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Vol. 01 | Issue 10 | FEBRUARY 2011

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hen the nation looks upon you to move the growth fortunes and figures – it’s a pride, privilege as well as a problem – even though we belong to an industry whose sole purpose is to move. Logistics can be a bottleneck as well as an enabler for the Indian economy. Talking about the bottlenecks only, our nation has a long way to go both in adopting modern logistics methodologies and in repairing a largely sub-standard transportation infrastructure. This problem, incidentally, has a dubious distinction of being an opportunity as well… but are there any takers? Problems poked but full of hopes…that’s Indian logistics sector for you. In spite of crippling infrastructure, and a myriad of other problems, India is still managing to achieve an impressive growth. India is a classic paradox of inefficiency and growth, which remains a point of discussion and study for critics. Yes we are able to attract business, but are we creating wealth for the nation? More money is chasing more business, yet the nation is saddled with broken and inadequate transportation at all levels. That puts a big question mark on India’s reliability for modern transportation needs. Is India giving away the opportunity of being the global frontrunner, an ideal business destination and an ultimate choice for the global multinational giants wanting to set up their next factory in the emerging economies? As one of the manufacturers has rightly said, India may be the second choice after China, but the transportation infrastructure is not keeping up with the growth of business in India. The biggest problem is getting goods from a seaport to truck or rail, and those are the only choices. Once on rail or truck,

the second problem is moving goods to the hinterland. The rail system is very antiquated and has not been updated. It is slow and congested, while India’s highway system is not what it needs to be. And this thought is echoed by many logistics service users as well as service providers. The impact…a host of logistics activities are already being outsourced to foreign contractors. So when will India as a nation and we as an industry wake up to find solution to these problems staring at us? While the logistics industry and its stakeholders work closely to bring in the changes as well as investments, the Indian Government should focus on developing infrastructure and encourage public private partnerships in infrastructure investments. Highway projects such as golden quadrilateral are already underway, but achieving overall connectivity, especially concentrating on the connectivity of rural India, the hotspot of growth, with the urban world should be a priority. Access to cheap capital should be made available to LSPs for investments in infrastructure, enabling them to extend longer credit periods to their clients and supplementing their working capital. Creating a uniform tax structure and doing away with multiple check points, documentation requirements, etc., will ensure speedier delivery of cargo. Let’s get started. Let’s get some speed. Let’s change the way we move and where we move…

Archana Tiwari-Nayudu Executive Editor

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VOL. 01, NO. 10


INSIGHTS & OUTLOOK: FREIGHT FORWARDING Global Freight Forwarding Are We Ready To Take On The Challenge?


As competition gets tougher, on-time delivery of goods to the customer in any part of the world, at the lowest possible cost has become the need of the hour. Today, global players owing to their size, reach and ability to provide services at the lowest cost are seen by companies as a better option for partnership rather than their Indian counterparts. Therefore, it is time for the Indian freight forwarders to fast track their services and work more efficiently to compete with the global players, thereby becoming a preferred choice for logistics.

Freight Forwarding Rule Book Alleviating Legal Entangles In Logistics Freight Forwarding Ensuring Impregnable Partnerships Freight Forwarding Technologies Traceability & Convergence Are The Secret Keys Global Forwarding Solutions Top 10 Ways To Improve Profitability


19 22 26 30 34

‘Efficient Use Of Electronic Data Interchange Will Hold Good For The Industry’ Abhik Mitra, MD, TNT India

SL EXCLUSIVE World’s Largest Heavy Lift Vessel MV Svenja: An Iconic Maritime Milestone

SMART STRATEGIES Railway Budget 2011-12 A Safe Bet?



FedEx Pioneering Innovation





Smart SCM Capabilities New Rules For A New Decade

WAREHOUSING & DC Warehouse Management System 5 Secrets To Ensure Future-proof Investment





HiTech Manufacturing Show Growth Stays Constant


Engineering Expo Chennai 2011 Tracking Impending Opportunities



5 8 10 13 14 46 48 66 67



India is aiming to invest $100 bn to develop new ports and ships under a major new government plan to unleash the country’s exporting potential. “We want to bring our ports at par with the best international ports in terms of performance and capacity,” said, GK Vasan, Indian Shipping Minister, in a recent statement. Improving creaking ports is seen by economists as key to making India a global exports hub for manufactured goods, which would generate mass employment and raise economic growth. India has already emerged as a world centre of small-car production, but relatively few are exported because of transport and capacity problems that bedevil its ports. Chetan Bijesure, a senior official at the Federation of Indian Chambers of Commerce and Industry (FICCI), said, “Indian ports had to become more efficient for the country to compete globally and become a manufacturing hub.” Under the new plan a total `4.52 trillion ($100 billion) of investment is proposed through private and public participation, with `2.87 trillion earmarked for ports and `1.65 trillion for ships. The investments will cover the development of two new major ports on the country’s east and west coasts at unspecified locations while four existing ports in Mumbai, Kochi, Chennai and Visakhapatnam will be expanded. NN Kumar, Deputy Chairman, Jawaharlal Nehru Port Trust (JNPT), said, “Congested ports make it nearly impossible to export goods. At JNPT, we need to carry out dredging operations, so we can handle bigger ships. And we need modern equipment, so we can load and unload ships faster.” He predicted that the investment could raise JNPT’s world ranking in terms of the volume of goods handled from 20th to 10th by 2015. As part of the plan, the ministry also aims to raise India’s share of the global shipbuilding industry from one to five per cent by 2020. It also seeks to increase the percentage of Indian seafarers in the global shipping industry from between six and seven per cent currently to nine per cent by 2015. The Shipping Ministry has also envisaged setting up of a new special purpose vehicle – Indian Ports Global – that would invest in port operations globally. The organisation could be on the lines of Singapore’s PSA and Dubai Ports’ DP World. Citing example of similar initiatives by other countries, the Ministry stated, “Port of Singapore Authority have established their wings in different part of the world by an instrument called PSA International. Similarly, Dubai Ports have too spread its wings internationally by the consolidated company viz. DP World. Likewise, some ports in Europe too made their presence in the rest of the world.” The government’s plan to spend an estimated $110 billion to develop ports and shipbuilding by 2020 is aimed to expand its overall ocean cargo-handling capacity to 3.2 billion tonne and implement major reforms in the maritime sector.

The Shipping Ministry has proposed that ports which come under the Centre’s major ports should be free to decide their user charges based on market conditions. At present, the port regulator Tariff Authority of Major Ports (TAMP) decides the user charge or tariff ceiling for major ports. But, ports under the State Government, non-major ports — are free to decide on their charges. While a timeline for the proposal was not given, the Shipping Minister, GK Vasan said that he would like the major and non-major ports to have a level playing field indicating the Government’s view on the issue. A senior Ministry official stated that the proposal, as and when it is introduced, will be implemented with prospective effect. Though the tariff regulations will be done away with, the Ministry proposes to create a common regulator for all ports, which will set up, monitor and regulate service levels, technical and performance standards. Over half of India’s major ports have registered a double digit growth in January with the total cargo handled by ports registering a 13.4 per cent growth at 51.3 million tonne compared to 45.2 million tonne in December 2009, with container volumes registering a 31 per cent growth year on year. This decision taken by the TAMP will further facilitate and widen the port infrastructure of the country. For instance, Gautam Adani-controlled Mundra Port and Special Economic Zone (MPSEZ), which runs India’s biggest private port at Mundra in Gujarat, had initiated talks to buy Gangavaram port in Andhra Pradesh, Adani picked or chose ports not controlled by the Union Government for expanding its business because these are free from tariff regulations.




 GOVT NOTIFIES NEW COASTAL REGULATION ZONE In a move that could protect the livelihood of seven million fishing families, promote economic activity in the coastal region and preserve coastal ecology, the Ministry of Environment and Forest recently notified the Coastal Regulation Zone Notification, 2011. The new notification replaces CRZ 1991. “In the latest notification, the ‘No development zone’ is being reduced from 200m from the high tide line to 100m only to meet the increased demands of housing of fishing and other traditional coastal communities. This is one of the major differences between CRZ 2011 and CRZ 1991,” the Minister for Environment and Forests, Jairam Ramesh, said. The Minister further stated that any economic activity including power plants, ports and industrial enterprises could be permitted in the coastal area. “India must get used to power plants being located in water areas. They require imported coal, gas and even uranium; all this necessitates that power plants be allowed in water areas,” Jairam said. Economic activity will, however, not be allowed in the no development zone in the high tide line. The new CRZ has special provision for Goa, Kerala,

Greater Mumbai and critically vulnerable coastal areas such as Karwar and Kundapur in Karnataka, Vembanad in Kerala, Coringa, East Godavari and Krishna Delta in Andhra Pradesh and Gulf of Mannar in Tamil Nadu among others. For the first time a separate draft island protection zone notification has been issued for protection of islands of Andaman & Nicobar and Lakshadweep. Refuting charges that the latest CRZ Act was meant to benefit anyone, the Minister said, “Violations of CRZ 1991 are not being condoned. What happened in Adarsh (society in Mumbai) and others will continue to be dealt with.”



Faced with repeated bouts of food inflation, the Finance Ministry is likely to give fiscal sops in the forthcoming Budget, to investment in all segments of the cold storage chain for fruit and other agri products. As directed by the Prime Minister’s Office, the Department of Industrial Policy and Promotion along with the Department of Food and Public Distribution, Ministry of Food Processing, have begun work on preparing the proposals for consideration of the Finance Ministry, sources said. “Investment will be encouraged in supply chains, including provisions for cold storages, which will be dovetailed with organised retail chains for quicker and more efficient distribution of farm products and minimising wastage,” the PMO had said. While foreign direct investment is not allowed in the multi-brand retail, the organised retail stores promoted by the domestic industrial houses have been steadily growing. However, the missing link has been the back-end supply chain from the farm gate to the consumer. The proposals under consideration of the government include 100 per cent depreciation on all investments in physical cold storage assets by the private sector in agriculture and the entire agri-value chain and tax holiday in respect of the profits for 5-10 years. As big investment is required in building the supply chain, the industry has been seeking fiscal sops for promoting the organised retail, which accounts for less than per cent of the total domestic retail estimated at about US$450 billion. It wants tax sops across different segments of the back-end infrastructure. “Cold chain infrastructure is not confined to cold storages but extends to temperature handling across the value chain from farms to consumers,” said Amit Mitra, Secretary General, FICCI. The cold chain includes farm level pre-coolers, small capacity chill cold storage refrigerated trucks, food processing plants, refrigerated display cabinets for retail shops and deep freezers. The measures announced by the PMO to fight food inflation included support to augment storage capacity of cereals and modernising godowns and other infrastructure.



The Railway Ministry has drawn up an elaborate plan to develop railway infrastructure in the NorthEast (NE), connecting all state capitals in the next 5-7 years. Currently, there is a plan to connect Itanagar and Agartala during the 11th Plan while Aizawl, Imphal and Kohima would be connected in the 12th Plan. Shillong and Gangtok are expected to be connected in the 13th Plan, an official statement said. In addition, work for gauge conversion of existing lines is also being taken up. At present, there is a network of only 2,447 km in the entire region, which accounts for four per cent of the national network. Of the total railway network, about 97 per cent is in Assam and two per cent in Tripura. “Therefore, an accelerated programme of rail connectivity is required to provide the basic infrastructure capacity for the region to realise its economic potential,” it said. According to the release, there is a demand to increase the rail network in the Northeast to six per cent of the national network in the next 10 years. India is going to construct the Agartala-Akhaura (Bangladesh) line to connect Tripura to the Bangladesh Railway network having the potential to transform the face of the transport infrastructure in the NE, the release said. It has been decided that the projects of the Railways designated as National Project will be supported by the Centre in the ratio of 75-25 where 25 per cent will be given from the Gross Budgetary Support of Railways and 75 per cent from the Government of India. It has also been decided to create a fund for development of rail infrastructure in the region.



State-run logistics firm Container Corporation of India (CONCOR) may hive off its upcoming logistics parks and offload up to 51 per cent equity in each of them to a partner from among customers, landowners or logistics players, a senior executive said. “Somewhere if I feel logistics parks would be better off as SPV or JV with a customer or a strategic partner, then I may hive it off as a separate company,” P Alli Rani, Director (Finance). CONCOR plans to invest about `300 crore in the first phase to set up 3 logistics parks in Punjab, Gujarat and Rajasthan by March 2012. “There are some companies who have approached us. We could get into JV with any one of them,” Rani said, adding a deal could go through in 2011/12. The rail container operator has demonstrated once again that rail based logistics could be the mainstay of the logistics sector, which would propel the country towards greater industrial growth. CONCOR is also planning to invest in logistics parks to effectively exploit recent Indian Railway policy announcement granting entry to private operators in bulk movement and bulk handling.






There is a proposal for a ‘Logistics Corporation of India’ to be created jointly by three public sector undertakings (PSUs) – Shipping Corporation of India, CONCOR and Central Warehousing Corporation of India. The three PSUs will be equity partners in the multimodal joint venture logistics company, according to the proposal made by an expert group headed by SB Agnihotri, Director-General, Shipping. The proposed corporation will provide integrated transport services. The integrated entity should be able to resolve the problems and ensure seamless movement of cargo. The idea is to provide an “end-to-end transport solution,” added Agnihotri. While CONCOR and Central Warehousing Corporation will look into the rail and road segments of the chain, Shipping Corporation will provide the shipping link. “Such services can also be provided by the private sector, but our suggestion is that the public sector should take the lead. Ideally, the service should begin this year when Shipping Corporation of India celebrates its silver jubilee,” said Agnihotri. In fact, Shipping Corporation Chairman S Hajara had earlier said that his vision was to see SCI become a total logistics solutions provider. Anil Gupta, MD, CONCOR, said that the corporation welcomed such a proposal and was keen to expand its integrated services. CONCOR already has a tie-up with Mumbai-based private shipping line Shreya Shipping for movement of containers. The proposal to set up a ‘Logistics Corporation of India’ is part of the recommendations made by the group on the development of coastal shipping. The group, set up on the advice of Shipping Minister GK Vasan, had submitted its report to the Government last month. It had also suggested service tax relief to coastal shipping service operators at par with road transport operators.

Steel Authority of India (SAIL) has signed a memorandum of understanding (MoU) with IRCON International for jointly working on rail infrastructure projects both in India and abroad. IRCON, an enterprise under the Ministry of Railways with expertise in developing surface transportation infrastructure, has handled around 300 projects in India and abroad, while SAIL is the major producer and supplier of railway materials. “The MoU is the first step by SAIL and IRCON towards joining hands for efficient execution of partnership projects of the Indian Railways, as well as participating in rail infrastructure projects in developing countries where there is no infrastructure for evacuation of raw materials,” a SAIL official said. The MoU was signed by directors of both SAIL and IRCON in the presence of SAIL Chairman CS Verma, IRCON MD Mohan Tiwari and senior executives from both the companies. Welcoming the partnership, Verma assured all cooperation, while Tiwari said that he looked forward to the synergies envisaged between the two companies in the MoU translating into a joint venture or a special purpose vehicle in the near future. Meanwhile, IRCON has already identified a number of projects in which SAIL and IRCON can jointly participate.



WORTH `11,000 CR

The National Highways Authority of India (NHAI) has got an approval to invite financial bids for developing highway projects worth `10,963.39 crore. The qualifying bid process for these projects has concluded. The inter-ministerial committee – Public Private Partnership Appraisal Committee (PPPAC) – has given an approval for highway projects with an estimated cost of `10,963.39 crore for a total length of 907 km. The Highways Ministry plans to award these projects on a public-private-partnership basis before the end of the fiscal year after taking the Cabinet’s approval, informed the Highways Ministry. Of the six approved proposals, five are on a build-operate-transfer (toll) basis, while one is on a BOT (annuity) basis.





Visakhapatnam Steel Plant (VSP) has signed a memorandum of understanding (MoU) with Indian Railways for setting up Uttarbanga RINL Rail Karkhana, an axle plant at New Jalpaiguri, West Bengal, at an estimated cost of `278 crore for manufacturing and supplying axels for BOX N wagons and others to meet the growing requirement of Indian Railways. P Madusudhan, Director (Finance) RINL, and senior officials from the Railway Board and RINL were also present on the occasion. RINL officials said that the project will be implemented by forming a 100 per cent subsidiary company of RINL or a joint venture. Indian Railways has selected RINL to set up the axle plant considering its technological strengths in special grades of steel for decades. RINL is known adopting latest technology such as RH process, LHF and EMS for production of high quality cleaner steel in its ongoing expansion project. Sanjeev Handa, Member, Mechanical Department, Railway Board, lauded the keen interest evinced by RINL, particularly by Chairman & MD PK Bishnoi, in the project. He said that the Railway Board was fully convinced with the assurance of RINL on quality aspect and he observed that signing of the MoU was only a beginning and would pave the way for many more things.

Ministry of Steel Secretary PK Misra termed the MoU a noble gesture by the Railways and advised RINL to expedite the project to fully reap the benefits.



The Kerala Ports Department has initiated the process for the development of yet another minor port in Malabar region on public private partnership (PPP) basis. The department has invited online bids for the development of Beypore port, which comes close on the heels of tenders floated for Ponnani and Azhikkal ports in the region. The development work includes construction of two wharves of 200 metre each with a total a project cost of `163.5 crore. Currently, the port handles only barges and small vessels as the available water depth is only around four metre. The project envisages deepening the draft to 12 metre in stages to enable the port handle vessels up to 20,000 dwt. The port now has two wharves of 200 metre each and handles cargo as also passenger traffic to and from Lakshadweep islands. The import cargo includes mainly chemicals, edible oils, metals and foodgrains from Gujarat, Punjab, Rajasthan and Madhya Pradesh, among other places. Besides, the port also handles petroleum products and LPG from Kochi Refineries to Lakshadweep islands. The total quantity of cargo annually being handled by the port now is around 1.5 lakh tonne. The detailed feasibility report for the project was prepared by Consulting Engineering Services India. The Ports Department had recently entered into a memorandum of understanding with the Lakshadweep Development Council for the construction of a dedicated berth for the Union Territory. The cost of the berth is put at `20 crore. Meanwhile, the State Government has not taken a final decision on the award of the contract for the development of Ponnani port. Chennai-based Malabar Ports had emerged as the successful bidder for the work through Swiss Challenge method. In the case of Azhikkal port, the department had received a lone bid from Mundra Ports and SEZ. The bidder had submitted a `3,000-crore project for the development of the port as against a `700-crore project envisaged by the department.

International Seaports (VISL), made a presentation before the committee. With this, the port project may have passed the first stage of procedures for winning the environmental clearance for the project, the minister said. In June 2010, the State Government had submitted the necessary papers that would have enabled it to pass this stage. But the committee had subsequently demanded that more papers be made available for its consideration. The first stage of the project was expected to require an investment of `2,500 crore. A consortium of banks and financial institutions led by State Bank of Travancore had presented its proposal for raising the required finances before the board of VISL. The banks had tentatively suggested interest rates ranging between 10 and 11 per cent with four years’ moratorium for repayment. A committee led by the Chief Secretary is going through the 14 requests for qualification bids for taking up the project, the minister said.



Tuticorin port is set to triple its cargo handling capacity by 2020 from 23.18 MT to 71 MT. This will be done in two stages – first by doubling capacity and then through capacity addition. The doubling of capacity, according to A Subbiah, Chairman, Tuticorin port, will be achieved within one-and-a-half to two years as the work on three major projects – capital dredging and construction of North Cargo Berths 1 and 2 – will be complete by that time. In 2009-10 the port, complete with 14 berths, handled 23.78 MT and the target for the current fiscal has been set at 25.23 MT.



The Ministry of Environment and Forests has given its ‘in principle’ clearance for the proposed Vizhinjam international port and deep water container terminal. The decision was taken at a meeting of the concerned committee of the ministry held in New Delhi, said Kerala Minister for Ports V Surendran Pillai. The clearance came after Sanjeev Kaushik, Secretary – Ports, Kerala & MD – Special Purpose Vehicle, Vizhinjam


If the trend is any indication, the target be surpassed, Subbiah said confidently. But it will be wrong to presume that everything is hunky-dory. With the present container berth, operated by Port of Singapore Authority, having virtually reached saturation, there is a proposal to convert a cargo berth into a container berth.

