Celerity, in business through Supply Chain September - October 2018

SUPPLYCHAINTRIBE.COM September - October 2018 Volume 2 Issue 5 For private circulation only

Special Story CEOs of 3PL companies share their evolutionary journey towards logistics outsourcing

ORDER BEHIND THE DISORDER

The government is taking an integrated approach to develop an ambitious National Logistics Plan, shares Anant Swarup, Joint Secretary (Logistics), Ministry of Commerce & Industry

PUBLISHER’S NOTE

One India, Logistically Dear Readers, A pleasure once again to bring a magazine with content ranging from an interview with the Joint Secretary (Logistics) to Blockchain’s applications in Logistics to CEOs of 3PL companies giving their views on the transformations taking place and much more.

The day I met Mr. Anant Swarup, Joint Secretary (Logistics), Ministry of Commerce & Industry, was the 4th day of the AIMTC’s (All India Motor Transport Congress) nationwide ‘Chakkajam’ strike. After an enthusiastic Namaskar, he asked for my views about the strike. Just as we were starting that discussion, his phone rang. Since time was short, we decided to do the photo-shoot first and come to questions later. Read all about the National Logistics Plan and the efforts being taken to get better efficiencies and organization in logistics.

Interest in blockchain has exploded and certification courses are mushrooming. Our in-depth article helps decode how blockchain can be successfully applied to different industries.

I will close here and let you get on with your reading this magazine. If you have any suggestions, please do feel free to write to me.

Charulata Bansal Publisher Charulata.bansal@celerityin.com www.supplychaintribe.com

Published by Charulata Bansal on behalf of Celerity India Marketing Services Edited by: Prerna Lodaya • e-mail: prerna.lodaya@celerityin.com Designed by: Lakshminarayanan G • e-mail: lakshdesign@gmail.com Printed by: Xposures, A 210, Byculla Service Industrial Estate, D K Cross Road, Byculla, Mumbai- 400027.

Logistics Partner: Blue Dart Express Limited

www.supplychaintribe.com

3

CONTENTS

September - October 2018 Volume 2 Issue 5

20

COVER STORY Picking Up to Deliver In an exclusive interview, Anant Swarup, Joint Secretary (Logistics), Department of Commerce, Ministry of Commerce & Industry, Government of India, shares the vision, plan and efforts towards making logistics more efficient and cost-effective in India

6 LEADERSHIP

26 FOCUS

Purity Pact

Blockchain for Supply Chain

For Kent, purity remains the core of business strategy, as strongly highlighted by founder & Chairman, Kent RO System Ltd, Dr Mahesh Gupta.

Blockchain is an enabling technology, which is most effective when coupled with other next generation technologies, writes Sandeep Chatterjee, Senior Manager – Technology Consulting, Deloitte Touche Tohmatsu India LLP.

10 EXCLUSIVE STORY The Specialists

OPINION

CEOs of some of India’s largest 3PL companies talk about the transformations taking place and their preparedness to capture the market

Industry Veterans sharing their insights on a year of GST

INTERVIEWS

31

16 A Chain of Supply Dr Seema Narera, GM Supply Chain, Tata Starbucks, elucidates as to how last mile is the most unorganized and disintegrated part of the supply chain in India.

37 Tuning to Logistics According to Subrata Ghosh, Vice President – Operations (Logistics and Supply Chain), Sennheiser Electronics India Pvt. Ltd., Sennheiser has always enjoyed great resonance in the audio industry attributing to its German lineage.

30 Priyajit Ghosh, Partner – Indirect Tax, KPMG, shares

32

that the new tax regime has offered an opportunity to relook at many age old practices.

Anshul Singhal, CEO, Embassy Industrial Parks, GST has created an enabling environment for the market to shift from unorganized multiple warehouses to organized hub and spoke model.

Sandeep Chatterjee, Senior Manager – Technology Consulting, Deloitte Touche Tohmatsu India LLP, informs that GST a lot needs to be done in terms of the teething problems in GST 2.0.

33 FEATURE Aiming a Way to Higher Ground This Feature talks about the country’s leading direct selling company – Amway’s aggressive plans towards driving entrepreneurial spirits in the country.

Editor : Prerna Lodaya DISCLAIMER: This magazine is being published on the condition and understanding that the information, comments and views it contains are merely for guidance and reference and must not be taken as having the authority of, or being binding in any way on, the author, editors, publishers who do not take any responsibility whatsoever for any loss, damage or distress to any person on account of any action taken or not taken on the basis of this publication. Despite all the care taken, errors or omissions may have crept inadvertently into this publication. The publisher shall be obliged if any such error or omission is brought to her notice for possible correction in the next edition.

The views expressed here are solely those of the author in his private/professional capacity and do not in any way represent the views of the publisher. All trademarks, products, pictures, copyrights, registered marks, patents, logos, holograms and names belong to the respective owners. The publication will entertain no claims on the above.

No part of this publication can be reproduced or transmitted in any form or by any means, without prior permission of the publisher. All disputes are subject to the exclusive jurisdiction of competent courts and forums in Mumbai only.

4 CELERITY September - October 2018

ADVERTORIAL

Logistics in Airports:

A Longer Perspective In contemporary trend no matter how

modern the Airport terminal building and how stunning the architecture, a fast, efficient and smoothly operating baggage handling system or logistic of baggage always plays a major part in delivering an exceptional service and ensuring that passengers will be drawn back to your airport.

We understand the complexities and factors involved in an airport’s dayto-day baggage logistical operations as well as broader issues such as process optimisation, scalability and sustainability. This customer insight underpins our development efforts and ensures our systems not only respond to current needs, but reflect industry developments long into the future. We are global market leader for valueadded logistic process automation at airports.

When it comes to automated airport baggage handling, no one raises the bar higher than the BEUMER Group, as we bring a different proposition to the airport business: we combine the process insight of a system integrator with seamless project and supplier management skills. The result is a blend of industry-leading application knowhow supported by the best hardware on the market – with world-class solutions delivered on time, every time.

To meet the critical airport and airline needs, we design, build, and integrate high-speed baggage transport and sortation systems which includes tote system and ICS (Independent carrier system) which has been heralded as among the most radical advances in airport efficiency and security to emerge during the last decade. Both systems achieve rates of 10 m/sec, which plays a

supplychain.celerityin.com

vital role in securing a fast and accurate transfer of baggage from terminal to terminal in major airports around the world.

The BEUMER high-speed baggage transport and sortation line also includes the energy-efficient tilt-tray sorters, cross belt sorter and standard transfer conveyors. We are continuously investing in innovative and sustainable technology and solutions in response to your needs. Our teams of technologists and application specialists are already working on the next generation of airport baggage handling systems, making airports more green, efficient, productive, safe and cost effective.

No one goes further in making baggage logistics as future-proof and adaptable. Together we have an unmatched reference list with over 1600 installations worldwide. We have the

Mr. Abhishek Prakash Chief - Sortation & Distribution Business experience and expertise to approach every project individually and in the context of your specific requirements.

This means we are at home in all environments, from the very largest and most complex airports in the world, to smaller terminals looking for a costeffective, quality solution.

We are there to support our customer as a reliable partner with commitment to their specific need which is changing frequently due to regulatory demands so this makes us more adaptive towards logistic process and systems requirement.

5

LEADERSHIP

PURITY PACT For Kent, purity remains the core of business strategy and that’s what has been strongly highlighted by Founder & Chairman, Kent RO Systems Ltd, Dr Mahesh Gupta. “For Kent, innovating health care products is more than just a business, it is our passion and the very purpose of our existence. Our patented Mineral RO TM Technology has been the biggest breakthrough for us.

With this, Kent RO water purifiers retain essential natural minerals in purified water using the TDS controller, thereby providing 100% safe and tasty drinking water,” he proudly reiterates during an interaction…

You have been credited for revolutionizing the water purification industry in India.

How was the scenario back then and what made you take this big business step?

It was late 90s when Kent started its voyage and there was no industry that existed in India by the name of water purifiers. A handful of players were trying their fate in this sector by selling very conventional purifiers through door to door marketing. Who would have thought that in couple of years, Indian water purifier industry will become one of the most lucrative sectors for national and international brands and is over Rs3500 crore.

The journey of Indian water purifier industry started when we first introduced the concept of a Mineral RO water purifier. It was an audacious move for me as I left a well-paid job to start making water purifiers. As of today, people in the country have easy access to RO water purifiers equipped with multiple purification techniques. Kent basically designed RO water purifier with combination of three technologies to make it suitable for treating every type of water irrespective of source.

LEADERSHIP

sown 20 years ago has shaped up as a giant tree. As the market leader in this segment, the onus lies with us to further take this industry to next level where pure drinking water is made affordable and accessible to each and every nook and corner of India.

We are also into air purifiers, cold press juicer, vacuum / bed cleaners, vegetable purifiers. The company has recently forayed into small kitchen appliance segment with a whole new innovative range of products. This includes noodle & pasta makers, dosa maker, pizza & omelette maker, turbo blenders, rice cookers, atta & bread Maker and many more. Another revolutionary product by Kent is a low-cost water purifier Kent Gold AS which is capable of removing arsenic from water. Arsenic is the most harmful poison dissolved in the water and a route cause of cancer. So far only RO purifiers were able to remove dissolved arsenic from water, but with Kent Gold AS, which costs just Rs3500 is capable of removing this dissolved poison from drinking water. We are positioned as India’s leading water purifier company.

We are keen to know your entrepreneurial journey. Please share some of the intriguing learnings gained.

The transformation has been in terms of technology and new product range.

Kent is working from day one on a mission ‘Drink Pure, Eat Pure and Breathe Pure’. Hence, each and every product of Kent RO is designed and sold to fulfil these 3 objectives. A seed

Well, I am an IITian and I invented an RO purifier, which was equipped to remove the dissolved impurities in the water. I designed first RO purifier for my own usage as I didn’t find a water purifier in the market in those days. Both my children were suffering from jaundice and the culprit was drinking water. The stuff available in the market left me unimpressed. Being an IITian, I decided to invent my own water purifier. After several trials and six months of hard work, I zeroed in on a technology-reverse osmosis (RO), which promised the results I wanted, and the first Kent purifier was born in March 1999. Recognizing its potential, and in order to promote a healthy and happy life for other families, I decided to market this invention. So, my experience has arisen due to my needs which I felt there was a lag in the country. It was bound to do well as this was a much-needed product and technology. So instead of the rat race I believe we should follow our passion

6 CELERITY September - October 2018

www.supplychaintribe.com

From then to now, how has been the transformation? Where do you position yourself?

and work toward something that benefits all. And you are sure to be hit!

How has been the journey so far?

network of 800 service centres and a force of centrally trained service technicians who provide reliable after sales service.

The journey was not a cake walk for me as the product I had made was something totally new for Indian audience to accept. However, I didn’t give up as I was pretty sure if this works for me as an Indian common man so as it will be for the millions of households who are deprived of pure drinking water. Starting the journey from a small garage, now Kent is enjoying the leadership position in the market.

How do you keep pace with the growing competition and how does the partner network play a critical role in the same?

Kindly highlight some of the most striking USPs of your manufacturing plant in Roorkee

Please tell is about your aftersales service….

Kent RO Systems Ltd. has an integrated manufacturing facility in Roorkee, Uttarakhand. The Roorkee facility is probably the largest water purifier manufacturing facility India with 1,00,000 sqft plant. Currently the manufacturing capacity of the company is 5 lakh pieces per year. Another stateof-the-art manufacturing plant is coming up in Noida with an investment of Rs100 crore. The processes are highly standardized and benchmarked to the best in the world. Stringent quality assurance measures are adopted, and effective cost management systems have been devised. At the back-end, Kent forges strong partnerships with vendors for quality compliance.

How crucial role does supply chain play in your business?

It plays a crucial role as we have a pan-India presence and not to miss the international footprints. The company exports products to Latin America, African Countries, Sri Lanka, and has recently entered GCC market. There is immense demand for our product both within the country and outside. With an effective supply chain, we are able to meet this demand. As the e-commerce market is evolving, the supply chain is assuming a crucial role.

Kent has a strong foothold in the Indian market today with a wide network with over 1500 distributors, 10000 dealers and over 500 direct marketing franchises. The deep penetration of marketing network is supplemented by a service support

The competition motivates us to do things in a meticulous way. Our biggest strength is our own manufacturing; we are not affected with the imports. Today we have one of the largest network of dealers and distributors, which is the backbone of the company.

