India’s Leading Logistics Magazine www.logisticsweek.com
Vol. 5 — No.8
Behind the Wheel Sudam Maitra, Managing Executive Officer (Supply Chain), Maruti Suzuki, shares the innovations that have shaped Maruti’s efficient supply chain.
And the winners are
Highlights from LW Supply Chain Excellence Awards
Budget bytes: What are industry leaders saying about this year’s Budget...12 Out in the cold: How the cold chain, an essential infra-backbone, is being ignored...36 Port of call: The govt has some ambitious plans for our ports. A snapshot...42
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India Warehouse Show Comes as a Complete Package Please comment on the expectations from the India Warehousing Show 2012 India Warehousing Show 2012 is being complemented this time with its concurrent shows India Materials Handling & Logistics Show and India Cold Storage Show 2012. The concurrent India Warehousing Conference gives an inside knowledge and understanding of the industry. The show showcases end to end solutions from warehouse building to warehouse running, material handling, supply chain and logistics under one roof. IWS has already grown triple its size from the previous edition and aims to bring all industry professionals i.e. solution provider along with all users and end users, consultants and new entrants all on one platform. Anuj Mathur, Director – Exhibitions at Manch Communications (P) Ltd
The total number of participating companies and the total number of expected visitors at the show. Already over 200 companies have joined in as exhibitors; displaying over 300 national and international brands. Being the largest exhibition on warehousing, logistics and material handling in India we are expecting over 10,000 business visitors in the exhibition. How do you differentiate India Warehousing Show 2012, from the of the earlier held editions This edition of IWS comes as a ‘Complete Package’ and is offering end to end solutions for Warehousing, Materials Handling, Logistics and Cold Chain Industry. As compared to its previous editions, not only we have bigger exhibits but two concurrent conferences for Warehousing & Logistics and Cold Chain sectors. Special programmes such as VIP Access Pass (VAP) and User Contact Programme (UCP) have been incorporated to maximize quality attendees. The exhibition is divided in four exhibit zones namely WAREHOUSING ZONE, MATERIALS, HANDLING ZONE, SUPPLY CHAIN ZONE AND COLD CHAIN ZONE. And the only platform which showcases everything required to build a modern warehouse, from PEB Solutions, Flooring Solutions, fork lift trucks, storage solutions, WMS systems, AIDC & Automation solutions, complete material handling solutions to movement and transportation of goods. You will also find solution providers for all your logistics and warehousing needs. What different and valued-added features can the visitors expect from this year’s event of India Warehousing Show 2012? India Warehousing Show 2012 shall be having not only end to end solutions for all industry segments Also this year the supply chain zone has been added where leading supply chain companies and warehouses shall be displaying their services. Added features like India Warehousing Conference 2012 on ‘Developing Effective Strategies to Meet the Emerging Supply Chain Demand’, where industry leaders with national and international experiences shall be sharing their knowledge and discussing opportunities, challenges and cost effective solutions.
April 2012 | www.logisticsweek.com
26 27 28
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Ekla Chalo Re
es Minister, a British sitcom aired on BBC in the mid80s, could well be a reflection of our current system of governance. In a particular episode, Humphrey, the parliament secretary, informs the Minister, Mr Hacker, about a fully-staffed government hospital. And that there is not a single medical professional working in the hospital. “What!” exclaims the Minister. “Yes Minister,” says Humphrey, “unfortunately, there were some cutbacks, so there was no money left for medical services.” Minister: There are over 500 people in the administrative staff, the hospital has been open for over 18 months, and there is no medical staff to look after the patients? Humphrey: The current staff does very important work, Minister. There is the contingency department, the finance department, the purchase department, and finally the administrative department that administers other administrators. Minister: But where are the doctors and the patients? Do you know what a hospital is for? Humphrey: What? Minister: Patients! Ill people! Healing the sick!! Sack the administrative staff immediately. That hospital has already fleeced our taxpayers enough. Humphrey: [Outraged] Now, I hope you are not going to ask me to sack the army because there is no war! On the same note, it is now clear to all of us, that the focus of the Indian bureaucratic machinery is to administer other administrators, and not provide any impetus to produce results. Take the Union Budget. What is the point of the annual exercise? As the founding fathers of our country envisaged, the Budget is to inform us that public expenditure -- the money spent on improving our quality of life -- is being handled efficiently. In other words, the efficiency with which the government is generating revenues, and how efficiently it is used toward public services. This point has somewhere got lost in all these years of flamboyant policy announcements (a number of which head nowhere. Look at the GST or at the Direct Tax Code). On the other hand, the fiscal deficit, a measure of how efficiently public expenditure is being handled, has remained unchecked all these years. Then there is the Central Planning Commission, which is a throwback to the Soviet era. The Planning Commission, which helps the ministries decide their respective budget outlay, is a body that has become redundant because of its centralized structure in a country where local concerns take
precedence over policies decided at the Center. All these facts are not lost on our industry. I’ve seen, particularly in the last two years, that the Union Budget evokes no hopeful responses from the logistics fraternity. Let me mince no words: Not many people in the industry wait for the Budget these days. People know the drill— some tax reshuffles, a near total lack of commitment on improving the efficiency of the public-expenditure mechanism, and some playing to the gallery with big announcements and very little follow through. I mean, why announce big plans like GST with a deadline without thinking through, and keep the industry on tenterhooks? If the logistics professionals start to follow in the footsteps of our ministers, not one consignment will reach its destination on time. After speaking to some of our industry leaders and analysts pre-and post-budget, I came to the conclusion that this year too, the industry had no big expectations from the budget, and rightly so. Besides the minor sops given to the already-in-thedoldrums aviation industry, such as allowing the import of Aviation Turbine Fuel (ATF) and customs duty exemption on aircraft spare parts (but on the other hand increasing the excise duty that will make these parts dearer), or announcing ambitious plans like the Maritime Agenda 2020 (we really hope the concerned ministries coordinate on this one and bring it to fruition), the Budget completely ignored some long-standing demands of the industry, such as providing infrastructure status to the logistics industry or addressing the yawning skill-deficit in the industry. But then, apparently, we have stopped expecting much support from our policy makers and a lot of us are beginning to understand the futility of this annual exercise in political showmanship. I think that’s a good sign.
Aanand Pandey firstname.lastname@example.org
April 2011 | www.logisticsweek.com 9
Contents 12 Analysis
A Status Quo Budget LOG.India speaks to a few industry people to understand the impact the Budget will have on the supply-chain.
Cover Story The Stuff Of Legend
Maruti Suzuki India Ltd, despite having faced turbulent times, accounts for a major share in the domestic car market. An overview of ideas and innovations that have transformed their supply chain for the better.
14 Upshot CII Institute of Logistics and Indospace arranged for a visit to Indospace Chakan logistics park. A report.
16 Event Report A Day To Remember
With the right mix of presentations, discussions, entertainment and awards, LW Supply Chain 2.0 Summit and Awards Night proved to be a memorable event.
April 2012 | www.logisticsweek.com
April 2012 ADVERTISERS Index Damco.................................................... Back Cover Gandhi Automation.................................................3 Green Earth Translogistics.................................. IBC Hannover Fairs Milano..........................................37 Hormann................................................................7 India Warehousing Show........................................5 Panprojects..........................................................15 Safexpress...........................................................25 Saudi Transtec.......................................................6
Steel Fab India.....................................................13
The inclusion of cold chains in the growth story of the country is long overdue. The report highlights the necessity for their development.
Vijay Logistics Pvt. Ltd...........................................8
Revitalisation Of Maritime Sector With its long coastline and abundance of ports, India could have been a major maritime power. But its dismal infrastructure has prevented its growth.
March 2012 IndIa’s Lead Ing
Vol. 5 — No.7
Salary12 20 Guide .34 Pg
47 Panorama Books, Journals, Blogs, Technology, C-Profile, and Mobile Apps - a look at what's new in and for the supply chain industry.
the huma N aNgLe 50 An
update on talent management in supply chain.
Devadas Nair, shoppers stophead supply chain, retail revolutio , is in the thick of a chain of one n, shaping the supply of its prime catalysts.
suppLy shy page 22 Locks: Extort ion from transp Let it pass orters at check : Reducing produ points is routin ction lead time a maN‘s WoR e. A report.8 is key to smoo LD: Where are thening logist the ladies in ics flow...16 the industry when we need them? ....42
A list of forthcoming events in April. INDIA |
April 2012 | www.logisticsweek.com 11
< news analysis
Train of Thought
If you cannot manage inventory, real estate, employees and logistics, you cannot handle retail. — Punit Agarwal, Promart, CEO, Promart Retail India Pvt. Ltd in an interview with Business Standard about the problem areas in managing discount chains.
It is disappointing that the government failed to highlight issues like policy transparency, investments in IT infrastructure and logistics in supply chain which is currently the need of the hour. — Vijay Bobba, MD & CEO, PAYBACK India, on the Annual Budget, as told to MoneyControl.com.
The Govt’s proposals to modernize 100 railway stations through PPP mode and setting up a Logistics Corporation are steps in the right direction. — Hemant Kanoria, chairman & MD, Srei presents his views to Hindu Business Line on government’s proposal to modernize 19,000 km of route length that carries 80 pc of total rail traffic.
Old Wine, Old Bottle LOG.India spoke to industry people to understand the impact of the Union Budget on supply chain and logistics.
he Union Budget 2012-13 has been received with mixed emotions by the logistics and supply chain industry. The certainty of the arrival of GST in August 2012 appears to have got the industry excited as well as relieved. Mahendra Kumar Agarwal, Founder and CEO, Gati Ltd, says, “The roll out of GST in a definite time frame reduces the long-term effect of taxes and eliminates boundaries for the supply chain industry.” This is expected to lead to setting up more optimal supply chains and the efficiencies accrued would lead to increased savings for end consumers. However, Arvind Ambo,
The roll out of GST in a definite time frame reduces the long-term effect of taxes and eliminates boundaries for the supply chain industry. Vice-President and Head Business Expansion, Credence Logistics, warns, “The increase in excise duty and service tax will lead to immediate increase in prices of day-to-day items. This will definitely be a huge dampener of sentiments and will have a direct negative impact on demand.” Popularly termed by most industry people as a status quo budget, with no populist
April 2012 | www.logisticsweek.com
schemes or reforms, a spokesperson at Frost & Sullivan, says, “the government’s lack of initiative on FDI in multi-brand retail will only postpone our chances in terms of foreign capital inflow.” However, simultaneously, a boost for supply-chain is the move to increase spending on warehousing as this will help the real estate sector and also help companies expand into more cities and towns.
Automation is scale-led. You need scale to automate. Till we hit scale at the various nodes and the links, I think we will struggle with the question of penetration of automation. —Jaldeep Sodhi, ED, Avalon Consulting, speaks about the future of supply chain in India at LW Supply Chain 2.0 Summit.
Highlights n Service tax raised from 10 percent
to 12 percent. n E xcise duty raised from 10 percent
to 12 percent. n `20,000 crore to be spent on
rural infrastructure development; including `5,000 crore for creating warehousing facilities. n A decrease in withholding tax from 20% to 5% on interest payments on external commercial borrowings for roads and highways. n GST network to be operational by August 2012. n Full exemption from basic customs duty for equipment for road and highway construction. n W ithholding tax on power, airlines, road and bridges, ports and shipyard, fertilizers, dams and affordable houses lowered to 5 pc from 20 pc for 3 years. n G ovt to create PDS through Adhaar platform by Dec to realize objectives of Food Security Bill. n C omputerization of the Public Distribution System to be executed. n Food Security Act will be fully provided for and subsidy to be 2 per cent of GDP for next two years.