PRICE TRENDS Road Freight Index Chart for January 2011 The RFI stood at 175 points for the month of January 2011, which was the same as in December 2010. However, it registered an increase of 4 points as compared to figures poseted in December 2009. TRENDS FOR JANUARY (Y-o-Y) For metros, ex-Kolkata rates registered an average highest increase by 7 per cent, where as ex-Delhi on an average registered the highest decrease by 6 per cent.








AUTOMOBILES The overall production data for April-December 2010 shows production growth of 30 per cent over the same period last year. In December 2010, production grew at 28 per cent over December 2009. Passenger vehicles segment in April-December 2010 grew at 32 per cent over the same period last year. Passenger cars grew by 32 per cent, utility vehicles grew by 21 per cent and multi-purpose vehicles grew by 51 per cent in April-December 2010 over AprilDecember 2009. For the period of April-December 2010, three wheelers sales recorded a growth rate of 19 per cent, while passenger carriers grew also by 22 per cent and goods carriers grew at 9 per cent.














COMMERCIAL VEHICLES 2005-06 The overall sales of commercial vehicles 2006-07 2007-08 2008-09 segment registered growth at 34 per cent in April-December 2010 as compared to the same period last year. While medium & heavy commercial vehicles grew at 43 per cent and light commercial vehicles grew at 27 per cent.



FORECAST FOR FEBRUARY 2011 The RFI in February 2010 over February 2009 had registered an increase of 1 per cent and there is an increase of 1 per cent over January 2010. The RFI stood at 171.59 for the month of February 2010 and 171.30 in the month of January 2010, registering an increase by 0.29 per cent. The RFI for the month of February 2011 can be expected to increase marginally. Indian Road Freight Index (IRFI), a service introduced by Transport Corporation of India (TCI), is an index of weighted average lorry freight rates across various routes, calculated based on the route density and the dynamic freight rates of routes across the country. Knowledge Partner: Transport Corporation of India (TCI); website:; e-mail:






Shanghai overtook Singapore as the world’s busiest and largest container port in 2010, riding on continued growth in Chinese trade and the business generated by the World Expo it hosted last year, said a release by the Shanghai Government recently. Shanghai’s port handled 29.05 million TEUs of containers in 2010, an increase of 16.2 per cent over the volume of 25 million TEUs handled in 2009. Shanghai’s 2010 container throughput was about 650,000 TEUs greater than the 28.4 million TEUs handled by the Port of Singapore in 2010, which was up 9.9 per cent from 2009, according to the Maritime and Port Authority of Singapore. Shanghai’s cargo throughput also rose to nearly 650 million metric tonne in 2010, maintaining its top global spot, said the statement. Singapore had became the world’s busiest container port in 2005 after predecessor Hong Kong lost out to cheaper harbours in southern China. As recently as 2001, Shanghai had moved fewer than half the containers handled by Singapore. China’s State Council has set an aim of making Shanghai a leading shipping centre by 2020 – the same year by which the government hopes the city will become a global financial centre. Shanghai will continue with a pilot project for export tax rebates, potentially expanding it, and is looking into developing shipping-price derivatives and an index on shipping prices, the City Government said.


HIGH IN 2010

According to the 2010 Annual Cargo Theft report released recently by logistics security firm FreightWatch International, the theft of cargo while in transit rose by 4.1 per cent to record levels in 2010. According to the report, an average of 75 cargo theft incidents were reported per month across the transport industry, the most ever recorded. The food and beverage industry has been the most heavily hit by cargo theft, accounting for 21 per cent of total theft activity, with an average loss value of $125,000 per incident, closely followed by the electronics sector, accounting for 19 per cent of all cargo theft and an average loss per incident of $512,000. Apart from cargo thefts, a record number of hostages were also taken by pirates in 2010. “To address these cargo theft issues, we have seen companies utilise additional layers of security to mitigate risk,” said Barry Conlon, CEO, FreightWatch. “The increase in protection combined with a decrease in total shipping during 2010, primarily due to decreased global demand, has forced cargo theft gangs become more aggressive and increase active targeting of unprotected loads.” While the rate of cargo theft continues to grow, data shows that the average value per loss declined in 2010.


162.1 PER CENT

After falling for 15 months in a row, Japanese export ship


orders rose for the 13th consecutive month in December 2010 on a year-on-year basis, soaring 162.1 per cent to 1,236,270 gross tonne, according to figures released by the Japan Ship Exporters’ Association (JSEA) recently. The year-on-year pace of growth quickened for the first time in four months and was significantly higher than 29.9 per cent in November. In December, Japanese shipbuilders received orders for 37 export ships – all bulk carriers. The 37 ships total 605,032 compensated gross tonne. In 2010, Japanese export ship orders totalled 11,153,401 gross tonne, up 95.3 per cent from the previous year. Japanese shipbuilders received orders for 271 export vessels – 251 bulk carriers, 10 general cargo vessels and 10 oil tankers – in 2010. The 271 ships total 4,982,409 compensated gross tonne. Japan is one of the world’s top shipbuilding nations along with South Korea and China. Japan’s export ship orders had suddenly started to plunge in October 2008 due to the deep global economic downturn triggered by the financial crisis that erupted in the United States the previous month. Japan started providing official financial support in early 2010 to shore up slumping vessel exports through the governmentaffiliated Japan Bank for International Cooperation (JBIC), one of the world’s biggest international financial institutions. The robust growth figures in recent months compared with extremely low year-earlier levels, and ship owners’ demand for Japanese vessels has not yet recovered despite recent numbers. Gross tonnage of Japanese export ship orders in 2010 was still down 42.6 per cent compared with the 19,425,920 gross tonnage registered in 2008.



DP World recently reported container traffic hike of 14 per cent in 2010 from the previous year to an all time high of almost 50 million TEUs (20-foot equivalent units) as world trade recovered from the global economic recession. The Dubai-based company handled 49.6 million TEUs at fifty terminals in 28 countries, up from 43.3 million TEUs in 2009, to consolidate its position as the world’s third largest container terminal operator. The increase included contributions from new terminals in Qingdao (China) and Callao (Peru), which came on stream in 2010. “This excellent performance in the second half of the year will lead to a stronger financial performance and we expect to report full year financial results in line with expectations and well ahead of the prior year,” said Mohammed Sharaf, CEO, DP World. “We remain confident about the long-term outlook for the container terminal industry and our strong competitive position within it,” Sharaf added. The company officials said that traffic growth was driven by a strong performance in Australia, the Americas, the AsiaPacific region and the return of growth in Europe. Traffic at the company’s 28 consolidated terminals grew 9 per cent to 27.8 million TEUs in 2010 from 25.6 million TEUs a year ago,

including 7.3 million TEUs in the final quarter, 12 per cent ahead of the year-earlier period. The United Arab Emirates handled 11.6 million TEUs in 2010, up 4 per cent from 2009, with fourth quarter traffic rising 7 per cent to over 3 million TEUs.



Ocean container carriers will face overcapacity for at least another 12 months as the supply of new ships outpaces slowing cargo demand, an industry analyst forecasts. The global container ship fleet will expand by an average annual rate of 8.7 per cent over the next two years, with 1.2 million TEUs due to be delivered in 2011 and 1.33 million TEUs in 2012, Paris-based Alphaliner said. This falls short of the average annual 1.37 million TEUs of deliveries in 2006-2008 but “the level of capacity additions remains a key concern for the industry,” Alphaliner opined. A large part of the 1.2 million TEUs of new capacity added in 2010 was absorbed by increased cargo demand fuelled by the rapid recovery of the global economy. But cargo demand is expected to slow significantly to below 8 per cent in 2011 from an estimated 13.6 per cent in 2010. The average growth rate of the world’s five largest container ports, all in Asia, slowed to 8 per cent in the final three months of 2010 from 18 per cent through the first three quarters “with the trend towards slower growth likely to persist in 2011,” Alphaliner forecasts. The slowing of demand in the fourth quarter of 2010 has already started to impact ocean carriers’ load factors,

ship charter rates are edging higher as ocean carriers compete for a limited volume of available tonnage to keep pace with strong cargo demand on key trade routes. Carriers are boosting their overall capacity with charter ships even as spot freight rates are drifting lower on the Asia-Europe and transPacific trades, undermining efforts to push through general rate increases that took effect at the beginning of the year. Cargo demand rose 12 per cent in 2010, outpacing an 8.5 per cent increase in capacity, according to London shipbroker Clarkson, as world trade rebounded stronger and faster than expected from the global economic recession. Market fundamentals are expected to favour carriers through 2011 though the demand-supply gap will narrow as shipyards step up deliveries of new vessels. The positive sentiment has pushed up charter rates for all ship sizes reflecting the growth in cargo demand on most trade routes. A 3,500 TEUs gearless sub-Panamax ship is currently earning $14,500 a day compared with an average of $13,250 in 2010 and $6,575 in 2009, according to Clarkson. A standard 4,250 TEU vessel is fetching just over $23,000 a day on a two year time charter against $22,555 at the beginning of the year, according to the Hamburg Shipbrokers Association. The Association’s ConTex index of time charter rates for five ship sizes, from 1,100 TEUs to 4,250 TEUs, fell to 548 at the end of November from a 2010 high of 601 in mid-October. It has recovered to 578. Container ship owners, who suffered big losses on vessels chartered out in the 2009 slump, are limiting the length of fixtures in the belief that rates will continue to strengthen as carriers seek tonnage ahead of the peak shipping season in the summer. Some carriers, including Geneva-based MSC, are holding off from taking on new tonnage because they expect rates will soften as more ships come into the market. The container ship order book amounts to around 28 per cent of the existing fleet but “with little (laid up) capacity left to reactivate and continued trade growth forecast for 2011, at last the containership sector looks in better shape,” according to Clarkson.


with Alphaliner estimating vessel utilisation rates on the Far East-US and Far East-Europe routes dropping to 80 per cent in December, the lowest level since May 2009. The market’s focus has now shifted to vessel utilisation levels over the next two months as these will determine the direction of ocean freight rates after China’s Lunar New Year celebrations.



Carriers seek capacity even as freight rates retreat. Container

Singapore Changi Airport reported an 11 per cent increase in freight tonnage in 2010 over the previous year. That still left cargo volume at the major Asia gateway behind pre-recession levels. Last year’s increase over the depressed 2009 figures included a 4.1 per cent year-over-year gain in December, when freight volume also grew 1.7 per cent from November. The improvement was Changi’s first year-over-year increase in freight tonnage since 2006, however. Changi’s 11.9 per cent year-over-year decline in 2009 was the steepest drop among Asia’s 10 largest air freight airports and the airport’s growth through most of last year lagged behind the strong gains at other Asia gateways, including the surging business at China airports.





As competition gets tougher, on-time delivery of goods to the customer in any part of the world, at the lowest possible cost has become the need of the hour. Today, global players owing to their size, reach and ability to provide services at the lowest cost are seen by companies as a better option for partnership rather than their Indian counterparts. Therefore, it is time for the Indian freight forwarders to fast track their services and work more efficiently to compete with the global players, thereby becoming a preferred choice for logistics. SUDHIR MUDDANA TODAY, India is seen as one of the fastest growing countries in the world. Along with the booming economy, the manufacturing industry in the country is on a constant rise, which saw an estimated 8.8 per cent growth in 2010. Also, various countries acknowledge the credibility of Indian manufacturers and prefer to import from India. To meet this growing global demand, and with freight forwarding playing a massive role in shipping of goods, Indian freight forwarders need to gear up in order to attain utmost efficiency while


competing with their global counterparts. Freight forwarding is a service used by companies that need to transport their goods internationally. Sending these goods from one international destination to another involves a large number of carriers, legalities, etc. Freight forwarders play a vital role in such cases. On behalf of the client, the forwarder performs activities such as picking up consignments from the source, providing warehousing and transportation facilities around the world, loading and unloading shipments

as well as ensuring custom clearance activities. There are numerous reasons for a company to select a freight forwarder for international shipments of their products rather than internally arranging the transport. One of these involves negotiating the best rate for services. A successful freight forwarder usually has strong contacts within the transportation service industry and is often offered services that are not available to people otherwise. This can help a company get

the best possible services at the least possible cost. Vikas Maurya, Sr Marketing Executive, SAL Logistics, says, “The advent of freight forwarders has completely changed the dynamics of logistics industry, as several new players have entered the market, making the environment highly competitive. Using their services is highly beneficial for companies, as they can bargain for best services at lower prices.” Following are some of the reasons to opt for a freight forwarder: • Logistics management: As transporting goods require a lot of planning and forecasting, a freight forwarding service will help save time, money and labour, as it manages the entire process right from packaging to documentation to the actual transportation. • Rules & regulations: Sending goods internationally involves knowledge of regulations, licenses and taxes applicable in that region. In such a case, a freight forwarder can best handle the documentation & legalities and ensure that the goods reach the destination. • Strong network: Freight forwarders have connections with different carriers and can transport goods via air, land and sea. They can suggest the best routes for transporting goods and offer the best quotations for using different means of transport. • Clearance through customs: A freight forwarder can help in clearing goods through customs with ease and in the shortest possible time.

FREIGHT FORWARDING SCENARIO Till now, freight forwarders were seen as mere transporters who do not actually move the freight themselves, rather act as intermediaries between the client and various transportation services. Also, freight forwarding at the sending and receiving end were handled by separate entities. The sending freight forwarder’s role was limited to providing services up to the point of consignment loading, while its counterpart at the receiving port would handle the consignment till it reached its final destination. According to Christoph Remund, CEO, DHL Global Forwarding, the term ‘logistics’ has rapidly gained popularity in the past decade. Following a worldwide trend, increasing number of companies involved in goods transportation have begun to call themselves logistics operators. These companies have mostly developed from

Factors To Look For In A Freight Forwarding Company Freight forwarding companies work closely with freight carriers and shipping companies to ensure that their clients get the products shipped at the best rates. This is a competitive industry and various factors affect shipping costs. However, to ship one’s goods from one place to another – either a huge multinational company or sole proprietorship – a freight forwarding company has the capability to facilitate the entire process. Following are some of the factors to look for in a freight forwarding company: • Price considerations • Scale – arranging the transport from point of origin to destination • Multi-scale operations – international shipping business insurance and customs documentation and clearance • Warehousing • Risk assessment • Methods of international payment. These services are the benchmarks and commonly provided to the client by the freight forwarding agency. Inputs by Christoph Remund, CEO, DHL Global Forwarding

forwarding businesses, having extended their service range with value-added services, now often referred to as supply chain management (SCM). Elaborating on the evolution of freight forwarding and the way it is seen today, LR Sridhar, MD, Sical Logistics, avers, “Today, with the government allowing 100 per cent foreign direct investment (FDI), a number of large international players have commenced operations in India and other countries, providing services both at loading and discharge ports.” He continues, “Earlier, freight forwarding was a standalone specialisation. The forwarder, instead of moving the freight itself, served as an intermediary between the client and the transportation services. But the coming years will see the rise of seamless singlewindow providers, with their end-to-end infrastructure of inland road and train transportation as well as port handling.”

FACTORS AIDING GROWTH According to Sridhar, freight forwarders today are expected not only to provide sea transport or air transport but also the entire chain of services to enable export of goods, eg, sourcing reliable and local transport, clearance documentation, tracing & tracking the consignment and updating the shipper/consignee until the consignment is received by the overseas buyer. The emergence of shipments like delivered duty unpaid (DDU) and delivered

duty paid (DDP) has enhanced the role of freight forwarders internationally, including India. In contrast, earlier, exporters had inhouse logistics departments, the modern trend is for exporters to concentrate on core competencies and strategic areas such as manufacturing, sourcing buyers and controlling supply chain costs. To this, Sridhar opines, “We believe that freight forwarding services will grow faster than India’s gross domestic product (GDP) growth and, within freight forwarding, the growth will be more marked for endto-end integrated multimodal logistics providers such as Sical.” Adding to this, Remund states that the growing industrial base in the country and the increasing global demand will be the key factors supporting the growth of freight forwarding in India. He explains, “On the world economic map, India is the fourth largest economy. Healthy economic growth in India is increasingly supported by robust industrial growth. One of the relatively lesser known but significant sectors that support almost all industrial activity – the logistics sector – is also witnessing this growth consequentially. India has become a preferred investment destination among multinational corporations. This has resulted in the demand for world-class logistics and warehousing facilities in India. The Indian logistics market is estimated to be $45 billion. By 2015, it is expected to reach almost $122 billion – growing at a


Global freight forwarding, continued

compounded rate of over 11 per cent, which is higher than the growth rate of the Indian economy.” He further adds, “India and other emerging markets are a key sourcing, manufacturing and distribution base for global industries. Increasingly, they will be key markets for consumption. This favours organisations such as ours, since our business depends on customers doing business domestically and internationally, driving up our volumes.”

OVERCOMING THE ROADBLOCKS With growth come hurdles, which companies in any industry encounter. Sridhar highlights a few of the challenges that freight forwarders face today: • Increased competition, as the large forwarders become larger, more versatile and drive margins in the industry downwards • Customers requiring real-time visibility and transparency along the supply chain • The need to measure performance across multiple products from different systems using a variety of vendors across air, ocean and domestic transportation • Constant pressure to keep headcount down and file count up • Daily pressure in keeping customer service response and standards high by involving less personnel • Processing payments to multiple vendors and reconciling back to each operational file • Lack of accurate information on the performance of contracted carriers • Employee attrition and poaching by international providers • The ability to insure against risks. To overcome these challenges, service providers must improve their brand visibility, quality of operations and reduce costs by: • significantly reducing the amount of time spent performing ‘manual communication’ via phone/fax by using online tools and giving operators the ability to address customer service proactively • providing an integrated platform that allows multiple systems to communicate into one repository in real-time • streamlining and integrating performance metrics and retaining the versatility of generating different metrics as required by the freight


forwarder and the customer • providing swifter, more accurate and proactive information back to the customer electronically and creating the ability to react to exceptions & challenges in the supply chain to reduce cost and improve agility • improving overall margin to forwarders and aid the delivery of more efficient and versatile value back to the customer • having instant tools to be able to provide customers with proactive solutions for their supply chain through real-time and accurate data • invoicing reconciliation by line item, receiving charges from vendors electronically and having in-house systems perform the audit process and deal with exceptions instead of consuming valuable operational time • supplying visibility to the carrier’s performance • communicating brand attributes and values through high visibility and covert media. Remund sees infrastructure and skilled manpower as the major factors denting the growth of logistics. According to him, although infrastructure challenges exist, it is encouraging to see that India is increasing outlays on ports and roads, with more tangible economic reforms. Further, expediting the construction of improved ports, roads and airports will allow the industry to take advantage of business opportunities. “We work closely with industry associations and government bodies, and welcome the changes & infrastructure upgrades that are taking place, as this will benefit and facilitate our services to our clients,” he says. On the lack of trained and skilled manpower, he adds that any industry that expands rapidly needs qualified manpower to keep pace with its requirements, and the logistics industry is no exception. “This industry certainly needs quality manpower. Although India has a sizeable educated population, very few educational institutions teach logistics. The key is to increase awareness of logistics as an industry and the significant role it plays in the economy of the country, as a trade enabler,” explains Remund.

COMPETING WITH GLOBAL PLAYERS Today, Indian freight forwarders face stiff competition from their global counterparts for international freight movement. One

of the reasons for this is that the global counterparts, because of their size and operations in many countries, are able to offer low freight rates and extend credit for long periods. Indian freight forwarders, on the other hand, because of their smaller size and lack of access to low-cost capital, are unable to match with the same. Moreover, clients of global freight forwarders often want to deal with a single service provider, which usually happen to be the multinational freight forwarders. In addition, lack of IT usage and proper communications infrastructure result in delays, lack of visibility and real-time tracking ability. Absence of a seamless flow of information can create a lot of uncertainty, unnecessary paperwork and delays. Being a standalone freight forwarder provides advantages related to understanding the local grassroots in a better way, but these are not enough for sustainable competitiveness. Sridhar states a few factors that as an end-to-end provider Sical has incorporated and that companies should consider if they want to compete and perform better than their global counterparts: • An excellent understanding of export and import (EXIM) laws and local rules/socio-politico-cultural issues • Business relationships built over several decades • Grassroots exposure to stevedoring operations/ship agency/custom house agents (CHA) at Indian ports • A multimodal pan-Indian transportation infrastructure with trucks, trains and warehouses • Inland container depots/container freight stations (ICDs/CFSs) that take care of EXIM cargo. Therefore, as India emerges as the global manufacturing hub, companies, along with being competitive also need to have value-added services. Indian companies also need to speed up their delivery processes to cater to the vast and ever increasing global market. However, to offer value-added services to their customers and to compete with their foreign counterparts, Indian freight forwarders need to address the challenges and learn to overcome them. This will help them to not only improve their services and create an image as a reliable service provider, but also grow by value and not just volume.