Kent has its own aftersales network backed by 24X7 call centre, we can attend any compliant in less than 24 hours which itself a big achievement for us. Also, we have constant training and knowledge upgradation sessions to keep the staff on the same page.

We have also been the first ones in the market to introduce a one-year warranty plus three years of free service.

The four-year warranty on Kent RO is a step to tackle and encounter the current issue of fake parts. This will help create awareness among the customers to not get the servicing done from local service providers and go with fake parts for a small amount as it totally deteriorates the quality of both the machine and the purified water. The four-year free service will also help us gain customers’ confidence as they will not switch to local and unreliable servicing alternatives as the consumer will have access to free quality and professional service and genuine spares.

Also, the life of the RO Purifier will be enhanced besides ensuring 100 per cent satisfaction and peace of mind to consumer.

What’s your strategy to capitalize on the burgeoning growth?

Every brand speaks highly of itself, but trust develops when an accredited certification body endorses the product/ brand. In the case of water purification industry, laboratories of international repute, like NSF, WQA and more recently ISI, have certified our products for its quality and efficacy.

7

LEADERSHIP should take the benefit instead of giving foreign brands the advantage. Also manufacturing locally will boost the functionality of the products as they can tailor the international design to suit the Indian market.

Kindly enlighten us on the experience centres built by you.

With our experience centres, customers can experience the innovative products.

It will be a chain of 10 experience centres, which will be on franchisee model. The company at present has opened 3 stores, one in DLF Mall of India, V3 Mall and another in Lajpat Nagar Market.

Having said that, we plan our products which give benefit of health and which are nonexistent. We don’t want to go into competitive space as we are not here to say ‘Me Too’ products.

Somebody else is manufacturing the same product and introducing the replica is not our chemistry. We will continue to research and come up with unique products. What differentiates us as the top brand is our focus on innovation and technology. We have not come with appliances, which are commonly architectured by the manufacturer. Our appliances are totally innovative and different. None of our product is competing with anyone except rice cookers. We have aesthetic and technical differentiation and unbeatable quality. For instance, Cold Pressed Juicers are not conventional Juicers. These are the juicers, which use technology that first crushes and then presses the fruits and vegetables for maximum yield. The juice extraction technique works on low RMP, speed less than 100 and so it does not produce as much heat as produced by conventional juicers. Hence, it retains nutrients and fibers and gives more juice.

and boasts of multiple purification techniques combining RO, UV, UF and TDS control to make water 100% pure.

Besides, Kent RO’s revolutionary Save Water Technology™ offers best water recovery rate of more than 50% and the reject water percentage is reduced to less than 50% and the wasted water is stored in a separate tank.

Kent has also launched 3rd generation RO water purifier christened as Kent Grand Star and Kent Prime Plus, shaped up as a digitally controlled RO water purifier, which gives you real time information of how impure drinking water is. This Smart RO purifier keeps users updated about the machine’s performance, the quality of water, filter change alarm and many other digital and helpful features. Soon, this product will have IoT connectivity, which means you will be able to connect it through WiFi and will be able to access the whole performance data on your smartphones.

What are the technological breakthroughs being achieved by you?

Delivering right technology at the right price is the key. What most entrepreneurs of today do or rather where they fail is the fact that although they are offering a good product, their pricing structure is the major drawback.

They price it very high because of which they lose out on the mass market.

Now-a-days ‘Make in India’ is taking a front seat and many entrepreneurs are working on this model. I too am not in favour of importing products as India is a luring market and we locals

Our patented Mineral ROTM Technology has been the biggest breakthrough for us. With this, Kent RO water purifiers retain essential natural minerals in purified water using the TDS controller, thereby providing 100% safe and tasty drinking water. It also utilizes double purification for 100% pure water. The advanced technology removes dissolved impurities, retains essential minerals

How do you view entrepreneurs of today? What do you think is lacking and what are the qualities that others can imbibe from them?

8 CELERITY September - October 2018

YOUR PERFECT INTEGRATED

LOGISTICS PARTNER

Warehousing Transportation

How do you view Indian economy five years down the line?

Reverse Logistics

Indian economy is one of the robust economies in the world and is flourishing rapidly. Today the entire universe is looking upon us as we have emerged as the largest market for global players. We feel the economy will further surpass the estimates keeping in mind the stability of performance of domestic sector.

Value Added Services Mission Critical Services Imports & Exports 3PL to E-Commerce

What are your plans in the future?

We are planning to double exports in the next two years. Currently we export products to Latin America, Africa, Bangladesh, Sri Lanka, Kuwait, Nepal and recently entered GCC Market.

Apart from that, we are constantly innovating our current product line.

Earlier we used to have selected 5-6 models of water purifiers and today we have over 50 products in our portfolio.

We are not introducing any new product just for the sake of adding the number.

Each of the products introduced by Kent RO is unique and innovative and has purity quotient. Even if you take our newly launched Smart chef appliances range, the products are designed keeping in mind the requirement of modern kitchen while without compromising on the health, i.e.., our cold press juicer is designed to keep the nutrients alive in the juice. Our bread maker can make homemade hygienic whole wheat bread. In a nutshell, my wishes are just to provide pure air, pure water and pure vegetable to public so that they stay away from diseases.

At ProConnect, part of USD 6 billion Redington Group, we provide end-to-end supply chain solutions to over 150 leading brands across Industry verticals.

Our modern ready-to-use infrastructure equipped with plug and play operations ensures minimum lead time in starting operations and scaling up quickly to cater to peak seasonal demand. Our clients get online visibility of operations through customized dashboards to take timely and effective decisions.

With over 170 warehouses and over 6 mn sft space, delivery capability to more than 36,000 customer locations and an enhanced reach in East & North-East, we can take care of all your requirements across India.

At ProConnect, our mission is to provide our clients with best-in-class services customized to meet their unique needs through effective collaboration, management and optimization of its integrated value chain.

CORPORATE OFFICE:

PROCONNECT SUPPLY CHAIN SOLUTIONS LTD Jandus Building, Plot No 33 A, 2nd Floor, South Phase, TVK Industrial Estate, Chennai- 600032.

Phone No.: 044 30649100 | E-mail: sales@proconnect.co.in Mr. Ravikumar – 09381385055 - ravikumar.a@proconnect.co.in West - Ashish Singh – 09699596512 -ashish.singh@proconnect.co.in South - Retash Agarwal G - 93800 51652 - retash.agarwal@proconnect.co.in North - Himanshu Sharma 9312050513 - himanshu.sharma@proconnect.co.in East - Bhaskar D - 9331371593 bhaskar.dasgupta@proconnect.co.in Transportation- Kaumudi K-9500077604- kaumudi.kanchan@proconnect.co.in MCS division- Murali M- 9381973313-murali.m@proconnect.co.in Website: www.proconnect.co.in

EXCLUSIVE STORY

THE SPECIALISTS A strong investment scenario, growing demand, government’s much needed thrust and the 3PLs’ preparedness to capture greater market share; are the success ingredients that are marking a new era of growth for the logistics industry in India. If all unitedly reach towards goalpost, we shall soon be able to develop an unparalleled supply chain network that will be envied by all the competing nations which will be characterized by low cost and high efficiency.

A

recent Technavio’s research report has predicted that the thirdparty logistics market in India will witness an incremental growth of more than $10 billion during the period 2018-2022.

That speaks about the volume and the value of the segment that it is slated to garner in times to come.

Looking at the buoyant opportunities waiting to be tapped, 3PLs are ready to invest in Infra, Technology and Systems, rather than just on people, mentioned Ravikant Parvataneni, CEO, Crimson &

Co India. He further added that they are now equipping themselves to provide solutions rather than just transactions.

REFORMS Since the inclusion of Logistics sector in the Infrastructure list, logistics companies have started getting access to the most economical loans under favorable terms, avail infrastructure lending at easier terms with enhanced limits, and other benefits. The implementation of GST has assisted in reducing the price differences between states and make tax liabilities uniform

Sheshadri P V, CEO, Future Supply Chain Solutions Ltd With the GDP growth likely to remain in the 7% area and the transformation we are witnessing in the logistics sector, 3PL service providers are poised for a YoY growth in excess of 15% over the next 5 years. A look at pipeline of “Big boxes” and new fleet deployments at a large scale is an indicator of what the industry is building capacity for.

We see an SCM outsourcing revolution similar to IT/BPO outsourcing revolution at the start of the millennia as a lot of organizations would want to focus on their respective cores of manufacturing, marketing or product development. The SCM can be outsourced to reliable experts.

10 CELERITY September - October 2018

across India. In April 2018, the e-way bill was introduced under the GST regime across India. Further steps are being taken to help in decreasing the logistics costs and increase the operating efficiencies by reducing crossborder checks.

On the changing diaspora brought about by the implementation of GST, Sheshadri P V, CEO, Future Supply Chain (FSC), stated that GST has brought about three significant changes to existing supply chain strategies: The first change has been observed in transportation with introduction

R Shankar, CEO, TVS Logistics Services Ltd – India “Over the last two decades, the Indian logistics sector has evolved from mere transportation services to fully integrated 3PL service providers. While the logistics industry is expected to grow at 7.7% CAGR to reach to market size of $197 billion in 2020; the 3PL market in India is estimated to grow at a CAGR of 19-21% to reach $8.4 billion in the same period. This trend is likely to continue in the next five years; and concurs with the spurt in outsourcing of logistics services to organised 3PLs, especially post GST implementation. Sectors such as automobiles, consumer goods, organized retail, e-commerce and engineering will offer high 3PL growth potential.”

of E-Way bill and an improving infrastructure. Infrastructure here has multi-fold manifestations: roads, modern fleets, telecom as well as supporting IT systems. All these have been enablers in reducing lead times, improving predictability and eventually optimizing SCM costs.

Second is the onset of “Big Box” phenomenon on account of either a gradual dismantling of smaller depots in each state and setting up much bigger distribution centres (DCs), each of them catering to a zone (cluster of 4-5 states) or a dramatic revamping into a 1 or 2 national DCs set up catering to whole of India within aggressive timelines. The scale which comes with a Big Box DC necessitates adoption of technology and automation. This trend of course varies by industry.

Apparel, consumer durables, automotive, industrial products and spare parts of some of the industries are among those sectors where enterprises have been bold enough to latch onto the consolidation bandwagon. There are enough case studies of such enterprises who have realized one or more of the below benefits: » Reduced fixed and operational costs owing to economies of scale and reduction of overheads » Improved order fulfilment and higher operations KPIs » Optimized inventory levels resulting in freeing up of excess working capital Third is the emergence and acceptance of 3PL service providers

www.supplychaintribe.com

as change agents. They have not only been able to usher in digitization and technology in SCM, but also minimized the risk of failure of technology adoption, which the enterprises are still reluctant to take up. Concept of outsourcing SCM and willingness to use multi-user tech-enabled warehouses is getting traction as enterprises see the benefit of sharing fixed costs and letting experienced hands manage their inventory storage.

“Having said that, there are still several enterprises who have been reluctant to adapt one or more of the above changes, owing to factors such as current lock-ins with existing vendors and inability to assess gains of higher inventory control against marginal increase in OpEx. Risk-aversion and inertia to alter status quo also plays its part in discouraging change. For example, those averse to outsourcing and with no experience of managing Big Boxes themselves will surely avoid consolidation fearing drop in service levels, sunk costs in warehousing infrastructure and eventual loss of sale.

But looking at the successes of their peers or competitors in adopting this change, they too will soon come on board,” he added.

Agreeing on the same, R Shankar, CEO, TVS Logistics Services Ltd – India, informed, “During the initial phase of GST roll out, delays in systems and related issues slowed down the pace at which customers adopted newer solutions. End of 2017 was especially sluggish for the whole industry, but the market picked up in the last quarter of past FY. In the year post GST,

companies are prioritizing optimization of warehousing space, network capabilities, and fleet choices – instead of planning their logistics networks around tax structures and compliances.

They are demanding more speed to market and efficiencies; and this has the potential to reduce logistics costs which at present are very high.”

He added, “Traditional businesses that have never outsourced before are realizing the impact of GST on their supply chain management and costs.

Beyond transportation and warehousing services, they are also demanding value added solutions including demand planning, application of technology, integrated solutions, scalability, better space utilization, optimum load planning, scheduling and visibility.”

Remarked Parvataneni, “3PLs are offering advanced systems such as WMS as a shared service to clients who themselves may not invest in such systems on their own.”