Since the Budget has retained the fuel subsidy at `450 billion, industry is sure of a fuel price hike. Umesh Bhanot, Vice-President (Marketing & Operations), Adani Logistics, says, “There will obviously be a fuel hike in the near future. The Railway Budget this year has increased freight rates across the board. The hike varies from commodity to commodity, ranging between 15 percent and 35 percent. This will increase the prices of bulk commodities, while other commodities will be affected by the diesel hike due any moment. This again could be from 5 percent to 30 percent.” Ambo of Credence says, “Apart from this, there is good news for the infrastructure and
From a logistics perspective, the decision to boost road infrastructure with the addition of 8,800 kms of roads during the coming fiscal is noteworthy. power sector – with announcements like the exemption of customs duty on coal imports and iron ore equipment. As a bulk logistics specialist, this would mean increased opportunities to move material and equipment from foreign shores to Indian ports in the coming year.” Likewise, the Budget increased funding for highways and other infrastructure. Anil Khanna, Managing Director, Blue Dart Express Ltd, says, “From a logistics perspective,
the decision to boost the road infrastructure with 8,800 kms of roads being added during the coming fiscal is noteworthy.” In terms of the Food Security Act, the Budget promised a subsidy of two percent of the GDP for the next two years, and the computerization of the public distribution system. While this sounds promising, Professor Viswanadham, INAE Professor, Computer Science and Automation, IISc Bangalore, is skeptical. He says, “Any
amount of computerization will not solve the mess in the PDS. The problems are at the data entry level. There is no one to verify the accuracy of the data and the whole system is likely to fail.” He also adds that what the government has provided for in the Budget is grain security and not food security. The International Food Policy Research Institute (IFPRI) is trying to make nutrition and health the keyword in ensuring Food Security. “But this is not what the government is doing. I fear the problems of PDS will continue. The government also needs to think of alternate schemes and a smart public and private partnership to iron out the problems.”
April 2012 | www.logisticsweek.com 13
Up Close: Indospace Chakan Logistics Park C
II Institute of Logistics and Indospace jointly organized a warehouse visit to Indospace Logistics Park, Chakan, on March 9, 2012, as an integral part of Logistics Parks and Interactive Seminar. 32 participants from Mumbai and Pune visited the modern stateof-the-art warehousing facility of Indospace. Abhijit Malkani - Managing Director, Realterm Everstone, gave a brief overview about the facility. He said that Realterm Everstone is investing in assets in India. He said, “We have spent time in understanding what is lacking in India that needs to be built. In India there is a big gap between demand and supply.” Mr. Malkani said that about 2million square feet has already been leased out in India presently by Realterm Everstone. Speaking
Date: March 9, 2012 Event: Logistics Parks and Interactive Seminar Organizer: CII Institute of Logistics and Indospace Venue: Indospace Logistics Park, Chakan
of Indospace Chakan Logistics Park, he said that the park is located in the heart of the Chakan industrial area, which is one of the fastest growing industrial areas in India presently. The park is located next to L’Oreal facility and is within 5km of Volkswagen, Daimler, Mahindra, Hyundai, Bajaj and four phases of Chakan MIDC. Located on the Chakan-Talegaon Road, the park is 18km from Mumbai-Pune Expressway, 35km from Pune and 140km from Mumbai. Industrial grade power and water will be made available within the park by Indospace. Parking facilities for large containers and trucks have been created along with 24 hour park security. High quality road infrastructure has been designed to achieve efficient traffic circulation. The Express Feeder installed provides24X7 power supply. Facilities for drivers, professional on-site property management services, fire fighting infrastructure designed to support high hazard sprinkler systems – all such amenities have been provided for in the park. Mr. Malkani’s presentation was followed by a visit around the facility that concluded the warehouse visit.
India’s No.1 Entrance Automations and loading bay equipment company -Gandhi Automations Offers Traffic – High Speed fold-up door with modular sections
High Speed Fold Up Doors q Sturdy, dependable and modular…the ideal solution for medium and large entrances Fast moving functional and reliable doors are what is needed in industrial and commercial contexts. Traffic high-speed fold-up doors, are versatile and solid ensuring long-lasting reliability. The modular structure of the curtains, assembled and joined by anodized aluminum extrusions, provides for a wide range of polyester sections available in a variety of colours. q Wide, full-width window panels ensure a safer traffic and allow more light in. Their fast and easy replacement, in case of accidental tearing, will save money and time. The alternating metal tubular structure there inserted ensure Traffic high wind-resistance. Traffic doors are the ideal solution for external entrances and effectively operate in any situation, even when strong winds are blowing, in rooms with high volume traffic. Sturdy and dependable, traffic is the intelligent door for medium and large entrances. q Functional and cost-effective 14 INDIA | March 2012 | www.logisticsweek.com
Versatile, with modular panels. Traffic is composed of a flexible curtain with modular sections inserted in rugged, metal tubular structures. Curtain modularity allows for various arrangement either to suit different applications, or replace possible tearing or damage due to accidental crashes. Traffic shows great versatility in that it can be realized by joining flexible, blind sections with one or more wide transparent PVC ones. Curtains are available in their standard versions as well as in their standard versions as well as in their strengthened one, according to different wind-resistance requirements. Easy and quick installation The crosspiece mounted over the sturdy uprights, makes the installation of the door easier. All transmission mechanisms are housed and shielded there. Quick polarized wiring ensures quick and accurate electric connections. High safety and reliability Traffic sturdy, integrated structure can withstand extremely heavy workloads. Its infra-red photocells, located on the uprights, ensure high safety standards. On the safety edge a self-controlled photocell device or a pressure-switch, electro pneumatic system can be installed to activate the immediate reverse of the curtain movement in case of contact with an obstacle. It is provided in aluminum extrusion with a rubber ledge and this is the standard version also suitable for all other DITEC doors. The Modular counterweight balancing system with strong traction belts, enables the motor to work with minimum working stress. Moreover, the counterweights ensure the curtain safety holdback. The Emergency lock release, available on both sides of the door, provides for semi-automatic re-opening of the curtain by releasing the counterweight system.
Gandhi Automations Pvt Ltd 2nd floor, Chawda Commercial Centre, Link Road, 14 Malad (W), Mumbai -400064 Ph:-022-66720200/300(200 lines) Email: email@example.com Website: www.geapl.co.in
Business Division of PANALAPINA WORLD TRANSPORT
< event report
A Day To
Enlightening presentations, captivating and insightful panel discussions, a grand awards night and a stimulating performance by Drum Cafe - LW Supply Chain 2.0 Summit and Awards Night could not have been better. Pritha Dey reports. INDIA |
April 2012 | www.logisticsweek.com
< event report
he Majestic Ballroom at Hotel Intercontinental The LaLit, Mumbai, witnessed a series of discussions, presentations, activities and awards, on March 15, 2012. The LogisticsWeek Supply Chain 2.0 Summit, organized by Hamburg Media, was attended by the cream of the logistics industry. Top supply chain leaders gave presentations on current issues, interacted with each other during panel discussions, and debated on matters of importance with unflagging zeal. A scintillating awards night followed, interspersed with performances by Drum Café. The day ended with cocktails and dinner. The summit began with the lighting of the lamp by Prof. N. Viswanadham, INAE Distinguished Professor, Computer Science and Automation, IISc, Bangalore, and, a welcome speech by Aanand Pandey, Group Editor, LOG.India. The first presentation of the day was entitled ‘Exploring New Frontiers of Excellence’. Prahlad Tanwar, Associate Director – Transport & Logistics, KPMG Advisory Services elaborated on subjects like reverse logistics, green logistics, optimal network designs, multi-modal infrastructure, integration of supply chain stakeholders, skilled manpower, technology and automation. He presented three case studies as examples of value added services, green logistics and efficient network design.
The first panel discussion of the day, ‘Supply Chain 2012 – What Next?’, followed. Moderated by Ashu Khanna, Founder, Valyou Consultants, the panelists discussed the constantly evolving supply chain industry in India, technology and best practices, and talked about what the future may have in store for the industry. The industry experts who participated in the panel discussion were Devadas Nair, Customer Care Associate & Head Supply Chain & Mission Control, Shoppers Stop Limited; Abhijit Chaudhuri, Independent Consultant, Jaldeep Sodhi, Executive Director, Avalon Consulting; Tej Nirmal Singh, Director and Head-Supply, Ericsson India; Vinay Sharma, Managing Director, Oil Field Warehouse & Services and Col. Arvind Gangoly from Tesco. Mr. Sharma said, “A service provider should be able to read between the lines while understanding customers’ needs as certain customers may not be very conversant about their specific requirements.” Speaking about the telecom industry, Mr. Singh said, “The major challenge for the immediate future is in productivity because we have to move away from cost savings to cost avoidance. So there is need for innovations, need for finding better ways of delivering the same product.” Mr. Sodhi was of the opinion that, “As one would move forward, one would look at upping the efficiency
Prof. N. Viswanadham, INAE Distinguished Professor, Computer Science and Automation, IISc, Bangalore, lights the lamp.
Prahlad Tanwar, Associate Director - Transport & Logistics, KPMG Advisory Services, giving a presentation on ‘Exploring New Frontiers of Excellence’.
A panel discussion on ‘Supply Chain 2012 - What Next?’. (L-R): Abhijit Chaudhuri, Independent Consultant; Devadas Nair, Customer Care Associate & Head Supply Chain & Mission Control, Shoppers Stop; Jaldeep Sodhi, Executive Director, Avalon Consulting; Vinay Sharma, MD, OWS; Tej Nirmal Singh, Director and Head-Supply, Ericsson India; Ashu Khanna, Founder, Valyou Consultants; Col. Arvind Gangoly, TESCO. INDIA | April 2012 www.logisticsweek.com
A panel discussion on ‘The Right Mix - Intermodal Logistics Of The Future’. (L-R): Vivek Kele, Director, Teamglobal; Sanjay Coutinho, CEO, OM Pizza and Eats; Shankar Shinde, Hon. Treasurer, FFFAI; Prem Verma, CEO, TMLD; Pankaj Chandak, AVP - Parts and Services, Fiat India; Dr. Ravi Prakash Mathur, Director, Supply Chain Management - Logistics, Dr. Reddy’s.
Prof. N. Viswanadham presenting a paper on Food Security and Managing its Supply Chain.
level manifold, and one would also be on the constant lookout for drivers of costs, and the endeavor of most of the supply chain officers would be to drive costs down as well.” Col. Gangoly added, “In my mind, the future lies in the fact of how you collaborate with your vendors to improve the vendor fill rates at that end, and integrate the two supply chains; how do you get into long, may be 1520 year partnerships with your 3PLs, so that they can invest in you. That kind of investment is not happening right now as most 3PLs see it as a one or two year partnership.” Mr. Chaudhuri said, “The serviceability of a supply chain is the co-
Darryl Judd, Global Operations and Managing Director - Asia, Logistics Executive, unveiling the Salary Guide published in LOG.India, March issue.