Multimodal transport of goods is gaining significance due to the emerging need for new and faster means of transportation. Freight forwarders are also making efforts to provide their clients complete freight forwarding solutions under one roof. This will help simplify legal complications across continents. Here’s an insight into the rules governing smooth transportation across India and foreign lands, which all freight forwarders need to consider. WITH continuous growth in trade across continents, delivering products from one destination to another internationally requires a host of carriers, requirements and compliance to legal formalities. Freight forwarding is a service used by people who manage international or multinational import and export, providing total logistics solutions, from packages and crates to containers, from one country to another. The freight forwarder’s role is that of an intermediary between the individual and the several transportation allies. The freight forwarder makes arrangements to enable transport of goods from seller to buyer often over long distances, using more than one mode of transport. Total freight forwarding solution under one head provides maximum handling of transportation-related tasks of the client.

It provides relief from being entangled in the sphere of different legal formalities widespread across continents.

GETTING INTO MULTIMODAL TRANSPORTATION Multimodal transportation of goods means carriage of goods by more than one mode of transport, under a single multimodal transport contract that ensures an efficient, speedy and superior quality of door-to-door service combined with a substantially low transportation cost. Under this contract, the owner of the goods can easily file a case against the multimodal operator in case of a default. But when goods are transported through different transport contracts, it is difficult to determine the point at which the goods were damaged. This step is


Freight forwarding rule book, continued

Multimodal Transportation of Goods Act (the Act) came in to force, which was codified and enacted in accordance with • The United Nations Convention on Multimodal transport of goods the rules of United Nations Council for has been instrumental in encouraging the development of the Indian Trade and Development (UNCTAD) and multimodal transportation laws. International Council for Commerce (ICC). • The Multimodal Transportation of Goods Act provides for the The Multimodal Transportation of Goods registration of an individual as MTO and prohibits any person from Act was amended in 2000. continuing the business of MTO, without being registered under the The Act provides for the registration Act, if it exceeds a threshold of annual turnover. of an individual as MTO and prohibits any • The Carriers Act serves the dual purpose of not only providing carriers person from continuing the business of to limit their liability for loss or damage to the goods for transportation MTO, without being registered under the but also provide for their liability for any negligence or criminal acts Act, if it exceeds a threshold of annual occurred while performing their services. turnover. The certificate for registration is • The Warsaw Convention is applicable to an international carriage, valid for a period of three years, subject which means a carriage shipped, with or without break, between the to renewal for a further period of 3 years parties situated within the territories of two or single contracting party at a time. with an agreed upon stopping place. The Act also provides the rights and duties of an MTO and specifies the anomalies regarding jurisdiction for settlement of particularly important for suing the carrier responsible for disputes between the parties. It also encourages peaceful and damage. amicable settlement of disputes by facilitating, arbitration and other alternative dispute resolution methods. Moreover, Indian UNITED NATIONS CONVENTION ON INTERNATIONAL multimodal law provides higher liabilities for MTOs.

Legal Acts That A Freight Forwarder Needs To Know:

MULTIMODAL TRANSPORT OF GOODS (GENEVA, MAY 24, 1980) The United Nations Convention on Multimodal transport of goods has been instrumental in encouraging the development of the Indian multimodal transportation laws. It has in fact been a great source of inspiration and is the foundation of the multimodal law applicable in several countries, including India. The importance of the aforesaid convention can be gauged from the fact that there has been a growing consensus on International Multimodal Law being considered as means to facilitate the orderly expansion of world trade. Key highlights of the aforesaid convention are as follows: • A fair balance of interest between developed and developing countries should be established in international multimodal transport • Determining the rules for carriage of goods by/under international multimodal transport contracts, including equitable provisions concerning liabilities of multimodal transport operators (MTOs) • Liability of the MTO under this convention shall be based on the principle of presumed fault or neglect • Emphasis on the need to streamline custom procedures, while giving due regard to problems of transit countries • The Convention shall not be incompatible with application of any national law relating to regulation and control of transport operations, including the right of licencing of the MTOs, participation in multimodal transport and other steps in national, economic and commercial interest • The MTO shall be bound to comply with the (a) laws applicable in the country in which it operates, (b) along with provisions of this convention.

MULTIMODAL TRANSPORTATION OF GOODS ACT, 1993 In India, there was no uniformity in multimodal transport of goods earlier, and the need for this was felt because it became a standard practice in international trade. Therefore, in 1993,


OTHER ANCILLARY ACTS A. Carriers Act, 1865 The Carriers Act serves the dual purpose of not only providing carriers to limit their liability for loss or damage to the goods for transportation but also providing for their liability for any negligence or criminal acts occurred while performing their services. The Act applies to all persons engaged in the business of transporting property under multimodal transport or hire transportation from one place to another. The liability of the carrier is restricted to a major extent, if the person delivering the goods for transportation fails to declare the value and description of the goods transported. Under the Act, it is mandatory to issue a notice within six months from the time when the loss or injury came to the knowledge of the customer transporting, to recover a loss. B. Carriage by Air Act, 1972 This Act was enacted solely to give an effect to the Convention for the unification of rules relating to international carriage by air signed at Warsaw on October 12, 1929, which was amended by Hague Protocol on September 28, 1955, and to make provisions for the rules in its original and amended forms. Both conventions apply to all international carriage of persons, luggage or goods performed by an air transport company for charges or gratuitously.

WARSAW CONVENTION The Warsaw Convention is applicable to an international carriage, which means a carriage shipped, with or without break, between the parties situated within the territories of two or single contracting party with an agreed upon stopping place. This happens even if the agreed upon stopping place is not situated within the territory of the contracting party. The Warsaw Convention was not applicable to activities undertaken under international postal convention. The Warsaw Convention lays down rules and procedures for

carrying passengers, luggage and goods, including rules to issue passenger ticket and luggage ticket, roles, responsibility and liability relating to the same. The said convention also deals with procedural aspects of air consignment note, receipt and delivery of goods, acceptance, liability, etc. According to the Warsaw Convention, the air consignment note is prima facie evidence of the conclusion of contract of the receipt of goods and conditions of carriage. Accordingly, the absence, irregularity and/or loss of this document or acceptance of goods by carrier without the air consignment note do not affect the existence or validity of the contract of carriage. Also, this will not prevent the carrier from excluding or limiting his liability. However, details in the air consignment note do not constitute evidence against carrier, except where the carrier has undertaken inspection of the goods and its condition. Further, according to the Warsaw Convention, any loss during the carriage shall be borne by the carrier and the carrier shall be liable for goods when under the charge of carrier, at airport or aircraft, till landing outside an airport in any place.

HAGUE PROTOCOL The amendment by Hague Protocol to the Warsaw Convention sought to simplify the procedures by seeking to replace the concept of air consignment note, with airway bill and enhancing the liability of the carriers in case of loss or injury to passengers or goods. The Hague Protocol also sought to limit the liability of the servant or agent of the carrier arising from the damage caused within his scope of employment. C. The Indian Carriage of Goods by Sea Act, 1925 (Hague Rules) This Act completely incorporates the Hague Rules as part of the Act, in the form of a schedule. Even though India was not a high contracting party to the Brussels Convention, as it was a domination of the Great Britain, the Hague Rules were adopted by India by virtue of the Act, to bring about international uniformity. This Act applies to carriage of goods by sea, in ships carrying goods from any port in India to any other port situated in or outside India. This Act had laid down rules relating to warranty of seaworthiness, bills of lading, risks, responsibilities & liabilities and immunities.

UNITED NATIONS CONVENTION ON THE CARRIAGE OF GOODS BY SEA, 1978 (HAMBURG RULES) Subsequently, India being party to the United Nations Convention on the Carriage of Goods by Sea, 1978, was willing to adopt the uniformity of international practice for carriage of goods by sea. This Convention establishes a uniform legal regime governing the rights and obligations of shippers, carriers, consignees, responsibilities, non-contractual claims, transport documentation and guarantees under a contract of carriage of goods by sea. This convention has also emphasised on amicable resolution of disputes by incorporating a mode of dispute resolution by way of arbitration. The convention was adopted by a diplomatic conference on March 31, 1978, and enforced on November 1, 1992. D. Carriage by Road Act, 2007 Recently, this Act was enacted to regulate common carriers,

limiting their liability and declaration of value of goods for adjudicating liability. The Act is applicable to all persons carrying business of collecting, storing, forwarding or distributing goods by motorised transport on the road, including goods booking company, contractor, agent broker and courier agency, doorto-door transportation of documents, goods or articles, and excludes the government. This Act requires registration of common carriers, which has a validity of 10 years. Registration is required even for opening and closing of branch offices in different states. The Act further lays downs the procedures for goods forwarding note, goods receipt, general responsibility and liability of common carrier.

FACILITATING SEAMLESS TRANSIT Even though India has adopted various conventions and protocols seeking uniformity with international practice, there still exist several separate laws for each mode of transport. However, the Multimodal Transportation of Goods Act, 1993, has had an over-riding effect on these laws. This has been a major leap in regularising this sector, with the regulation of multimodal transportation system in India. Development of infrastructure across the nation is now emphasised more, and there is an ongoing requirement for updating the laws to cope up with emerging new and faster means of transportation, and simultaneously achieve faster means of processing. This is because faster service of cargo is still an illusion in the Indian context. Courtesy: Soloman & Co.





As businesses expand globally, constant attempts are being made to penetrate the farthermost share, in terms of international transportation of goods, it is critical for companies to select getting involved into a partnership, one needs to ascertain some very critical prerequisites SUDHIR MUDDANA SELECTING a freight forwarder for transporting goods internationally is crucial to the ultimate success of any business. Shipments getting delayed, lost or reaching the destination in a poor condition is a major concern for any business. Therefore, it is important to partner with a competent freight forwarding company that is best suited for the customers’ business needs. But there are some prerequisites that must be considered before taking that step.

ABILITY TO MANAGE BUSINESS The first factor to consider is whether the freight forwarder would be able to handle its clients’ business and shipping


loads, even in case of an overload. A small freight forwarder might not be able



to handle more than a certain number of shipments per month. Hence, if the company requirement exceeds that number, then the business will suffer. Also, there may be instances when the person in-charge is absent. In such a scenario, the functioning should not cease, simply because there is no one to answer questions or handle shipping instructions for the goods’ movements. Therefore, it should be ensured that the forwarder has skilled and knowledgeable staff.

STABILITY AND REACH Along with the ability to handle business volumes, like in any other industry, while partnering with another company, the


locations on earth. With logistics as the backbone, and freight forwarders having the major and partner with the right freight forwarder to efficiently manage their business. But before to realise potent benefits.

balance sheets and other credentials of the company are checked. In the logistics industry, it is also important to enquire about the financial ability of the freight forwarder along with its experience in the business. It is best to select an established freight forwarder because the new ones will not have as large a network of agents, shipping companies and other contacts for coordinating shipments. An established freight company will have a close-knit network of people through whom they deal for sending shipments and timely delivery. Also, freight forwarding companies that have been in the business for a long time will be experienced in utilising all modes of transport and

Prerequisites While Selecting An International Freight Forwarder • Presence in different cities/towns, all major/minor ports in India with own presence/partnership in major global locations • Thorough understanding of EXIM rules & policies and national standards of different countries, especially major trading nations • Ability to provide web-based tracking and monitoring • Sound financial backing • Presence across different segments of the supply-demand chain across sea, air, port, road, and rail. Inputs by LR Sridhar, MD, Sical Logistics

providing additional value-added services, if required.

STRONG NETWORK OF AGENTS An essential prerequisite for freight


Freight forwarder selection, continued

Benefits Of Using A Freight Forwarder Company opts for a freight forwarder for the following reasons: • It is difficult to deal directly with shipping lines if the volumes per month are low; in such a case, freight forwarders are a better option • No shipping line gives credit (at the most credit is given for 7 days and that too by a regular shipper and not a new one) • The companies require house bill of entry for customs purpose • For less than container load • Every shipping line works in particular corridors, in such a case, freight forwarders are the best option as they work in multiple corridors. forwarders is a good network of overseas agents. This network includes offices or agents in the buyers’ countries. In addition, they should have good carrier and freight broker relationships. These freight forwarders should find freight carriers that will charge less and provide services at lower cost. Therefore, this must be kept in mind while choosing a freight forwarder, to ensure that goods reach the destination smoothly without damages or delays. For example, if perishable goods are to be delivered to another country, they must reach at the right time, or else they shall perish. In such a case, a failure in delivery will not only lead to financial losses but also have serious consequences on the reputation of the business.

KNOWLEDGE OF PRODUCTS SHIPPED It is preferable to select a freight forwarder that has some knowledge of shipping

the type of products that the customer wants. Thus, the forwarder will be aware of the special issues that such cargo might have and will also know how best to deal with them in case any urgency crops up. One way to ensure this is by asking the forwarders to demonstrate their experience of handling the type of products that their clients want to transport.

CUSTOMS AND COMPLIANCE Apart from freight agents and freight brokers, the forwarder must be able to clear the shipment through customs. This will eliminate the need to hire a separate customs broker to manage this aspect of shipping needs. In such a case, the freight forwarder will provide regular updates on changes in foreign government import regulations that may affect future export sales of the client.

Prerequisites For Selecting An International Freight Forwarder • If the freight forwarder is small, he might not be able to handle more than a certain number of shipments per month. So, finding an international freight shipping supplier that can handle required volume of shipments is essential. • Before selecting a freight forwarder, it is important to know as to how long he has been in business. This is required, as a bigger company will have a large network of agents, shipping companies and other contacts with which they can coordinate shipments. • Whether international freight forwarders have brokering services because if the freight shipping company can also clear shipment through customs, the client will not have to hire a separate customs broker to take care of this aspect of shipping needs. • Does the freight forwarder have experience in dealing with the type of cargo of the client as they are aware of issues such cargo might have and how best to deal with anything that might come up. Inputs by Sanjay Sinha, MD & Founder member, Leeway Logistics


ERRORS AND OMISSIONS INSURANCE Despite being good at work, the best of people may make mistakes. So, even if the freight forwarder is extremely conscientious, there is always a possibility for error. Here, even a minor error can cause a delay in product delivery and damage products, sales and, ultimately, the revenue. Therefore, it is important that the freight forwarder selected has ‘errors and omissions insurance’. This insurance will help protect the client from bearing the full cost incurred due to the damages.

EASE OF COMMUNICATION Is the customer comfortable communicating with the agent assigned by his freight forwarder? Is the forwarder willing to take the time to explain terms and procedures such that the customer can understand? If not, then one should go for a new agent. However, if provision of a new agent is not possible, one should consider partnering with another freight forwarder altogether. Freight forwarding is an important part of any business. Hence, it is imperative that the customer is comfortable with and can communicate with the individual handling his accounts. Unless the customer can freely communicate with the forwarder and feel the same attention being reciprocated, one should not do business with them.

PARTNERING FOR SERVICES Although it is important to consider the amount of money being spent on different services, price should not dictate the choice of a freight forwarder, as opting for an inexpensive freight forwarder may lead to a compromise on service quality as well. Therefore, before making a list of probable freight forwarding partners, one must make a note of the objectives, total cost, coverage for customer service, IT, etc. The services needed must be listed down and checked as to which companies meet the requirements. This will help in shortlisting companies that can provide suitable services to its customers’ business. The forwarders’ abilities and experience can also be assessed by requesting references from their previous clients regarding their track records. This will help in zeroing in on the appropriate partner to cater to one’s requirements.



TRACEABILITY & CONVERGENCE ARE THE SECRET KEYS The freight forwarding industry is witnessing burgeoning opportunity both on the domestic and international fronts. The stiff competition today necessitates that freight forwarders consistently provide the best of services to customers. For enhancing their capability, most forwarders are looking at the latest technology adoption as a cost-effective & efficient bargain. SHIVANI MODY WITH increasing business volumes, the logistics industry today contributes immensely to the economic growth of any country. A part of logistics includes freight forwarding, which has a strong impact on a region’s economy and international standing, as these services are directly linked to trade, import and export. Several logistics companies are now looking to tap the market potential by building on their freight forwarding capacities in terms


of latest technology deployment and adoption of new transport trends. The growing opportunity has also resulted in an increase in the number of freight forwarding companies all over the world. This has made it possible for an exporter to send cargo to almost any part of the world at a competitive cost and in a shorter timeframe. The increasing competition in the freight forwarding space has translated into choice and quality

services for customers. To make the most of these opportunities, freight forwarders are now banking on efficiency, quality freight forwarding and cost-effectiveness, and one way to achieve this is to provide services using the latest technologies. As the transport of goods becomes critical, customers are demanding high level of consignment security in the process. This has led to an increase in the use of technology for scanning, checking

Corporation, avers, “Freight forwarding has been one of the most successful sectors of the global logistics industry in the past decade. The rapid development of economies in China, India, Russia, Middle East and Latin America has created the demand for international forwarding services, especially for mid-sized manufacturers going global. Moreover, global players have also been quick to exploit the resulting opportunities. The most visible trends include integrated solutions, consolidation at both individual and industry levels and use of technology. Freight forwarding companies are constantly seeking innovative solutions to make transportation more efficient and cost effective. These technologies can include cleaner, more effective fuels for trucks, planes & shipping and state-ofthe-art navigation systems to help cargo vehicles find the most efficient way to their destinations and route optimisation. Technological innovations also help ensure security, with scanners providing detailed X-ray scans of trucks to check for illegal cargo. Renewable energy too has an important part in new freight technologies. While using refrigerated trucks, companies are evaluating the use of air conditioning unit that can be completely run by solar energy. This will bring down the cost of transporting food products.


and providing minute-by-minute data to customers. The impressive growth of logistics and manufacturing in India and China has led to a swift evolution of the entire industry. The importance of logistics in achieving overall operational success of an organisation has made it vital for service providers to offer integrated, end-to-end solutions that clients look for. Whether it is moving goods from a particular sea port through road transport to the final delivery place, service providers need to be a one-stop shop for clients. Consolidation of players is also important here. This enables reducing service cost, achieving greater efficiency and increasing domestic and global reach. Kiran Salunke, MD, Siesta Logistics

In the past, the movement of goods from one location to another was an elaborate and cumbersome process. Delivery of goods to their destination took nearly 8-10 days. But, today technology has evolved considerably, with upgradation and advanced tools to move materials and even plants from one location to another. This rapidly progressing technology has made the delivery of materials hasslefree, error-free and time & cost effective for clients as well. Salunke informs, “All large players are aware of the benefits of IT and are willing to upgrade their systems with the latest tools. However, it seems that mid-sized companies are not yet fully aware about IT benefits and, unfortunately, have a conservative approach in this regard.” Increasing adoption of the Internet and electronic communication systems has changed the industry landscape. Also, the role of multi-modal transport and freight

forwarding as the intermediary between the buyer and seller has evolved. Clients need to be connected with the freight forwarding systems to access their files for status, extract reports from freight forwarding databases and also have their shipments processed in an error-free and timely manner. The new-age systems are designed to be user-friendly, which require minimal human intervention and real-time tracking and tracing. The systems being web-enabled can provide authentic information, with proper accountability and can be accessed anytime, anywhere. On this, Vineet Malhotra, Sr VP, Kale Logistics Solutions, says, “To meet the changing needs of customers, many forwarding companies are adopting the new-generation systems, which inculcate industry best practices and standardised processes. A global business presence requires that the key managers have access to management information system (MIS) reports at all locations and a decision support system to enable critical decision making.” Further, Malhotra views, “Data exchange between these applications, as well as legacy and external systems, can be achieved through multiple technologies – message-based electronic data interchange (EDI), Internet applets, middleware or other messaging software layers. The future solutions for the forwarder community need to interface with all trade partners’ systems providing centralised, uniform software with suitable upgrades that comply with security norms.” The use of enterprise resource planning (ERP) systems today is increasingly being used by the industry. To this, Salunke adds, “ERP systems have been successfully adapted by a number of industrial segments. Several logistics players have installed ERP systems and gained considerable improvements in the operational efficiency. As service providers move into the international arena, the cost models change. We need to address tax issues, particularly norms and regulations in the country. The expenses incurred are beyond movement of materials, and here the ERP system adds value to the services provided.”