The contractual value of the agreements is also increasing after GST. Customers are recognizing the benefits of outsourcing non-core functions to organized players who bring with them many years of experience; and the efficiencies of scale emanating from larger sized facilities. Large organised 3PL providers like TVS Logistics who have invested in technology and operate with a focus on quality and compliance are benefiting from this shift in mindset.

Dr Arunachalam R, CEO, ProConnect Supply Chain Solutions, highlighted, “Earlier there was a trend of warehouse positioning as per the taxation

11

EXCLUSIVE STORY Dr Arunachalam R, CEO, ProConnect Supply Chain Solutions Today, client is not satisfied by just giving a solution, client needs a solution which offers a consulting approach. An approach to study current network scenario, understanding the strengths to utilize them to take steps ahead, they don’t want traditional ways of operations. We at ProConnect provide tech enabled solutions, ERP implementation. We do R&D for continuous developments in Warehousing & Transportation to provide one stop solution for our clients across all domains and sectors. We know how to ramp up with pace, strengthening storage & manpower.

requirements which were state wise.

Now there is regional consolidation of warehouses. No geographical boundaries and it’s like installing a base.

Enhancement of hub and spoke model, wherein there is a base installed like a central mother warehouse. Lot of clients are reaching out to the supply chain service providers/3PLs to help them in channelizing towards revamping their networks.”

GST is enhanced by the introduction of e-Way bill as it set timelines for transportation and reduces compliance hassles with queues. There is also substantial reduction in turnaround time for trucks post GST. The interstate check posts are removed and thus led to significant decrease in idle/waiting time for trucks & thereby improving TAT & efficiency.

STRATEGIES TO BEAT THE COMPETITION FSC is known for its operational experience, pan India presence and as one of the pioneers of technology adoption in SCM in India. “We continue to differentiate ourselves based on these capabilities along with a measurable value addition and assurance of reliable service. Our delivery and capabilities have earned us a lot of interest from new customers and repeat business. We have convinced several customers on moving to a WMS enabled modern warehouse for getting higher throughput, better visibility and reduction in costs by as high as 20%.

We have effected transformation of one of the most complex supply chains during India’s modern retail revolution.

So, our strategy is simple – address our

client’s SCM pain areas and deliver value against those using technology and leveraging our experience in the Indian environment,” asserted Sheshadri.

“As we speak, we are adding 30 lakh sqft to our warehousing area on the back of signed up orders. Continually adding to our distribution network every week and covering newer pin codes speedily from our current 11000+ and boosting our last mile capabilities to nearly 3000 by year end. We are a well-equipped and possibly the most experienced 3 PLs to cater to almost all consumer businesses like food, FMCG, apparel, general merchandise, consumer durables, home & furniture as well as auto, electrical and engineering sectors,” he added, Shankar said, “TVS Logistics is one of the few large organised 3PL players with pan India presence and end to end supply chain solutions’ capability.

We are leaders in automotive logistics in India and have extensive experience across other sectors as well including FMCG, consumer durables, telecom & infrastructure, hi-tech, components, engineering, retail, energy, chemicals, etc.”

TVS Logistics aims to achieve a high double-digit growth in FY19 and move up the customers’ value chain by providing end to end supply chain solutions, which are technology enabled. “This will really significantly differentiate us from others; and provide a real value to customers in the form of reduction in logistics cost and high quality of service. Our asset light operations are enabling us to scale up quickly and add quality infrastructure as needed. Our strategy also focuses

12 CELERITY September - October 2018

equally on enhancing our customerrelationships, improving our capabilities and strengthening our geographical presence. We are reinforcing our business development and solutions teams; and are also cross deploying international best practices from our operations in developed markets into India to enable enhanced operations and better customer service,” Shankar averred. Recognizing the growing skill demand in this sector, TVS Logistics is also keenly working on diversity and talent development initiatives to be future-ready.

According to Arunachalam, today, client is not satisfied by just giving a solution, client needs a solution which offers a consulting approach.

An approach to study current network scenario, understanding the strengths to utilize them to take steps ahead, they don’t want traditional ways of operations. “We at ProConnect provide tech enabled solutions, ERP implementation. We do R&D for continuous developments in Warehousing & Transportation to provide one stop solution for our clients across all domains and sectors.

We know how to ramp up with pace, strengthening storage & manpower,” he said.

On their positioning, Jasjit Sethi, CEO, TCI Supply Chain Solutions, averred, “We are in sync with our customers’ demand in moving from RCM to FCM. Small unorganized truckers are clueless about this changing demand of market & do not have any strategy to embrace this change. We will be educating unorganized truckers who are associated with us as vendors about benefits of

FCM & support them in going through this migration. As we go further, we are keeping our often-repeated strategy of going beyond the rule to enabling technology to move up the value chain and support our customers in their growth plans.”

He added, “Being a listed entity, the compliances of GST benefit us directly and we stand to gain as an organized player. GST has provided a much-needed boost to the logistics sector due to tax compliances, especially to the organized ones. Here, we find ourselves in a very comforting position in terms of technology advancement coupled with our maturity of knowledge to adapt ourselves with the changing market conditions. Our ERP is home grown and very robust, we have

spanning Mobile Apps and own Web based applications & have used GST regulations as an additional opportunity to differentiate the TCI offerings from rest of the industry in terms of support to customers and suppliers. Not to mention, the revenue of the Group is growing as per expectations.”

TOWARDS UNPRECEDENTED GROWTH With the GDP growth likely to remain in the 7% area and the transformation we are witnessing in the logistics sector, 3PL service providers are poised for a YoY growth in excess of 15% over the next 5 years. A look at pipeline of “Big boxes” and new fleet deployments at a large scale is an indicator of what

the industry is building capacity for.

“We see an SCM outsourcing revolution similar to IT/BPO outsourcing revolution at the start of the millennia as a lot of organizations would want to focus on their respective cores of manufacturing, marketing or product development.

The SCM can be outsourced to reliable experts,” believes Sheshadri.

Shankar remarked, “Over the last two decades, the Indian logistics sector has evolved from mere transportation services to fully integrated 3PL service providers. While the logistics industry is expected to grow at 7.7% CAGR to reach to market size of $197 billion in 2020; the 3PL market in India is estimated to grow at a CAGR of 19-21% to reach $8.4 billion in the same period.

This trend is likely to continue in the

Changes witnessed post GST implementation

Implementation of GST has been a game changing event for businesses in general & also for organized logistics players. We can categorize changes under 3 heads: • Accounting Perspective: With the introduction of GST, OEMs are preferring to migrate from RCM to FCM mode of taxation, for purpose of claiming input credit. Looking at the demand of the market, organized 3PLs are also trying to migrate to FCM mode along with clients.

• Network Plan: Before GST implementation, it was anticipated that post GST, consolidation of warehouse will take place. On long routes, number of larger trucks will increase. Although after GST, the supply chain network has become much logistically right rather than taxation friendly but expected consolidation of warehouses is not happening. Driving force is closeness to customer & emphasis is put on avoiding the materials to go off the shelves.

Also, not much changes is seen in terms of load consolidation with usage of bigger trucks as of now. We expect FY 18-19 to bring more changes in this aspect.

• Consolidation in transporter: Post GST, customers prefer choosing an organized 3PL who is more compliant to GST regulations. So, slowly consolidation of small transporters has started which might speed up in future.

Slated growth projection

Like most other industries, transportation & logistics is currently confronting immense change & like all changes, this brings both risks & opportunities for growth along with it. Logistics companies are facing an era of unprecedented change as digitization takes hold & customer expectations evolve.

Indian economic growth is gaining momentum as the fastest growing economy in the world after the transitory disruption of demonetization as well as GST implementation. We are optimistic that India’s logistics industry will grow in a vibrant pace to facilitate India’s economic growth which is expected to emerge as $7000 billion economy in coming years. The logistics sector has been quite unorganized with many small players in the market. The implementation of GST is expected to drive the logistics sector into an organized one.

Jasjit Sethi, CEO, TCI Supply Chain Solutions

13

EXCLUSIVE STORY next five years; and concurs with the spurt in outsourcing of logistics services to organised 3PLs, especially post GST implementation. Sectors such as automobiles, consumer goods, organized retail, e-commerce and engineering will offer high 3PL growth potential.”

Companies are recognizing the impact of logistics and supply chain on their bottom lines; hence the exercise is likely to become less transactional and more strategic and collaborative in nature. In line with this, another major change will be the shift towards longer term contracts to realize better value for both customers and 3PLs while also capturing any available quick wins.

3PLs willing to invest in technology and skilling, offering control through compliances, and developing capabilities in multi-modal solutions can expect bigger gains.

Being in a sector that contributes the largest in GDP but the monetary spend is quite less in logistics. “With the upcoming boom in organized 3PL in market, we can see increase in business and profitability as clients are driving towards high tech enabled solution providers which is through organised 3PL. Market is constantly shifting towards organised sector for consolidation and Digitalization.

We see substantial requirement for Logistics of Mission critical devises and we are equipped to handle those as we are handling now. We see future for those who are organized by the way of end to end ERP, automations, AI & ML applications in supply chain etc., in which ProConnect has already commenced its journey,” commented Arunachalam.

THE STATUS QUO Variation in transportation capabilities and increased shipping demand have enabled service providers to enhance their supply chain activities. The thirdparty logistics market is expected to progress as service providers are moving towards the use of automated freight payment and audit services to reduce costs. These providers are gaining competitive advantages by reducing capital expenditure (CAPEX), mitigating risks, managing inventory, and focusing on the core competencies of their business operations.

The emergence of Big Data and availability of industry-specific logistics

Ravikant Parvataneni, CEO, Crimson & Co India

Integrated Supply Chain Solutions

3PLs are evolving quickly to capture business. They now have the vision of investing in Infrastructure ahead of time. In short, they are ready to take risk of hiring/building facilities bigger than what is required for existing/signedup clients.

services are expected to be the key driving factors boosting the industry growth. Lack of necessary internal control has resulted in the increase in outsourcing of these services by the middle market companies (including wholesalers and retailers) to overcome the logistic challenges.

The manufacturers and end-use industries in the emerging countries lack the internal control required for addressing logistics challenges. This has provided an impetus to the 3PL industry growth. Additionally, the key vendors are adopting cloud-based Customer Relationship Management (CRM) solutions to enhance the shipper-vendor relationship and reduce the supply chain complexities by providing increased visibility in the process.

PEEK INTO THE FUTURE India is the fastest growing economy in the world and as the reform impetus continues, the surging GDP is expected to grow even faster in the coming months. Sethi asserted, “As the countries’ logistics sector enters a new sectoral era, we believe that TCI is attractively placed to climb into a new orbit. As a group, TCI serves as a one stop solution for clients from basic freight movement to parcel delivery to complex supply chain network design & implementation. We further intend to invest in state-of-the-art technologies, setting up multi-user and multiproduct warehouses and widening through access to ships, trucks and trailers.

With “Navigating Tomorrow” being the inherent philosophy that we carry forward, our vision for the future is to continue to strive hard to fulfil TCI’s destiny and contribute to the growth of

the world’s largest democratic nation, economically, socially and sustainably.

TCI will continue to work with all stakeholders to contribute to growth in the 3PL sector along with India’s economic growth.”

Shankar applauded the government’s initiatives and avowed, “We have to commend the Government of India’s initiative of setting up a separate division on Logistics under the Department of Commerce which shows the growing recognition of the importance of this sector.”

In the long term the government and industry should partner to introduce initiatives to reduce the cost of logistics and bring it at par with international standards at 8-9 percent of GDP. For this purpose, we have to invest in better road networks, look at higher adoption of rail networks and waterways, and more mechanized operations. Logistics industry also needs to develop the ability to upskill and reskill the talent in this sector; increase the number of people employed and improve the return on capital in the livelihood business. We have to promote, partner with and facilitate significant smallscale entrepreneurs to flourish and develop. Some of these entrepreneurs will own assets (like trucks, small motor boats etc.) and others will develop unique models of last-mile delivery, services and support, which will help them scale their businesses over a period of time.

TVS Logistics Services is an Indian MNC and the partner of choice for customers from across sectors for integrated supply chain solutions. With innovative solutions and robust technology, we overcome supply chain bottlenecks, deliver value for our customers and build enduring relationships the world over.

