuPont started at the beginning of the supply chain, working with our farmers to ensure their land can be managed sustainably and working with communities, state universities and local organizations to understand their needs and concerns and to learn from their experience. From there, every process is viewed through the lens of operating in a sustainable manner. We invest in R&D to learn how to harvest efficiently. We collaborate with partners to learn how to remove the biomass in a way that doesn’t harm and even aids the growing of the next crop. For the harvesting stage, we use lean practices February 2012 | www.logisticsweek.com for the most efficient and effective way to move across fields, sourcing the highest efficiency equipment and using the equipment at full capacity to avoid wasting energy. We also looked at locations with access to rail routes to provide a more environmentally friendly and financially efficient mode of transportation. Finally, we looked at the waste material from the harvest and production processes as potential opportunities; including composting waste biomass material and soil into something of value that could be returned to the farms as well as using or selling other co-products to generate energy or be further processed. Each of these individual acts is important; however, the sum is greater than the parts. We are creating a sustainable supply chain throughout the entire lifecycle of our cellulosic ethanol operations. http://bit.ly/y1VRbW — Compiled by Anuja Abraham PORT FINANCE INTERNATIONAL INDIA 20-21 MARCH 2012 NOVOTEL MUMBAI - JUHU BEACH Unlocking Boundaries and Investigating Opportunities in India’s Ports WHO IS THIS CONFERENCE FOR? The 2nd Port Finance International India Conference is designed to present an in-depth understanding of innovative ﬁnancing solutions and practical advice surrounding the challenges and opportunities in India’s dynamic ports sector. It will provide an excellent opportunity to meet potential equity and business partners such as Government ofﬁcials, senior executives from port authorities, port and terminal operators and the legal and banking industries, involved either in investing in ports or in sourcing investment. Additionally, the conference will place a spotlight on India’s ports and their plans for expansion and development, whilst also investigating opportunities for growth and investment. Speakers who have already conﬁrmed their participation in 2012 include: • Rajeeva Sinha, Director, Mundra Port & Special Economic Zone Ltd. • Capt. Prasad Rebala, Sr. Vice President (Port Operations), Karaikal Port (P) Ltd • Atul Kulkarni, Chief Executive Ofﬁcer, Chowgule Ports & Infrastructure Pvt. Ltd. Port Operators, Terminal Operators, Forwarding and Shipping Companies, Shipyard Operators • Chairman of the Board/CEO • CFO/Head of Corporate Strategy/Planning • Head of Transport/Logistics • Head of Investor Relations • Head of Business Development • Head of Marketing Finance Industry (Banks, Investment Funds) • CEO • Head of Corporate Finance • Head of Transport/Infrastructure Desk • Head of Project Finance • Head of Leasing Business • Head of Business Development • Head of Investor Relations Law Firms and Consultancies • Partner, Infrastructure/Project Finance • Partner, Structured Finance • Y.S. Prasad, CEO Kakinada Seaports Limited, Kakinada • Vishal Kalantri, Director, Dighi Port Limited • Vishal Thakkar, DGM M&A, Essar Group • Rohit Modi, Joint Managing Director, Gammon India Limited • Bhanu Mehrotra, Senior Investment Ofﬁcer, IFC - International Finance Corporation • Rohit Chaturvedi, Head (Transport), CRISIL Risk and Infrastructure Solutions Limited (A subsidiary of CRISIL Ltd., A Standard & Poor’s Company • Mital Shah, Director – Strategy & Development, Halcrow Consulting India Private Limited • Martin Mannion, Global Head of Maritime, URS/Scott Wilson • Suren Vakil, Managing Director, BMT Consultants India PARTICIPATE - REGISTER NOW Contact us: patrick@portﬁnanceinternational.com Registration: • USD 533.00 (Inclusive of 10.3% Service Charge) for Indian nationals, citizens and residents of India* • USD 1,713.00 (Inclusive of 10.3% Service Charge) for all other conference delegates • 20% off for two or more delegates from the same company. • Ishtiaq Ali, Partner, Clasis Law • Milind Joshi, Managing Director, Investment, IDFC • Jasbir Singh Solanki, Head- Critical Infrastructure Group, Mahindra Special Services Group • Asit Sikdar, Vice President, SBI Capital Market Limited • Sushi Shyamal, Partner Transaction Advisory Services & Abhaya Agarwal, Partner Transaction Advisory Services, Ernst & Young • Neerav Kumar Gupta, Head India, Rent a Port n.v. • Pranab Thakur, Deputy General Manager – Infrastructure (Ports), Lanco Infratech • Jamie Simpson, Director, GHK International • Abhishek Tandon, Consultant & Research Manager - Ports & Containers, Drewry *Please note this list of speakers may be subject to change Focus sessions on Ports throughout the entire Indian continent – Senior Government and Port Operator speakers to be announced Payment methods: Our prices are set in US Dollars. Direct bank transfers in US Dollars or UK Sterling only (net of all bank charges) are accepted without any surcharges. Credit card payments are accepted in US Dollars only via paypal. All fees are inclusive of 10.3% service charge in accordance with the Central Board of Excise and Customs of India.*Proof of ID required* To register now please contact: E: patrick@portﬁnanceinternational.com T: +44 20 7017 3411 Delegates in India please contact: E: cheers@portﬁnanceinternational.com T: +91 22 2778 2094 To register for news updates and information on future events, sign up at www.portﬁnanceinternational.com Trade Media Partner: With thanks to our partners: INDIA India A4 advert Jan 12.indd 1 16/01/2012 10:19 < panorama LaUnChpaD mobile apps of The month A peek at some of the latest mobile applications for logisticians. umov.me Schedule It uMov.me offers a complete environment of development, delivery, and support for applications used on mobile devices. It has numerous apps for logistics tracking, inventory management, loading and unloading, break-bulk logistics. Moreover, you can create your own b2b app according to your business needs. Developer: Trevisan Tecnologia Language Supported: English, Portuguese Price: Free trial. US$ 1990 monthly per person URL: http://umov.me/aplicativos It is a crucial app for employee and staff scheduling. It runs as a standalone web application or you can share events with Schedule it desktop application. Receive events sent to you by other users, update, and return the changes. Developer: ScheduleIt Language Supported: English Price: Free trial. Price on request URL: http://tiny.cc/turug Platform: RIM-Blackberry, Android, Symbian DB Schenker 2.0 Platform: iPhone mind Your Business Platform: iPhone Platform: Blackberry, iPhone, Android DB Schenker Logistics has made tracking using smartphones even more convenient. With the launch of new version 2.0, customers can now use even more search criteria to track shipments, including all references entered at booking, such as the delivery note number and invoice number, as well as the air waybill and bill of lading. Developer: DB Schenker Language Supported: German, English, Spanish (Translated into ten different languages) Price: Free URL: http://tiny.cc/e4y7d http://tiny.cc/5gatr Manage your clients, your services and products through this app. Add services, add products prices and descriptions unique to your business; scan through lengthy client lists, check total client revenue, appointment history, upcoming appointments, and client notes. Developer: The Muscle Lab Language Supported: English Price: Free URL: http://tiny.cc/r3pga KiBiz mobile Sales advantage TmS Platform: iPhone Advantage TMS promises that shipping managers will not have to leave their warehouses to get quick quotes. Users can get accurate, instant rate quotes by entering origin/destination zip codes and the weight of your shipments. Developer: HA Advantage, LLC Language Supported: English Price: On request URL: http://tiny.cc/gemwi 64 INDIA | February 2012 | www.logisticsweek.com Platform: iPhone Mobile application of KiBiz Basic Sales enables users to create, edit, and view contacts, products, inventory, and sales on iPhone. Free yourself from office, and still be connected to your important data wherever you are. You can enter and process customers' orders immediately. Users can access their live data on iPhone using this web app. No syncing is required. Developer: KiBizSystems Language Supported: English Price: License fee on user package varies from $299 to $1399 URL: http://tiny.cc/38grs < EVENTS A PUBLICATION OF HAmBUrg mEDIA grOUP Februar y 2012 February 6 and 7, 2012 Military logistics india Manekshaw centre, new delhi Military Logistics India is a trade event that shall partake the responsibility of analyzing the financial support that is available to the Indian government