BECOMING ECO-FRIENDLY With growing concerns for the environment, the logistics industry in developed countries is looking at cleaner


Freight forwarding technologies, continued

and renewable fuels. Also, at government levels, policies and regulations are being drafted to accommodate industry needs and create a safer environment. Instead of opting for heavy investments in cleaner fuels, forwarders prefer carbon credits. Presently, the developing nations still use carbon credits to continue manufacturing old emission technologies, as for them issues like employment guarantee are still of utmost importance. Salunke views, “Developing countries are still in the phase of overcoming the high investment involved and compliance requirements of cleaner fuels. The reliance on carbon credits might see a change in the future. In recent times, most statutory bodies have started offering incentives to promote the use of clean fuels to keep pace with the constantly evolving needs. It is important that fuel policies and other related measures are always accompanied with initiatives that promote use of cleaner fuels, primarily to cut emission hazards and achieve safer environment.” Added to this is the concept of renewable energy which, as a part of new freight technology, still remains negligible in the country. Attaining success on this front in India is complex. Also, facilities such as refrigerated transportation are limited in the country, which is not the case in developed nations. Salunke explains, “For example, we import Turkey from France to India, which takes 12 hours to reach the Indian airport. But, delivering the same to the destined hotels takes almost 72 hours, given the fact that we do not have a highly developed refrigerated transportation facility in India. This also increases the cost of commodity.” He further notes, “Leveraging renewable energy has a long journey to traverse in India, with huge investments attached to it. The Foreign Direct Investment procedure is not much of a solution either and investors are not ready to invest in freight technology because of the lengthy return phase of almost 15 years, or even more.”

SECURING THE CARGO In India, select places use X-rays scans for trucks ‘A’ category ports. Several companies in India are listed under the Green Channel Companies, and only these companies use scanners with prior permission of concerned authorities. These are controlled by relevant authorities and technologies that are made available from


time to time by every governing council. Several companies still insist on vendor qualification and vendor audits so that they can refrain from such activities, and thus maintain their brand equity.

CHALLENGES AND ISSUES Today, a forwarder typically has little time to strategise and plan for business expansion. So a freight forwarder requires a system that provides a single window for all stakeholder interactions and helps improve its efficiency in operations and shipment visibility. Salunke says, “Implementation of new processes and technologies always brings with it new challenges. These challenges include areas of cost of implementation and the time taken in earning returns. Also, technological issues are such that each location utilises a set of applications that need to be shifted to one uniform platform.” With a large number of freight forwarders, the industry faces stiff competition in tapping lucrative opportunities. Retaining a client for the long-term requires innovation and developing enhanced capabilities in a short span of time. Thus, the onus lies mostly on the forwarders. Evaluating the right technology requirements and then considering the expenses also become a challenge for freight forwarding companies. Malhotra informs, “Technology is slated to play a critical role in improving client interactions, shipment visibility, transparency, transportation, cost optimisation and customer satisfaction. Shippers, forwarders and transport operators are expected to increase their investment in long-range real-time radiofrequency identification (RFID) monitoring systems, feeding into powerful databases. However, in reality, most small companies try to focus on their business-centric processes while trying to leverage on benefits of technology where relevant.” He further adds, “Most large and medium companies are willing to utilise technology for scalability and improving operational efficiencies but are holding back because of huge costs involved. Other problems include training of personnel as well as operational and maintenance issues.”

TAPPING OPPORTUNITIES Freight players who can provide the latest solutions to customers are set to make the most of the opportunities waiting to be

tapped. Only players having the required resources will prosper, eg, extensive global networks and sophisticated IT systems, as well as the flexibility to adapt quickly to the opportunities created by the changing market landscape. Freight forwarders today need systems having a service-oriented architecture that can support EDI, third party ERP systems and other emerging technologies to cope with a dynamic business environment. The freight forwarding community needs to embrace e-commerce strategy as a step towards maintaining a competitive market position similar to those practiced by their technologically advanced counterparts in the developed world. On this, Malhotra says, “Future technology needs can be largely classified as intra-organisation automation covering enterprise-wide business applications, mobility solutions, security solutions, business support applications/ERP and inter-organisational automation covering EDI – interfacing with customs, agents, carriers and community systems. The increased application of RFID technology and tracking shipments in real-time also provide opportunities to freight forwarders.” He believes, “The use of technology tools like global positioning system (GPS) and RFID will definitely help the company to grow, but the stakeholders need to be made aware of the value addition by technology adoption. The use of new-generation technology can give a logistics service provider an upper hand over global competition. This will also help in attracting more business from overseas players.” India is marching towards becoming an economic superpower. Several international logistics companies have already started setting up their base in the country. Many other global players are showing keen interest in being a part of India’s growth story. Salunke says, “Today, along with competition within the country, Indian freight forwarders are facing greater competition from their international counterparts. Hence, there is an urgent need to reshape ourselves, form strategic alliances, networks and partnerships for common interests. While competing with each other, it is also important to play a complementary role to attain common benefits. Globalisation brings with it challenges as well as opportunities. Thus, the future growth depends on how we position ourselves in the market.”

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PROFITABILITY Freight forwarding companies are seen as partners in progress by many companies. In the race to be the customers’ first choice, they offer value-added services. While this is the most crucial element to stay afloat, they also need to take a hard look at their operations to determine how they can increase their profitability. Utilising new tools and service offerings is one way to generate new revenues. Explore the action items and determine what is important for your business.


Following are 10 actions to help companies introspect their software solutions and the benefits they would derive by arriving at the right solution.


IMPROVE REVENUES THROUGH NEW BUSINESS GROWTH Winning new business and meeting the needs of one’s business prospects should be the first priority. Customers are looking beyond cutting a bill of lading or arranging for freight and towards added services that can provide greater visibility, online bookings, improved time to delivery and logistics management. And, all the while they are ensuring that they stay compliant with the government regulations. Helping one’s customers navigate through these steps in the supply chain as well as providing these added services will help gain new business and revenues. Forwarders compete for new business by adding new services and offerings to drive greater revenues. A company must understand its prospects & customer requirements and leverage these ideas to drive new offerings. An example of an added service that a company can provide to customers: During the review of a prospective shipper, one discusses the documents and

production and integrate this information into one’s forwarding solution. This becomes a win-win situation for all parties. The forwarder offers a software solution for improving efficiency and productivity of the shipper. It could then transmit this information to one’s forwarding solution to process their shipment. This example has following benefits: • This new service/tool will offer greater opportunity of getting new business and improve revenues • There is a strong ROI for both parties due to improved efficiencies • The electronic integration between the company and its customer not only provides efficiencies but creates a much tighter link, making it harder for them to switch. Companies can look for a forwarding solution that can extend their current offerings and allow them to provide new services and tools to customers and enhance their business prospects.


LEVERAGE FUTURE BY IMPROVING OPERATIONAL EFFICIENCIES Most forwarding solutions do not allow for the application to be easily modified to meet a company’s specific requirements. They may have easy-to-use attractive

ACT Despite all the advancements in technology, most companies continue to rely on manpower to re-enter information to process a shipment. An optimum solution will maximise connectivity to one’s trading partners, carriers, agents and brokers. By having this connectivity, information can be automatically updated and passed on to the next party without re-keying. AS global trade begins to pick up pace in the current economic environment, this is the right time to re-evaluate the technology and software solutions to drive more revenue as well as position one’s company for greater efficiencies and profits. Companies should evaluate their software solutions and determine whether there is a return on investment (ROI) in the short-term that can lead to growth in the long-term. Companies can take advantage of the combination of available resources and the high number of ‘bids’ to find the right solution that can help in acquiring new business.

information that will be needed to move the shipments. During the conversation, it becomes apparent that the shipper is using a manual process to create the export documentation. It has employees that use nothing more than a ‘word template’ to create documents such as SLIs, packing list and commercial invoices. The volumes of documentation are substantial and there is a real need for automation. Solution: Because this is a highvolume shipper that would represent a substantial amount of freight, a company can consider offering them a tool that would automate the export document

screens but it is not clear whether they will be able to meet business needs of a company as it grows and brings in new customers. Will the company have to make substantial expenditure to modify the application to meet their specific needs? What about that special line of business which requires more information to create, say, forwarding documents? In most cases, the answer to the last question is ‘NO’. A modern solution should have the ability to easily configure and modify the user interface (UI). It should also have the ability to modify the workflow to accommodate one’s own way


Global forwarding solutions, continued

ACT A key component to an automated solution is to have strong customer service tools that allow augmenting what the staff can perform. Tools such as service-level agreements, automated alerts (both internal and external), extensive database search options, ad-hoc reporting and real-time dashboards help improve a company’s customer service quality. of doing business. This is critical for two reasons. The first and major reason is to have the flexibility to modify the solution to meet one’s specific requirements at present. Not every forwarder follows the same work process. Having a solution that allows companies to configure the screens and flow to meet their requirements is paramount to gaining efficiencies in operations today. The second reason is to have a solution that will allow a company to accommodate new business, new prospects and adapt the solution to new challenges that the future may deliver. One cannot predict what the future will deliver in terms of specific customer requirements, government and security initiatives or commodity-specific business. Forwarders today want to ensure that they have a solution that will empower them to change the UI and workflow to meet these new demands.


CONNECTIVITY DRIVES PRODUCTIVITY AND MINIMISE DELAYS In today’s world, it is hard to believe that most information required to process a forwarding shipment is manually entered several times before it is processed.

and passed on to the next party without re-keying. The benefits are substantial with a huge ROI. First, it will allow companies to reduce error rates with document production, which can often lead to costly delays with customs, banks or carriers. Entering the information at once can reduce the likelihood of errors while it can automatically be passed down to the next step in the process. Second, time and efficiency can be saved by not having to re-key in information.


BEST OF BREED VS FULLY INTEGRATED SOLUTION Whether one believes in a strategy of selecting best of breed solutions or is looking for a fully integrated solution, the initial cost can be minimised by the type of solution selected. Both options can be explored here. Best of breed: In this process, one may select the optimal freight forwarding solution, which would then need to be integrated to a host of other solutions. If this is a company’s preference, one should look for solutions that subscribe to a service-oriented architecture (SOA), which allows for a strategy that optimises the ease and supportability of the integration. Some of the common


It is important to look internally at a company’s own service offering to improve the service and help retain & secure new business. Having a solution to provide one’s employees with automated tools to guarantee a premier level of service is critical for success.

Despite all the advancements in technology, most companies continue to rely on manpower to re-enter information to process a shipment. An optimum solution will maximise connectivity to one’s trading partners, carriers, agents and brokers. By having this connectivity, information can be automatically updated


integration points would be: accounting, customs clearance, government agencies and CRM. Fully integrated solution: For this, one should look for a provider that can meet as many of the major components as possible, eg, accounting and custom brokerage. One must look for a robust

solution to meet both short- and longterm goals of the company. A classical mistake is selecting a solution that is just ‘good enough’ for now without considering the future. With growing business, one needs a solution that can meet the future requirements as well.


GLOBAL PRESENCE, GLOBAL SERVICE, ONE SYSTEM In all segments of this business, one can see global expansion, from the smallest to largest forwarders. In the past, globalisation was part of the strategy for only big players. But, today, even small forwarders have reached out across the globe and opened international offices. Whether fuelled by large customers, growth in a particular lane segment or the desire to expand the business, a company’s software solution must be able to accommodate this requirement. It should be able to run in major global trading countries, accommodate multilingual & currency capabilities and have the ability to add local government interfaces as well. In a global operation, it is most advantageous to have a single operating environment for all locations. This allows working easily on a complete end-to-end shipment by using one global shipment ID and seamless passage of the data. This eliminates duplicate data entry, provides greater data integrity, expedites cross-border processing and ultimately establishes a compliant solution. One should also look for solutions providers that can also provide integration into the local country-specific customs clearance.


OFFERING EXPANDED TOOLS TO ONE’S CUSTOMERS Offering efficient new and innovative tools and services to one’s customers is the best way to acquire new business and drive up revenues. This will help a company to be seen as a leader and major service provider. For companies in which innovation is not as critical, offering better services and tools can be equally critical in securing new business. Customers basically look for good and easy-to-use visibility tools that provide tracking and tracing. Customers are now looking for automated alerts that can give them a view of the critical milestones in the supply chain. More important would be automated alerts when service-level

agreements or major milestones are not achieved. This allows customers to manage their shipments by exception while providing them with greater efficiencies. Some other important tools include purchase order (PO) management, online booking, quotations and access to shipment data through a flexible reporting tool. These tools provide another level of service and visibility that the customers of this age are requesting. Providing these tools will help in retaining customers and/or leverage new business.


TURN COMPLIANCE REQUIREMENT INTO A STRONG SERVICE OFFERING For many forwarders, trade compliance is a priority and is taken seriously. Continuous education for their employees and enforcement within their company is something that most forwarders adhere to. Having said this, forwarders should turn this strength into service offerings to fill the void for their customers. They must leverage it in their marketing and sales materials with campaigns that will lead to new revenue opportunities within the company. There are many ways to leverage adherence to the myriad of trade compliances. For example, not all shippers do an exhaustive search to ensure that they are not shipping to a party on a government ‘denied party list’. Shippers are often challenged with ensuring that they have the appropriate licences to export their goods. When shippers have these licences, they may be difficult to track. These are examples where forwarders can utilise their software solutions to offer such services to the shipper. This can often result in higher fees, new bidding opportunities or even added consulting services to a company’s offerings.


QUALITY CUSTOMER SERVICE HELPS RETAIN & LEVERAGE NEW BUSINESS It is important to look internally at a company’s own service offering to improve the service and help retain & secure new business. Having a solution to provide one’s employees with automated tools to guarantee providing a premier level of service is critical for success. A best-in-class tool allows forwarders to pre-define the service levels for their customers. After the parameters of these

service levels are set, the system and a solution that can provide a tool or automated alerts can help a company stay service that can easily map these files on top of their customers’ list. Alerts can into the correct format. This would allow be sent to the company’s internal people the company or provider to easily take to rectify the situation before it becomes non-standard files and update them into a problem. Alternatively, the alerts can its system. With both these capabilities, be sent to one’s customers, giving them companies can ensure that their system valuable information about the status of can take advantage of the value from their shipments or time-critical information electronic data exchanges. regarding delays in the supply chain. In STRONG FINANCIAL case of a breach in the service level, it ANALYSIS becomes critical for the forwarder to take The last and most forgotten action. This requires good search engine elements are strong financial reports tools to look up the status of pending that allow a company to stay on top of shipments for one’s customers. Once the company has this information, forwarding specific analysis, which are it is important to have good ad-hoc critical to financial success. Some of the report writers to create custom reports. reports that are critical in this business Reacting quickly to a service-level breach include agent splits, agent reconciliation and following up promptly with a status (netting AR & AP), agent profit analysis, consolidation profit reports, lane analysis report to one’s customers is critical to reports and files not billed report. provide quality customer service. Therefore, a key component to an automated solution is to have Customers today look for easy-to-use visibility strong customer tools that provide tracking and tracing. They service tools that are now looking for automated alerts that can allow augmenting give them a view of the critical milestones in what the staff can perform. Tools the supply chain. such as servicelevel agreements, These are only a few type of reports automated alerts (both internal and that companies will need to manage their external), extensive database search forwarding business. It is important to have options, ad-hoc reporting and real-time a solution that will allow companies to dashboards help improve a company’s have a wide range of flexibility to not only customer service quality. Ultimately, quality run these standard reports but query and customer service can help companies in create their own reports. Additionally, a retaining their customers and leverage this strong system will have the tools to ensure reputation to secure new business. automatically setting up the business rules STAY CONNECTED VIA EDI for items like agent splits, methods for cost There is no better way to improve allocations on consolidations and rules for a company’s productivity than to billing algorithms. In the current economic leverage the data from its customers. Not times, billing correctly and staying on top of only will the company want to connect every penny is paramount to profitability. to its partners but also to its customers FOCUSSING ON PROFIT DRIVERS through strong EDI or file transfer There is no better time to accelerate one’s mechanisms. Uploading POs, bookings and business with new revenue opportunities. SLIs can assist in the process of preparing One needs to follow the appropriate the required documents for one’s shipper. due diligence and look for a solution that Gathering this data electronically will help will provide a strong and quick ROI. If reduce errors and also save time. the current solution can provide these Features that companies look for in a opportunities, then these options must be solution are twofold. First, they look for a reviewed and the business refocussed on solution that has standard EDI file uploads to drive new revenues and profits. or APIs in their application. Second, not all solutions and trading partners are Courtesy: KEWILL standard. Therefore, one must look for







EFFICIENT USE OF INTERCHANGE WILL HOLD “I believe that India needs to fast track its customs process and speed of clearance to match quality of execution, etc.,” opines Abhik Mitra, MD, TNT India, in conversation with SELECTING THE RIGHT STRATEGIES


The growth of logistics in India will be supported by two main aspects. It includes the ability to have a dense network that allows reaching the secondary and tertiary towns of the country. Additionally, companies should be in close connection with their customer and their customers’ customer. Although strategy selection is the key to successful logistics, the more important factor is strategy execution. Focussing on the customer and his needs helps in deriving a great strategy. The strategy of a company into shipping, road transportation and small courier company may not be identical in terms of the assets it uses, types of goods it moves, etc. But, its purpose is to transport goods from one place to another at the lowest possible cost while supporting the customers’ needs. Hence, the real issue is to understand the customers’ needs and then work on one’s plans around them. The market is huge and continues to grow, but in the future, successful companies will be using simple strategies with a focus on their customers. They will execute the strategies in a convincing manner, with a focus on people and processes. While planes, trucks, land, and investments are important, they only serve as enablers to the business, and not the key differentiators for success.

Infrastructure continues to be a big dampener in India. It includes roads, airports, container fright stations and the ability to clear goods from airports, ports and railway stations. Looking at the geography of India, the use of rail, and road are all critical to logistics. It is not good enough to move goods from one place to another and then get stuck because the roads beyond that point do not allow movement of heavy traffic. On the other hand, efficient use of electronic data interchange (EDI) will hold good for the industry. Overall, considerable work has been done and we, as express industry, have played a central role in that. But I still believe that India needs to fast track its customs process and speed of goods clearance to match with that of the rest of the world, and also improve it in terms of speed of decision making, quality of execution, etc.

GOVERNMENT SUPPORT Our experience in the domestic markets or international shipments has been quite positive. Thus, from TNT’s perspective, India tops the list of countries to grow and invest in. There are several areas where the government needs to focus and work on. The Goods and Service Tax (GST) implementation will be the key to this, provided a quick decision is made on the date of its implementation, followed by a flawless implementation of the same.


IMPACT OF GST IMPLEMENTATION Successful implementation of GST will see the supply chain dynamics changing for many players, such as fast moving consumer goods (FMCG) and pharmaceuticals, wherein people will move from large number of warehouses to bigger warehouses at lesser number of locations. The supply chain cost will be a key determinant of the entire process, rather than tax-based issues. Today, the Indian supply chain is decided not by the supply chain or customer requirements, but on what is best from a tax perspective. This will bring tax-based issues to an end. Moreover, we expect increased loads on the primary modes of transport, while secondary & tertiary modes of transport will have to improve further. There will be more pressure on players like us to become more secure on the last mile. This will help the last mile become more professional than what it is at present.

ADOPTION OF LAST MILE STRATEGIES The last mile is becoming increasingly important. However, flawless delivery of the last mile is extremely important. To achieve last mile connectivity, electronics and technology solutions will be beneficial in future. With the deployment of such smart solutions, users will be able to track their consignment till the time it does not reach the destination. Hence, speed and reliability are the key factors to ascertain the same. Thus, we need the right people, the right processes, and right technology to support these activities.

ACHIEVING COST EFFICIENCY Logistics is a scaled business. This means, the bigger a company becomes, the lower the cost per unit should be. In such a case, one can negotiate on the basis of growth of unit costs. Secondly, IT will be a cost increasing factor, which needs to be managed. Also, the cost of organisation structure is important because manpower is important. Last but not the least, claim liability is one of the biggest factors concerning logistics companies. The most important thing here is to have the service capability to deliver what is promised – to avoid claims for damages, delays, etc., from customers.