Inventory Management

Master Data Management

Packaging Solutions

100 year TVS Legacy

www.tvslsl.com

14 CELERITY September - October 2018

Freight Forwarding

End to End Transportation

Global Strategic Purchasing

In-plant & Finished Goods Warehousing

Serving 50 Countries

Multi-Sector Expertise

+91 9867273141 | +91 9920074822

Material Handling & Management

Aftermarket Support

No. 1 in Auto Logistics in India

contact.us@tvslsl.com

INTERVIEW

INTERVIEW a strong connect with the customers.

We believe that more than coffee or place, they just like the feeling of being there with their friends, colleagues or the loved ones. Starbucks has actually become a part of their lifestyle and routine. This offering of a preferred third place has blended fabulously with Indian culture. Yes, price wise we are serving a premium coffee brand but considering the periphery that comes with a cup of coffee, it’s surely a great value proposition for our customers.

You must be knowing that Starbucks has become quite popular among entrepreneurs as a preferred place to work from. Thus ultimately it’s all about offering an experiential journey.

How is supply chain ably backing the growth?

A Chain of Supply “Last mile is the most unorganized and disintegrated part of the supply chain in India. The products get transported in bulk for the most part of the supply chain and it is relatively easier to control the product handling when in bulk.

However, in the last mile, every single delivery gets exposed to different conditions of temperature and handling. Also, this leg is what the consumer feels directly as part of buying experience. So, if this leg is not well equipped, all the hard work of previous legs gets washed out with a bad customer experience,” elucidates Dr Seema Narera, GM Supply Chain, Tata Starbucks, during a tête-à-tête. Excerpts…

It’s been a new journey for you at Starbucks. Kindly share with us your experience so far.

Since it’s just been 6 months from the time I joined Starbucks, the journey has been quite enriching and excellent.

I am not saying it as a cliché’ but I genuinely mean it. Tata Starbucks is

an organization which truly values its culture, its people and their passion.

As we all know Tata as a group stands for a strong connecting value. It’s a company with a soft heart. Everything we do has an angle of people and community to it.

16 CELERITY September - October 2018

What factors have enabled Starbucks’ tremendous growth?

The brand stands for offering the best experience to its consumers. We believe in providing the best cup of coffee, served by the best partners, in the best ambience. We have the best people as our partners and they believe in building

In India, Starbucks is only 6 years old brand. Growth driver for us has been new store openings. Our topline & bottomline will continue to get better as we open more stores because that gives us scale advantage and we are able to cater to larger audience as well.

In the entire scheme of things, the crucial role of supply chain has been to find the best way to supply fresh products at each of our stores on a daily basis. It’s been a journey with its own set of challenges. We have to scout for suppliers and a lot of products which were imported earlier are now being sourced locally with an aim to get cost benefit. Our primary focus has been in finding local vendors who can give us the same quality ingredients that we had been sourcing from abroad. At the same time, we are also scouting for newer vendors to expand our base in newer regions.

What are the USPs of your supply chain?

Our supply chain is extremely well integrated with the operations of the company as well as the partners involved in the business. This has been a differentiating factor for us from the rest. Integration makes sure that we can deliver fresh products without any delay.

The phenomenon is just not applicable to supply chain, but the entire business process. No one in the system is thinking about individual KPIs, everyone is working towards one common organizational goal and that’s what has been driving us seamlessly.

www.supplychaintribe.com

What are the considerations on the basis of which you select a 3PL service provider?

We deal with food products and more importantly perishables. When our customers are placing their trust on the Starbucks brand, we need to make sure that we offer them the best quality, healthy and fresh products every time they walk-in to a Starbucks store. For us, the most important criteria is to have that trust on our suppliers that our food products, which are being transported by them, are being kept in the right temperature conditions and handled in the right manner.

Our vendors need to make sure that there is no temperature abuse or no contamination instances. There is no damage to the product and it has been handled as per the prescribed criteria.

For us, a long-term trust plays a very important role because we can’t afford to lose the customers’ trust with a single case of contamination or product damage. If any vendor is not meeting that criteria gets filtered out ultimately.

Our basic premise is trust & reliability in handling our products.

You talked about ambient temperature conditions and we all know that cold chain facilities in India are not upto global standards. How do you match them up to your standards?

There are two aspects to it: one is training and the second is disciplining.

First is making sure that the vendor or supplier knows what to do and second is making sure that they have the intent to do it. Our dealings are completely transparent where we clearly define our requirements, their roles, improvement areas, etc. We have very stringent guidelines to evaluate supplier capability & quality standards and basis that we decide the vendor empanelment. We make sure that our suppliers are also educated on what is desired out of them and what is the scope for improvement. As far as disciplining the vendors is concerned, when there is trust & reliability in the relationship, the onus of delivering the products in right condition becomes a joint onus. Our vendors need to take the ownership in order to enhance ours as well as their business performance.

Therefore, we really believe in close collaboration. That’s also precisely the

reason that we are quite stringent in our vendor selection approach. If trust isn’t there, then intent building can’t happen. We are happy to partner with them in process improvement, QA certification, technology investments etc. At the same time if certain quality specifications are not met, then there is a very stringent exit clause as well.

What are the technology tools implemented by you? How has tech integration happened?

As far as QA systems are concerned, we are investing heavily and we are even motivating our vendors to invest where we are happy to share the cost too. We are partnering with vendors who can give us live report as well as history reports so that at any point of time we should be able to track the status of goods in transit. I am not denying that there is a plethora of technology tools available, but the matter of fact remains that the entire cold chain spectrum is quite disintegrated. The entire value chain needs to be seamless and system analytics should be able to give us insights about every store delivery in an effortless manner without any error.

Getting those insights is the biggest challenge for a supply chain manager.

We are working on the integration of different checkpoint processes and vendor reports.

17

INTERVIEW

INTERVIEW

We deal with food products and more importantly perishables. When our customers are placing their trust on the Starbucks brand, we need to make sure that we offer them the best quality, healthy and fresh products every time they walkin to a Starbucks store.

You are a part of global organization. How different is the supply chain vis-à-vis other countries?

In India, logistics is at a very primitive stage. Because of the infrastructure backbone, it’s very easy for other countries to consolidate. It’s easier to get an end-to-end solution from vendor vis-à-vis in our country. For instance, in other countries, we would be able to find vendors who have their own fleet of vehicles as well as they can supply fresh produce from their in-house kitchen too. In that case, we don’t need to run around two different places, which is the case in India. We procure raw material from somewhere, we collect pre-cooked food from some other place and have contracted a third party transporter for logistical milestones. All these not only boil down to an additional cost, but also stretch our delivery timelines.

If the entire process is integrated and is the responsibility of one vendor, then it becomes easy to manage the quality & freshness of the product.

The unorganized state of affairs is actually hampering our growth in a big way. Poor state of infrastructure adds to the on-time delivery woes. As we

operate majorly in Metro cities, higher traffic congestion results in higher unpredictability in the timely delivery.

On the contrary, infrastructurally sound countries are able to deliver products seamlessly at lower cost. All our deliveries are managed at night as there are restrictions in the city entry points, thus causing wastage of man-hours during the non-operational hours.

What are the global best practices imbibed by Indian venture?

Some of the global best practices that we brought in India are that there is a temperature check at every transition point from the kitchen to the vehicle, from vehicle to store, etc. At the same time, we follow the same stringent food handling criteria that is being followed globally which varies for different product types. We have a common globally accepted standard operating procedures (SOPs) to handle food items.

The same SOPs are being followed by our kitchens, our logistics partners as well as store fronts.

How has been the career like as you have worked with some of the biggest Fortune

18 CELERITY September - October 2018

100 companies? What crucial learnings have you gained in your career so far?

One of the learnings has been that it’s always good to be open about things around us. One should view his/her role from the lens of organizational goals and not just specific to one’s individual KPIs. Professionals need to get out of their respective silos and work towards achieving organizational goals harmoniously. This way not only one gets to learn various business nuances, but it also opens up entirely new professional avenue of opportunities for their career growth. It’s good to struggle in the task assigned to you, learn from mistakes and adapt to changes thrown at you. By doing this, one gets to learn newer things and help in shaping a well-rounded professional. In short, being open and ready to experiment is the key.

There are very few women in supply chain. What’s your take on that and how can it be enhanced over a period of time?

Historically this has been a nonglamorous function. Warehousing and transportation has always been an unorganized sector. Dealing with

labourers at warehouses requires a certain kind of behavioural skills, which at times restricts women to be on the job. The scenario remains the same at manufacturing sites as well. Additionally, supply chain roles have been based out of manufacturing units or warehousing hubs which are far-flung. It again raises concerns for women employees to work under such adverse situations. Having said that, times are changing and women today are ready to take up the role as the warehouses are becoming more organized, tech savvy and well connected. Companies are taking the diversity inclusion as part of their HR policies, which involves taking certain measures to make workplace women friendly. Risk taking appetite of women have also increased over the years.

Organized players and larger corporates are also making the entire workplace for women more conducive.

How do you see Indian supply chain taking a transformative turn from here on?

In the vendor space, there will be newer opportunities which didn’t exist at all 10-15 years ago. With the advent of larger groups coming into the supply chain industry, things will evolve for fresh graduates and new age managers.

Good thing is that the sector itself will become avenue for supply chain professionals to make their career.

Secondly, e-commerce is going to drive the scope of supply chain professional in the near future. In online retail, supply chain is the lifeline and everything else is just a peripheral aspect. Supply chain professionals who have been in the business for more than 15-20 years might not be having an inclination and a thorough understanding on running an e-commerce supply chain. In contrary, new age professionals can quickly grab this opportunity and make a mark in

www.supplychaintribe.com

this burgeoning space to climb the ladder. As e-commerce are also trying to put their act together, they are happy to take risks with new talent as they are nimble, agile and adaptable. They are happy to try new, experiment newer roles, learn on the job, etc.

These two are going to be the key enablers in shaping up the future supply chain. Moreover, with the fast paced technological interventions, things will pretty much fall in place. Technology, e-commerce and infrastructural development will cohesively change the course of supply chain in India.

What has been one of the most challenging days in your tenure at Starbucks?

No one day as such stands out as the most challenging but I sort of struggled in my initial days when I began learning the nuances of food/beverage items.

The Gourmet world is completely different from FMCG or retail world.

People here have refined taste palates.

They can really decipher and describe taste and aroma variation. Initially, all of this was Greek and Latin for me.

Understanding the different coffee profiles, roasting processes, brewing processes, taste profiles is a mix of art and science. I am still in the process of learning all of that.

How do you ensure the best quality product on shelf to satisfy customers on time every time?

There are precisely three pillars, which actually help us in ensuring that the best quality products are available on shelf. These include: • Stringent Sourcing Criteria (As per Global guidelines) • Processes (QA and Supply chain integrated) • Vendor collaboration (For storage and delivery).

During the recent conference, it was aptly said that ‘last mile is the first mile to improve’, your experience and expertise on the same…

Last mile is the most unorganized and disintegrated part of the supply chain in India. The products get transported in bulk for the most part of the supply chain and it is relatively easier to control the product handling when in bulk. However in the last mile, every single delivery gets exposed to different condition of temperature and handling. Also, this leg is what the consumer feels directly as part of buying experience. So, if this leg is not well equipped, all the hard work of previous legs get washed out with a bad customer experience.

How do you keep up with the competition to sustain customer base?

If you observe our stores, you will notice that no two stores are alike while all the stores have a ‘Starbucks soul’ to it.

Every store is part of its neighbourhood and it is supposed to serve what works best in that neighbourhood. We are ready to evolve and offer variety across locations basis the local taste profile and preference. This helps our stores in getting integrated in respective locality and community. Continuous innovation in food & beverage offerings excite the customer and give them a reason to celebrate while keeping the basics of ‘Best cup of coffee at a preferred place’ constant.

Dr Seema Narera is also known as Dr. Supply Chain in the industry circle because of her specialization in philosophy of Supply Chain. She is an Engineer, MBA from XLRI and a doctor of Naturopathy. She has 12 years of industry experience in Fortune 100 companies like CSC, Aditya Birla Group and Unilever. On a personal front, Dr Seema has a vast background in eastern philosophy.

She is trained in Zen and Taoism from Tao Zen Dojo and certified in Jeet Kune Do, Art and philosophy of Bruce Lee from Asian centre of JKD. She has spent more than 7 years in the study of eastern philosophies and stress management. She holds third degree blackbelt in martial arts, testimony to her serious study of mind, body and spirit, besides being a national level badminton player and mountaineer.