The Award winners EDITOR’S CHOICE AWARDS:
Young Achiever in Supply Chain 2012: Dr. Ravi Prakash Mathur, Director, SCM Dr. Reddy’s Laboratories The Supply Chain Excellence Award: Maruti Suzuki India Limited Enterprise Supply Chain Manager of the Year: S.K. Krishnan, VP Mahindra & Mahindra Industry Icon: Prem Verma, CEO TMLD Green Logistics: Ericsson India
USERS CHOICE AWARDS:
Best 3PL Company: DHL Supply Chain Best Shipping Liner: APL Line Best Air Cargo Carrier: Emirates SkyCargo Warehousing Excellence: Safexpress Best Service Logistics Provider: TNT Express Best Technology Service Provider: Kale Logistics Solutions Excellence In Supply chain Education:
Institute of Supply Chain Management (ISCM) Best international Project Forwarder: Pan Projects South Asia – India Best Innovations in Supply Chain: Mr. Vinay Sharma, OWS Industry Icon – Service Provider: Mr. Shashi Kiran Shetty, Allcargo global Logistics
SPECIAL RECOGNITION AWARD
Pioneer of Modern Industrial and Logistics Parks in India: Indospace
April 2012 | www.logisticsweek.com 19
< event report
‘The Big Debate - Who will pay for value? Users or 3PLs?’. (L-R): Arif Siddiqui, Director, Coign Consultancy; Rajkiran Kanagala, National Head, Business Development, TCI; Mrityunjoy Tripathi, Industry Vertical Manager — Hi-Tech, TNT; Mohandas Menon, COO, Future Supply Chains; S.K. Krishnan, VP, Mahindra & Mahindra; Prem Verma; Dr. Rakesh Sinha, COO (Marketing and Operations), Godrej Consumer Products Ltd.
Prabhakar Mahadevan, Regional Director, India, Goldratt Consulting, speaking about Performance Markers.
Anshuman Singh, MD & CEO, Future Supply Chain Solutions Ltd., presenting a paper on Transformations Through Supply Chain.
April 2012 | www.logisticsweek.com
creation of the customer, the maker and also the distributor – all the three put together and it is all evolving very quickly; the future of logistics is going to be very much dependent on how quickly we can align ourselves on all the co-ordinates and co-create.” Speaking of automation, Mr. Sharma said that although Indian companies provide automation to foreign countries they are reluctant to provide solutions within the country as they prefer earning in dollars. Mr. Singh said, “3PLs in India are very fragmented. Cost is a factor which is not encouraging the SMEs to invest in tools or automation. They believe in hiring more work force than in automating.” Mr. Sodhi opined that automation is scaleled. Mr. Khanna added, “I feel that as human beings we are losing patience, so customers are now driving automation. Foreign companies like TESCO or Walmart will drive automation.” The panelists agreed that it is very important to have training institutes for drivers. Integration of automation with infrastructure, industry consolidation, collaboration of suppliers and users were some of the important topics of discussion.
Post a short tea-break, Prof. N. Viswanadham, INAE Distinguished Professor, Computer Science and Automation, IISc, Bangalore, discussed the role of supply chain management in ensuring food security in an engrossing presentation entitled ‘Food Security And Managing its Supply Chain’. He discussed current efforts being made by government and NGOs to facilitate proper public distribution, food security indices by the world organizations, food security supply chain network coordination, and the supply chain risks. A panel discussion on intermodal logistics titled ‘The Right Mix – Intermodal Logistics of the Future’ followed. The panel consisted of Dr. Ravi Prakash Mathur, Director, Supply Chain Management–Logistics, Dr. Reddy’s Laboratories Ltd.; Pankaj Chandak, AVP – Parts and Services, Fiat India Automobiles; Shankar Shinde, Hon. Treasurer, Federation of Freight Forwarders Association in India; Sanjay Coutinho, CEO, OM Pizza and Eats (Papa John’s Pizza); and, Vivek Kele, Director, Teamglobal Logistics. The panel, moderated by Prem Verma, CEO, Tata Motors Distribution
Company Ltd., addressed the issues plaguing intermodal logistics in India today, and tried to figure out that perfect mix of transportation which would help both users and LSPs alike. Mr. Kele opined, “There are things which we can do at individual and organizational levels which can bring about more transparency in intermodal transportation. The container freight stations, the rail terminals, the port terminals, goods handling sheds – just by having better handling equipments at the interfaces, the entire intermodal transportation can become more efficient.” He added that efficiency in intermodal transport will come when all the modes of transport are geared to handle ISO containers. Mr. Chandak said, “Intermodal transport surely will be more costefficient and environment friendly.” He mentioned that infrastructure has to be seamless and there should be a uniform load carrying system, seamless connectivity of communication which will help get clearances at different roads, railway and port transport heads, and, seamless policy which would enable connectivity between bodies which will manage intermodal transport. Discussing the need for intermodal logistics in India, Dr. Mathur said that the cost of logistics in India is close to 12 percent whereas in developed countries, it is about 7 percent. He stated that every year India incurs
logistics waste of 7 percent of the GDP as a result of not using intermodal transport. The next topic was the star attraction of the afternoon – ‘The Big Debate – Who will pay for value? Users or 3PL?’. The discussion was moderated by Arif Siddiqui, Director, Coign Consultancy, and the panelists were Rakesh Sinha, COO (Marketing and Operations), Godrej Consumer Products Ltd.; Prem Verma, CEO, TMLD; S.K. Krishnan, Vice President, Mahindra & Mahindra; Mohandas Menon, COO, Future Supply Chains; Mrityunjoy Tripathi, Industry Vertical Manager–Hi-Tech, TNT; and, Rajkiran Kanagala, National Head, Business Development, TCI. In an enthralling discussion, the panelists discussed with tremendous enthusiasm the challenges and tried to arrive at solutions and were reluctant to leave the dais after time-up was called for. Mr. Sinha began the debate by saying, “Before we decide who pays for value, we have to see where the value is getting created.” Responding to that Mr. Verma said, “Value always pays for itself. All decisions, if taken from the cost perspective, will invariably be operational decisions, not strategic decisions. If you take strategic decisions, cost will be one of the elements but not the only element.” Commenting on expectations from 3PLs, Mr. Krishnan said, “What we expect in our relationship with the 3PL is that there are certain elements where the 3PL has to un-
Dr. Ravi Prakash Mathur receives the award for Young Achiever in Supply Chain from Jayashree Mendes, Executive Editor, LOG.India.
Aanand Pandey, Group Editor, LOG.India, presents the award for Supply Chain Excellence to Maruti Suzuki India. The award being received by Mayank Kaushik, Senior Manager - Supply Chain, Maruti Suzuki India Limited.
S.K. Krishnan receives the award for Enterprise Supply Chain Manager of the Year from Aanand Pandey.
A panel discussion on ‘Warehousing Excellence’. (L-R): Pamela Cheema, Editor - Special Projects, LOG.India; Ramit Chopra, VP, Realterm Everstone; Devadas Nair; Anshuman Neil Basu, Regional Executive Director, CSCMP, India; Padmini Pagadala, GM, TPG Consulting; Rajkiran Kanagala. INDIA |
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Pamela Cheema presents the award for Industry Icon to Prem Verma.
Jayashree Mendes presents the award for Green Logistics to Ericsson India team.
Bipin Reghunathan of DHL Supply Chain receiving the award from Jayaram Nair for Best 3PL company.
Simon Trobe of APL accepting the trophy for Best Shipping Liner from Christopher Kent.
April 2012 | www.logisticsweek.com
LW Awards Night: A full house.
derstand our requirements and upfront look on certain investments on IT.” As a logistics service provider, Mr. Menon commented, “In most cases we use our hands and legs and do not get the opportunity to use our brains. A service user cannot just penalize me for a fault and not incentivize me when I exceed their expectations.” Mr. Kanagala said that the logistics service provider industry is in a very nascent stage. He elaborated, “People who are trying to take these businesses do not have domain knowledge in entirety; it is acquired or derived domain knowledge, not fundamental. We have people from the industry who are trying to get this knowledge. So till that gap exists, and we are looking at contracts with respect to costs, we are not really going to address the issue of how we are going to add value. It will only be based on the maturity of an industry and how much the users look up to us to add that value.” Addressing the issue of value addition, Mr. Sinha said that in physi-
cal transactions there is not much scope for value creation; but, in intellectual inputs, there is lot of value which can be created. Mr. Siddiqui summed up the panel discussion by saying, “The service provider end should definitely start looking at things more than transaction, more than operations values and start looking into their capabilities into actually forming a part of the strategic initiative on the supply chain decision making process.” The sixth track of the day was very interesting as Darryl Judd, Global Operations and Managing Director – Asia, Logistics Executive, unveiled the Salary Guide published in the March edition of LOG.India. The compilation of Salary Survey Report 2012 covers the entire spectrum of salary bands and geographical territories in India. After releasing the survey, Mr. Judd gave a very interesting presentation on the key findings of 2012 Global Employment Market Survey, the trends in India as compared to the rest of the
Patrick Mascarenhas (right) of Emirates SkyCargo taking home the trophy for Best Air Cargo Carrier.
Vineet Kanaujia of SafeExpress accepting the trophy for Warehousing Excellence from Christopher Kent.
Drumming to the beats of Drum Cafe.
world and the consequent impacts on talent attraction and retention. He offered a well-researched perspective into the salary rises and talent pools in India, and what companies in India need to do to ensure that salary hikes are commensurate with talent. Next, Prabhakar Mahadevan, Regional Director, India, Goldratt Consulting, gave an insightful presentation entitled ‘Performance Markers’. He spoke about challenges in supply chain, typical inventory distribution, how to measure and enable flow, and the concepts of flow. He also explained how flow is blocked in the supply chain and how the concepts of flow can help enhance efficiencies. Track eight, ‘Transformation Through Supply Chain’, comprised an interesting presentation by Anshuman Singh, MD & CEO, Future Supply Chain Solutions Ltd. Mr. Singh elaborated on transformations in the supply chain which could help cut costs and optimize supply chain networks. The summit ended in a panel discussion titled ‘Warehousing Excellence’. The panel was moderated by Pamela Cheema, Editor Special Projects, Log.India. The participants were Rajkiran Kanagala, National Head, Business Development, TCI; Padmini Pagadala, General Manager, TPG Consulting; Anshuman Neil Basu, Regional Executive Director, CSCMP India; Ramit Chopra, Vice President, Realterm Everstone; and, Devadas Nair, Customer Care Asso-
ciate & Head Supply Chain & Mission Control, Shoppers Stop Limited. The panel discussed the problems that Indians warehouses face even today and attempted to arrive at solutions. Ms. Pagadala opined, “Modern warehouses have started emerging in India, but there is still a long way to go. WMS is not used in most of the warehouses in India even today.” To that Mr. Nair added that most of the companies coming forward are investing heavily in warehousing because most of them have realized that WMS is extremely important. Speaking about parameters of warehousing excellence Mr. Chopra spoke of floorings, roofing, other clearances, fire hydrants, and, fire sprinklers. Mr. Basu spoke of the need for talent development among the warehouse personnel. He elucidated, “It is very important, and is probably missing in today’s scenario. Housekeeping and proper training of personnel, proper training about how to manage the equipments is something which is definitely missing in today’s scenario.” Finally, the LogisticsWeek Supply Chain Awards. Although giving out awards are a sign of industry’s appreciation and recognition, the LogisticsWeek Awards 2012 encouraged winners and nominees alike to compete better, if not more fiercely, in their chosen arena. The awards had two aspects to it – The Editors Choice Awards, and The Users Choice Awards.
Nitin Dave and Mrityunjoy Tripathi of TNT receive the award for Best Service Logistics Provider from Ramit Chopra.
Sumeet Nadkar of Kale Logistics accepting the award from Ramit Chopra for Best Technology Service Provider.
Piyush Shah receiving the trophy on behalf of ISCM from Ramit Chopra for Excellence in Supply Chain Education.
April 2012 | www.logisticsweek.com 23
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Christopher Kent receiving the award for Best Intl Project Forwarder from Prem Verma.
Adarsh Hegde accepts the award for Industry Icon of the Year on behalf of Shashi Kiran Shetty (Allcargo Logistics) from Prem Verma.