IDEAL SUPPLY CHAIN INFRASTRUCTURE The overall supply chain infrastructure should also focus on utilising India’s long coastline. Given the excellent rail network available, the Railways also need to be effectively used. Looking at these modes of transport – along with road and air – the issue is to make all these functional and in sync with each other. Also, it is not enough to just move a ship from one place to another, but also to load it correctly at the source and unload it faster at the destination. Thus, end-to-end services need to be looked at.

ELECTRONIC DATA GOOD FOR THE INDUSTRY with that of the rest of the world, and also improve it in terms of speed of decision making, Sudhir Muddana. Excerpts... EXPORT-IMPORT SCENARIO IN INDIA Export-import in India has been steadily growing but the inefficiency to manage the same can spell trouble for us. The exports have seen a major fall with the strengthening of Indian Rupee. Organisations involved in exports find it difficult to compete with other locations, especially Bangladesh, Philippines and Vietnam. However, on the import side, there has been a huge growth driven by engineering, spare parts, etc., as many companies prefer importing spare parts instead of manufacturing them here. Therefore, the make-and-buy decision has also changed now. Also, supply chain has become more efficient. In order to become globally competitive, the government needs to put forward an export group strategy. Currently, our domestic market is thriving, which is a good sign. If our exports grow further, then our overall GDP growth will grow much faster.

market has shown continuous growth. Taking example of a mobile phone... the phone can get damaged and needs repair during transit. Earlier, no one thought about things like bringing a damaged phone to the equipment manufacturer, get it repaired, and send it back to the customer in the least possible time. We have a huge competitive advantage over other players, as they are not able to offer these services as quickly as we can. Similarly, if an ATM stops functioning, one would want to repair it quickly, as a huge amount of cost is involved. We have worked on the supply chain with one such player, which allowed us to deliver the repaired ATM within two to four hours from the moment it stopped functioning.

ROLE OF TNT IN BOOSTING INDIAN LOGISTICS We are focussing on the international market, which is a combination of exports to Europe and imports from Europe and China. This is one way in which we are supporting the growth of Indian logistics industry. Second, in the domestic market, we are focussing on offering next day and day definite services through a combined air and road network. But, with regard to the rail segment, we are looking at the prospects.

INSPIRING SUCCESS STORY As service expectations or service needs of customers are increasing, the pressure is also mounting on the supply chains. I would like to mention our experience with a telecom company and a banking ATM equipment manufacturer. Over the years, the Indian telecom mobile equipment






The prospects of sea transportation just got bigger & better with the invention of the world’s largest heavy lift vessel – MV Svenja. A vessel having the combination of speed, world’s highest crane capacity, latest offshore positioning tools and technologies has been recently introduced in the global shipping industry by a German company, SAL. On its maiden voyage to India, the vessel explores the promising horizons that are destined to transform the business dynamics of Indian logistics in the years to come… SUMEDHA MAHOREY THE beginning of a new decade has brought with it many possibilities, milestones and challenges to conquer. This potentially holds true for global trade with the narrowing down of international boundaries and increasing competitive collaboration. It is a known fact that sea transportation, owing to factors such as environment-friendliness, low-cost, safe & secure voyage and cargo load capacity, plays a crucial role in the transportation


of goods worldwide. With the global shipping industry preparing itself for the promising phase fuelled by growth in the heavy engineering and offshore oil & gas sector, the Indian shipping industry is facing the emergent necessity of vessels that can cater to the increasing cargo handling and transportation demands of this fast developing market. As an answer to this demand from the industry, the invention of the world’s largest

heavy lift vessel, MV Svenja, comes in as a major milestone in global shipbuilding. This vessel, recently commissioned by SAL, with a lifting capacity of 2,000 tonne and speed of 20 knots, visited the Indian shores on its maiden voyage.

WORLD’S LARGEST HEAVY LIFT VESSEL MV Svenja, Type 183, built by Germanybased Siestas shipyard and commissioned

controlled system for positioning the vessel in offshore operations like turbine installations, oil & gas operations, etc. MV Svenja also possesses ISO 14001 and OHSAS 18001 HSE certifications – the highest certifications available for environmental protection and occupational health & safety. The heavy lifter measures 160.5 metre in length and 27.9 metre in width. It has a loading capacity of 11 ts and 40 cbm (freight volume).


by SAL Schiffahrtskontor Altes Land GmbH on December 9, 2010, is the world’s largest heavy lift vessel. Named Motor Vessel (MV) Svenja after the daughter of the chairman of the company, this vessel represents a new generation of heavy lift ships in the world. It is equipped with two 1,000 tonne high-performance cranes from Neuenfelder Maschinenfabrik (NMF), Hamburg, which is also a part of the Siestas Group. This vessel built at the cost of €60 million is jointly financed by SAL, HSH Nordbank and the City of Hamburg. Apart from its unique lifting capacity, the cranes stand out because of their significant outreach of 38 metre. The ship’s diesel engine, with its 12,610 kW and its capability of generating a speed of 20 knots, comes from the Augsburg-based MAN Group. This combination of speed and performance makes the ship unique

in the project area. In addition, MV Svenja can operate as an open-top/open hatch ship and enable companies transport heavy cargo of large dimensions. Additionally, it is equipped with Kongsberg dynamic positioning system (DP-I) – a computer

With the growing challenges of meeting the worldwide energy demands, major oil & gas (O&G) and renewable energy producers are taking initiatives to increase exploration with special emphasis on offshore infrastructure. An already established example includes Vattenfall’s Thanet offshore wind farm. Even in India, O&G companies are mulling over offshore exploration prospects. In this scenario, the world’s largest vessel built to carry oversized cargo comes as a much needed initiative from shipbuilding companies catering to this heavy engineering segment. This type of vessel is a solution for the transportation as well as installation needs of the O&G sector and other offshore equipment such as turbines for offshore installations, crane movement, heavy machinery, power plant equipment and floating cargo. Highlighting the role of this heavy lift vessel in the Indian market scenario, Rukhsana Vohra, MD, Sai Maritime & Management (SAL’s Indian agent), says, “We are looking forward to introducing this new vessel type with enhanced capacities in the Indian O&G as well as renewable markets. If there is a possibility of going offshore in the wind energy sector, then we would like to be the

I believe, particularly in the Indian context, shipping is a very lucrative option as there is still a lack of inland infrastructure. If a company wishes to transfer the cargo from the West to the East coast, the sea route is much more convenient as compared to surface transportation where connectivity to the remotest of the places is a rarity. SVENJA HEINRICH, CO-OWNER, HEAD – MARKETING & PR, SAL



World’s largest heavy lift vessel, continued


MV Svenja is named after the ship’s co-owner Svenja Heinrich. It was built in a record time of six months at the Siestas Shipyard in Germany. Seventy-five per cent of the parts employed in its construction originate from Germany. Apart from its high speed, the vessel is characterised by lean structure and low draft, which makes it highly flexible and well-equipped to reach even less accessible ports. With its crane capacity of up to 2,000 tonne, the vessel is able to rely on its own equipment for loading and discharging in most ports worldwide. The ship’s diesel engine, with its 12,600 kW and its capability of generating a speed of 20 knots, comes from the Augsburg-based MAN Group. In addition, the vessel is fully equipped with an inventory that includes forklifts, spreader bars, lifting beams, lashing and securing materials.

most preferred transportation providers in this space as well.” Another advantage of this type of vessel in the Indian context is its high speed capacity. With the vessel having a maximum speed of up to 20 knots, it is able to offer short transit times, imperative for time-sensitive cargo. While the high speed guarantees early arrival in any major port, the vessel’s competitive advantage further lies in its ability to call more ports facilitated by low draft and onboard cargo handling equipment. High


says, “O&G sector worldwide is mostly controlled by engineering, procurement and construction companies (EPCs) like Latin, British Gas, Dolphin, etc., that we wish to target in future. For example, the present cargo consigned to Latin was appointed by ONGC. While, in the renewable sector, we have already been working with companies like Vestas. We see major potential for import and export activity in this sector.”


With multiple facilities like shipbuilding & repairing, lighthouse facilities, freight speed also facilitates safe transportation forwarding, etc., the shipping sector plays with conscientious care and handling of an important role in India’s economy. Post the cargo. liberalisation, the Indian shipping industry Noting the technological benefits of is striving hard to acquire new dimensions this vessel, Svenja Heinrich, Co-owner, Head – Marketing & PR, SAL, avers, “The vessel has a dynamic Specificities positioning system, which allows the ship to position itself close to Deadweight: 12,500 mtonne offshore and deep sea operations Tonnage: 15,200 GT/4,600 NT where it can not only transfer Length all over: 160.5 metre cargo to a particular destination but also transfer cargo for direct Beam: 27.50 metre installation on to a platform.” Deck: 128.50 x 27.50 metre This ability has opened up new horizons for transportation ships Hold: 107.10 x 17.0 x 13.70 metre with which can now also cater to adjustable twin deck and capability of the demands of installation trading with an open hatch needs of various Crane outreach:16 metre – 1,000 mtonne industry verticals. With state-of-the-art 25 metre – 800 mtonne engineering onboard, 38 metre – 500 mtonne these types of ships Crane capacity: 2 x “NMF” SWL can now cater to highly 1,000 tonne, fitted on port side technical project cargo that need specialised Service speed: 20 knots handling. Draft (Summer): 9,013 metre Commenting on the potential of this new application in the Indian in terms of demand and infrastructural market, Vohra adds, “Till now, development. in the Indian market, we used to Also, with deregulation in the oil focus only on moving goods from sector, crude oil carriers now do not have one place to another. But now, to deal with fixed freight rates irrespective with this new vessel and the sister of the market condition. In this changing vessel that will be commissioned in market scenario, the evolution of the March, we will be exploring and cargo vessel capacity to the 2,000-tonne learning how we can innovate the mark is a crucial step that would help ships to do things that heavy lift in catering to O&G as well as various ships have not done before. industry verticals in a more efficient and We will also explore newer customised manner. markets such as O&G, Delving into the changing market where vessels of these kind scenario, Vohra says, “Logistics is an are applicable.” evolving market. Every year, the piece Speaking about the global weight of cargo is becoming heavier. shipping industry, Vohra


Equipped with two 1,000 tonne high-performance cranes, MV Svenja can operate as an open-top/open hatch ship and enable companies transport heavy cargo of large dimensions.

Twenty years ago, cargo weighing 20 tonne was considered really heavy and now 1,800 tonne has become routine. With the growth of the shipbuilding industry and the advent of shipping technologies,

lucrative option as there is still a lack of inland infrastructure. If a company wishes to transfer the cargo from the West to the East coast, the sea route is much more convenient as compared to surface

Logistics is an evolving market. Every year, the piece weight of cargo is becoming heavier. Twenty years ago, cargo weighing 20 tonne was considered really heavy and now 1,800 tonne has become routine. With the growth of the shipbuilding industry and the advent of shipping technologies, manufacturers will gain the much required confidence to build bigger. RUKHSANA VOHRA, MD, SAI MARITIME & MANAGEMENT manufacturers will gain the much required confidence to build bigger. This not only saves a lot of time but also the assembling cost. We have many clients who build equipment up to 1,300 tonne. Having this vessel as well as its sister vessel in March will surely open up newer avenues for us in handling heavy cargo.” Commenting on the Indian logistics need, Heinrich avers, “I believe, particularly in the Indian context, shipping is a very

transportation where connectivity to the remotest of the places is a rarity. Establishing sufficient infrastructure for land transportation would outweigh the cost that is needed for sea transportation. With many companies becoming aware of the resource of this calibre in the market, they will also feel more inclined to build units near the 2,000-tonne mark. This, in future, would be a lucrative avenue in sea transport.”

SAL will be commissioning the sister vessel of MV Svenja in March. The second new SAL building will be equipped with a Dynamic Positioning II System (DP 2). The DP 2 feature will allow customers to use these vessels as a combined solution for both transport and offshore installation including sub-sea handshakes. This vessel will be suitable for offshore windmill installation works, particularly for installation of piles, mounting of transition pieces and feedering of components from shore to offshore installation platforms. Commenting on the technologies aboard this vessel, Heinrich says, “The sister vessel has the same configuration. However, it will be upgraded with the DP 2 system. This vessel will be more powerful engine-wise and have all the security elements to perform complicated operations offshore. It will also cater to the same industry verticals.” Commenting on any capacity expansion plans in the near future, she adds, “We do not aim to increase our capacity beyond the 2,000tonne mark at present. We are already way ahead of our closest competitor who has vessels up to 1,400 tonne. Presently, we need to stabilise in this segment and optimise all the features that we have on this vessel, which have not been explored as yet and introduce in the market. Anything next in line would not be something that will top it but something that will be slightly lower in service and have some different features for different markets.” Talking about the industry’s reaction on the world’s largest heavy lift ship, Vohra avers, “Our clients are very excited. Companies like Larsen & Toubro, Godrej & Boyce, ISGEC and Thermax have already shown interest in its capacities.”

GOLDEN ERA OF CARGO SHIPPING With the world’s largest heavy lift vessel entering the Indian waters, Indian shipbuilders need to understand the changing dynamics of the shipping industry as well as the various needs of the heavy engineering vertical to better compete in this global market. Also with the vessels of this calibre available in the market, the Indian engineering and heavy manufacturing industries can explore transportation as well as installation capabilities of these kind of vessels in the future.




Welcome to the world of speculations and predictions as all eyes turn to the most awaited Railway Budget. Being the most crucial link of the supply chain, Railways has not been able to attract its due credit in driving the growth of Indian logistics. More so, heightened cost pressure on the government is acting as a major hurdle in its growth bandwagon. It’s time that the government takes critical measures to fuel the prospects of the rail freight segment in the forthcoming budget. SANDEEP PAI THE countdown has begun. It is that time of the year when all eyes from the logistics industry are on the upcoming Union Railway budget. Rest assured that as days pass, any news or even a snippet related to the budget will be scrutinised to the ‘T’. Conclusions would be drawn, changed and then redrawn. For the entire month, contents of the budget would be under intense speculation. And then the grand finale will arrive – the day when the budget will be presented in the parliament. The Union Rail Minister will present the policies, plans and incentives in the parliament, with spectators instantly


analysing the repercussions. Let’s create news today and add fuel to these prolonged discussions. Let’s analyse the Railway’s current financial status and its impact on the future of freight services. This is an indispensible topic of any discussion related to the

YoY (%) Overall goods traffic Coal Iron ore Cement Source: CARE Research

logistics industry, as these are interlinked. As freight contributes to almost 65 per cent of the Railway revenues, the performance of freight services primarily decides whether the Railway minister can fund new projects, especially, the freight services

Growth trend of freight traffic carried by railways (%) FY09 FY10 FY10 (8 m) FY11 (8 m) 4.9 6.6 7.4 3.3 9.2 7.2 8.4 7.0 -4.6 1.7 3.7 -13.6 8.7 8.4 9.1 5.8

Share (%) 100.0 45.6 12.9 10.6

related infrastructure projects and policies, as passenger services are way to politically sensitive not too get the desired attention.

THE FREIGHT CORRELATION According to the Railway Ministry officials, Indian Railways had carried 673.31 MT of revenue-earning freight traffic during April-December 2010. This freight volume shows an increase of 20.68 MT over the freight traffic of 652.63 MT actually carried during the corresponding period in 2009, registering an increase of 3.17 per cent. Going by the growth figures, one can say that the revenue from freight services is not adding serious money to the depleting railway exchequer. Those managing the Railways’ finances, and currently engaged in preparing the forthcoming rail budget, are a worried lot, as they were hoping to increase their revenues and cover up expenses through the income generated from this year’s freight. As per the Railway Board, Railways has a net deficit of about `2,500 crore, as its expenditure has gone up by almost `1,330 crore, while earnings have come down by `1,142 crore. It is expected that the Railways may not have enough funds this year to allocate money to two critical reserves to fund the purchase of new assets and improvements in amenities – the Capital Fund and the Development Fund. In fact, last year also, the Railways



had failed to allocate money to its Capital Fund, which is used for buying new assets. Furthermore, the Railways’ operating ratio (the sum of money spent to earn a sum of `100) is the best indicator of the financial condition. According to a Ministry official, “In 2001-02, the operating ratio was as high as 96 per cent. The Railways then made dramatic improvements to bring it down to 75.9 per cent in 2007-08. However, in 2008-09, it again deteriorated, and finally ended up at 94.7 per cent in 2009-10. This year, the operating ratio is threatening to increase well beyond 94 per cent.”

MONETARY DISARRAY This disarray is the result of increasing expenditures and no serious increase in revenues. While the reasons for increase in expenditures are related to external factors and Railway Ministry’s policy in general, reasons for the negligible increase in revenues are linked with sluggish growth in freight services. Chaitanya Raut, Manager – Research, Credit Analysis and Research (CARE), says, “The primary reasons for increase in expenditure are higher wage bills and rising fuel costs. The diesel prices have increased by about 6-7 per cent since the beginning of financial year 2011, resulting in


Railway Budget, continued

During the current financial year, the movement of freight was affected by the shortages of wagons. So, it is expected that in this budget, government will take necessary actions to enhance availability of the wagons. We also expect the government to focus on building railway links connecting ports to existing rail heads. Moreover, we anticipate government to bring in serious reforms to encourage private participation in the areas like, construction of new tracks, repairs of tracks and signalling system, etc. – CHAITANYA RAUT, Manager – Research, Credit Analysis & Research (CARE)

We expect that Railways should rationalise the increase in haulage charge for stability in freight rates as this constitutes major chunk of operating costs. Introduction of viable freight forwarding schemes for freight forwarders is also desired. It should provide common infrastructure hubs/facilities at major locations throughout India. It should promote a policy wherein joint investment can be made on unused sidings of Indian Railways and can be developed as container rail sidings with required infrastructure. Lastly, it should promote aggregation of cargo and it should apply rake load rates commodity wise on various cargo being loaded in a single rake. – TS NARASIMHAN, Executive Director, DARCL Logistics

overcome these in the future. However, it should be noted that these steps will not bring about any drastic change in revenues at the time of the upcoming budget. In order to keep the finances healthy on a long-term basis, Raut suggests, “The continuation of Railway Ministry’s recent increase in the freight rates by 4 per cent for major products like coal, cement, iron ore and steel is indispensible. Moreover, there is a dire need to increase the rail network. At present, both passenger and freight services run on the same track, with remarkable difference in the speeds of the two. Passenger trains are normally run as per their schedule, while freight trains have to find their passage in the remaining slots, which thus results in delays in transit. Hence, there is an urgent need to expand the railway network. Finally, passenger fares also need to be increased, as this is an immediate source of revenue. ” Moreover, the process of completing the dedicated freight corridor (DFC) project must be accelerated. This will alleviate the congestion on the long distance rail routes to carry cargo, thereby enhancing the freight traffic. The DFC was targeted to be completed by FY16. However, this project has seen a lacklustre progress. Furthermore, the government should take initiatives to design and deliver premium services to core industries like coal, steel, cement, etc, and charge fees for services according to value-added services. They should also initiate longterm transportation agreements with major customers. Taking these steps will contribute towards the growth of freight services and, in turn, increase Railway revenues.

ON THE BRINK severe financial losses. Moreover, some of the benefits provided to employees, such as hike in daily allowances, performancelinked bonus and implementation of recommendations of the 6th Central Pay Commission (CPC), has raised the wage bill of Railways by `15,000 crore per annum.” Raut further enlists the reasons behind less revenue earned by Indian Railways. • Freight contributes almost two-thirds of the total revenue of the Railways. In the first nine months of FY11, the growth in freight carried by the railways has shown a sluggish trend.


• During April-November 2010, the freight traffic of all major commodities has shown a decline in the growth momentum • The restrictions imposed by governments of Orissa and Karnataka on the movement of some minerals have adversely affected freight traffic. In fact, iron ore has shown a negative growth in the traffic during the same period.

REQUIRED RESOLUTION While it is clear that financial imbalances persist, possible steps can be taken to

Just days ahead of the railway budget, the news that the railways are running at a loss of about `2,500 crore does not sound good for the logistics industry. This has in fact harboured scepticism in the minds of many. With limited resources and the politically sensitive issue of raising passenger fares, experts are concerned that the government may give away the idea of bringing out new projects/policies related to freight services. However, it may so happen that these fears prove unfounded when the Railway Minister presents the budget. Till then the speculations can continue.