19

COVER STORY

Picking Up to Deliver “For the first time in the country, the government would be taking an integrated view to the development of the Logistics industry. We are creating India’s National Logistics Plan, an institution that would lay down the structure for India’s Logistics infrastructure investment to promote inter-modality and govern the regulation of Logistics services including EXIM, transport and storage to remove inefficiencies and ease bottlenecks,” proudly shares Anant Swarup, Joint Secretary (Logistics), Department of Commerce, Ministry of Commerce & Industry, Government of India, during an exclusive interview with team Celerity…

Logistics is slated to be gamechanger for the Indian economy. How do you view the scenario?

20 CELERITY September - October 2018

www.supplychaintribe.com

Logistics efficiency will be the next game changer. Consumers today want high quality products to be delivered at the right time at affordable prices. Efficient logistics would be a distinguishing characteristic amongst companies. Presently India has a very high logistics cost as a percentage of GDP at around 14% as compared to other nations such as Germany and

21

COVER STORY United States which stand between 8-10%. Logistics systems and processes in India are currently rife with inefficiencies and bottlenecks. Reform in logistics has the potential to save USD50 billion a year, as per a report by ASSOCHAM.

With logistics getting its due credit from the government and receiving the sector status, what are the transformations that we are going to witness in the near term?

The government has now created a logistics division in the Department of Commerce in addition to granting this sector infrastructure status. For the first time in the country, the government would be taking an integrated view to the development of the Logistics industry. We are creating India’s National Logistics Plan, an institution that would lay down the structure for India’s Logistics infrastructure investment to promote inter-modality and govern the regulation of Logistics services including EXIM, transport and storage to remove inefficiencies and ease bottlenecks.

We are also creating a National Trade Portal and Logistics E-marketplace. This platform would bring all logistics stakeholders in the same place. The portal would provide a single window system for grant of all regulatory approvals. It would also expand the logistics market to small and marginal players and give a push towards an organized logistics sector.

domestic and EXIM freight volumes.

The primary focus would be to identify the inefficiencies in the transport and storage of these commodities and develop interventions to ease such bottlenecks through regulatory streamlining and infrastructure development. Secondly, we are engaging with BIS and other partner agencies and re-looking at standards & processes and benchmarking them with international best practices. We are working with the National Skill Development Council to identify the skill gaps, develop better curriculums and closely work with the industry to identify their specific needs.

Through stakeholder consultations, we are re-looking at all laws and regulations that govern the logistics sector.

How are you planning to engage industry stalwarts in this changed diaspora?

The triple helix model of Government, Industry and Academia is the need of the hour. Any policymaking could only be successful if there is a frequent and free exchange of ideas between the three stakeholders. We have signed an MoU with CII specifically on logistics to closely listen to the voice of the industry. We are also creating an Institute of Logistics and trade facilitation in IIFT to act as a think tank for the government by taking inputs from the industry. We are also closely looking at creating a national logistics forum – an institutional mechanism, which provides an avenue for regular industry interaction.

What are the need gaps and how are you planning to address them?

How best can public-private partnership be explored?

The need gaps can be broadly put into three categories – Infrastructure, Skilling & Standards and Regulatory.

On the first, we are doing a commodity analysis of the top 20 commodities by

Logistics is mostly in the private sector; the role of the government is limited to be the regulator and facilitator.

New infrastructure is being created like Roads, Sea and Air Ports through

public-private partnership. The role of the government is changing to be a facilitator to promote such partnerships.

We are also in discussions to come up with a multi-modal logistics park policy which also has a huge potential for PPP.

How can the industry be a part of these changing dynamics?

The logistics sector provides huge opportunities for the private sector. CII has estimated that the global logistics industry is likely to grow from USD 8.2 Trillion to USD 15.5 Trillion by 2024.

As the growth of the Indian economy continues to gather pace, more logistics services would be needed, and the Indian industry has to gear up to meet this need. The Indian industry also needs to deploy better processes and technology through automation, digitization and security.

What are the policy measures that are slated to come to fore to enhance logistics efficiency?

The implementation of GST has a huge positive impact on logistics efficiency.

Studies have confirmed that after the implementation of GST, there has been a substantial increase in the distances that were being covered per day by trucks. The Ministry of Road Transport and Highways (MORTH) is also re-looking at the standards of trucks, higher axel loads are now being permitted and digital documents are being accepted. The government through programs such as Bharatmala, Sagarmala and the Dedicated Freight Corridors are adding more infrastructure to enhance logistics efficiency. Customs has employed risk management systems and implemented the authorized Economic Operator Scheme for faster clearances. E-SANCHIT has been introduced to allow digital filing of documents and minimize human intervention. The logistics division is

The National Logistics Plan would be the action statement of the government that would be the guiding document for the integrated development of the logistics sector in the country. This strategy document would include interventions to promote inter-modality, reduce inefficiencies in freight transport and provide an investment structure for infrastructure development.

22 CELERITY September - October 2018

The triple helix model of Government, Industry and Academia is the need of the hour. Any policymaking could only be successful if there is a frequent and free exchange of ideas between the three stakeholders.

We have signed an MoU with CII and are also creating an Institute of Logistics and trade facilitation in IIFT to act as a think tank for the government by taking inputs from the industry. We are also closely looking at creating a national logistics forum – an institutional mechanism, which provides an avenue for regular industry interaction.

also tracking the performance of select ports in terms of operational and regulatory efficiency. Improving logistics efficiency is a moving puzzle, and the government is committed to pushing it forward.

How best is the government planning to utilize multi-modal logistics as today road network is highly utilized while inland waterways are not yet explored?

Logistics cost can be reduced if freight can be moved to more efficient modes of transport. As part of our corridor analysis for the top 20 commodities, we are looking at the commodities and

www.supplychaintribe.com

corridors where the modal shift can take place. Out of the 180 million tons of Iron Ore that is transported in the country, there is a potential to move 60 MTPA of Iron ore through pipelines as opposed to Road or Rail. Pipelines have 70% lower transportation costs as opposed to other modes. This has the potential to save the country `6,000 crores.

Study of Cement transportation in the country has revealed that development of Integrated Cement terminals, a move towards bulk as opposed to bagged cement and a push towards inland waterways and railways, has the potential to save `4,000 crores.

Similarly, a study of Steel transport in the country shows that 13-14 MTPA of Steel can be moved from other modes to Coastal Shipping can alone save `300 crores a year, there exists potential to move 40 MMTA of Steel via Inland Waterways, which can save nearly `1800 crores a year. As we understand the transport of more commodities, we will identify many such interventions that promote inter-modality and promote efficiencies.

What enabling aspects would be included in the to-be-announced National Logistics Plan?

The National Logistics Plan would be the

23

COVER STORY

The future of Indian logistics would be driven by four I’s – Infrastructure, Integration, Innovation and Intelligent Systems. action statement of the government that would be the guiding document for the integrated development of the logistics sector in the country. This strategy document would include interventions to promote inter-modality, reduce inefficiencies in freight transport and provide an investment structure for infrastructure development.

What are the aspects that will bring Indian logistics sector at par with the rest of the world?

India has already made a lot of progress in logistics efficiency. New infrastructure is being added, processes are being streamlined and regulations are being eased. The many ground-breaking policy reforms instituted by the Government of India would place India in a competitive position. The Goods and Services Tax has provided a levelled playing field for the logistics market participants and paved the way for larger capacities and greater efficiencies in logistics. We need to improve reliability of supply chains through the use of better technology, automation and digitization.

Among logistics, which subsector do you feel needs utmost attention?

Development of logistics is predicated on infrastructure creation, increase in efficiency of services and improvement in skilling and standardization across the sector. While development of infrastructure takes time, the subsectors that require urgent attention are skilling and standards. Currently there exists a mismatch between the skills demanded by the industry and those possessed by the staff, secondly, lack of standardization leads to inefficiencies across the board.

What are the opportunities waiting to be tapped for logistics players and how can they be a part of India growth story?

As mentioned earlier, the logistics

sector holds tremendous potential for growth. Logistics players should develop processes and services that promote efficiency. For example, air cargo transport has shown a growth of 14.5% between 2013 and 2017, MORTH constructed a record average of about 27 km/day in FY ’19. They are planning to invest another USD 82 Bn to construct 34,800 kms of roads by 2022.

The government has also identified areas for the development of 35 multi modal logistics parks.

After the implementation of GST, industry has the opportunity to create large capacity warehousing facilities, the demand for warehousing is expected to grow by 57% till 2019.

The penetration of logistics services is also underwhelming in India, with 3PLs accounting for 9% of the outsourced logistics revenue. India is the fastest growing large economy in the world, the e-commerce market in India is expected to reach USD 50 Bn over the next 3 years from the current USD 20 billion.

This massive increase would require efficient and reliable logistics systems.

Reduced logistics cost is one of the major areas where the government needs to intervene in order to make the goods competitive globally. Your take on this…

The Indian economy is primarily driven by domestic consumption. Exports and Imports of merchandise contribute to only about 28% of the economy. As Indian consumption grows, so must the efficiencies in logistics and the capacities available in our country.

These increased capacities combined with reduced logistics costs will result in Indian products being globally competitive.

You have been assigned a tall task to achieve. How do you plan to achieve that?

This task is daunting but not overwhelming. We have instituted measures to collect data from various

24 CELERITY September - October 2018

sources. We have pursued a partnership with GSTN to access E-Way Bill data for logistics planning, additionally we are also exploring technology-based measures such as creating a way to crowd source data on congestion, graft, etc. A Data and Analytics centre is being planned, which would pool data from various channels and allow the government to make data-driven intelligent decisions. Additionally, we are coordinating with all the relevant stakeholders to ensure an integrated development of the logistics sector.

We are also holding regular industry consultations to incorporate their suggestions in our policy planning.

Kindly enlighten us on India’s ranking in the Logistics Performance Index (LPI).

Logistics Performance Index is a perception-based report. During the last two years, a lot of work has been done on all the six indicators. The Report at several places acknowledges India as an over performer, a top performer and a consistent performer. The Report also recognizes that since 2016, India has emphasized logistics among its high-priority economic reforms to meet challenges of large country size, congested hubs, and internal barriers to trading good and services.

How crucial will be the role of technology in achieving the goalpost?

Technology would be a key enabler to achieve the goals of logistics efficiency.

We are creating a National Trade Portal and e-marketplace that would bring stakeholders across the logistics value chain onto a common platform.

Technology will play a crucial role across efficiencies in ports, warehouses, transport.

Logistics is at the cusp of a major revolution. Where do we see the industry five years from now?

The future of Indian logistics would be driven by four I’s – Infrastructure, Integration, Innovation and Intelligent Systems. As I have mentioned earlier, this sector holds tremendous potential and we see a very bright future for it.

FOCUS

FOCUS

Blockchain for Supply Chain In an increasingly digitized world, emerging technologies, such as blockchain, afford organizations the opportunity to drive business value throughout their supply networks. Building supply chain capabilities with digital technologies can result in greater levels of performance. Blockchain is an enabling technology, which is most effective when coupled with other next generation technologies such as Internet of Things (IoT), robotic cognitive automation or smart devices, writes Sandeep Chatterjee, Senior Manager – Technology Consulting, Deloitte Touche Tohmatsu India LLP.

S

UPPLY chains encompass the end-to-end flow of information, products and services, and money. The way these components are managed affects an organization’s competitive positioning in areas such as product cost, working capital requirements, speed-to-market, and service perception. Organizations are exploring innovative methods to streamline their supply chains to meet evolving consumer demands and optimise efficiencies. Technological advances are collapsing linear supply chains into dynamically connected and always-on digital supply networks (DSN), transforming how businesses exchange and share information and assets. Many believe that 40% of Fortune 500 companies will not exist in a decade as a result of these disruptions. These findings suggest that business leaders are under growing pressure to innovate and reconfigure their supply networks, maximizing value and efficiencies while reducing costs in an increasingly competitive world.

Despite DSN enhancements, paperbased processes are still common, resulting in reduced transparency and collaboration across networks. Decision making amongst supply chain actors is further complicated by disparate systems which provide limited visibility of other functions. These initiatives have focused mainly on intra-organization collaboration to gain higher efficiency.

There are four key supply chain pain points, which are experienced worldwide: 1. Traceability: Capability to monitor events and meta data associated with a product 2. Compliance: Standards and controls to provide evidence that regulatory conditions are met 3. Flexibility: The ability to adapt rapidly to events or issues, run various scenarios, without significantly increasing operational costs 4. Stakeholder Management: Effective governance in place to enable communication, risk reduction and trust among the involved parties.