Prem Verma presents the award for Best Innovation in Supply Chain to Vinay Sharma.
Jayaram Nair, Publishing Director, LOG.India presents a special recognition award to IndoSpace. Award is being received by Ramit Chopra of Realterm Everstone.
April 2012 | www.logisticsweek.com
The Editors Choice Awards had five categories. The winners were chosen according to parameters set down for each category and based on the continued interaction the editors of LOG.India had with the company representatives spanning over a year. The Users Choice had eleven categories. Nomination forms were sent out to large user companies. The forms contained various parameters for different categories, such as change-readiness, cost-efficiency, operational performance, turnaround time, management excellence, quality of service, storage utilization, inventory and data visibility, RoI factor, and value-added services. Users filled in the forms and named the companies who best deserved the award. The final winners were chosen based on the number of nominations received. The event was marked with industry-wide interaction on all sides, and a meeting ground for old and new friends. Not to forget, the exciting and exhilarating interactive sessions of Drum CafĂŠ, a leading teambuilding group.
The Drum Cafe group regales the audience.
<< cover cover story story
The Stuff Of Legend A year since the coverage of Maruti Suzuki Indiaâ€™s extensive and efficient supply chain, Managing Executive Officer (Supply Chain), Sudam Maitra, permits us a closer look at some pioneering innovations and ideas that have been introduced in recent years. Anuja Abraham reports.
April 2012 | www.logisticsweek.com
Sudam Maitra, Managing Executive Officer (Supply Chain) Maruti Suzuki India Ltd.
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n a windy wintry afternoon, as we enter the 300-acre facility of Maruti Suzuki India Ltd, we are greeted by a sea of green: gangs of workers in green uniforms, with a few in pale chocolate brown uniforms too, swarm down the sidewalk, maintaining lane discipline, while returning to their respective offices post lunch. A little later we glimpse Sudam Maitra, Managing Executive Officer (Supply Chain), Maruti Suzuki India Ltd (MSIL), formally clad, checking out one of the new models of cars which will be launched shortly, in a dusty stockyard. He welcomes us with a warm smile and leads us to his office. It has been a year since LOG.India wrote about Maruti’s much-lauded ‘e-nagare’ and seamlessly effective supply chain system. But Mr. Maitra prefers to speak of the series of novel ideas and consumer-friendly value additions that the country’s largest automaker has implemented for cost-effectiveness and inventory reduction. A Mechanical Engineering graduate from IIT-Delhi (1976), he has over 34 years of exhaustive and diverse experience across verticals like manufacturing and engineering. Currently, Mr. Maitra oversees procurement of local and imported components, including raw materials and helms inbound logistics at Maruti Suzuki, the corporate with which he has been associated for 29 years.
Organizing Freight Movement In a demand-supply situation, when demand exceeds a certain limit, market forces find it difficult to keep up with supply. But Maruti has done the improbable. It has exceeded market expectations and continues to keep up with increasing volumes in spite of the high demand from the
April 2012 | www.logisticsweek.com
market. Maruti is also a pioneer of the milk run supply chain within the automotive industry. The idea of the milk run was spawned when Maruti noted that the steep volumes of components flowing into the factory were causing a logjam within the premises. The company hit on the idea of the milk run in the National Capital Region (NCR) and began organizing their trucks to go to suppliers’ locations at a designated time, pick up the components and deliver it. Consequently, factories carried lower inventories and also ensured timely supply of components. The reduction in congestion of components also reduced the cost of logistics for the company. Earlier, 40-45 percent trucks would be partially full at the factory. With the milk run supply chain, significantly all the trucks come in filled. “We
began saving about 25-30 percent in our overall cost of logistics,” discloses Mr Maitra.
Back On Track Maruti constantly aims at cost improvement. Mr. Maitra proceeds to share his company’s plans of portto-plant freight corridors. Maruti is planning to convert to rail mode to gain lower freight per ton. Adani Logistics offers end-to-end services to Maruti, exporting 60 percent of Maruti cars and providing end-toend solutions for cold rolled (CR) coils. This includes handling at port, transportation to the NCR, storage at built-to-suit warehouses and JIT delivery to the plant for a volume of 100,000 metric tons per annum (MTPA). In the near future, the company is depending heavily on the completion of the western dedicated freight
corridor (DFC), expected to be ready by 2015, so that it can start transporting coils from the port directly to the plant. The DFC planned by the government will reach Manesar, but to ensure continuity, Maruti plans to lay railway tracks till the Manesar plant. At present, Maruti is content with its part-road-part-rail movement. But the last mile connectivity by road does cause congestion. “The DFC is a better option than transporting all the way from Kandla port to Gurgaon or Manesar by road,” opines Mr. Maitra.
rail, it also made specific arrangements for coils to be transported by rail. While the system of tracking trucks is well-known, Maruti also formulated an in-house coil tracking system, its very own USP. From the time the coils arrive at the port till they reach the factory, Maruti tracks
the movement of coils at every stage. The ever-increasing volumes have also compelled the company to ship components from overseas suppliers once a week, up from bringing in shipments once a month. The inventory for domestic supplies is kept at 2 hours now (a radical shift from inven-
Maruti is holding talks with the Indian Railways to build special wagons that will carry cars back to the port for export.
Tracing The Coils Maruti has made arrangements for ‘coiltainers’ (trailers specially carrying coils) for the purpose of transporting coils by roads. These coils are used for manufacturing various panels in the car. When the company decided to convert to part-road-part-
On receipt of empty trolleys at the vendor location, the loaded trolleys get dispatched to the facility.
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< cover story tory kept for three weeks earlier) and for overseas supplies is one week.
Inventory Check Maruti has been able to keep its inventory under check and this can be attributed largely to the Just-In-Time (JIT) and Kanban system. Kanban is Japanese for ‘signboard’ or ‘visual card’; it is a means to achieve JIT. The purpose of Kanban is to divide work into different segments and mark each process with posts, to assign explicit limits to how many items may be in progress at each workflow state and to optimize lead times. Mr. Maitra flashbacks to a time when orders would be placed with suppliers a month in advance and full payment would be made. The suppliers would deposit the entire load of components at the factory within the first ten days of the month. The company faced the dilemma of carrying a heavy load of a month’s inventory at the factory. “Seeing no trucks at the factory’s materials section towards the latter half of the month would create unnecessary panic. We would wonder if the inventory had depleted or if there was a shortage on the line,” recounts Mr. Maitra. “Hence, we decided to come up with a 15-day schedule
where we placed orders for 15 days’ inventory. Now with the e-nagare (electronic-nagare) system in place, the inventory time has come down to two hours.” Maruti went into overdrive and sketched out intricate plans to save additional costs of carrying inventory. The company pioneered the enagare system, built exclusively for MSIL, which is the backbone of the corporate’s supply chain. Applying the Kanban principle, the schedules are released through the e-nagare system with only one delivery time per day for the suppliers. There are three sets of trolleys in the system; one trolley is at MSIL for production, the other at the storage location in the production shop, and the last trolley is ready for dispatch at the suppliers’. Once the trolley at the production line is emptied and further material is required, then the trolley at the storage location is brought in and the empty trolley returned to the vendor. On receipt of the empty trolley at the vendor location, the loaded trolley at their facility gets dispatched. Now, the next set of trolleys is prepared for dispatch. This system is currently being followed with the vendors in the supplier park.
Trolley Kanban System
Source: Maruti Suzuki
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MSIL has formulated an in-house coil tracking system that can track the movement of coils at every stage.
The vendors are constantly informed from time-to-time if the movable storage bins (that store components moving into production) must be replenished. “We inform our suppliers the next day about the number of deliveries and the time slot. Hence we ensure uninterrupted production and quick response to market fluctuation,” remarks Mr. Maitra. Maruti today holds inventory for a maximum of two hours, a stark contrast from the bleak times when inventory was held for 12-14 days. This improvement can be attributed to the Kanban or JIT method. “As
far as the system is concerned, it is indeed, a giant exponential leap, wherein supply scheduling is done through the e-nagare system, ensuring supplies in two-hour fixed slots, with one-day prior notice to vendors through the extranet system, clearly stating the date, time of supply, part number, quantity and delivery location,” emphasises Mr. Maitra proudly.
Direct On-Line To slim down its supply chain, Maruti Suzuki eliminated its receipt and holding stores. This was a pragmatic choice as an abundance of
transit warehousing points resulted in delays, excess inventory management and affected quality issues due to unwarranted additional handling and storage. Maruti has now switched to the Direct-Online-System in order to make manufacturing leaner. Formerly, the internal workforce collaborated with the truckers at the receipt stores and inspected each lot before sending them to the holding stores and to the line. But with the elimination of the receipt and the holding stores, the company required human intervention to carry the material from the trucks to the
line. “Then somebody from our team suggested making holes in the wall of the shop floor tantamount to the height of the truck and now
Maruti’s Journey In FY 2010-‘11 n 1.27 million cars sold in FY 2010-‘11, 25 percent more compared to ‘09-‘10. n Milestone: Rolled out 10 millionth vehicle. n 4 out of top-5 selling cars in India (4/5) - Alto, Wagon R, Swift, Dzire. n Capacity expansion: Additional capacity of 500,000 units per annum at Manesar by 2012-’13. n Alto K10 launched. n Green Range (CNG) –SX4, Estilo, WagonR, Eeco and Alto launched. n 500,000th K-series engine rolled out. Source: Maruti Suzuki
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Side-opening trucks expedite the process of loadingunloading.
a roller track carries the consignments right up to our assembly line,” says Mr. Maitra expansively. These newly-minted methods also depicted Maruti’s faith in the ability of its suppliers to deliver quality components. Capt. Sandeep Mehta, COO, Adani Logistics Ltd, speaks warmly of Maruti as a pathfinder which guides its suppliers at every step. “Maruti has a history of cultivating vendors. This creates a relationship that is based on understanding, trust and is long-lasting, rather than being just transaction-
al,” he says. Suppliers, on their part, have to follow stringent parameters, conduct regular inspections and send daily reports to Maruti about quality and efficiency. Every filter has its own limitations. The key lies in producing quality parts/components the very first time. “It is important that the components are produced right,” stresses Mr. Maitra. “A filter’s efficiency is 9596 percent so even if you are filtering everything, some defect will pass unnoticed. Hence, the suppliers are expected to produce quality auto parts.”
Maruti’s Financial Performance (FY 2010-11) Market Share
44.9 pc in the passenger vehicle segment, increased by 30 bps
1,271,005, highest ever with a growth of 24.8 pc
Rs. 375,224 million, highest ever with a growth of 24.6 pc
Rs. 22,886 million, declined by 8.4 pc
Sales Outlets: 933 Cities: 668 Service Outlets: 2,946 Cities: 1,395 Source: Maruti Suzuki
April 2012 | www.logisticsweek.com
Indigenizing Models Over the years, the debut of new models and their variants in the Indian market often led to higher import of components. Gradually, the company began searching for indigenous components. But that depends on a number of factors viz. suppliers’ capability, availability of required technology, collaborations with foreign suppliers for necessary ToT (Transfer of Technology) and further joint ventures for production in India and the lead time in respect to the launch of the model. By localization one can achieve better economies of scale as the input cost is always competitive in the country. Further, the supply chain becomes notably shorter and leaner with less inventory carrying cost. Also, Indian consumers are shielded from external international environmental factors, viz. forex fluctuations
and other factors prevailing in the country of import, which may have direct or indirect affect on supplies.