Following the initiation of free market principles in 1991, India began to register a fast-paced economic growth. There was an upsurge in foreign investment and competition. Manufacturing & exports boomed, which in turn propelled the need for integrated logistics solutions. Tapping this promising potential is HiTech Manufacturing Show that will aid the industry sustain its growth spiral. With HiTech Automation & HiTech Material Handling as the concurrent shows, it promises to bring new dimensions to the dynamic industries...

SHIBANI GHARAT THERE are very few moments that carry the magnitude to change the course of history. The opening up of the Indian economy in 1991 was one such defining moment. Globalisation not only shaped the Indian economy but also formed the silver lining for industrial development in India. It helped encourage exports and increase productivity by employing comparative advantages that could be achieved through exposure to foreign competition, enhanced technical development and access to economies of scale. Globalisation has indeed helped India in many ways and logistics is one of the industries that has benefitted the most due to liberalisation. “Since 1991, the Indian economy opened up and witnessed an inflow of the FDI in several sectors and less export-import regulations. These factors not only provided access to international markets but also contributed to the technological development in the country. The corresponding development of globalisation of the Indian manufacturing sector helped drive the growth of several industry verticals such as logistics, automobile, pharmaceutical, textiles, etc.,” says Sudhanva Jategaonkar, Associate Vice President – B2B Publishing, Infomedia18, a Network18 Group company. Sturdy economic growth and liberalisation have also shepherded a significant increase in domestic and international trade volumes resulting into a spiralling requirement for transportation, material handling and warehousing. India is a witness to growth in integrated logistics solutions as the companies are

increasingly compelled to concentrate on their core competencies and avail of the cost saving potential.

MANUFACTURING BACKBONE Today, the manufacturing industry forms the backbone of the Indian economy. It has not only helped overall productivity and employment, but also played a vital role in strengthening logistics and several other sectors. In other words, the fortunes of logistics and manufacturing are interlinked. The Indian manufacturing sector is successfully competing in the global marketplace and registering high growth on a year-on-year basis since the 1990s. This brings to light the critical need of new age equipment & technologies to move goods. “Today, the kind of innovations that the industry is witnessing was unimaginable around 20 years back. Almost, every day there is a new product, machine or service launched. The buyers are really spoilt for choice,” says Jategaonkar. HiTech Manufacturing Show, organised by Network18, is one of the largest tradeshows in the country showcasing pioneering solutions in engineering and manufacturing. HiTech Material Handling Show and HiTech Automation are two concurrent shows under the umbrella fair. HiTech Manufacturing will help bring all players from these two major industry verticals under one comprehensive roof. This event will display the best in terms of cutting-edge technology and innovation that will help shape the future of the

industry in India. From plastics & packaging machines to IT & software, automation systems, electrical & electronics and material handling equipment storage systems, the entire industry will converge to showcase their innovations on this unique platform.

ENVISIONING THE FUTURE The trade show is bound to have several product launches, live demonstration, dedicated zone/areas for various industries that will help those participating in the show on long-term basis. “The manufacturing industry in India is bound to experience a revolution called HiTech. If the Indian manufacturing industry has evolved since 1991 to the stature of a gigantic player in the world arena, HiTech Manufacturing Show intends to take the country to the position of a leader. It will not just help the exhibitors in terms of quality business visitors, but also enrich them with the experience of a lifetime,” says Jategaonkar. With this show, the entire spectrum of the manufacturing industry in India will be spectators to a plethora of exhilarating developments, which in turn will definitely help several businesses grow beyond measure. HiTech Manufacturing show is all set to give shape to a robust manufacturing future for a country that has seen this industry grow from strength to strength, year-on-year since the 1990s. Indeed, the show will not only introduce the Indian industry to the most futuristic innovations but also help set a foundation to launch India as the Future Factory.



Oracle releases new transportation and global trade management solutions

Ascendent ID develops automated load tracking system

ORACLE has recently


released a new broad set of market-driven enhancements to further support global transportation and trade compliance processes. The new releases include Oracle Transportation Management 6.2 and Oracle Global Trade Management 6.2, and provide additional support for transportation and global trade management through enhanced fleet management; transportation sourcing, business intelligence and planning; small parcel and rail transportation; dock scheduling; product classification; as well as trade control determination. The enhancements deliver unmatched management functionality on a single, unified platform, and further standardise and automate processes to reduce transportation costs, increase operational efficiency, improve customer service,

decrease supply chain lead times and mitigate supply chain and trade compliance risk. “To align business processes, optimise execution and expand global reach, shippers and logistics service providers need to be able to effectively manage global transportation and trade compliance processes,” said Derek Gittoes, VP – Logistics Product Strategy, Oracle. The new capabilities include fleet management enhancements for shipment and asset optimisation, dispatch workflow automation, geographic visualisation and mobile communications; transportation sourcing enhancements to support the requirements of procuring and optimising less-than-truckload (LTL) transportation services; and transportation planning enhancements to optimise order consolidation and three-dimensional equipment load.

ID recently released its new radio-frequency identification (RFID)-based load tracking system for automating and securing previously labourintensive and error prone transactions. Ascendent ID is a premier manufacturer of adjustable range RFID for Automatic Vehicle Identification (AVI), long-range vehicle access control and process automation for large mobile assets. Trucks carrying goods are equipped with long-range rewritable RFID tags and readers are installed at loading areas, as well as at truck scale or site exits. As the truck is loaded, product information is automatically written to the memory of Ascent ID’s RFID tag by a standalone reader. When the tagged truck approaches the scale or exit reader, a reader identifies the ID number in the tag and

reads the memory containing information about the product loaded. This information is sent to the customer’s system, which eliminates the time and errors associated with paper tickets and key-entry. This new read-and-write range will help the driver focus on driving the vehicle, and not on paperwork or manually entering transaction data. The versatility of Ascendent ID’s load tracking system makes it applicable for tracking aggregate to wheat and everything in between. Doug Crane, President, Ascendent ID, states, “With our unique ability to reliably read and write our tags at distances of greater than 10 feet, we can save our customers considerable time and money due to increased throughput and significant reduction in errors.”

Breakthrough logistics flow control system by Descartes IN order to address the challenges in managing the flow of goods for retailers and their supply chain partners, Descartes Systems Group recently launched its breakthrough logistics flow control solution, in a federated network. This cloud-based solution is specifically designed to address the post-purchase order process for retailers. It combines multiple logistics capabilities across Descartes’ federated Global Logistics Network – global trade compliance, inventory and purchase order visibility, transportation management, and yard & dock-door flow control of


distribution centre operations. Current logistics and global trade compliance systems across these communities are often not well integrated or designed to collaborate across all necessary parties involved. Without a network-based approach, information comes neither on time nor is comprehensive. Thus, retailers are forced to carry additional inventory unnecessarily, are less reactive to consumer demand and have to pay excess importation fees or even fines. For efficiently and effectively controlling the logistics flow post-purchase

order, retailers and their partners need a solution to connect, collaborate and manage suppliers, logistics services providers and customs house brokers involved in moving and clearing goods. Descartes’ new logistics flow control solution uses Global Logistics Network to connect and collaborate between these parties, while combining global trade compliance, transportation management, visibility, dock-door appointment scheduling and yard management capabilities to manage the flow of goods from supplier to retail dock-door.

LogiAssist introduces learning BAE Systems develops while driving system non-lethal laser for defence CONSIDERING the fact logistics and training sectors, against pirate attacks that everyone has a different developed LogiAssist. “The capability for learning, scientists have developed a system that adapts learning content to specific requirements of the individual. LogiAssist addresses the needs of companies in the logistics sector and longdistance truck drivers. This can help them learn while driving using audio lectures, text documents or video. Truck driving today is an occupation that requires enhanced skills and good qualifications. Modern truck drivers have to operate electronic devices, adapt their routes to the given traffic and loading situation, know driving fuel-efficiently, be up to date with statutory regulations and monitor safety of their load. Also, there is complex legislation introduced at the EU level. Drivers who make trips to other countries also need to have some knowledge of foreign languages and be familiar with the regulations in different countries. Modern truck drivers always have something new to learn, and they are even obliged by law to keep up with the developments. But, the problem is that they spend most of their time behind the wheel. Trucks only earn money when they are out on the road, and so the driver has limited time for other things. With this in mind, research scientists at the Fraunhofer Institute for Applied Information Technology (FIT), Sankt Augustin, working closely with partners from the

system will help drivers and trucking firms handle their occupational training needs,” explains Dr Martin Wolpers, Project Manager, FIT. The idea is for truckers to listen to

Truck drivers can develop their occupational skills with the LogiAssist System.

an audio lecture after work, during breaks or while driving and receive specific assistance while on the road. Training content is offered via a smart phone, tablet computer or laptop – in other words, on devices that the driver already uses in his truck. It is tailored to the learning needs of the sector and can be adapted to relevant context as well. The content can be put together from a kit of readymade tools, which can be operated with the software that users are familiar with. The learning environment is designed to adapt to the learning and working style of the individual.

CONSIDERING the rise in piracy worldwide, as reported by ICC’s International Maritime Bureau (IMB), and the increase in operations and capabilities of pirates, commercial shipping agents are looking for ways to prevent attacks while avoiding armed guards on their ships. For combating this growing threat, BAE Systems has come up with the concept of using a non-lethal laser, which would leave only temporary effects, to distract and deter potential attackers from a distance. The company has created a prototype device to serve as an effective non-lethal deterrent against pirate attacks on commercial vessels such as oil tankers and container ships. Leveraging the capability of its Optics and Laser Technology Department within its Advanced Technology Centre, BAE System’s researchers worked on to assess the feasibility of laser distraction as a non-lethal weapon. They have successfully demonstrated a suitable laser at the Pershore Trials Range in Worcester over varied distances under different conditions. The laser beam can provide a visual warning to pirates at distances greater than 2 km, and disorient attackers sufficiently at lesser distances so that weapons cannot be targeted effectively. Also, the power of the laser remains safe for eyes. Roy Evans, capability technology lead for laser photonic systems, BAE Systems, said, “The effect is similar to that when a fighter pilot attacks from the direction

of the sun. The glare from the laser is intense enough to make it impossible to aim weapons like AK-47 or Rocket Propelled Grenade (RPG), but does not have any permanent effect.” The researchers have developed a bespoke Neodymium Yttrium Aluminium Garnet (Nd:YAG) laser, which is an effective deterrent at relatively low power levels. Thus, by utilising targeting systems and changing beam patterns, it can be used against multiple targets and intensity of distraction effect can be enhanced. The laser distraction system can be fitted on commercial ships and use its own targeting capability or integrated with existing ship radar and sensor systems to control the direction and power of the beam. It can work semi-autonomously and also include security features to ensure that pirates cannot use it in case they board the ship. Bryan Hore, Business Development Manager, and the lead for anti-piracy programme, BAE Systems, said, “Laser distraction is part of a wider programme of anti-piracy technologies being developed by BAE Systems, including radar systems, which utilises expertise and knowledge from the military domain. The aim of the laser distraction project is now to develop a non-lethal deterrent to pirates, which has no lasting effects, can work in maritime environment, be operated by the crew at no risk and is cost effective.”






Advancements in technology and communication have played a pivotal role in business convergence. In the face of increasing competition, almost all the industry verticals have embraced these changes. While the returns on investments are high, most companies are turning to automation for ensuring effective and timely services to customers. DEVELOPMENTS in communication and information technology industries have enabled people to communicate with one another irrespective of the distance, thereby making the world a smaller place to live in. The revenues of the total logistics technologies market in India were about $246.6 million in 2010. Enterprises in the present era of knowledge-based economies need to improve their technological capability to survive the competition and market dynamics. Accordingly, companies need to adopt new technologies in the logistics arena and integrate it into their corporate strategy. Logistics technology supports efficient management of materials flow, transforming the materials into finished products and delivering them to the final customers. The areas where logistics technology can be applied include inventory management, procurement, warehousing, transportation and production. This will facilitate information flow through various channels to integrate these activities. The logistics technologies that can be utilised for this purpose are as follows: • Barcode technology • Radio frequency identification (RFID) • Global positioning system (GPS)

Increasing number of LSPs and the upcoming 3PLs and 4PLs Growth of manufacturing and retail industries

Unorganised logistics industry

• Warehouse management system (WMS) • Transport management system (TMS)

MARKET OVERVIEW Barcoding, RFID, WMS, TMS and GPS are some of the prominent technologies used in logistics and supply chain functions. The market base for TMS and WMS is very small, and is expected to rise with growing logistics industries and containerisation. Also, the government is promoting RFID, which would continue



Lack of advanced technology, wireless networks and communication infrastructure


Less availability of professionals with expertise in logistics technologies


Most companies being family owned in India, owners prefer manual operation over technology usage to safeguard privacy.

Source: Frost & Sullivan


Lack of awareness about the technologies and their return on investment

Figure 1: Key market drivers and restraints in the Indian logistics technologies market 2011–2015

Key Challenges Rank

Greater focus on streamlining the supply chain

to be used in large-scale projects. With the government formulating mandatory rules, GPS vehicle tracking is also likely to increase. The usage of barcodes is increasing, gradually shifting towards twodimensional barcoding.

NASCENT BUT NICHE The penetration of a majority of logistics technologies (RFID, GPS, WMS and TMS) is currently in a nascent stage, primarily due to the high cost of these technologies and lack of complete understanding among end-users about the return on investment these provide. Despite the restraints, the Indian logistics technology market is currently on a rapid growth phase. And the market is expected to achieve revenues of more than $600 million by 2015, at a compound annual growth rate (CAGR) of 19.8 per cent. Courtesy: Frost & Sullivan

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Engineering Expo Chennai 2011



Chennai has emerged as a hot destination for investments from across the globe. Availability of educated manpower, robust infrastructure, accessibility via different modes of transport are some of the deciding factors that have made the city a preferred destination for several companies from various industry verticals. Trade shows like Engineering Expo have proved to be platforms of growth for the industry to come together under one roof, and help induce the growth of trade & commerce in the region. SHIBANI GHARAT TAMIL NADU has been successful in attracting massive investment since time immemorial. Today, it is one of the premier foreign direct investment (FDI) destinations in India. The investors have capitalised on the strategic location of the capital city – Chennai – which today wears the crown of the leader, as far as industrial presence is concerned. The region remains unarguably the epicentre of investments. Today, it boasts of being a hub for several industry verticals. From IT to automotive, logistics & material handling to textiles & apparels, medicine to petrochemical, Chennai plays host to several industry domains.

PRESENCE OF INDUSTRY BIGWIGS Several software companies like Accenture, Cognizant Technology Solutions, CSC, EDS, HCL, HP, IBM, Infosys, Satyam, Sun Microsystems, Symantec, TCS, Verizon, Wipro, US Technology Resources, etc., have development centres in Chennai. The city has also surfaced as an electronic manufacturing hub with MNCs like Samsung, Nokia, Motorola, Cisco, Dell, Siemens, Sony-Ericsson, Flextronics and Foxconn setting up manufacturing units in

the 250-acre Sriperumbudur electronics SEZ. Ericsson and Alcatel have R&D facilities in the region. Besides, R&D facility for Texas Instruments and semiconductor companies like SPEL and Tessolve are in the pipeline. A large chunk of the Indian automotive industry is based in Chennai. Almost 30 per cent of India’s automobile industry and 35 per cent of its auto ancillary industry is based in & around this region. Further, several global automotive companies such as Ford, BMW, Hyundai, Mitsubishi, TVS, Ashok Leyland, Nissan-Renault,

the outskirts of Chennai. The presence of big names from the industry provides the local industry an opportunity to grow. Participating in an industry exhibition is the perfect way to showcase technology, exchange ideas, and meet & interact with customers as well as competitors. It also helps in leveraging the opportunities put forth by the presence of such diverse industry verticals. “Exhibitions provide an opportunity to interact with business buyers, understand their expectations and develop innovative technologies,”

A large chunk of the Indian automotive industry is based in Chennai. The presence of big names from the industry at the Expo provides the local industry an opportunity to grow. Caterpillar, Royal Enfield, TI Cycles, MRF, etc., have manufacturing plants in the same area. Various petrochemical companies like Chennai Petro Chemicals, Manali Petrochemicals, Petro Araldite and pharmaceuticals companies such as Orchid Pharmaceuticals are situated on

says S Sriram, National Sales Manager, Boge Compressed Air Systems. Boge manufactures a range of oil-lubricated & oil-free screw and piston compressors. The company has participated in all the four cities of Engineering Expo. According to S Prabhakar, Marketing

Chennai | 11-13 Mar, 2011 Engineering Expo, organised by Infomedia 18 Ltd, is one of the biggest events in the country dedicated to the engineering industry. The 2009-10 edition witnessed business transactions worth over `150 crore. Launched in Ahmedabad in 2002, the event today boasts of a huge visitor turnout. The Expo is a preferred destination for SMEs and manufacturing & engineering companies to transact, network, tie-up and exchange ideas for the growth of the industry. After flagging off Engineering Expo 2010-11 in three cities – Pune, Ahmedabad and Indore – this season of the Expo will conclude with Engineering Expo Chennai.

The road & rail network provides great connectivity to major cities like Bengaluru & Mumbai and several other major western & northern cities. Waterways connect Chennai with many countries in Asia and beyond. This has also led to infrastructure development in the form of logistics hubs by logistics players such as DHL, Realtime Logistics and Shri Kailash Logistics in the region. “There are several regions in India

EXCELLENT CONNECTIVITY Chennai is well-connected through major roads such as Oragadam Industrial Corridor Road, East Coast Road, NH-44, NH-45, a major seaport, railway station and also has an international airport.

LARGEST SME GATHERING Engineering Expo is one of India’s largest SME gatherings. Every year, it boasts of profuse industry participation from various verticals, some of which include machine tools & accessories, process machinery & equipment, material handling equipment,

Considered to be one of the most preferred platforms to grow business by the 1,000+ companies that participated in Engineering Expo in the previous editions, this year’s Expo promises more business than ever before. that have grown into major industrial hubs owing to massive investments from domestic as well as international players. But Chennai has an advantage over other regions. It owes its strategic advantage to an established infrastructure and excellent multimodal connectivity, a huge manufacturing presence, demand base and supplier presence,” avers Sudhanva Jategaonkar, Associate Vice President – B2B Publishing, Infomedia18, a Network 18 Group company, and the organiser of Engineering Expo Chennai.

ADEQUATE GOVERNMENT SUPPORT Representative, Bois Technologies, “This is the 4th time we are participating in Engineering Expo Chennai. In the previous years, the event has been a good experience and helped us generate a lot of leads.” Along with SMEs, Engineering Expo Chennai will see participation of some of the renowned names from the industry. Atlas Copco India, FEIN Power Tools, Tussor Machine Tools, Trelleborg Sealing Solutions, Pathak Machines International, Nilkamal, Emtex Machinery, Boge Compressors, Toshnitek, Sri Yantra Engineering, Rittal India, etc., and several other major manufacturing industry players will be participating in Engineering Expo Chennai.

looking at the need to support industrial growth with the formation of planned urban infrastructure.

The Government of Tamil Nadu has been promoting industrial growth through various initiatives to make the state a hub for manufacturing. Currently, the state ranks third in terms of development of SEZs in the country. The various places where SEZs are being set up in Tamil Nadu are Hosur, Tuticorin, Ennore, Tirunelveli and Vandalur. The government has realised that the future investments will be centred around the emerging industrial centres. “SEZ helps in economic and industrial development of the state. It also helps in bringing investments and creating employment & business opportunities for the locals. The government is making efforts in the right direction to help the industry prosper,” states Jategaonkar. The two leading agencies of the state – the Tamil Nadu Industrial Development Corporation (TIDCO) and the State Industries Promotion Corporation of Tamil Nadu (SIPCOT) – that help sustain industrial growth of the state are now

hydraulics & pneumatics, automation & instrumentation, electrical & electronics, IT products & services, light & medium engineering, safety & security, packaging machinery, etc. Considered to be one of the most preferred platforms to grow business by the 1,000+ companies that participated in Engineering Expo in the previous editions, this year’s Expo promises more business than ever before. Showcasing some of the pioneering engineering solutions and technologies for the visitors, Engineering Expo Chennai has participation from a variety of industry verticals. “Initiatives like Engineering Expo in the past have proved to be principal platforms for this thriving industry to grow beyond measure. Exhibition and trade shows have been utilised as an effective medium to generate business leads, and launch new products & services. Engineering Expo has helped several SMEs in this region to spread awareness about their businesses,” says Jategaonkar. The investment pipeline for Chennai is indeed robust, and many prospective investors are eyeing the region closely. Platforms such as Engineering Expo help foster trade and commerce in the region. Engineering Expo is an ideal medium through which several businesses can reach out and spread awareness to these prospective investors about their products. Indeed, the Expo proves to be a perfect combination of a vast range of exhibitors, spacious venue, state-of-the-art amenities and humungous visitor turnout – the most crucial factor for any exhibitor.