These issues are felt across industries and need to be addressed before organizations can unlock the hidden value in their supply chains.

Traceability across supply chains is one of the most compelling use cases for blockchain technology. Blockchain could be the enabler to allow organisations to more effectively tackle these problems.

Enter Blockchain Blockchain has been described as an information game changer due to its unique capabilities and benefits to provide greater information transparency. At its core, blockchain is a distributed digital ledger that lives on the internet and records transactions and events. The technology relies

26 CELERITY September - October 2018

privacy within a single organization’s parameter, blockchain is designed to record specific transactions and events that are shared across a network of parties where transparency and collaboration is required. In a supply chain, a private or permissioned blockchain may be implemented, dictating users’ ability to read and write to the blockchain.

The implementation of blockchain technology can remediate the aforementioned supply chain pain points including traceability, compliance, flexibility, and stakeholder management.

Benefits of Blockchain in the Supply Chain Businesses can improve their supply chain management through more transparent and accurate end-to-end tracking. Over 90% of consumers surveyed list food product transparency as a critical factor impacting their purchase and expect manufacturers to provide the necessary information. An estimated 55% or more of consumers will pay a premium for services from companies promoting social responsibility. With blockchain, it is possible to digitize physical assets and create a decentralized, immutable record of all transactions, making it possible to track the asset from production to delivery or use by the end user and provide greater product history and transparency. This provides more visibility to both businesses and consumers into the products they consume.

Blockchain’s transparency may also

on well-established cryptographic principles and operates as a repository for information, which is recorded and shared through a peer-to-peer community. Within the decentralized network, all participants maintain their own copy of the ledger, referred to as a node, where they validate new entries to the chain through the use of a consensus protocol.

While one of the primary uses of blockchain is record keeping, organizations should know that blockchain is much more than simply an enterprise database. While databases are suitable for recalling ad hoc queries of large volumes of structured and relational data that require complete

supplychain.celerityin.com

Traceability

Compliance

Auditability Blockchain provides a full audit trail of data, creating an everlasting means of record keeping along a supply chain

Immutability All blockchain transactions are timestamped and tamperproof, providing a single source of data integrity

Flexibility Smart Contracts Continuous realtime tracking of data is facilitated through the use of smart contracts across the supply chain

Stakeholder Management Disintermediation Blockchain enables peer-to-peer interactions which can be trusted based on the digital signatures

With blockchain, it is possible to digitize physical assets and create a decentralized, immutable record of all transactions, making it possible to track the asset from production to delivery or use by the end user and provide greater product history and transparency. This provides more visibility to both businesses and consumers into the products they consume. Blockchain’s transparency may also help reduce fraud for high-value goods such as diamonds and pharmaceutical drugs. help reduce fraud for high-value goods such as diamonds and pharmaceutical drugs. According to the Organisation for Economic Co-operation and Development (OECD), counterfeit goods account for over $450 billion in trade annually. Furthermore, an estimated 10–30% of medicines sold in developing economies are counterfeits, leading to hundreds of thousands of deaths and billions of dollars in revenue losses globally. Blockchain could help companies understand how ingredients and finished goods are passed through each subcontractor and reduce profit losses from counterfeit and grey market trading, as well as increase confidence for end-market users by reducing or eliminating the impact of counterfeit products.

Furthermore, businesses can

27

FOCUS maintain more control over outsourced contract manufacturing. Blockchain provides all parties within a respective supply chain with access to the same information, potentially reducing communication or transfer data errors.

Less time can be spent validating data and more can be spent on delivering goods and services—either improving quality, reducing cost, or both. Finally, blockchain can streamline administrative processes and reduce costs by enabling an effective audit of supply chain data.

Processes involving manual checks for compliance or credit purposes that may currently take weeks can be accelerated through a distributed ledger of all relevant information.

In today’s social media landscape, a single post regarding labor issues in the manufacturing process or unapproved subcontracting (i.e., subcontract manufacturer outsourcing the job to another factory without notifying the brand) could result in a public relations disaster. Proactively managing the supply chain and getting ahead of the curve in traceability can help build a reputation as a leader in responsible manufacturing. Presenting data verified by a blockchain can contribute to improved public trust in the supply chain data. Transparency can give more weight to quality checks and build authenticity for data shared between the supply chain partners.

Implementing blockchain solutions in the supply chain requires cooperation from all stakeholders. This could be presented as an opportunity to rethink stakeholder relationships and create more collaborative ecosystems.

FOCUS

Proactively managing the supply chain and getting ahead of the curve in traceability can help build a reputation as a leader in responsible manufacturing. Presenting data verified by a blockchain can contribute to improved public trust in the supply chain data. Transparency can give more weight to quality checks and build authenticity for data shared between the supply chain partners.

Industry

Applications

Financial Services

International payments in a faster, cheaper, and more secure way with lower counterparty risk Registry for better Know Your Customer (KYC) checks and compliance Trade finance blockchain platform to improve and accelerate the financing of international trade

Healthcare

Smart contracts to connect different parties and automate transactions Public Sector

A shipping company used blockchain to manage freight tracking, providing buyers, sellers, and officials with a mechanism to track goods shipped around the world. Products travelling across borders may require review and approvals from up to 30 parties before arrival, creating a large amount of paperwork and creating opportunities for fraud at multiple points in the process—leading to billions of dollars in maritime fraud each year. Through collaboration with customs authorities, the shipping company streamlined

Registry to manage the digital identity of people and the ownership and transaction information on different assets such as real property and vehicles to increase efficiency and reduce fraud Enhanced security and transparency of voting in public election

INDUSTRY FOOTPRINT Blockchain in shipping logistics

Ability to share clinical trial launches and enrollments in real time to better match patients and prevent double enrollments

Energy and Resources

Smart contracts for more efficient and faster execution of energy trades and payments Managing and recording oil and gas transactions and connecting various stakeholders via blockchain to improve supply chain processes

Technology, Media and Telecom

Storing cryptographic hash of data, linked to digital identities and using smart contracts Supporting data storage and interaction among a large number of IoT devices in a cryptographic format

Consumer and Industrial Products

28 CELERITY September - October 2018

Better management of loyalty points programs Streamlining buying and leasing processes Tracking and traceability

the approvals process by creating a secure record of transactions and approvals and reduced the time needed to transport goods. Similar use cases illustrate blockchain has the potential to reduce administrative and logistics timelines in shipping by more than 85%—from more than one week to less than one day.

Blockchain in food production A startup is using blockchain as part of an effort to increase supply chain transparency in the second-largest traded commodity in the world— coffee beans. The company is using a distributed, decentralized protocol for real-time mobile transactions, recording data about the transactions and allowing all involved parties to access the record of payments at any time. The system increases transparency as the coffee beans progress through the supply chain and helps to ensure farmers receive proper fair-trade payments.

transparency between diamond certification houses and global diamond suppliers for the certification process.

So far, the company has digitized more than one million diamonds.

Blockchain in pharmaceuticals Another promising area for blockchain solutions is provenance (tracking of assets across a supply chain) within the pharmaceutical industry. Tracking active pharmaceutical ingredients during the manufacturing process is difficult and faces increased challenges from the widespread and lucrative counterfeit drug operations around the globe. Blockchain’s immutability provides a basis for traceability of drugs from manufacture to end consumer, identifying where the supply chain breaks down. There is potential not only to reduce the $200 billion in losses each year but also to increase public safety and prevent some of the estimated one million deaths per year from counterfeit medicine.

Implementing blockchain solutions in the supply chain requires cooperation from all stakeholders. This could be presented as an opportunity to rethink stakeholder relationships and create more collaborative ecosystems.

Blockchain in luxury manufacturing A logistics company has introduced a cloud-based blockchain solution to digitally certify diamonds and protect against unauthorized tampering with supply chain records. Diamonds are held to strict certification requirements to ensure they are sourced ethically, but fraudulent certificate reports and insurance claims can disrupt the safeguards set in place. To combat this, the company uses over 40 diamond characteristics including colour and clarity to create unique diamond IDs. The blockchain solution allows for immutability and security for the supply chain data and provides the necessary

supplychain.celerityin.com

Drivers of Blockchain The following are the drivers of blockchain technology: w Lower costs of bandwidth, data storage and computing: Like other technologies, blockchain also benefits from declining costs and rising capabilities in computing, storage, and bandwidth. w More efficient way to maintain trust: With increased globalization and digitization of businesses, maintaining trust can become expensive, time consuming and inefficient. Blockchain’s immutability would increase the reliability of data and counterparties with reduced chances of fraud, thereby, increasing trust.

w Prevalence of decentralized business models: Decentralized business models are becoming more common in a world of the shared economy. However these models still have large aggregators that control the information and system, implying unequal redistribution of value among all contributors. Blockchain can democratize the value exchange in sharing-economy businesses by removing the need for centralized aggregators.

Roadblocks to Blockchain However, there are some challenges which act as a deterrent to its success, namely w Low awareness and understanding: There is a still low awareness and a lack of understanding about blockchain.

w Lack of standards and best

practices: There is a lack of uniform standards on blockchain technology even as new blockchain-based solutions are being developed. w Regulatory and legal uncertainty: The regulations have not kept pace with advances in technology.

Changing paradigms It would take a while before we see wide commercialization of Blockchain platforms and application. While many challenges may remain, it is important to assess the suitability before jumping into the bandwagon. What works well for someone may not work for another!

Sandeep is a Senior Manager with Deloitte with responsibility for advisory practices.

Prior to Deloitte, he has worked with KPMG, Tata Motors, Lafarge, Infosys and Oracle Consulting and his key strengths lie in the areas of supply chain management, business process reengineering, emerging countries enablement, network optimization, ERP Implementation and ERP Footprint Review across multiple industries and geographies.

Sandeep is currently pursuing his PhD in Supply Chain Management. He holds an MBA from Indian Institute of Management, Kozhikode and a Bachelor of Engineering (Mechanical), Bengal Engineering and Science University, Shibpur (formerly Bengal Engineering College).

29

OPINION

OPINION

SIMPLIFICATION IS THE KEY

“GST 1.0 has been moderately successful. A lot needs to be done in terms of the teething problems in GST 2.0,” informs Sandeep Chatterjee, Senior Manager – Technology Consulting, Deloitte Touche Tohmatsu India LLP. extent. In a nutshell, it has not been a great performance but not bad either.

Please comment on how the various companies/industries have evolved in this one year.

How has been the impact of GST since the time it was implemented in June 2017?

We have been planning for this for so many years but finally it was decided to implement. Since the nation was not ready (though the deadlines were communicated long back), it was envisaged that the economy will crumble. But though there are teething problems, it was not that bad.

Confusion, infrastructure challenges, tax evasion were some of the highlights, but GST 1.0 has more or less driven the intent on what it wanted to achieve.

We have definitely seen a simplification of the tax rules, though there is a lot of work which is pending around that.

There was a concern about the number of returns being filed to be very high.

This has now been reduced to ease out the compliance issues. There were manufacturing-heavy states which were opposing this move as GST is a destination based tax. But one year down the line, these issues seem to have been ironed out. The deferring of the E-Way bill was definitely a matter of concern as unscrupulous middlemen were making money but the rollout of this has eased the burden to a great

The major benefits have been for the trucking industry. Trucks are now covering more distance with lesser stoppages as most of the multilevel taxes are gone. The second is the phenomenon birth of the supply chain function. All these years, the warehousing and distribution was guided by the tax laws in the country.

If we had to do business in 29 states, each opened a warehouse in each state in order to reap the tax benefits.

Additionally, there were incentives for producing and selling in the same state. With GST, companies have started looking at supply chain network optimization. There are now bigger and efficient warehouses. This has led to the emergence of logistics providers in a big way. In order to receive input credits, every company needs to register. So, more and more companies have come under the gambit of the organized sector. For most of the commodities, with a four-slab tax rate, the overall tax burden has come down. How much of that is being passed to the end customer is still debatable.

How further do you see the dynamics changing by the runup to elections?

GST 1.0 has been moderately successful.

A lot needs to be done in terms of the teething problems in GST 2.0.

For example, the input credit for the balances before GST Go-Live (transition credit) has been a point of debate. The rate of compliance stood at 64.6%, which is worrying as this shows the

30 CELERITY September - October 2018

PUSH TOWARDS CONSOLIDATION “GST has created an enabling environment for the market to shift from unorganized multiple warehouses to organized hub and spoke model,” highlights Anshul Singhal, CEO, Embassy Industrial Parks.

confidence level of the current system.