Step-By-Step Kaizen Maruti is tirelessly endeavouring to improve processes which will not only assist cost reduction, but also contribute to the environment. The company has absorbed invaluable lessons from its parent company, Suzuki, on ‘kaizen’ (improvement) and has promptly translated these teachings into actions that have enabled them to trim flab and scorch the market with its effortless supply chain. After immense thought, the latest development in inbound logistics is the use of collapsible racks and bins to carry overseas shipments. Earlier, the racks were sold as scrap as they could not be reused. “If we did not recycle, the amount of wastage would have been too large. Then it dawned upon us that probably if we got the components on collapsible racks, we could take the components off, collapse the racks and send them back to Japan,” explains Mr. Maitra. The idea of using collapsible racks was derived from the parent company, Suzuki, as this idea was put into practice in domestic logistics in Japan. Mr. Maitra and his team have received special permission from the customs to send the empty racks back on the same ship to Japan. In the automotive industry, it is imperative that loading-unloading processes follow the FIFO norm. But rear-opening trucks make it impossible for items loaded first to be taken out first. The model of side-opening trucks is unique to Maruti in India, another invention inspired by Suzuki. “These trucks expedite the process of loading-unloading, because the amount of space that is open makes it easy for the forklifts to lift the auto components or finished items and take it out. So, the efficiency of loading-unloading goes up and in the
meantime, we follow FIFO,” explains Mr. Maitra energetically. Another innovation in the assembly units is the implementation of the principle of ‘Pokayoke’,it literally means ‘fool proofing’. It is crucial for all manufacturers to create a failproof system that systemically checks errors time and again and aids in creation of high quality products. Maruti has automated the assembly line to the extent that the line comes to a standstill and an alarm goes off to notify any human error. Leaning back in his chair, Mr. Maitra cites the example of the engine filling section in the assembly unit. “A worker fills every engine with oil manually. During the course of time, it is only sometimes a worker may miss an isolated engine. When that happens, the entire line stops. The conveyor belts have points where the engines are weighed before and after being filled with oil and if it notices that there isn’t much difference in the weight before and after, the line comes to a halt.”
Value Creation As the country’s largest automaker, Maruti Suzuki has tirelessly and successfully experimented with diverse ideas in different models of its cars. The company’s value addition and value engineering (VA/VE) is based on specific changes in the existing or new models. Mr Maitra and his team follow an exercise where disassembled auto parts are placed before a select few team members. They evaluate and come up with new ideas, note it on a yellow slip and post it on the wall. The exercise ends with 400600 slips on the wall, out of which 3540 ideas are deliberated upon. “Now there are around 7000 components in the car, if we reduce 350 components we get a good cost reduction without compromising on the quality of the models,” says Mr. Maitra animatedly. Over the years, small accessories like lighters and ashtrays have disap-
Maruti’s CSR Initiatives: n The company also runs an employee volunteering programme called e-Parivartan and operates two schools for children of employees and the local community. n The company began its road safety initiative in 2000, offering a well-structured and scientifically designed driving training programme to the public. The company’s driving training infrastructure at present includes four Institute of Driving and Traffic Research (IDTRs) and 166 Maruti Driving Schools (MDS) spread across the country. IDTR and MDS have together trained over 850,000 people in safe driving so far. n Maruti is presently working with seven ITIs, across the country for skill training of manpower. The company has chosen to work with the ITI at Elathur, Kerala, that specifically caters to the Schedule Caste and Schedule Tribe (SC/ST) community. The company also works with two ITIs dedicated for women at Gurgaon and Jhajjar in Haryana. n The company continues working in four neighbouring villages in Manesar on issues of healthcare, education, infrastructure development and skill training. n Under the volunteer programme, employees contributed 2,792 volunteering hours in 2010-11. Cumulatively, employees have spent 7,095 hours in volunteering activities since the programme launch in November, 2008.
peared from Maruti’s low-end range. “This also contributes to our efforts to acknowledge the anti-smoking campaign that was so prominent a few years ago,” notes Mr. Maitra. The basis of VA/VE is to analyze and add value at a lower cost either in-house or otherwise. It could be by changing the process, design, source, etc., or putting new cutting edge technologies in place or even by learning and imbibing / adopting significant innovations from its competitors by benchmarking. In today’s intensely fierce market where each competitor would like to cut the ground from under the other, there is sustained focus on various cost reduction activities which encompass Value Analysis Value Engineering, MSIL imports and vendor
Source: Maruti Suzuki
April 2012 | www.logisticsweek.com 33
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Auto parts being transported within the MSIL facility at Gurgaon, Haryana.
part localization, Master Production Schedule (MPS) Activity( a weekly scheduled activity with one vendor each week) annual negotiations with local vendors, Focused Model Cost Reduction, Commodity Price Management, Periodic Cost Down, Forex management, etc. Improving output/input ratio is a continuous activity that is being carried out at Maruti through yield improvement. It effectively results in cost reduction with a focus on optimal material utilization. Here the cost reduction is achieved by better input material utilization, reducing wastage, scrap utilization, recycling etc. Mr. Maitra underscores an example where ‘nesting’ of metal sheets obtains more components and reduces wastage of end pieces.
April 2012 | www.logisticsweek.com
Tying Indo-Pak Shipments Earlier, components, parts, consumables and other miscellaneous items were shipped from Japan to India and Pakistan on two different respective country-bound ships. “The Japanese believed there was a conflict between the two countries, hence they sent the shipments separately.” This resulted in transshipment at Singapore where individual supplies to India and Pakistan were held for three-four days. “Seven years ago, over deliberations on kaizen to reduce logistics costs, we wondered what measures could be taken to save time and money. Then, we resolved to consolidate shipments to India and Pakistan. We had to convince our Japanese counterparts and finally when they saw reason, they agreed,” smiled Mr Maitra. Today
supplies for India and Pakistan are combined and sent on a mother ship that calls at JNPT before proceeding towards Karachi. By eliminating the need for transshipment at Singapore, the transit time has been reduced by four days.
Guarding The Rupee Maruti faces difficulty in purchasing certain parts or accessories from local vendors in India. “For example, take seat belts. The belts are sourced from Japan and external additions like buckles are appended in India. Of late, we have been promising local suppliers lucrative incentives on manufacturing spares and other body parts in India,” Mr. Maitra elucidates. “The cost saved is shared with the suppli-
ers thus, encouraging them to continue manufacturing.” Maruti has been lobbying Suzuki intensely to set up a manufacturing plant in the country for such parts/components. Due to constant imports/exports, Maruti is subjected to enervating foreign exchange fluctuations. Maruti has also introduced the concept of hedging in the Indian automotive industry. In the past two years, only twothree suppliers of Maruti have taken up hedging. “The convoluted trading name and lack of clear understanding deters suppliers from taking up hedging,” adds Mr. Maitra. With special permission in hand from RBI, Maruti has taken up hedging on behalf of their suppliers to guard their best interests against constantly fluctuating foreign exchange (FE) rates.
The Forex risk is invalidated; also the company does not have to pay extra to the suppliers in case of varying FE rates. “This is something like the share market, where your shares keep falling or rising. At the start of every fiscal, we create budgets taking into account the in-house valuation and the present FE rates. The main motive behind hedging is to protect our budget, not make profits,” he insists. Maruti has survived a turbulent phase in the past couple of months. Industrial relations which had gone awry affected sales of the models in the market, thus bringing production at Manesar and Gurgaon to a grinding halt. The overall market has been sluggish, he shrugs. “The overall growth in the automotive market will be around four-five percent, this year; hence we won’t be able to meet the five million mark of production as claimed earlier. Maybe not five, but we will touch the two million mark, re-gaining our 50 percent domestic market share,” says Mr. Maitra with cool confidence. Maruti Suzuki’s market share may have come down from 50 percent to 40-44 percent, but Mr. Maitra firmly states that “this was a temporary aberration due to a particular cause.” Before the long drawn-out strike hamstrung the company’s operations, the production rate was 4,500 vehicles per day; however, the company is strenuously trying to cut back its losses for the five-month strike period by pushing its current production rate to 5,200 vehicles per day. “It will not be long before we get our 50 percent market share back,” he promises.
Growth Drivers Earlier, Maruti stored its supplies in a single main warehouse in Gurgaon. But the corporate has now taken the pragmatic and radical path of decentralization. Maruti has opened its first stock depot facility
In The Pipeline n Introduction of new technologies. n Knowledge and information management system upgradation. n To develop in-house capability to facilitate patent filing. n Developing costing knowledge of various automotive technologies through standard cost tables and cost benchmarking. n Developing new products to meet Indian consumers’ requirements. Source: Maruti Suzuki
at Bangalore. The story behind this venture is that when Suzuki Chairman, Osamu Suzuki, asked Mr. Maitra’s team how many days it takes to deliver a car (that is not on the waiting list) to a customer in Guwahati, they replied that it was 15 days. The answer expected of them was two days (if not on the waiting list)! That unvarnished truth has triggered off the current decentralization, with Maruti contemplating setting up stock depot facilities across India at four strategic locations: Nagpur, Bangalore, Siliguri and Chandigarh (tentative). These depots will be able to stock about five to six days worth of production and promise to reduce the delivery time period and measure up to world-class standards. Maruti is also in talks with the Gujarat government to establish another plant, close to the Mundra port. Proximity to the port will ensure faster procurement of components and it will eventually reduce logistics and manpower. Maruti Suzuki has constantly striven to maintain its hegemony in the market. But despite some fluctuations of fortune, the company appears to have surmounted its problems and is apparently cresting the wave of popularity again. With its tireless work, the company has struggled to preserve its position on the pedestal indefatigably and in the hearts of millions of its loyal customers.
April 2012 | www.logisticsweek.com 35
< special feature
The Essential Infrastructure With the modernization of the nationâ€™s infrastructure, cold chains are an essential part of the nationâ€™s economy. Purvin Patel reports.
cold chain is a temperature controlled supply chain which is used to extend and ensure the shelf life of products such as fresh agricultural produce, seafood, frozen food, chemicals and pharmaceutical drugs. The cold chain consists of two logistic systems: Surface storage: Refrigerated warehouses for storage of temperature sensitive products. Refrigerated Transportation: Reefer trucks, containers, ships and trains for transport of temperature sensitive products.
April 2012 | www.logisticsweek.com
A cold chain logistics player could either be a cold storage owner or the owner of a fleet of reefer trucks. Also, there are 3PL firms which own the entire network, right from procurement to the final destination of the temperature sensitive products. Thus, the success of cold chain companies relies on how efficiently they can transport temperature sensitive products from the place of origin to their destination with full integrity. Different products require different temperatures. The common standard temperatures
are Chiller (-2oC), Frozen (-18oC) and Deep Frozen (-25oC).