PIONEERING INNOVATION The dynamics of the Indian logistics industry keep evolving day-by-day with the introduction of unique and innovative products & services to bring delight to customers. This impressive growth owes a lot to industry pioneers like FedEx as they have helped the industry move up the value chain. The company is ever-willing to scale new heights in providing complete customer satisfaction, which has become the core value of any logistics service provider these days. A visit to the immaculate expanse of its Delhi premises has only cemented this fact. ANWESH KOLEY


of one of the global leaders widens the perspective towards a new era of product delivery and customer services.

GRAND ENTRANCE Spread across a lavish 48,000 sq ft of cargo space at the Indira Gandhi International (IGI) Airport, the Delhi FedEx hub showcases the company’s commitment towards speedy delivery and timeliness. The premises of the hub give an idea of the magnitude of the company’s operations. For the first timers to a logistics destination, the experience is awe-inspiring. The vast expanse of the cargo floor, high security at every point and systematic step-by-step handling of shipments, all bring to light the immense safety of goods throughout the process of transportation. What really sets FedEx apart is the impeccable integration of the office area with the cargo floor area. Every department can have a clear view of the runway and a peek through the windows shows the cargo loading and unloading area. This allows everyone to have a look at every flight that arrives and the shipments that arrive with it – a smart arrangement indeed. With a total of 684 aircrafts, both owned and leased, FedEx operates with one of the highest numbers of aircrafts in India. A commendable fact is that the

it to the operating unit where the load is consolidated and sent to the attached hub by evening. The deliverables reach the hub from different operating units, which are then segmented and sent to the required hubs by the same night.

DELHI: A PRIORITY HUB FOR FEDEX FedEx central hub acts as a sorting centre for the flow of shipments arriving (on the spokes) from all over the world to be dispatched on the spokes in different directions. The New Delhi hub is the gateway for shipments arriving from as well as leaving for places like Shanghai (PVG), Guangzhou (CAN) and Charles de Gaulle (CDG). It is of little wonder that the best of staff and aircrafts are deployed at this facility. “We have a commitment to fulfill at every step of our operations, as our customers seek value from us and that can only be ensured by systematic integration and employee confidence,” says Taarek Hinedi, MD – India operations, FedEx. He further adds, “Our India operations have attained huge confidence among our customers, and it can be attributed to the precision in delivery coupled with meeting customer expectations on time, every time.” Recently, Delhi hub of FedEx became the most sophisticated hub for

Our India operations have attained huge confidence among our customers, and it can be attributed to the precision in delivery coupled with meeting customer expectations on time, every time. TAAREK HINEDI, MD – INDIA OPERATIONS, FedEx

THE business of logistics has assumed a magnitude far greater than what it was a decade ago. Earlier, it merely meant delivery of products from one point to another. Moreover, the liability of the delivering company ended when the product reached to its destined customer. However, now there is a transformational change in the way logistics industry functions with regards to offering valueadded services. This has been possible because of the inspirational benchmarks set by leading companies operating in this domain. A visit to the Delhi facility

time interval between an aircraft landing at the hub and taking off again is only 90 minutes. This includes loading and unloading of cargo as well as refuelling. Aiding this speedy operational time is an efficient information technology department, which ensures the time limit for every aircraft unless it has to go in for a check. The company had started with 54 destinations across the country and is currently present at 331 destinations. The company follows a hub-and-spoke model for its business. Its advantage is that a dedicated flight is not required for every route. The operation staff picks up material from the customer and brings

the company in India, as it marked the successful completion of 10 years of direct operations in India. “Technology and innovation drive our business all around, and we have extended the same values to our Indian operations. The Delhi hub is the most advanced gateway in India, as the largest cargo traffic is seen through Delhi,” adds Hinedi.

LEADERSHIP EXEMPLIFIED The no-compromise policy adopted by the company is evident in every step. The package size varies from small boxes to large cartons well over 200 pounds in weight. Barcodes are printed on every


FedEx, continued

Roller-enabled floor to move the cargo

deliverable, which can be tracked from anywhere in the world. This allows the customer to be completely sure of the whereabouts of his cargo, and the time it will take to reach its destination. “Our services have impressed customers throughout the years and till date, all our aircrafts fly in full capacity. We have seen a 30 per cent year-on-year growth and intend to expand our services on the basis of excellent customer feedback,” claims Hinedi. An important feature of FedEx is the money back guarantee scheme. “Even if the product reaches the customer a few minutes later than the stipulated time, we offer the package for free. This is a service not offered by any other logistics service provider,” says Hinedi. Till date, the company has never had to deliver a package free to its customer, as there have been no delays in delivery. Shipments are carefully sorted according to their weight and the hub-and-spoke model further eases up the task of delivery commitment. Loading and unloading of the cargo requires technique and craft. The aircrafts are hollow chambers, which, according to their size, can pack in vast expanses of cargo for transport. Each FedEx aircraft has additional weights fitted to the front wheels. This is done because when the aircraft is loaded, it tends to become rear-heavy. So the weights on front wheels balance the mass of the plane and minimise chances of on-flight risks. This is another unique initiative taken by the company.

BRINGING A SMILE TO EVERY FACE The world’s largest express transportation company has the reputation of being one of the best employers in India and is constantly earning accolades in employee satisfaction. It is probably for the same reason that when the global meltdown occurred, the company did not lay off any of its employees, rather saw it as an opportunity to enhance the crisis


management skills of its employees and empower them for the upswing when it comes. “When the economy turns around, we have to be prepared for it. Considering that we were always in the growth environment in India, we have weathered the downturn well,” adds Hinedi. Handling such large amounts of shipments always entails issues regarding customs clearance. While this is a regular process, any delay in clearance can cause unnecessary delays in timely commitment to customers and would, in turn, hamper the company’s image. In order to address this problem, a customs clearance division has been set up within the cargo processing space. This not only saves time in clearing shipments, but also makes things easier for the customs authorities, as the cargo reaches them immediately upon arrival. A myriad of shipments are transported at the Delhi hub. The company has been successful in converting customers, who used freight-forwarding services, to their package of complete solutions due to the wide range of activities offered to the customer. While contracts are generally signed for a period of one year, the maximum contract duration with customers can go up to three years. “Customers have been renewing their contracts regularly, as they are satisfied with all services that we offer. We deliver value-added services on time and according to customer demands,” says Hinedi. The entire hub area is under heavy security and has access to the workstation. The docking stations entail security checks of both person and property. As cargo operations need to be positioned on the outskirts of city premises, security assumes heavy importance, particularly when shipments worth millions come in and go out regularly. With increase in services, the magnitude of operations also increases. This warrants employment of high levels of security, which becomes an integral part of customer satisfaction.

BRINGING IN INNOVATION FedEx has pioneered in bringing in innovative approaches that have not only boosted its profit margins but also benefitted other players in the industry. The consistency attained by the company in India and around the world has provided valuable insights into the varied needs of customers as well as about new methods of increasing base and bringing in higher quality levels. The company relies on deployment of technology as it is nearly impossible to manage all aspects of shipment delivery without adopting state-of-the-art solutions. Online services offered by the company are quite popular and help customers in ensuring the safety and timely delivery of their goods. The company employs a vast fleet of aircrafts for transportation and every aircraft bears the name of the son/ daughter of an employee from anywhere around the world. “This is a way to keep our employees happy and make them feel their worth within the company,” informs Hinedi. The names are changed once every year.

GROWTH AHOY! The logistics industry in India is growing rapidly and logistics service providers are making the most of this opportunity. Industry leaders like FedEx have shown what value addition means for an industry that has immense potential due to increasing consumer needs. There are various services that customers were not aware of in the past; however, introduction of these services has generated awareness among other players in the market, thereby benefitting the customer by raising the bar. Being one of the most important factors contributing to the development of the manufacturing sector across the world, logistics services are all set to witness new heights. With all these unique initiatives, companies like FedEx will continue to pioneer the best to bring a smile to the face of every customer.

Illustration By: Sanjay Dalvi



The complexities of today’s economic environment and ever expanding global supply chains mandate new guidelines for peak performance. Volatile global market conditions and customer demand variability require optimal supply chain configurations to synchronise supply and demand. But lack of visibility into the myriad information sources inhibits supply chain response to these unpredictable swings. Those companies looking to outperform their peers in the hyper-competitive marketplace will need to adopt new guidelines to restore supply chain stability and create enterprise value.

TODAY’S new economic environment is becoming increasingly volatile, complex and structurally different than that seen years ago. In fact, in few places, this is more apparent than in the movement of goods & services. For ascertaining the depth to which today’s uncertain environment affects the global supply chain – ie, the ‘lifeblood of economic and social progress’ – the IBM Institute for Business Value surveyed 664 supply chain management (SCM) executives in 29 countries around the world. It discovered that complexity exacerbates the challenges that these executives must manage on a daily basis. The findings mirror in large part those of the ‘2010 IBM Global CEO study’, which identified complexity as among the top organisational challenges that executives

will face in the coming years. Global economic turmoil and uncertainty underlie the most significant challenges that SCM executives identified in this study. Chief among these challenges are the following: Volatility: Fluctuation in customer demand has been the leading challenge confronted by supply chain executives. Added to demand variances are increasing customer requirements for sustainable products & services, as well as heightened expectations for responsiveness, uncompromising quality and low cost. At the same time, though, supply chain managers are encountering poor quality and reliability performance from suppliers, which, along with logistics constraints and bottlenecks, hampers delivery performance and customer service levels. And, as more companies

continue to globalise their operations and enter emerging markets, these issues may have no quick solution, as operations will become increasingly dependent on a growing number of customers, suppliers, regulators and markets. Visibility: As the number of supply chain partners increases, the need for accurate and time-sensitive information becomes more acute. But lack of collaboration and integration between supply chain and product development partners continues to be a major concern. Product lifecycle traceability in consumer products, pharmaceuticals and other industries is a growing requirement. Yet, despite continued technological enhancements, timely information to make in-stream decisions remains a significant issue.


Smart SCM capabilities, continued

The bottom line is that increased visibility requires the dexterity to make fast decisions in response to constantly changing market conditions. Value: There is, and seemingly always has been, a constant pressure for SCM and operations to create enterprise value. End-to-end supply chain cost and pipeline inventory optimisation are predominant challenges, as well as the means for protecting margin and decreasing working capital. Securing and deploying the right talent and skills for global operations remain a critical concern. The talent vacuum is most acutely felt in emerging markets. The business risks associated with insufficient leadership talent is exposed in decreased cost efficiencies, inventory deployment and in managing regional and local operations with partners. Managing risks and disruptions with global partners at each node is increasingly important. As supply chains become more complex and interdependent, managers must find a way to offset growing complexity with increased flexibility (Figure 1).

INVESTMENT IN NEW RULES VARIES ACCORDING TO STRATEGY Depending upon the strategic initiatives they have in place to build the capabilities outlined by ‘new rules’, as well as their timetables for implementing them, IBM has segmented the organisations that participated in survey into three categories: operators, planners and visionaries. Operators: Operators’ strategies reflect ‘back to the basics’ with investments in warehouse management, transportation management, manufacturing execution systems and data management. They concentrate on cost reduction initiatives, process improvements and information linkages with key suppliers and logistics providers. Planners: Their strategies and initiatives characterise planning and operational efficiencies. Visionaries: Their focussed strategies and initiatives include supply chain visibility with partner collaboration, business intelligence and analytics, risk management, optimisation of networks, cost structures and inventory, and customer demand management with networked S&OP.

OPTIMISING SUPPLY CHAIN PERFORMANCE Overcoming the often-daunting obstacles that complexity and uncertainly introduce


Demand variability


Cost optimisation


Increasing customer expectations


Inventory optimisation


Supply chain visibility


Integration and collaboration with partners


Globalisation of supply chains


Supplier variability

26% 26%

Talent management




Risk management Product lifecycle management and traceability


Source: IBM Institute for Business Value

Volatility: Complex market conditions causing constant flux in demand Visibility: Need for integrated, timely information to make rapid decisions Value: Constant pressure for the supply chain and operations to create enterprise value

Figure 1: Supply chain challenges expose volatility, driving a need for visibility to create value.

into the constant and seemingly relentless challenges of managing the supply chain requires three new rules: New rule 1: Know the customer as well as yourself. Smooth volatility with predictive demand: According to this study, 69 per cent of top executives view volatility in the new economic environment as their largest concern. The CEOs refer volatility as deeper/faster processing cycles, such as order-to-cash and procure to pay. Volatility has been a serious challenge in the past several years for supply chain executives as well. Responding to volatility in market conditions, and the resulting customer demand patterns, has proved to be the biggest challenge for supply chain executives and, not surprisingly, a key investment area. Still experiencing the repercussions of the worst economic downturn in decades, many companies are currently focussed on stabilising their businesses against this volatility. Even though surveyed executives rated demand variability and changing customer expectations as their two biggest challenges – ahead of even cost containment – they are responding to these impediments in different ways. Some, such as operators, are hunkered down, focussed on operational improvement and a return to ‘business as usual’. Operators are doing rudimentary planning (sales forecast, production and supply plans), but with little-to-no consensus planning. A consensus plan is a single agreed-upon operational plan, created based on product development, sales and marketing, finance and supply

chain executives. Planners, on the other hand, realise that the primary objective of the S&OP process is to create a single consensus plan, translated into financial objectives, that is executed across the entire organisation. They are setting up and positioning for growth through globalisation and customer alignment in international and emerging markets and are fine-tuning their distribution networks and enterprise S&OP processes. Visionaries carry these practices even further. They are now moving beyond enterprise planning and focussing on intelligent network planning. They are also attacking marketing volatility with analytical intelligence for supply/demand synchronisation and resource allocation. Top strategic capabilities for visionaries are: • Rapid response to changes in market conditions and demand variability. Networked sales & operations planning linked to actual demand signals (pointof-sale (POS), orders, continuous replenishment) • Use of market analytics and customer collaboration to predict demand • In-process or in-stream reallocation of inventory in response to demand variation: resupply, redistribute, reroute • Responsive allocation of all resources – human, assets, supply. Visionaries are designing strategies that enable them to rapidly respond to constant changes in market conditions and demand variability. In order to better synchronise supply and demand actions, notifications and

signals, visionaries are improving demand management and forecasting by taking S&OP beyond the ‘four walls’ of the enterprise. Not only are they building consensus from sales and marketing through operations, integrating sales statistics with operational planning, but are moving towards networked S&OP. They are sharing forecasts, production, supply and replenishment plans with key suppliers and service providers to ensure that all are on the same page. They are increasingly emphasising on getting customer and channel inputs into the S&OP process, reinvigorating their efforts to refine and align plan versus actual with market analytics and insights and actual customer demand information. This intricate synchronisation of supply and demand requires intelligence across all supply chain functions and partners to bring products to market, while meeting demanding customer requirements. Visionary leaders are investing significantly in advanced analytics and market intelligence to support customer collaboration than other companies. They are collaborating with customers for true demand-driven S&OP, while making adjustments based on realtime signals for synchronisation. They are

because a store is nearing stock-out levels of an advertised promotion. Customer replenishment, vendor-managed inventory and other tactics ensure that the right products are at the right place, at the right time. Those following a predictive and demand-driven model include customer considerations, interaction and performance criteria in all their supply chain activities. New rule 2: See what others do not. Unveil visibility with collaborative insight: Supply chain visibility was the leading challenge identified in the study. This continues to be a major concern today as well, because companies seek agility and responsiveness in their global operations. Although supplanted by demand variability in the latest survey, visibility, integration and collaboration with network partners still demand the attention of supply chain executives. At a time when information is readily available in most parts of the world through Internet, supply chain managers still struggle with accessing accurate and timely information to run their global operations. Effectively capturing, managing and analysing information, and collaborating with global partners to make

Visionary Leaders’ Top Strategic And Smarter Capabilities • Extensive outsourcing of non-differentiated functions: Visionaries take advantage of global capabilities, skills & cost structures and share risks across the extended network • Optimised pipeline inventory: Inventory is kept at ideal levels throughout the supply chain • Efficient cost structures: Visionaries employ variable costs structures that fluctuate in direct synchronisation with demand variability. Integrated, balanced, evaluation of constraints helps reduce/contain costs while maintaining customer service levels • Cost-efficient sustainability practices: They use models, analysers and optimisers of cost and service levels, while evaluating the trade-offs of the carbon footprint, energy, water usage. Product design includes environmental considerations such as recycling and after-life disposal • Hedged risks: Visionaries use inclusive risk management policies and programmes that are adjusted for the probability of an event occurring. To facilitate immediate response, mitigation strategies are in place and known by all. using market intelligence, advanced analytics and varied customer communications tactics to predict demand in a better way. Based on this predictive demand, they are making in-stream corrective actions, reallocating inventories, making supply and resource decisions mid-stream and even redistributing in-transit products. For example, a shipment may be re-routed

real-time decisions, are major concerns today and require substantial effort. Executives are at different points in building smarter collaborative visibility capabilities. Operators are still struggling with transactional level exchanges and breaking down the silos among supply chain functions within the enterprise. In sharing information with their supply

chain partners, they rely primarily on electronic data interchange (EDI) and are working through standardisation and data management approaches to make sense of the information. Planners have taken things a step forward with integration. They are integrating their strategies, plans and operational capabilities with visibility, both across functions and business units within the enterprise. They are building more integrated visibility capabilities with key partners (suppliers, service providers, contract manufacturers and customers) that are focussed primarily on supply chain planning and logistics functions. Additionally, they are implementing dashboards and scorecards to better monitor on-going performance against targets and manage exceptions and disruptions. However, the visionary leaders are pushing ahead. They are using collaboration among their network partners with business intelligence to make collective and fast decisions. Their top strategic capabilities include the following: • Use of business intelligence and analytics on key control point indicators, eg, forecasts versus orders, schedules versus production capability, inventory in transit, shipment status • Performance management, dashboards and alert notification for exception management • Collaborative planning and execution with partners • Resourceful integration and visibility across the supply chain (internal & external) • Real-time information generated by ‘smart’ devices and objects, eg, radiofrequency identification (RFID), sensors & actuators. Visionary leaders are using business intelligence and advanced analytics to analyse, monitor and detect changes, from the highest priority events to the most minute transaction, that influence customer service. From adjustments in forecasts due to real-time point-of-sales or actual orders, to production schedule adjustments from a supplier, to in-transit shipment status from a carrier, they are aware and reacting faster. Performance management and event monitoring includes evaluating thresholds of tolerance, responding to business rules with either corrective actions automatically or with alerts for human intervention. Visionary leaders are integrating and


Smart SCM capabilities, continued

synchronising end-to-end information among all parties, bringing together pertinent data on events to monitor activities and on performance to monitor plan. They are implementing dashboards, in multimedia, on multi-devices, to proactively manage their supply chains. They are taking ‘sense and respond’ to greater levels of ‘predict and act’. For example, an automated replenishment signal from a store shelf predicts a potential out-of-stock situation. Inventory balances are automatically checked, as are the business rules associated with this product for this customer. An automated transaction is generated and transmitted to the distribution centre to ship the product immediately. No human intervention is required here. Visionaries are creating ‘virtual command centres’ to fuse real-time information, event processing and advanced analytic technologies. Their extensive connectivity enables the entire supply chain network to plan and execute decisions collaboratively. They are aggregating or segmenting information for trend analysis, automating business rules and recommending actions based on performance criteria. Furthermore, they are capturing real-time information to proactively monitor product and service flows using smart devices such as RFID, global positioning system (GPS), sensors and actuators. Although this capability may later be on their list of priorities, those endeavouring to use objects, versus labour-based tracking and monitoring, are realising the benefits. As product lifecycle traceability in many industries is becoming a major concern, the use of smart devices is likely to become more prevalent for tagging products wherever they are, as well as the containers and modes that are transporting them. New rule 3: Exploit global efficiencies. Enhance value with dynamic optimisation: SCM is not only about aligning supply and demand. It is also about developing and executing the strategies to achieve the company’s financial objectives. Executives are under constant pressure for supply chain operations to create enterprise value. Each interaction in the supply chain network represents an opportunity to perform more efficiently and productively. The study found that overall, companies are focussed on bringing value through the use of enabling technologies to manage costs, inventory, risks and


talent. Operators tend to have fixed cost structures and focus primarily on the core supply chain functions of manufacturing, transportation and distribution. As their category name implies, they are operationally (versus planning) oriented, seeking cost efficiencies by enabling and fine-tuning these core processes. Planners are engaged in developing more variable cost structures. They outsource their non-core functions to take advantage of logistics service providers’ and contract manufacturers’ assets, skills, technologies and global footprint capabilities. With outsourcing, they are distributing or sharing the inherent risk of market volatility and demand variability by being in a better position to ramp up or down according to current conditions. They routinely evaluate their distribution network for efficiencies in outbound distribution and transportation flows. Also, they optimise pipeline inventory at critical points, such as inbound supply logistics. Nevertheless, the visionaries continue to lead the charge. Visionary leaders are investing significantly to optimise their global networks, inventory positioning and overall cost structures and processes. Like Planners, they are replacing fixed cost structures with the variable ones, partnering and outsourcing to benefit from flexibility, scale, skills and expertise outside the organisation. They are using everything from simulation models to test-market new product introductions, to scenario planning and modeling to evaluate the trade-offs of cost with other constraints. Inventory and network optimisation are the next categories of strategic capabilities they are building and investing in. Inventories are being evaluated aggressively at all phases, from raw material to end product. The visionaries are using analytics and modeling to incessantly perfect inventory position and levels. Network optimisation is taking on a new dimension in a number of ways. Historically concentrated on the distribution network, now many are including strategic sourcing considerations in their network designs. Visionaries are also modeling their networks with sustainability in mind, including carbon management, water management, energy usage and waste management. They are doing so to create more cost-efficient sustainable practices. And, lastly, they are hedging risk. They are developing optimal networks considering compliance strategies and practices with

suppliers, service providers and other stakeholders (regulatory and financial). They are incorporating risk strategies and mitigation practices end-to-end across all supply chain functions, with an emphasis on logistics. The most advanced ones are using probability-adjusted risk assessments, modelling and scenario simulations to adjust and optimise inventory for risk avoidance considerations.