One thing we need to understand that we require a change in mindset.

Tax-evasion should not be the norm.

Petroleum products have been kept out of the ambit, which can become food for political debate. There are certain litigations, which need to be addressed as well. There have been infrastructural challenges in terms of logging into the network. The need of the hour is to make it more user-friendly.

distances every day with an improved turnaround time ensuring that the transporters can successfully carry out their business with a consolidated fleet.

Companies would now need to carry small levels of inventory to support the same level of sales, leading to greater financial savings. The biggest advantage of the GST has been the reduction in inventory. The savings generated due to reduction in overall inventory levels are expected to surpass savings in real estate costs, as a result of consolidation of warehouses.

What would your advice be to companies to make the most of the new taxation?

If we compare the previous system with the current system, there has been a lot of simplification. Tax evasion should not be the norm. The overall tax rates have come down and it is imperative that some of these benefits need to be passed to the end consumer. The cascading effect of the tax structure has been eliminated to a great extent.

It is also the right time to look at the entire supply chain network and devise means to optimize it. As more and more companies get registered in the network, there will be more companies under the gamut of organized sector.

Organized sector has its own benefits in terms of compliance and labour laws.

What can be the challenges going ahead?

The real challenge for GST will be in 2018-2019, the current financial year.

The Central Government expects to earn Rs6,03,900 crore through the tax during the course of the year. This means an average collection of Rs50,325 crore per month. In April 2018, the central GST collected stood at Rs28,797 crore, way short of what was needed to be collected as per the budget.

What are the strategies that you adopted in changing paradigms?

It’s been a year of GST. How would you describe the impact currently vis-à-vis what you envisaged a year back?

GST has had a positive impact.

The introduction of E-way bill has conveniently accelerated the shift towards organized warehouses with Embassy Industrial Parks being a direct beneficiary of this shift. Since e-way bills are being stabilized, the savings from reduction in travel and turnaround time will increase gradually. Most companies have started consolidating their warehouses, thereby moving towards a hub and spoke model, with a large hub efficiently servicing multiple spokes. Post the introduction of GST, trucks are able to cover longer

www.supplychaintribe.com

The role of warehouses has increased due to wider product range, emphasis on shorter lead times, and constant changes in customer demand. The emerging new technologies are creating strategic opportunities for organizations to build competitive advantages in various functional areas of management including logistics and supply chain management. Some of the modern innovative concepts like fast track technology, PEB, precast and sustainable technology are few innovations leveraged by our facilities.

Our parks will comprise a large group of special amenities such as truck parking, canteens, rest areas, dormitories, business centres, etc., ensuring that each park becomes a self-sustaining business environment. The roof enabled for solar panels will allow firms to enjoy low operational cost, leaving a smaller carbon footprint from their operations.

Currently, majority of the warehouses across markets do not follow the norms and procedures for setting up such a park. But, our parks are fully compliant.

We follow globally accepted systems, governance and processes. And finally

our parks are IGBC compliant parks with focus on environmental sustainability.

How have the infrastructure and real estate sectors especially taken to this path-breaking taxation regime?

GST has created an enabling environment for the market to shift from unorganized multiple warehouses to organized hub and spoke model.

Due to which the demand for legal warehouses across all major cities has increased. Additionally, from the supply side there are significant amount of investments that have flown into the sector from major real estate players and global funds. Over years, organized real estate players will grab market share from current unorganized players, and also grab most of the new demand as well.

How further do you see the dynamics changing by the runup to elections?

It is highly unlikely that there will be any major changes to the GST structure leading up to the elections. However, it appears there will be tweaks done by the by the current government to the GST in the run-up to elections with an aim to make it company and compliance friendly.

31

OPINION

A THOROUGH RELOOK “The new tax regime has offered an opportunity to relook many age-old practices be it designing the contract or supply chain dynamics or staffing,” shares Priyajit Ghosh, Partner – Indirect Tax, KPMG.

One year of revolutionary GST implementation… your thoughts on the same…

Ease of tax compliance was a key concern especially amongst the MSMEs owing to proposed multiple returns and lack of familiarities around GST filings.

After a year, the concerns appear to be largely addressed through allowing additional time for filing return, introduction of simplified return and frequent awareness campaigns. The teething troubles were anticipated to be far more than the experience. Except the challenges arising from the GST portal, others were quickly handled through a consultative process and postponing some relatively complex areas such as deduction of tax, e-way bill.

Impact on industries in general Companies had to calibrate their IT system, pricing strategies, supply chain, business processes and even the compliance team set up in the new era.

For manufacturers, in absence of welldefined mechanism, anti-profiteering compliance (provisions under the GST law which is aimed at ensuring that benefit arising from the GST is passed on to the consumers) has been a grey area. Removal of state specific peculiarities in tax laws and tax cost on inter-state transactions has led to simplicity in taxation structure and has converted India into one market.

For service providers, requirement to obtain separate registration in each state where they have offices as compared to single registration possible under pre-GST service tax regime has led to marginal increase in compliance.

Some of them are now allocated to state authorities while under the

service tax regime, they were under the Central Government authority, leading to uncertainty. This may be primarily owing to the fact that state authorities have never dealt with the service providers. For certain industries such as retail and distributors, tax cost came down significantly.

Shape of things to come Well, on a simplistic analysis, many efforts can be linked up to the run-up to the elections whether lowering of tax rate or simplification of returns, however, this may not be true or complete. From another perspective, such activities would be a natural step towards ensuring a seamless transition and improving an improved tax system.

Requirement of invoice level reporting of GST transactions, at the GST portal by the tax payers, is creating a digital footprint as the goods and services are changing hands. This is creating enormous data points to do smart and large-scale analytics in the second most populous country in the world. The analytics can be deployed by the government for many useful purposes such as improving the tax compliances, predictive analysis around economy, consumption patterns, etc.

Your advice to companies The new tax regime has offered an opportunity to relook many age-old practices be it designing the contract or supply chain dynamics or staffing.

Further, it has also afforded an opportunity to introduce IT enabled solution at a pan-India level which would result into accuracy, efficiency and quick decision-making capabilities in short to medium run.

32 CELERITY September - October 2018

FEATURE

Aiming a way

to

HIGHER GROUND India is the land of entrepreneurs and reasonably so, the world’s largest direct selling company grabbed this dynamic opportunity to set up and expand its base. For Amway, this 20 years’ journey has been quite enriching. Right from empowering entrepreneurial growth to acing corporate social responsibility and enhancing green supply chain, Amway has achieved it all. My recent trip to its world-class manufacturing facility at Nilakottai near Madurai brought out interesting facets and their aggressive expansion plans in India. Prerna Lodaya reports…

H

aving started operations on May 5, 1998, direct selling company Amway completed its two decades of operations in India this year and to celebrate the milestone, the company announced an aggressive growth plan for the country during the FAM trip hosted by them at their state-of-the-art facility in Nilakottai near Madurai, Tamil Nadu. Currently, India is the seventh-largest market for Amway. Key products here include the Nutrilite range of protein and vitamin supplements, Glister toothpaste, Artistry range of beauty and cosmetic products, and the Amway Queen cookware.

Amway India currently derives 50 per cent of its revenue from its nutrition and wellness portfolio, and the other half from a cross-section of

www.supplychaintribe.com

categories including beauty, personal care and home care. “The push into nutraceuticals, led by a range of herbal products launched in January, is expected to take the contribution of its nutrition and wellness business to over half of its total top line over the next few years,” proudly informed Anshu Budhraja, Chief Executive Officer of Amway India. “Our nutrition and wellness portfolio has a turnover of Rs10 billion now, which we are looking to double by 2025. The herbal range should help us in this regard, given that consumers are increasingly demanding more of these,” he added.

MAKE IN INDIA Situated at Nilakottai, this is Amway’s third manufacturing plant located outside USA. Amway has spent in India

more than 30% of the $335 million allocated for global expansion. The manufacturing plant is one of the first in India, which has achieved LEED GOLD certification by the US Green Building Council (USGBC) and is a zero-discharge waste facility. It has one of the largest solar rooftops in Tamil Nadu. The company is targeting to conserve up to 50,000 cubic meters of rain water every year as well at the site. The world-class green manufacturing facility is designed to achieve energy optimization and operational efficiency.

Currently the company is utilizing approx. 50% of its capacity. The facility has an annual capacity to manufacture 1.2 billion tablets and soft gels, 7 million canisters of drink mixes, 19 million cosmetic jars, bottles and tubes and 60 million tooth pastes.

33

FEATURE

FEATURE

Anshu Budhraja, Chief Executive Officer, Amway India The direct selling FMCG industry is expected to touch Rs65,000 crore by 2025, clocking an almost six-fold growth from its current size, while providing entrepreneurship opportunities to more than 18 million people of which 50% constitute women. We have registered a CAGR of 20% over the past 20 years, which is testimony to the robustness of our business model and importance of the Indian market, which ranks among the top markets for us. We are eyeing a three-fold growth in our business by 2025, fueled by innovation and digital penetrations along with our direct sellers network and focus on engaging young consumers.

Good Manufacturing Practices (GMPs) are followed for all the products to ensure safety, proper identification, etc., is being employed during the manufacturing process. Highlighting about the quality conscious spirit of the company, Vinay Kumar, Chief Technical Officer, Amway India, informed, “Quality is an ever-evolving journey, which includes lot of elements in the qualification process before any material entering the plant, be it technology, development of raw materials and packing materials used.

Through a Supplier Quality Development Programme, we qualify these suppliers.

The incoming materials are tested for meeting regulatory and international standards. The specifications are developed for components without compromising on safety and potency of materials used in our products as we are like any other FMCG company. That’s one differentiation where we don’t compromise upon.”

While taking a round of their manufacturing facility, one is sure that the testing machines & equipment which have been deployed at the India plant are state-of-the-art and resembles a global facility. As he added, “We invest the most on Quality by Design philosophy, be it technologies adopted, critical equipments or processes that we deploy. We pride ourselves in sharing with you that latest technologies across the globe are being adopted even in India too. Man, Material, Machine and processes are what define us to be the best in class.”

products and even marketing. QR code is the most recent technology that has been implemented by Amway, which precisely helps consumers in tracing the specific lot (it could be roots or leaves or bark, etc.) of all the ingredients that have been used to make a particular product. End benefits of the products as well as raw materials are also brought

to the fore so that a consumer can understand and experience the benefits of the quality and ingredient story while selling their products. “We have made significant investments in ensuring the organic roots of our Nutrition business.

We have devised NurtriCert program and insist on high quality ingredients for our supplements. We grow plants in

our own certified organic farms, and we rely on our NutriCert™ certified partner farms for plant concentrate, extracts and botanicals used in Nutrilite Range,” Kumar elaborated.

SOURCING STRATEGY Amway has ambitious plans to scale up organic farming and source ingredients for its foods supplements brand Nutrilite for both global and Indian operations.

It has already tied up with various state governments such as Government of Andhra Pradesh and is in discussion with suppliers to increase organic farming to enhance sourcing of different ingredients, like Holy Basil, Turmeric, Marigold, boswellia, pomegranate. ginger. The company, which has four company-owned farms spread over a total of 6,000 acres in Brazil, Mexico California and Washington State, and is currently sourcing ingredients in India from nine third-party owned farms certified under its Nutricert program from 6 states in the country. These farms supply many of its ingredients not only for India but also for global manufacturing.

SUPPLY CHAIN PROWESS By now, it’s quite evident that the company places great emphasis on each and every part of the value chain, so one can imagine how precisely they must have designed their supply chain for the wide & varied market like India.

It was quite interesting to catch up with Diptarag Bhattacharjee, Chief Operating Officer, Amway India, during the visit and learn about the nuances of supply chain at Amway. As he mentioned, “From the time we have established

FAST FACTS

Diptarag Bhattacharjee, Chief Operating Officer, Amway India GST is possibly the best things that has happened to us. Today setting up a warehouse in every region is no compulsion. I can go back to my central warehousing proposition too if that suits my business because today it’s one tax, one nation. So, one doesn’t really need to spend on zone specific warehouses. But doing that will I still be able to service my customers in the shortest possible time is the question I need to answer.

Today it’s not the compliance which is dictating my business decisions, rather it’s the demands of business which will drive my distribution strategy. There was a time when we had around 40 warehouses in the country, today we have been able to bring down this number to 15 warehouses. Today the companies who are abiding by the laws have the scope of expanding their horizons and capture greater heights.