Current State Of Sector Industries which need cold chains are fruits and vegetables, ice cream, processed meat and poultry, seafood, preventive medicines (mainly vaccines) and chemicals. The cold chain has a critical role to play in India as two-thirds of the countryâ€™s population is dependent on agriculture for its livelihood. The Indian food market is estimated at over $182 billions. India is the second largest producer of fruits and
< Special feature vegetables in the world, with an annual vegetable produce of around 85 million tonne and an annual fruit produce of around 45 million tonne. Of the close to 130 million tonnes of fruits and vegetables that the country produces, nearly 40 percent gets wasted. India is the largest producer of milk in the world, producing close to 100 million tonne, and accounting for nearly 17 percent of global production. About 35 percent of this milk is processed. More than 10 percent of annual milk production in the country is lost due to inadequate storage facilities. India has roughly 5,300 cold storages with a capacity of 23 million metric tonne, over 90 percent of which are suitable just for storing potatoes only. Inconsistent standards in different sections of the cold chain could lead to damage of food, either by shock or by undue temperature variations. This degrades food quality due to chemical reactions which are triggered off, which can otherwise be mitigated by low temperatures. To maintain integrity of food and pharmaceutical products, these providers rely on efficient and fully integrated end-to-end cold supply chain technology. Thus cold chain companies should design a supply chain solution which maintains the required temperature according to the physical attributes of the product.
for Cold Storage: Cooling units are not mobile units, so the location of such units becomes a key constraint as there are very few parcels of large land spaces available in India. n Lack of Proper Infrastructure: The cold chain industry in India is very fragmented, with players not having the strength to invest in the technology needed to build high quality cold storage or to invest in reefer trucks. n High Energy Cost: Energy expenses alone account for about 30 percent of the total expenses of the cold chain sector in India. This is the main constraint about setting up cold chains in India. Indiaâ€™s peak power deficit is around 17-18 percent. Thus the investment in backup systems increases capital investment costs. n Uneven Distribution of Capacity: The majority of cold storages in India have been established in states like Uttar Pradesh, Uttarakhand, Maharashtra, Gujarat, Punjab and West Bengal. But the establishment of such cold storages needs to be more geographically diverse. n The cold storages present in India can cater to single commodities
Cold chains face several roadblocks in their growth and some of the most challenging hurdles are listed below: n Rising Real Estate Cost: A fully integrated cold storage facility of international standards, with one million cubic ft. of storage space, will require an area of approximately an acre, which is a huge investment.
Role Of Cold Chain Service Providers With the demand for better quality food at affordable prices by consumers, companies rely on cold chain service providers to fulfill it. The service providers should be able to develop systems and processes to mitigate risk associated with temperature abuse in cold chains and thus help in business growth. The service provider should understand the importance of capacity utilization, productivity, inventory, cost, waste, error and theft (WET) management, along with the ability to track and trace these parameters. This will help to reduce total system costs which in turn will improve the bottom line. The success of implementing cold chain solutions to serve the
Cold Chain Management
Challenges In The Sector
only. Different commodities require different temperature conditions, resulting in poor capacity utilization and low financial viability. n FDI Restrictions in Retail: Cold chain infrastructure needs huge investment. Easing restrictions on FDI in multi-brand retail could open up channels for further fund infusion from new foreign entrants.
April 2012 | www.logisticsweek.com
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Editor’s Note Enfant Terrible Bad logistics is often the cause for unhappiness and displeasure. It could be due to numerous reasons from trafﬁc snarls, to delays in paper work or some little-known regulation that could cause delays in delivery. But to the receiver, it is bad logistics. Often, when you have asked for something to be delivered at a pre-decided destination and especially if you are eagerly awaiting the delivery, nine out of ten times it will never arrive on the scheduled date. This happens so often each time I order some books/CDs/appliances. The service provider will tell you that he has made more than one trip and there was no one home. And then you get into an argument. Is ensuring prompt delivery so tough? Don’t responsible people sitting in ofﬁces take stock of goods that have arrived and those that need to be delivered? Is the infrastructure in such doldrums? Surely, they are not short-staffed. Nor do people live in such remote areas (In the movie Il Postino, a make-shift postman delivers a letter with prompt regularity to his only customer who lives on the top of a hill) where they need to search out more deliveries within the area to justify their trip. And God help you if your parcel happens to be a passport.
Vyas anshuman Singh, Md & ceo, Future Supply Jayakumar Krishnaswamy, AkzoNobel’s SCM chain Solutions limited, gives an overview of l’s SCMGroup. the ScM strategies ofNobe the Future head, is managing a 24x7 supply-chain. Here’s igues amy, Akzo aj Rodrain. Here’slow TElEcom NEglEcTEd page 22 how he plans to accomplish it. Ravir Krishnasw Page 16 supply-chy Manager, 20 ger Jayakumar a 24x7 ent logisTics adopTioN 24 waTErways 44 Sanja ging Mana nishm it. the FMC PageG16 OLD hd is mana EcTE s Reple GET SET,n GO 38 ORDER: How auto cos manage serviceIndia logistics for phased-out models...08 mplis Movement of telecom Why WMS still does is ignoring inland head,Distr ibutio NEgl ain of44 Britannia’ to acco nal plans 08 network equipment openss ring not have enough HAND: How FDI in Retail would waterways at its own logistics...25 rway Natio supp The the true story ofly-ch supplymodels...THE FOREIGN change India’s waTE how he ge ensu phased (right) and g inland-out s...25 takers and a window of opportunity in India peril for mana 20 s chain education in India. ignorin is locks (left), logistic SCM: Amid all the din around green logistics, some practical wisdom...30 Page PRO-LIFE low own logistic serviceIndia 24 India’s the eroadb ...30 ays at its Mukherjee ingmanag waterw cos would auto ShapinG up Retail Brawn 18change some practical wisdom Food Security and ScM: The bill is noble, but do we have the supply-chain...10 adopTioN look. How clear r while R: does in sharp s, still peril AFDI majo ORDE : How tics. -line...14 Jane: The percentage of women execs in corporate supply-chain....16 OLD Why WMS green logistic Woodland’s products logisHow ny bottom Supply less enough IGN HAND din around seam FORE not have all the on....30oF inventory: Scrutinizing ways to improve inventory turns.....60 come together from scratch THE s dent compa India SCM: Amid rdizatiturn takers in -chain hurdle rue lack of standa 36 ... supply PRO-LIFE How ers SCM chiefs cs manag gation of PICTURE: Retail logisti BIGGER biggest congre LACUNAE: from arguably the IL RETA hts MIT: Highlig CII SUM
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Devadas Nair, head supply chain, shoppers stop, is in the thick of a retail revolution, shaping the supply chain of one of its prime catalysts. page 22
the humaN aNgLe 50
suppLy shyLocks: Extortion from transporters at checkpoints is routine. A report.8 Let it pass: Reducing production lead time is key to smoothening logistics flow...16 a maN‘s WoRLD: Where are the ladies in the industry when we need them? ....42
An update on talent management in supply chain.
November 16–30, 2011
amit mukherjee, Vicepresident (iT and supply chain) and group cio at rpg, has deployed exemplary supplychain strategies at spencer‘s retail >> page 34
TIOEN TIM OVA NCNH CRUIN
Ms. Shagun Kapur Gogia, Director/Founder of Tuscan Ventures, has grand plans for the cold chain industry in India.
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Your’s truly, Jayashree Mendes
Firms Rethink Supply Chain Risks
Disasters in Japan, Thailand highlight need for continuity plan Bangkok As flooding in Thailand disrupts supply chains in many industries, the event—along with Japan’s March earthquake and tsunami—is prompting many to consider aspects of supply chain risk that might have been previously overlooked, says a recent report in Business Insurance. While many expect global sourcing to become an even larger factor for businesses going forward, recent events are prompting companies to consider the geographic concentrations of suppliers, the need for backup suppliers and reengineering processes to accommodate backup components should supply chains be disrupted. With an estimated 45 percent of the world’s hard-drive production located in Thailand and flooded plants affecting production by major manufacturers such as Seagate Technology Inc. and Western Digital Inc., some analysts say the disruption could affect PC production through the first half of 2012. The flooding also has had a major impact on the auto industry, where disruptions at Thai auto manufacturing plants and parts producers reportedly is expected to result in lost production of 250,000 vehicles worldwide. Many Japanese companies relocated production to facilities in Thailand after the March earthquake and tsunami. London-based law firm Reynolds Porter Chamberlain L.L.P. said the move to Thai facilities helped many Japanese companies mitigate their losses after the Japan disaster. But many now face further losses as a result of the floods in Thailand. “The problem for insurers who provide business interruption cover to Japanese manufacturers is that they have to cover the losses stemming from the Thai flooding because so many businesses moved some or all of their supply chain there,” Daniel Saville, legal director in the reinsurance and corporate insurance department of Reynolds Porter, said in a statement. “Moving production from Japan to Thailand was “Plan B.’ The question now is whether those businesses have a “Plan C,’” he said.
Car manufacturers across the world suffer delays as factories lie submerged. Gerry Alonso, senior VP of claims at Factory Mutual Insurance Co., noted that the “slow developing” nature of the Thai catastrophe makes it difficult to get a handle on the extent of losses. And, the duration of the flooding could exacerbate the losses. “We’ve had some clients that have been able to procure divers and go in there, but that gives you an idea of what you have.” Mr. Alonso said. “The frustrating part from a claims perspective, you can’t assess losses until the water’s gone.” William J. Montanez, director of risk management at Ace Hardware Corp. and a member of the board of the Risk & Insurance Management Society Inc., said his company hasn’t been affected by either catastrophe, though it relies on overseas suppliers. Mr. Montanez said, “At the back end, we have to look at safeguarding and how we can make it less risky to do it.” With the Thai floods raising awareness of the risk of geographical concentrations of suppliers, Linda Conrad, director of strategic business risk management at Zurich Financial Services Ltd. in New York, said her company has been working with clients to
identify where suppliers and industries are concentrated. “I think this illustrates the need for better continuity plans, including backup supplier arrangements, diversifying the locations of suppliers and using different backup suppliers than competitors.” Ms. Conrad also said companies are starting to ask existing suppliers about their own continuity plans. “People are also starting to do a lot more scenario analysis, including calculating the potential impact of having to re-engineer processes if alternative components or parts don’t match the specifications.” In general, the recent supply chain disruptions are leading many companies to embrace “that resiliency mindset of: Let’s try to think through some hypotheticals and plan for this when it costs us less than when we are in a crisis,” Ms. Conrad said. “At the end of the day I think the onus that’s going to be on risk management and management in general is how can we get a preview of what the future might look like and how will we respond to it,” Mr. Montanez said. “That’s what ERM is all about.”
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Method In Motion
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In For The Long Haul
Varun Dhawan, VP-Taxation, Blue Dart Express Ltd., simplifies the issues with GST that have boggled many in the logistics industry.
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< special feature consumers involves proper network optimization of warehouses, facility planning, the monitoring of product quality throughout the cold chain and having a corrective action plan to counter any gaps. Further, the higher cost associated with operating cold chains needs excellent operational efficiencies and continuous improvements to maximize profits for service providers. Other major challenges which make cold chains more complex are inadequate logistics infrastructure,
unwanted ripening, colour changes, texture degradation and the growth of fungus as well as the decay of products. The export of fresh produce often involves long transit time and frequent handling. This makes effective cold chain management more difficult and even more essential, to ensure that the product finally consumed retains maximum freshness.
Importance Of Efficient Cold Chains n Increasing
Major challenges which make the cold chain operations more complex are inadequate logistic infrastructure, poor road connectivity, inadequate IT systems and inefficient transport providers. poor road connectivity, inadequate IT systems and inefficient transport providers.
Product Handling To move temperature sensitive goods with full product integrity, supply chain solution providers should have well-established processes from pre-shipment preparation to final verification and delivery to destination. Product handling is an inherent and important aspect which needs great attention. The maintenance of a cold chain is the best way to maintain the quality of a product and minimize all forms of deterioration after harvesting, including weight loss which results in wilting and limpness, softening, bruising,
April 2012 | www.logisticsweek.com
government regulation. n The demand from customers for continuously available high quality food products are primary drivers of cold chain integration. n Todayâ€™s busy and health conscious consumer is demanding fresh, wholesome and healthy products in increasing volumes and a variety of offerings. n Cold chain systems can be of strategic importance to companies since brand integrity, customer confidence, market share and profit are all at risk.