for developing the logistic infrastructures and equipments in the Indian Army that are undergoing changes for the better. This event will ponder over the repairing, maintenance, caring and refurbishment of the ammunitions, tools, scientific war logistics, helicopters, and other logistic devices that will provide a new dimension to the structure of Indian army. Military Logistics India will be assembled by numerous, scientific technologists, retired colonels, and government delegates who shall also focus their attention over the resources and finance that are needed for further advancement in the logistic infrastructures of army. organizer: The Shephard Group Tel: +44 1753 727001 February 8 – 11, 2012 oceantex bombay exhibition centre (bec), Mumbai Oceantex will bring latest developments and updates from offshore technology, refining, transport and logistics and other related sectors. With informative conferences, helmed by qualified industry experts, the event showcases an impressive array of reactors, maintenance and material handling tools, storage tankers, heat exchangers, distillation columns and associated products. The SMP World Expo and the Enertech World Expo are held concurrently with the show. Oceantex draws in more than 223 exhibiting companies, looking to showcase a large array of oil and gas sector related products and equipments to the visitors at the show. Some of the main items of exhibits here are reactors, storage tanks, maintenance tools, cathodic protection equipments, pipelines and boilers. Heat exchangers, distillation columns, electrical appliances, recovery plants, pumps and valves are also showcased here. Flares, scrubbers, monitoring tools, drilling equipments, safety products, testing and consultancy services, engineering tools and financial services are also exhibited during the event. organizer: Chemtech Foundation Tel: +91 22 22874758 February 8 – 11, 2012 shipping, Marine & ports World expo bombay exhibition centre (bec), Mumbai The Shipping, Marine & Ports World Expo is receiving acclamation from key players of the shipping industry. Organized by Chemtech Foundation, the 66 INDIA | exposition proves to be a viable place in interacting with cross fraternity of different users and service providers across the shipping industry. Profile for exhibit include Shipbuilding/Shipyard industry, maritime services, ship sections, ports/ port technology, shipyard installations and equipment, offshore technology, prime movers/propulsion systems, cargo handling & logistics, dredging, maritime and training institutes, ship operation equipment, information technology/software, electronics/communications, research organizations, marine technology, marine equipment, navigational equipment & aids. organizer: Chemtech Foundation Tel: +91 2222874758 February 22 – 24, 2012 rFid - nFc expo pragati Maidan, new delhi rFID - NFC Expo is an evolving technology that is used for toll ticketing, and to track goods from needles and missiles to even pets. The rFID system is a replacement for barcodes in a few applications and overcomes issues like line of sight and security, while having the memory to incorporate numerous product details and history. Profile for exhibit includes access control, chips design and development, communication security, detecting and security, testing equipment, electronic components, high frequency rFID, IT software and hardware, manufacturing equipment, printing & labeling, public platform and services, rFID. organizer: Exposium India Tel: +91 22 26057836 February 22 – 24, 2012 e-sec expo pragati Maidan, new delhi e-Sec Expo is an international exhibition and conference on e-security technology and applications. In recent years, e-Security has become one of the fastest growing sub-sectors in IT around the world. And with ever-increasing reliance on networking, convergent technologies and mobile communications demand for e-Security products, services and specialist skills is certain to keep rising. Exhibitors include: Communication security, consulting and business services, digital signature, disaster planning, firewall, management, identification systems, internet filtering, internet security, IT hardware, network security, PKI, residential custom electronics installation accessories, risk management, remote access, recruitment and training, security management, secure electronic mail, software viruses and virus protection, VPNs, wireless security. organizer: Exposium India Tel: +91 22 26057836 February 2012 | www.logisticsweek.com INDIA www.logisticsweek.com Hamburg media Private Limited Bldg.4/6, Sona Udyog, Parsi Panchayat Road, Andheri (East), Mumbai -400069 INDIA Phone :+91-22-61162345 international office: Red Dot Building 28 Maxwell Road, #03-05 Singapore 069120 publisher: Jacob Joseph Puthenparambil email@example.com publishing director: Jayaram Nair firstname.lastname@example.org editorial editor: Aanand Pandey email@example.com editor-special projects: Pamela Cheema firstname.lastname@example.org executive editor: Jayashree Mendes email@example.com editorial executive: Anuja Abraham, Pritha Dey creatiVe chief designer: Shivasankaran Pillai firstname.lastname@example.org ad-sales Ashok Chand Thakur email@example.com Dinesh Mishra firstname.lastname@example.org Snehal Phatnaik email@example.com eVents events Manager: Upendra Kshirsagar firstname.lastname@example.org Marketing support: Sangeeta D, Suhasini S HAMbUrG MEDIA GrOUP www.logisticsweek.com Printed by Jacob Joseph Puthenparambil, published by Jacob Joseph Puthenparambil on behalf of Hamburg Media Private Limited. Printed at Print House Private Limited, rabale, MIDC, Navi Mumbai - 400 705, India and published at bldg.4/6, Sona Udyog, Parshi Panchayat rd., Andheri (E), Mumbai - 400069. No part of this publication may be reproduced or transmitted in any form or by any means including photocopying or scanning without the prior permission of the publishers. Such written permission must also be obtained from the publisher before any part of the publication is stored in a retrieval system of any nature. No liabilities can be accepted for inaccuracies of any description, although the publishers would be pleased to receive amendments for possible inclusion in future editions. Opinions reflected in the publication are those of the writers. The publisher assumes no responsibilities for return of unsolicited material or material lost or damaged in transit. All correspondence should be addressed to Hamburg Media Private Limited. All disputes are subject to the exclusive jurisdiction of competent courts and forums in Mumbai only. ANNUAL SUbSCrIPTION rATE INDIA: `1,080/INTErNATIONAL: EUrO 240 / US $325 SUbSCrIPTION TErMS The minimum subscription period is one year. Endorsed by RNI No. MAHENG/2007/23777 l Registration No.MH/MR/South-279/2011-13. Allowed to post at Patrika Channel Sorting Office G.P.O. Mumbai - 400001. Date of mailing: 5th of every month issue. Published on 1st day of every month Consulting Design Swisslog is a leading global provider of integrated logistics solutions for warehouses and distribution centers . We plan, develop and implement turn key - ready logistics systems . We provide support and modernize existing facilities. Integration After Sales Support Realization Our Offerings Warehouse Management System WMS ............................................................................................................................................. Pallet Conveyor System ProMove ............................................................................................................................................. Miniload Crane Tornado ............................................................................................................................................. Light Goods Conveyor System QuickMove ............................................................................................................................................. Light Goods Storage & Transport System SmartCarrier ............................................................................................................................................. Small Parts Storage for Specific Application AutoStore ............................................................................................................................................. Pallet Stacker Crane Vectura ............................................................................................................................................. Automated Guided Vehicle AGV System ............................................................................................................................................. Monorail System Overhead Transportation for Pallets Partial List of Our Clients: Contact us at : Level 2, Prestige Omega No. 104, EPIP Zone Whitefield Bangalore, Karnataka-560066 INDIA Office : +91 804 060 0770 Fax : +91 804 060 0700 Email : email@example.com Website : www.swisslog.com 68