VISIONARIES ENJOY PEAK PERFORMANCE According to the new rules for this decade, the elite group of visionary leaders is seen to be building advanced capabilities. They are – and have been – investing in developing these capabilities and are looking to deliver results in the short term. Planners are close behind and investing in similar, though perhaps not so far-reaching, visions and strategies. The return on investment (ROI) is substantial. Visionaries, by themselves, have set a lofty bar of performance for others to emulate. The three-year average return on invested capital (ROIC) for this leadership population was 27 per cent. But the astounding fact is the three-year average revenue growth rate of nearly 25 per cent. Despite the struggles and pressures felt by most in the past several years of global economic recession, this elite group of companies continues to enjoy healthy growth rates as they build smarter supply chain capabilities. Although these companies represent different industries, product/service families and even geographies, what is consistent is that visionaries continue to substantially outperform others. Visionaries have several characteristics in common: • Tight integration across the entire business from customers, partners, suppliers and service providers • Flexible, sustainable supply chain practices that optimally and strategically drive growth • High-performing, globally integrated supply chains that return real value to the enterprise and investors. Visionaries emphasise that global integration is an important organisational capability – creating globally integrated operations, with access to global teams and talent, while recognising the need to be intensively local when it comes to customer focus and local market requirements. One size does not fit all.

They know that success on a global scale depends on serving distinct global markets with differentiated capabilities, regionally and locally. To achieve flexibility and speed, these companies are more likely to replace fixed cost with variable cost – partnering and outsourcing to benefit from flexibility, scale, skills and expertise outside the organisation. Visionaries use optimisation, collaboration, integration and business insights significantly more than other

They are investing in strategic initiatives to achieve business value (Figure 2). They have revealed the three top strategies that must be continuously advanced to counter-demand variability, increase supply chain visibility and enhance enterprise value: • Analytics applied to demand management with networked sales and operations planning • Collaborative network visibility with intelligent performance management

Cost optimisation



Customer collaboration



Supply chain visibility

Sourcing, collaboration and integration


Business intelligence and analytics


Inventory optimisation


Network optimisation


Sales and operations planning


75% 73% 72%


Risk management


Source: IBM Institute for Business Value





37% 18%

60% 62% 58%


55% 52%

Performance management





Sustainability strategies and operations




Demand management

Gap 23%


3% Visionaries Other companies

Figure 2: The top 12 supply chain investment areas over the next three years

companies. They are truly globally integrated. They apply mathematics and performance criteria to manage the functions surrounding product/service flows – planning, sourcing, procurement, logistics, distribution, transportation, product lifecycle management, asset management and sustainable product design. This provides these organisations with the flexibility to scale up or down depending on market environment – and global integration provides the platform to be able to quickly pursue new growth opportunities as they arise.

STRATEGIC DIRECTION FOR THE NEW DECADE Based on inputs from executives around the world, this study demonstrates the value of building smarter supply chains. According to the leaders, the motivation behind smarter operational practices is not just for efficiency but also for growth. They have the foresight to generate innovative capabilities in the midst of extreme periods of volatility and complexities. The performance of visionaries serves as a guideline for how and when to build smarter supply chains. They are following a planned and phased course of direction.

• Variable and optimised cost structures, modeling inventory and talent deployment, adjusted for risk. As supply chain executives plot their course for the new decade, they have much to consider. The most important thing here is that their strategies must not just be closely aligned with the enterprise strategies and objectives, but in lockstep. Plotting the course requires considering a few questions, which are as follows:

SMOOTH VOLATILITY WITH PREDICTIVE DEMAND • With volatility and variability rising, are there analytical capabilities to determine the optimal global configuration for one’s supply chain? • Is one using market intelligence and customers’ data to predict buying patterns with real-time adjustments to demand planning and execution? • Are one’s customer relationships as strong as the supplier relationships? Which parts of the supply chain lack participation?


on key control point indicators, ie, forecasts versus orders, schedules versus production capacity, inventory in transit, shipment status, etc? • Does one have integrated performance management of all events with realtime dashboards, key performance indicators (KPIs), event alerts and performance thresholds? Does one closely collaborate with the supply chain partners? • Is one’s performance measurement system centred on customer goal achievement? Is that aligned to global versus regional versus local strategies and tactics?

ENHANCE VALUE WITH DYNAMIC OPTIMISATION • What is one’s cost containment strategy? Is there flexibility in one’s processes to match the current revenue and demand streams? Is the cost structure fixed or variable? • Is one focussing on core capabilities? Are the right functions being outsourced? Is one taking advantage of the global cost, capabilities, local regulatory knowledge and skills of partner companies? • Does one dynamically allocate all resources: human, assets, supply and production? • How is risk factored into one’s operational decision making and contingency planning? How is the effectiveness of one’s risk management strategy measured? • Is there a sustainable strategy reflected in product design and packaging, collaboration with customer initiatives and supplier compliance programs?

PREPARING FOR FUTURE BENEFITS Today’s global marketplace is going to become even more competitive over the next few years. As enterprises seek to optimise their supply chains and respond to constant demand variance, adopting new rules to restore stability to supply chain operations is critical. Visionaries are already reaping the benefits of the new rules for the new decade. Are we prepared to join them? The article is an excerpt from the whitepaper, “A vision for smarter supply chain management”, authored by Karen Butner, Global Supply Chain Management Leader, IBM Institute for Business Value



Image Courtesy: Future Supply Chains



All industries have their trade secrets, and the warehouse management system (WMS) industry is no exception. While evaluating systems for distribution management, any company would want to have complete information to enhance the search process. It’s not a small project to evaluate, select and implement a WMS. These endeavours take diligence, time and a thorough understanding of one’s business goals to achieve operational excellence and competitive advantage over the long-term. Here are five factors to keep an eye on before purchasing a WMS and thus, future-proof your investments.


EVALUATION, selection and implementation of a warehouse management system (WMS) can be an uphill task. Learning how to critically compare WMS vendors and their various offerings will keep companies ahead of competition and enable them in selecting the the best fit solution for the company’s needs. This will also guide in the evaluation and selection processes in a way that best benefits one’s business, customers, and also ensures long-term success and competitive advantage. Here are the five secrets of the WMS industry, which must be looked into before buying a WMS:



Supply chain and logistics executives are typically interested in two basic things. First, they want to ensure that the product reaches the customer such that it meets the customers’ expectations. Second, they want to achieve this at the lowest possible cost. A company’s differentiation can be found in how, and how well, one can accomplish these goals. The catch, however, is that the customers’ requirements and expectations keep changing. Thus, it is not clear what will be required of a company’s operations in six months, much less a few years later. Ongoing success requires a WMS that will help a company meet the functional needs of today, while responding quickly to unforeseen changes. When evaluating a WMS, is it safer to simply assume that a vendor’s features and functions will help meet changing needs to help a company differentiate its offerings? Standard WMS functionality that incorporates industry best practices can be useful for most facets of the operations in a business. But this is not sufficient for companies to truly differentiate their operations from that of the competitor. A WMS that enables an agile response to changes can be a competitive weapon. The problem here is that most WMS take a flawed approach to addressing a change. These systems feature enormous functionality option switches to keep pace with the changing needs of the customers. However, no system can possibly include all necessary functionality options because every business has different needs. In such systems, anything beyond the functionality offered with these switches must be incorporated along with addition of

expensive custom coding, which is most often performed by the vendor. This code is added during implementation of the original system, to bridge the gap between the standard product and the company’s unique needs. With new requirements arising, the company can contact the vendor to make expensive changes or make do with the options available in the switches. In an effort to control costs, many companies forego making necessary changes (and upgrading) and slowly settle for the standard functionality of their WMS. Thus, they opt not to incorporate innovative processes that could help in differentiating their business. A company’s order profile, business strategy and unplanned events will change, requiring fast action to ensure success. For changing a company’s WMS, an agile system is needed to incorporate the new processes quickly and cost effectively. It is necessary to implement a system that will truly help develop a company’s ability to take advantage of new operational ideas. What can be done? • Ask the vendor to demonstrate, in detail, how changes are made in the system • Talk to customer references to find out how quickly the vendor can respond to new requirements and how expensive these changes were • Find a consultant experienced in business evaluation and system

applications are not supportable over the long term. These can hold a company captive to the vendor not only for ongoing changes necessary to keep pace with new business needs, but often for the technological advances the vendor offers in the form of upgrades. But such an undertaking can paralyse a company’s operations and profitability. This is because many conventional systems have a limitation in their design, as a result of which only a certain number of changes can be accomplished through switches. Change requests that go beyond these switches require custom coding, which is not carried forward with an upgrade. This custom code is to be added during the original system implementation to bridge the gap between the standard product and a company’s unique needs. More codes are added the moment further needs arise. However, when too many changes are made in the system, any new modification becomes a major undertaking, which may reduce the system’s ability to be altered. Upgrading such WMS, with additional code-level changes, leads to a potentially disastrous spiral of exorbitant costs, extended timeframe & system as well as operational risks. On upgrading the system, all previous code-based modifications have to be re-applied. For a company, this could mean a never-ending process that results in loss of competitive advantage and possibly, irreparable damage to key customer relationships. At some point,


Purchasing a WMS is an important decision for a company’s business. WMS software vendors can drive ROI better than most other software industry players. Companies can boost their ability to realise their ROI by understanding the nature of the industry and demand more from vendors. selection. These firms can provide strong guidance for performing operational assessments and carrying out vendor searches.



The WMS industry is largely driven by providing services to customers, and not developing agile software products. Many WMS vendors generate huge revenues by customising their standard solutions. But these

it may become difficult to recognise any return on investment (RoI) because the upgrade process contains only negative outcomes. Companies today are becoming smarter in their technology choices and expectations. However, overall, the WMS industry has been slow in responding to these needs with the right solutions. Companies want to have upgradable solutions and the autonomy to make solution changes without spending much or waiting for an opening in their vendor’s


Warehouse management system, continued

How Service Oriented Architectures (SOAs) Work? A service oriented architecture enables solutions to be constructed from pieces of business functionality exposed as services. These services span business logic, devices and a spectrum of business technologies. They may be run separately and/or assembled in various ways to create business processes. If business needs dictate change, the services may be re-orchestrated to adapt to the change without involving costly edits to underlying code – in essence, customisations. If an architecture is truly an SOA, it should allow for upgrades without extensive consulting projects to bring system changes into the latest version. schedule. This has given rise to a culture shift as the industry moves from its vendor-centric, service-driven roots, to a more customer-centric, flexibility driven enablement. What can be done? • Evaluate the total cost of ownership for the system over several years and track this metric with vendor’s customers. Have users been able to make system changes themselves or was the vendor always involved? • Ask vendors for customer references to learn about the time, cost and overall approach to upgrades. Were the changes carried forward or did they require re-application? Was custom code involved?



Demands for more flexible business software and emerging technologies such as extensible markup language (XML), web service description language (WSDL) and simple object access protocol (SOAP) have driven the adoption of service oriented architectures (SOA), and for a good reason. SOA allows for cost savings and faster system changes. It drives low the total cost of ownership, by putting flexibility in the hands of the system owner. However, for the SOA to deliver these benefits, the applications must embrace flexible software intrinsically from the beginning of their development. Many software providers have taken legacy code bases and exposed elements of


these code bases as services. This provides additional flexibility, but not of the level that most businesses require. This approach lacks flexibility for two reasons. First, the company is completely dependent on the vendor’s decisions about which business functions are offered as services. This means that flexibility will always be constrained by the software provider’s product roadmap. Second, this approach makes an invalid assumption that users will never need to change the nature of a service. A software provider with a truly flexible SOA will allow users to change the underlying behaviour of a service to support unique business requirements. The most important point here is that legacy systems can be migrated to

SOA, but this may have little positive benefit other than chasing a technology story or market requirement. An SOA is not a monolithic system constructed from inflexible, dated technology that has been patched to work with the latest standards. A true SOA is actually capable of manipulating the behaviour of the system itself. Because of this capability, it will allow a company to embrace the changes it will face in the long term. Therefore, the company need not change its business practices to fit the software. What can be done? • Consider the cost advantage of true flexibility and evaluate the vendor’s business model accordingly • Ask vendors to demonstrate system changes and give specific examples of how customers have made changes • Ask about how upgrades are carried out. Do previous changes automatically carry forward or must the vendor or a consultant re-apply them to the new version?



This scenario has become common during WMS selections. To get a clear picture of the features required, many companies perform the exercise of understanding their order profile and documenting their functional requirements across the business. They even gain budget approval and support from key decisionmakers in their organisation to initiate the software project. For this purpose, they send a request for proposal (RFP) to several vendors in the space, most of whom have extensive industry experience. Nearly all vendors claim their systems to be capable of providing the functionality requested. And yet, there are stories of cost over-runs and failed projects.

Image Courtesy: Future Supply Chains

How can this be? Many companies are caught up in such a situation because they do not require vendors to give responses based on a single, deliverable WMS. The vendor

might indicate that it meets all requirements, yet its response mixes the functionalities from several WMS, which does not give an accurate picture of what it can actually implement. In fact, most vendors are able to provide multiple WMS offerings due to acquisition/consolidation. It is also impossible to document company specifications to the point of eliminating scope creep. Companies need to modify the system to meet the emerging requirements. Features and functions do not save money or mitigate risks. The only thing that can save money and mitigate risk is a system that matches a company’s business needs today and is adaptable to meet future requirements. What can be done? • Ask the vendor to stick with a specific WMS throughout the evaluation cycle • Ask about the vendor’s licence-to-services ratio to verify whether one is buying a solid software product or simply services to tweak one’s system continually over the long term • It is also important to consider the cost-to-benefit ratio – buying a WMS is not about gaining RoI over 18 months, but is about total cost of ownership over the long term.



The typical supply chain execution suite comprises systems that manage warehousing (WMS), transportation [transportation management system (TMS)], yard operations [yard management system (YMS)] and labour [labour management system (LMS)], and have some application to link all these together. Optionally, this family may even extend to supplier enablement and other applications. Order management and supply chain planning are typically seen as supply chain management or advanced planning and scheduling solutions, and not SCE. What makes a suite truly valuable is the clear visibility to material flows in a boundary-less manner. This requires a single, scalable technology structure, spanning all applications – one platform, one database, one user interface and one set of tools. In the 1990s, ERPs had to have each of these elements to be considered an ERP. Adoption of these requirements rendered silos of functionality and technology obsolete [ie, material requirements planning (MRP) vs order management vs financials]. The integration of MRP with order management, finance, DRP, CRM, etc., was predicated on an integrated database that could be scaled up. But this is not the case in the SCE suites available today. Many vendors have pieced together their suites through acquisition. Some even have multiple WMS applications, which they market as being ‘industry-specific’. However, these applications typically reside on different platforms. Vendors rarely share data at a common platform level, but rely on merely interfacing disparate modules. In addition, these applications are typically developed by different teams that use different technologies and focus on contending business objectives. These are not suites, but different software products sold by a single vendor. This approach poses many risks to buyers. A company may

select a product that is soon to be discontinued or that will become secondary to other solutions in the vendor’s long-term product development plan. It may also have to spend considerably on hardware to make applications work together. This inconsistent approach requires the company’s internal staffs to be fluent across hardware and technologies that are not core to its IT strategy. The deployment may also create problems or be expensive. Thus, the imperative here is integration. What can be done? • Evaluate platform and interface requirements closely. Ask vendors if they have built the application or bought it. If they built it, are all solutions based on a single execution platform? Do they share a common data model or rely on interfacing their modules? • Ensure that maintenance finances go towards R&D or investment in the platform purchased.

GETTING MORE FROM SAME RESOURCES Purchasing a WMS is an important decision for a company’s business. WMS software vendors can drive ROI better than most other software industry players. Companies can boost their ability to realise their ROI by understanding the nature of the industry and demand more from vendors. Courtesy: HighJump Software



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ADEA - Automotive Dealership Excellence Awards ...........................49

ODC transportation..................................................................................................25

Commercial vehicles ........................................................................................36, 37


Container transporters ............................................................................................66

Plastic pallets ..................................................................................................................21

Containerised transportation ............................................................Back cover

Project transportation...............................................................................................25

Custom clearances .....................................................................................................25

Self-adhesive tapes .....................................................................................................65

Everest pre-engineered steel buildings ........................Back inside cover

Smart Logistics Leadership Series .....................................................................11

Exhibition - Engineering Expo ......................................... Front inside cover

Ventilators ........................................................................................................................65

Exhibition - HiTech Manufacturing Show ....................................................29

Ware housing ................................................................................................................25

Freight forwarding .......................................................................................................25

Warehouses ................................................................................................Back cover

Material handling systems suppliers ................................................................... 3

Pg No


Tel. No.




ADEA - Automotive Dealership Excellence Awards +91-22-30034650


Engineering Expo


Everest Industries Ltd




HiTech Manufacturing Show



Instrumentation & Control Systems India



Mahindra Navistar Automotive Ltd



Majha Transport Pvt Ltd



MFC Transport Pvt Ltd.



Nina Concrete Systems Pvt Ltd



Progressive Media Group



Schaefer Systems International Pvt. Ltd.



Sintex Industries Ltd



Smart Logistics Leadership Series



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Vijay Logistics Pvt Ltd


Our consistent advertisers COC = Cover-on-Cover, FIC = Front Inside Cover, BIC = Back Inside Cover, BC = Back Cover


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 Smart Logistics Leadership Series  Ventilators

 Exhibition - Engineering Expo

 ODC transportation

 Exhibition - HiTech Manufacturing Show

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Second Fold Here  ADEA - Automotive Dealership Excellence  MFC Transport Pvt Ltd.

Awards  Nina Concrete Systems Pvt Ltd  Engineering Expo

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Please complete the following & get a quick effective response from suppliers: 1. Your company’s business function is (one only)  Wholesalers  Manufacturer  Distributor  Agent  Other, please specify ______________ 2. Your role in your company’s buying process can best be described as:  I buy  I identify potential suppliers  I approve purchases  I negotiate contracts  I select suppliers. 3. Your line of business 4. Specific product requirement Name: Designation: Company Name:






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‘A’ Wing, Ruby House, J. K. Sawant Marg, Dadar (W) Mumbai 400 028, INDIA.


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