Improving The Cold Chain n The
Budget 2011-2012 provided infrastructure status to the cold chain sector. n The Budget exempted air-conditioning equipment and refrigeration panels used in cold chain infrastructure as well as conveyer belts from excise duty. n The Budget 2010-2011 proposed a concessional import duty of five percent with full exemption from service tax to set up and expand cold chains to preserve farm products as well as milk, meat and poultry products. n The Budget 2010-2011 included duty-free import of refrigeration units, which is required to make refrigerated vans or trucks. It also exempted trailers and semi-trailers
used in agriculture from excise duty. n The government of India introduced tax benefits for companies investing in cold chain facilities as part of the budget 2009-2010. n The government of India has also revised its scheme of food parks in the tenth Five Year Plan and changed to the Mega Food Park Scheme (MFPS) under the 11th Five Year Plan n Investment from private equity funds in various cold chain projects. n The involvement of railways and airports for transportation of cold chain products. n The government of India has taken a decision to set up the National Centre for Cold Chain Development (NCCD) to address the issue relating to gaps in cold chain infrastructure in India. Maintaining and enhancing efficiencies in the cold supply chain is the most important thing. The best way to do this is by reducing touch points in the supply chain. By following these practices rigorously and with passion, we can reduce the cost of the cold chain as well as improve cold chain processes. With average capacity utilization in the cold chain sector between 30 percent to 75 percent, the profits of a cold storage facility depend largely on investment in technology, infrastructure and service standards. The most important factors that will decide the growth of the cold chain sector is the flow of funds in this sector. The investment can be from large business houses. Also, the government can help in acquisition of land to set up cold chain storage facilities. The government must also speed up the introduction of GST, which will help in the development of centrally located warehouses. The author is Chief Operating Officer, Radhakrishna Foodland Pvt. Ltd. He can be reached at email@example.com.
Kelley® Announces Launch of New Entity, Kelley Material Handling Equipment India Pvt Ltd. (Gurgaon, India), Kelley® is pleased to announce the launch of Kelley Material Handling Equipment India Pvt. Ltd, a 100% wholly owned subsidiary of 4Front Engineered Solutions, Dallas, TX USA.
Founded in the United States in 1953, Kelley’s innovation has become the world-wide industry standard in dock equipment servicing the manufacturing, warehousing, retail and logistic industries. “India is a hub for engineering excellence and industrial infrastructural growth,” said Vice President, Sales and Marketing, 4Front Engineered Solutions, Steve Sprunger. “So we are confi-
dent the introduction of Kelley India will undoubtedly be a step in the right direction towards growing our global presence in that region,” he added. “We are excited to bring these best-in-class products and solutions to companies in India,” said Piush Goyal, Managing Director, Kelley India. “They are designed and manufactured to enhance key operation requirements and parameters that are becoming more and more prevalent in the Indian market place,” he mentioned. With more than 150 patents and 7 state-of-the-art manufacturing plants across the world, the endless range of products includes: Dock Levelers, Energy Saving HVLS Fans (Big Fans for Industrial and Warehousing use), Dock Doors, Seals, Shelters, Vehicle Restraints and Integrated Control Systems. Currently, some of their customer base in India includes M/s Tetrapak, Walmart, Indo Space Rohan, AO Smith, MJ Logistics and Semco. For more information about these new Loading Dock Solutions, HVLS Big Fans and Kelley India, please contact John Walia in Gurgaon at firstname.lastname@example.org / +91 9717211122 or Abhijeet Sonawane in Pune at email@example.com / +91 9890072923.
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< Special Feature
Revitalising The Maritime Sector Indiaâ€™s rise as a major maritime power is being stymied by its absymal infrastructure. Anamika Gupta reports.
February 2012 | www.logisticsweek.com
he Indian sub-continent is blessed with a landscape diversity that few countries can boast of. With a long coastline of 7500 km, crossing few important global routes, India is unavoidably an important maritime nation. Its coastline is dotted with 13 major ports - Kolkata, Visakhapatnam, Paradip, Chennai, Tuticorin,
Cochin, Mangalore, Murmugao, Kandla, Mumbai, JNPT, Ennore and new entrant Port Blair. All major ports except the one in Ennore which is registered as a company are government administered. These major ports play a key role in facilitating external trade, and account for nearly 40 percent of Indiaâ€™s GDP. However, the 200 nonmajor ports in India, controlled by their respective state maritime boards with an increased participation of the private sector, are increasingly making a handsome contribution to Indiaâ€™s revenue.
CARGO TRAFFIC AND PROJECTED GROWTH RATE In 2010-11, the total traffic handled by Indian ports was recorded at 870 million tonnes (MT), out of which major ports handled 570 MT, while nonmajor ports handled around 34 percent of the total cargo at 300 MT. The
April 2012 | www.logisticsweek.com 43
< Special feature traffic at major ports is likely to grow at a compound aggregate growth rate (CAGR) of 8.03 percent from 561.09 MT in 2009-10 to 1,214.82 MT by 2019-20, according to the Maritime Agenda 2020. To handle such magnitude of traffic, ports have identified schemes which would create capacity to the tune of 1,459.53 MT. In order to effectively manage the swell in traffic, the government has proposed an investment of Rs 277,000 crore during the next 10 years to boost the capacity of ports to 3,130 MT by 2020. The report estimates that Indian ports are expected to handle one billion tons of cargo in 2011-12, two billion tons by 2016-17 and 2.4 billion tons by 2019-20. According to a report by ICRA, 2010-2011 registered a moderate cargo growth of 4 percent at Indian ports, resulting from a low growth of 1.6 per cent in cargo volumes at the major ports. The main reason behind their phenomenal growth is that these ports have deeper drafts allowing bigger ships to dock and are also equipped with the latest mechanized cargo-handling facilities, providing higher efficiency and better productivity, saving both time The initiative of connecting inland cargo lines with ports through PPP is not bearing expected returns for operators.
April 2012 | www.logisticsweek.com
and costs for shippers. This has been made possible due to the involvement of private companies. On the other hand, infrastructure at major Indian ports is far from being conducive to growth, and is failing to cope with the increased volume of trade, due to inadequacies in many subsystems. Insufficient depth available at major ports, increases operation costs and leads to loss of traffic and delay. Large vessels are being berthed at Colombo or Dubai, and cargo is shipped to India later in smaller lots, hiking up freight costs. Low level of mechanization at most Indian ports naturally leads to heavy reliance on manual labor and leaves scope for human error. Frequent labor strikes, boycotts and picketing by port workers over wage disputes or working conditions, etc. further stalls the process and leads to wastage of productive man hours. In addition, the lack of tariff flexibility by The Tariff Authority for Major Ports (TAMP) has led to major ports losing substantial private investment. In a study, the Planning Commission has predicted a decline in private investments for major ports
from its earlier estimate of Rs 36,868 crore to Rs 21,965 crore under the National Maritime Development Plan (NMDP). These have cumulatively led to a low turnaround time of approximately 84 hours at Indian ports compared to seven hours in Hong Kong and Singapore.
MEASURES TO ENHANCE PORT CAPACITY In order to address the concerns, the government has undertaken various initiatives to augment ports capacity with regard to dredging, reduction of dwell time, streamlining of customs procedures, functioning of container freight stations, improvement in port connectivity and perspective planning at ports. At present, drafts of up to 17 meters are available at major ports and measures to increase the depth further are being considered at major as well as non-major ports. Infact, the 21 meters draft at Gangavaram port in Andhra Pradesh, is the deepest among Indian ports, major or nonmajor. This makes handling super capsize vessels of up to 200,000 Deadweight Tonnage (DWT) possible. To reduce the total dwell time, the government has recommended measures such as optimization of cargo handling systems and equipment, creating additional testing facilities, strengthening roads to and within the ports, creating exclusive cargo freight corridors, implementing Electronic Data Interchange (EDI) and Port Community System (PCS), a single window environment for port users and simplification of documents, among others. The implementation of a Risk Management System (RMS) has brought about significant reduction in detention of cargo for customs examination at ports. In order to enhance connectivity, the government has constituted a Committee of Secretaries (CoS) under
the Chairmanship of Member Secretary Planning Commission. Under the CoS, greater emphasis is being laid on the need to have four-laned roads and double-line rail connectivity for all major ports. A case in study is the formation of a special purpose vehicle by JNPT, NHAI and CIDCO Maharashtra Limited, which provides the last mile connectivity with existing national or state highways. Other such projects are being implemented through PPP on a Build-Operate-Transfer (BOT) basis. However, according to recent news reports, this initiative of connecting inland cargo lines with ports through PPP is not bearing expected returns for operators as there is a cap of 14 percent on the rate of returns they can get. To add to this, projects facing time and cost overrun cannot qualify for viability gap funding, making it unattractive for operators. The government is simultaneously trying to introduce an investor friendly policy framework. The highlights of some of the policy initiatives are as follows: n 100 percent Foreign Direct Investment (FDI) under the automatic route for port development projects. n The Model Concession Agreements have been standardized and simplified. n The tariff setting mechanism has been modified with tariffs being set upfront by Tariff Authority for Major Ports (TAMP). n Acquisition of all types of ships has been brought under the Open General License.
NATIONAL MARITIME DEVELOPMENT PLAN The Ministry of Shipping has finalized a National Maritime Development Program (NMDP) to implement specific program/ schemes for the development of the port sector, and bring it at par with the global standards. Under the NMDP, 276 projects at an estimated cost of Rs 55,803 crore
have been identified in the major ports to be taken up in 2011-12. Out of the total investment of `100,339 crores envisaged in the program, `55,804 crores is for major ports as is mentioned above. The activities covered under the program include tonnage acquisition, maritime training, coastal shipping, aids to navigation, shipbuilding and building up of IWT infrastructure. The Ministry of Shipping launched the Maritime Agenda 2010-20 on January 13, 2011, outlining its ten-year plan for a sustained and comprehensive growth of the Indian maritime sector. It is aimed at bringing Indiaâ€™s Maritime sector at par with the global standards and practices. The plan envisages a cumulative investment of around `2,774 billion in the port sector over the next ten years in three phases. With this proposed capital expenditure, the capacity of the port sector is likely to surpass 3 billion tonnes by 2019-20.
try, according to the data released by Department of Industrial Policy and Promotion (DIPP)
TOWARDS BETTER GOVERNANCE IN PPPs Till March 31, 2011, a total of 29 PPP projects with a total investment of over `92 billion had been completed and were in operation at the major ports (includes both captive and commercial projects). Another 20 projects entailing an investment of over `100 billion are under way at various major ports. These include: construction of offshore container berths and a BOT terminal at Mumbai (awarded
The Government of India is also promoting Indian ports as a lucrative destination for foreign investment.