TECH STRIDES Amway is quite tech savvy the way it manages its business be it processes,

34 CELERITY September - October 2018

this manufacturing unit in India, our major emphasis has been on increasing the localization of our products. We are proud Amway India sells more than 140 to say that today we are daily use products across categories such sourcing around 95% as nutrition, beauty, personal care, home care of products locally and and consumer durables through Amway Direct only Artistry range is Sellers as well as Amway’s own website.

The company plans to launch its latest innovations being sourced from focusing on herbal in the beauty and personal care abroad. In that sense, category. there has been a sea It is making a major push into consumer durables change in our supply and announced the entry into air purification chain strategy. Having category. said that, in order With the aim of increasing consumer to reduce our carbon outreach, Amway has set up 55 Xpress footprint, we are making Pick & Pay stores across the country. sure that we find suppliers in the 200Km radar of our facility.” Agreed Kumar, “During the journey, we have developed so many suppliers in the country. We have 6070 per cent local suppliers. It has been unique for our Nutrilite bottles. We have a truly evolutionary journey for us since invested in injection blow moulding the time we started 20 years back. On technology at our suppliers’ end. To an annual basis, we have consciously carry forward the growth momentum, made efforts to maximize our local we believe in growing with our partners. sourcing expanse.”

We are proud to say that 95% of the Bhattacharjee added, “As you know packaging material is sourced locally. that we are highly quality driven, our We have also started running pilot sourcing decisions are mainly based on projects with the industry veterans as the quality of products. For instance, well as the government because we feel Salmon fish oil is being procured that sustainable growth is only possible globally from Norway because that’s if the entire industry takes charge.” the best quality we are looking for.

Talking about the nitty-gritties Secondly, we invest a lot on R&D as involved in direct selling business, far as packing materials are concerned.

Bhattacharjee averred, “What’s This also has been taken care by the enigmatic in direct selling is that in parent company on a global level.”

India, some geographies are quite Seconded Kumar, “packaging plays a entrepreneurial in nature. We need to key role in the entire business strategy. be quite region specific in planning our For instance, the bottle has to be distribution strategy because no two consumer-friendly. We have designed regions would require the same set of and patented technology, which is SKUs always. Depending on the demand

www.supplychaintribe.com

35

FEATURE

Vinay Kumar, Chief Technical Officer, Amway India Quality is an ever-evolving journey, which includes lot of elements in the qualification process before any material entering the plant, be it technology, development of raw materials and packing materials used.

Through a Supplier Quality Development Programme, we qualify these suppliers. The incoming materials are tested for meeting regulatory and international standards. The specifications are developed for components without compromising on safety and potency of materials used in our products as we are like any other FMCG company. That’s one differentiation whch we don’t compromise upon. patterns, we have to adopt our supply chain strategy. As you know that in direct selling, the feedback is quite instantaneous unlike when the goods are sold on the shelf. This has been quite decisive factor for us to improvise our products & processes as per our customers’ requirements.”

Managing national demands almost daily can be quite a task but they have no qualms about it as he proudly shared, “We serve 11,000 pincodes nationally and that’s a real big number.

I can vouch for a fact that e-commerce marketplaces would also not be having such a reach. We procure from suppliers who are qualified by us. Our selection criteria is extremely stringent and is followed globally. Once being onboard, they follow a certain quality process.

Hence the procurement is an adherence to our global quality benchmark. Before setting up this plant, our bottles were coming from North but today owing to cost consideration and a close adherence to green practices don’t allow us to do so as we want to ensure that we consume lesser fuel, thereby leaving a green footprint.”

Notably so, quality consciousness and a highly aggressive expansion plan in place, the company would be having stringent norms for selecting 3PLs too… Bhattacharjee stated, “We have also started doing one day home delivery to our distributors in India and that requires a very critical 3PL service provider who has greater reach and can fulfil our desired expectations. We do branded home delivery wherein vehicles with our own brand deliver goods to our partners as well as end consumers.

To our credit, we are the only FMCG player who offers this unique service.

Today we are omnichannel. We have our own experience stores. We have

our own website through which we get a lot of traction and then we are having a physical connect through our partners. In such a scenario, we need partners who are able to give us value for money; have the bandwidth to offer one-day delivery option; and ultimately have a great reach.”

ENHANCING TRACEABILITY In order to enhance traceability in the entire value chain, Amway recently tied up with FarEye to help increase the visibility of deliveries of customer orders. As soon as the customer or direct seller places an order for a product, the warehouse team prepares a ready-to-ship package and digitally notifies one of the multiple 3PL partners using FarEye’s platform. Based on the customer’s location and an assigned drop-code, the 3PL partner organizes delivery to the customer or direct seller location seamlessly.

DIGITALIZATION PUSH As part of its digital drive, Amway has also onboarded JDA Software, Inc. to standardize warehouse operations and increase order fulfilment effectiveness, resulting in a superior customer experience. Among its many achievements since beginning its digitalization push, Amway has implemented 50 strategic warehouse locations across the globe with JDA, and in the last few months alone, 28 warehouse sites went live in record speed in India. During an announcement made on a global level, Marc van Pruijssen, director, supply chain development & innovations, Amway, stated, “These launches are a result of seamless collaboration between India Operations, global supply chain centre of excellence and the regional supply chain

36 CELERITY September - October 2018

support team, and will contribute to an improved order fulfilment experience for distributors and customers in India.”

ADDING NEWER DIMENSIONS TO GROWTH Buoyed by increasing opportunities, Amway is looking to triple its turnover to Rs60 billion in seven years from Rs 18 billion now, on the back of its push into nutraceuticals, durables and digital channels markets. This target will also take the local unit of the direct-seller into the top three after the US and China.

With the increasing demands for the Vitamins and Dietary Supplements (VDS), which has the current market size of Rs8400 crore, is poised to grow at 10% in the next 5 years. Currently the Indian market only comprises of 2-3% of the global market, which offers immense growth potential.

Amway plans to invest around Rs100 crores over the next 2-3 years in India in R&D, manufacturing and digital initiatives. The company will continue its focus on digital tools to enhance customer experience and benefit from its strong sales force of Amway direct sellers.

As part of its customer outreach and engagement plan, a significant portion of the investment is committed to launching Amway XPP stores in India.

The company will be adding 25 more Xpress Pick & Pay (XPP) stores across India during 2018.

With so many exciting things happening and company’s turn towards omni-channel retail, it would be interesting to see how this US based business further creates deeper footholds in India.

INTERVIEW

TUNING TO LOGISTICS “Sennheiser has always enjoyed great resonance in the audio industry attributing to its German lineage. Sennheiser has a legacy of bringing quality products with great attention to detail, which in turn provides us the competitive advantage. It will be our strength till the time we keep innovating and stay true to the promise of bringing something new every time that addresses the needs of the evolving customers,” asserts Subrata Ghosh, Vice President – Operations (Logistics and Supply Chain), Sennheiser Electronics India Pvt. Ltd., during an interview.

What are the complexities involved in managing consumer electronics space?

Although the consumer electronics sphere is a dynamic industry, it has its own fair share of challenges. The very first being the damages faced by the products because of constant use.

Another major factor is the rise of the e-commerce industry, which is creating a major setback for the offline market, reducing the number of customers that experience the products in-store.

What are the USPs of Sennheiser vis-à-vis competitors?

Sennheiser has a legacy of bringing quality products with great attention to detail, which in turn provides us the competitive advantage. We take pride in the sound quality of products, which is attributed to the superior technology

the brand hosts. Another factor that differentiates us from the competitors is the wide range of products available to our customers, giving them the muchneeded variety to choose from that customers look forward to today.

How complex is the supply chain and how innovatively do you manage the same?

We have no firm planning system as our customer request is ‘yesterday’.

Secondly, India is a diverse country, reaching its length and breadth takes 2 days to 10 days’ lead time with an addon to all legal compliances. Also, the logistics infrastructure in the country is not at par with other continents. We are always working on war footing note, which is causing higher freight charges to make them available at customer premises. Moreover, the linehaul

damages, pilferages and losses for too many manhandling of shipments are added concerns. Funniest thing is that reaching one consignment from Delhi to Bengaluru by air takes 3 hours but locally plying in cities it takes 1 day due to no entry timings, etc.

In spite of having challenges, our delivery service level is a standard of 97%. In order to protect the pilferages, we have adopted the open delivery and open pick up approach. Final bagging of the boxes is done to avoid the visibility of the brand and also the specifics of the goods in the boxes in transit. To ensure simplicity of logistics, maximum efficiency and best utilization of time, we have adopted the volume matrix.

Please enlighten us on one of the most challenging projects managed by you at Sennheiser.

The most challenging project we have taken on yet is the Nokia and

www.supplychaintribe.com

37

INTERVIEW forecast with the organization.

What are the transformations that have shaped up over the years?

Supply chain, something which is extremely crucial to the whole process, have revolutionized over the years.

Companies have started keeping up with the pace of the trade as well as the upcoming trends. They have started realizing that in the absence of not evolving their processes basis the needs of the people and the market, they will become obsolete. As a result, supply chain today is creating a virtual world to physical transformation.

Samsung Bundling Project with the Sennheiser headphones. The project required an end-to-end supply chain within the mentioned time frame and most importantly, the final delivery location wasn’t just one specific region or area; it was pan-India. But, with all its challenges, it was an extremely interesting and insightful project.

How can companies achieve an integrated sales and operations planning (S&OP) process to balance customer requirements, customer service, inventory and cost to serve?

There are various ways to achieve these by suppliers, for example, customer integration supply–demand integration, operational excellence and performance, communication quality, competitive strategy, customers’ preferences, replay & satisfaction, demand planning, predictability, logistics sync, material flow, physical operations, supply chain performance & strategies, joint planning trust and commitment.

How creating stronger internal collaboration, accountability and clear key performance indicators (KPIs) can help improve onshelf availability, customer satisfaction and increase sales?

One of the most important elements is reduced lead time, because it is a key factor in aligning a firm’s production, reduced inventory and forecast accuracy.

Distribution, as a concept, includes a diverse range of activities such as logistics, transportation, warehousing, inventory management, channel management, and selection of channel

partners. Historically, distribution has been regarded as one of the most fundamental parts of the supply chain.

Independently, each firm establishes a large buffer of inventories and does cost/profit planning as maintaining the cost as low as possible has always been a vital issue in the integrated SC network. Other important elements include the service level and on-time delivery, which, if taken care of, can achieve great results for the business.

What are the parameters on the basis of which you select a 3PL? For us, these five parameters hold prudent potential when it comes to selecting a 3PL: Location; near to airport or transport hub for inwards and outwards; no labour union; legal NOC for government; and connectivity for IT.

How crucial is the role of technology and how is Sennheiser steering the tech growth in supply chain?

Research and development plays an integral part in coming up with breakthrough technology and hence, we have regular programme/workshops to train our experts. We strongly reward our R&D team as it is because of them that we manage to stay committed to our goal of constantly evolving for our customers and bringing something new in the market regularly. Moreover, appreciation and recognition keep the employees motivated in the bid to do more and be more. We are also adopting automation slowly and steadily. We use Oracle based Demantra software linked with our business intelligence. We do 12 months rolling

38 CELERITY September - October 2018

What are the aspects that can make up for an exceptional supply chain?

Customers don’t want excuses for problems in the supply chain, they want solutions. One company knows first-hand the dangers of unchecked exceptions and the importance of realtime visibility with supply chain event management.

Making last mile delivery agile » Proper and final bagging » Cross tape signature on boxes » Proactive delivery and failure alerts » Dedicated implant single window solutions » 100 % proof of delivery » Customer feedback through delivery process » Tailor made and flexible – 24*7 real time support through customer service.

Having been associated with the organisation since the past 11 years, Subrata Ghosh has extensive understanding in driving logistics planning processes and leading global operational and process improvement initiatives across the supply chain logistics function. A strategist-cumfacilitator, Subrata has over 18+ years of experience in logistics and supply chain across varied industries like FMCG, Telecom, Acoustic industry and Consumer Electronics.

He takes immense pride in delivering quality services to customers and clients through product development and quality assurance.

RECAP

MANAGE DYNAMIC SKUs

FLEXIBLE AND RECONFIGURABLE

MINIMUM FOOTPRINT MAXIMUM CAPACITY

INTELLIGENCE FOR SMARTER WAREHOUSES

RELOCATION/ CONSOLIDATION SERVICES

CONSULTING SERVICES

www.supplychaintribe.com

SAFETY AUDITS

39