Major Investments Ahead Having set the tone for the growth path, the major as well as non-major ports have formulated ambitious plans for development of new outlets. As per these plans, while the capacity at the major ports is likely to increase to 1459.53 million tonnes by 2020 (from the present level of 616.73 mn tonnes), the capacity at non-major ports is likely to increase to 1660.02 mn tonnes by the same period (from the present level of 346.31 mn tonnes). The proposed investment during the next ten years is expected to be `2.77 lakh crore - 1.09 lakh crore for major ports and `1.68 lakh crore for nonmajor ports. The Government of India is also promoting Indian ports as a lucrative destination for foreign investment. Foreign direct investments (FDI) flows for ports stood at US$ 1.64 billion during April 2000â€“November 2011, accounting for 1.07 percent of the total FDI inflows into the coun-
in 2009); development of a container terminal at Ennore (awarded in 2010); three deep-draught berths at Paradip, including one each for coal and iron ore (both awarded in 2009), and the third for clean cargo including containers (awarded ion 2010); and two berths at the Vizag port for coal handling (awarded in 2011). To improve the institutional framework for PPP projects at major ports, the central government constituted a committee under the chairmanship of B K Chaturvedi in February 2010 to review and recommend revisions in the basic contractual framework governing the PPP model in India- the Model Concession Agreement (MCA). The key recommendations include the following: n A three-pronged strategy may be adopted to improve the tariff setting mechanism as follows: streamlining TAMP procedures and building
April 2012 | www.logisticsweek.com 45
< Special feature
Although PPPs are an important tool for improving economic competitiveness, it is not a magic wand that will resolve the issues plaguing the industry.
in-house capacity in the short term; delegating the tariff setting function to the respective port trusts over the medium term and allowing market forces to determine tariffs over the long term with the role of the port authorities being limited to oversight. n The provision relating to a cap on number of applicants to be shortlisted for second stage bidding of PPP projects (generally six to seven) may be done away with as it unnecessarily prolongs the process, limits competition and frequently results in litigations. n The environmental clearance process may be simplified in order to speed up project execution. n The performance requirement relating to ‘Minimum Guaranteed
Europe ‘Guidebook on Promoting Good Governance in Public-Private Partnerships’ identifies seven areas or principles of good governance in PPPs: Principle 1: Governmental level: executive stewardship of the system as a whole The PPP process requires coherent policies that lay down clear objectives and principles, identifies projects, sets realistic targets and the means of achieving them, with the overall aim of winning the support of the population for the PPP approach. Principle 2: Public administration: where policies are implemented Governments can build their capacities in a combined approach that in-
Cargo’ (MCG) as prescribed in the MCA may be replaced with ‘Minimum Guaranteed Revenue’ (MRG). n The bar for invocation of conflict of interest clause with respect to shareholding pattern of BOT projects may be raised from 5 percent as of now to 25 percent. However, while PPPs have emerged as an important tool for improving economic competitiveness and services, it is not a magic wand that will automatically resolve all the issues plaguing the industry. The United Nations Economic Commission for
cludes building skills, establishing new institutions and training public officials and using external expertise. Principle 3: Judiciary: where disputes are settled Legal processes in many jurisdictions are either insufficient or too complex and therefore fail to provide sufficient security and incentives to investors in PPP arrangements. Lawmakers should aim to create PPP rules that are ‘fewer, better, and simpler’. Principle 4: Economic society: refers to state-market, public and private sectors
April 2012 | www.logisticsweek.com
PPPs allow risk to be transferred to the private sector, which are most able to manage them. However Governments also need to accept their share and help to mitigate those risks allocated to the private sector. Principle 5: Political society: where societal interests are aggregated The selection of the bidder should be undertaken following a transparent, neutral, and non-discriminatory selection process that promotes competition and strikes a balance between the need to reduce the length of time and cost of the bid process while selecting the best proposal. There should also be zero tolerance of corruption. Principle 6: Civil society: where citizens become aware of and address political issues and The PPP process should put people first by increasing accountability and transparency in projects and improving the quality of life, especially of the socially and economically disadvantaged. Principle 7: Sustainable development: where environmental concerns are included. The PPP process should integrate the principles of sustainable development into PPP projects by reflecting environmental considerations in the objectives of the project, setting specifications and awarding projects to those bidders who fully match the green criteria. The government cannot evade its responsibility towards ensuring that port development is carried out in a sustained and sustainable manner, keeping not just economic growth and profit maximization, but all other parameters in mind. Anamika Gupta finished her post graduation in Social Communication Media in 2007 and over the next four years worked as a journalist in print, broadcast and new media. She can be reached at g.anamika @ gmail.com.
< panorama Off the shelf
The Rise and Rise of China
he Shipping Point examines the historical transformation taking place in China today as it evolves from global manufacturer to global consumer marketplace. The book further examines the impact this transformation will have on the future of retail supply chain management. The book is divided into four key sections. Section One: The Rise of China examines the remarkable ascendancy of China's economy, domestic infrastructure, and flourishing human capital. Section Two: The Changing Face of Consumer Retail, discusses the impact that social networks and internet design technology are having on traditional retail models and looks at the development of China's retail sector and domestic consumer brands. Section Three: Retail Supply Chain Innovation looks at ways of building more dynamic, sustainable and resilient transporation networks and discusses
the critical role that people and technology will play in supporting the supply chain of the future. Section Four: Supporting the Dynamic Supply Chain provides a more tactical perspective on the fundamentals of logistics network design and successful supply chain execution in China. The critical role that leadership plays in building and supporting successful logistics programs in China is also discussed. The Shipping Point offers a definitive reference guide for anyone involved in retail supply chain management in China. The Shipping Point: The Rise Of China And The Future Of Retail Supply Chain Management By Peter J. Levesque Publisher: Wiley Price: `2,506.25
The Logistics Dictionary
he contents of this dictionary are the result of many years of work in production, purchasing, distribution, trade and traffic as well as information and communication. Considerably enlarged, with now more than 30,000 entries, this dictionary provides high benefit for all those who take part in the logistics and supply chain process.
Jens Kiesel held different positions in purchasing, logistics and supply management and carried out consulting tasks in the U.S. and in other countries all round the world. Dictionary Of Logistics And Supply Chain Management, 16th Edition By Jens Kiesel Publisher: Wiley Price: `3,007.50
Managing The Drug Industry
his book bridges the gap between practitioners of supply-chain management and pharmaceutical industry experts. It aims to help both these groups understand the different worlds they live in and how to jointly contribute to meaningful improvements in supply-chains within the globally important pharmaceutical sector. Scientific and technical staff must work closely with supply-chain practitioners and other relevant parties to help secure responsive, cost effective and risk mitigated supply chains to compete on a world stage. This should not wait until a drug has
been registered, but should start as early as possible in the development process and before registration or clinical trials. The author suggests that CMC drug development must reset the line of sight â€“ from supply of drug to the clinic and gaining a registration, to the Supply Chain Management In The Drug Industry: Delivering Patient Value For Pharmaceuticals And Biologics By Hedley Rees Publisher: Wiley Price: `5,009.99 INDIA |
April 2012 | www.logisticsweek.com
< panorama Blogosphere Retailers, Manufacturers Must Rethink Their Planning And Fulfillment Strategies Fabrizio Brasca We are seeing a convergence of revolutionary trends that are causing retailers and suppliers to truly re-think how they approach their planning and fulfillment strategies. Multi-Channel Retailing. Adopting an integrated, holistic approach to transportation processes will help better position retailers to consider added volume as part of their standard supply chain policies. As a result, they will have the ability to allocate their modal strategy more evenly across the network to keep service levels high and meet consumer demand for on-time shipments. Shelf-Connected Supply Chain. To compete and thrive in a consumer-driven environment, retailers and consumer goods manufacturers must quickly respond to the choices that consumers make at the shelf and across all buying channels. Pop-Up Retail. With many pop-up stores, space is limited; making carefully-timed shipments is critical in ensuring a regular pipeline of product is headed to the store. These conditions change the transportation network dynamic through smaller and more frequent shipments, which have the potential to increase network costs. For this reason, it is critical that retailers look
Journals, Case Studies, Research Reports
Resource Center Inventory in Motion—A Direct Alternative To Global Fulfillment UPS Logistics visionaries have talked for years about eliminating (or, at least, drastically reducing) the role of inventory in modern supply chains. The most efficient, slack-free supply chains, after all, wouldn’t require any inventory buffer, because supply and demand would be in perfect sync. This vision certainly has its appeal: The death of inventory would mean dramatically reduced logistics costs and simplified fulfillment. A growing number of companies are overcoming these barriers by taking a more direct approach to global fulfillment. This direct-to-store approach — also known as distribution center bypass or direct distribution—keeps inventory moving from manufacturer to end customer by eliminating stops at warehouses along the way. Because companies can shrink the fulfillment cycle and eliminate
at their network holistically and focus on network optimization strategies to mitigate the complexity and cost. To adapt to broader supply chain strategies and changing transportation scenario, retailers and manufacturers should really look to employ these strategies: Think Holistically. Take a step back to look at how you can maximize your available network resources to mitigate cost and risk and maximize service will drive considerable value. Optimization is not a commodity. The challenge here is that the problem-solving ability of any transportation solution is what provides the majority of the value that drives the business case, meaning that significant dollars are being left on the table in lieu of simplicity. Shippers should look to measure the cost of the “wrong answer” when evaluating their existing practices. Beyond analytics. Advanced analytics has become a key technology trend across many solution areas including transportation, but are analytics alone enough? Are there ways to bring those metrics in line into actual operational processes instead of a separate off-line activity? Shippers should look for use cases where they can leverage analytics to enable real time, execution-level decision making. http://bit.ly/GAucKM
inventory costs, direct-to-store can offer a good balance between fulfillment speed and logistics costs. Global sourcing and the upstream migration of value-added logistics services are certainly primary drivers. Internetenabled electronic links between supply chain partners have allowed better coordination and collaboration among the various supply chain segments. Meanwhile, at the front of the supply chain, increasingly sophisticated point-of-sale systems can capture product demand patterns. This information can then be fed up the supply chain to manufacturers and components suppliers. The direct-to-store approach is not necessarily the appropriate model for every company —or even every product line within a single company. It requires additional coordination further back in the supply chain, including more-accurate demand forecasts and precise delivery allocation planning. And the complexity of managing the process makes it even more
April 2012 | www.logisticsweek.com
necessary to have sophisticated tracking and tracing tools in place to provide detailed supply chain visibility, even as shipments change hands and hop from one mode of transport to another. It also requires a higher level of coordination among functional groups such as inbound and outbound transportation and warehousing. The key is identifying which product lines are the best candidates. Direct-tostore is a good alternative for product lines that meet one or more of the following criteria: timeliness, seasonality, allocation predictability, higher-value goods, emergency/back orders, higher-growth companies, custom-manufactured products. Direct-to-store offers cost savings in a number of areas: capital investment savings, reduced inventory-carrying costs, improved network efficiency, reduced material-handling costs, lower administrative costs, lower damage costs. http://bit.ly/GPu9bH — Compiled by Anuja Abraham
Mobile Apps Of The Month A quick look at some of the latest mobile applications for logisticians.
Om Logistics Mobile
Logistics 2 Go
Platform: iPad iOS 3.0, iPhone
Om Logistics Mobile provides up-todate tracking information. Customers having omlogisitcs.co.in login account will be able to access MIS reports. Om Logistics Mobile also provides a direct link to our Customer Care. Developer: Om Logistics Language Supported: English Price: Free URL: http://bit.ly/GGVq0G
Description: With this app, you will be able to calculate more used logistics calculation, such as volume weight in air cargo and cubing a sea freight container, you will also be able to have a quick consulting for the incoterms 2010. Developer: Xisen Science Technology Co., Ltd Language Supported: English, Spanish Price: Free URL: http://bit.ly/GCPlUz
The app provides its compliant carrier partners the opportunity to view, search and bid on available freight 24/7, from anywhere on the palm of their hands. Routing and planning your trucks has been made easier. The app filters loads from current location/desired location. Developer: Load Delivered Logistics Language Supported: English Price: Free URL: http://bit.ly/GCFfOV
Description: With this application you can track your package, estimate shipment price and locate RPX office, this will provide experience that is easy and secure transactions for RPX customers while on the go. Developer: RPX Logistics Language Supported: English Price: Free URL: http://bit.ly/GCvmBK
Platform: iPad iOS 5.0, iPhone 3G, 4, 4S
TripPak MOBILE Platform: iPhone, iPad iOS 4.2
Gist Logistics Freight Finder Platform: Android
It can produce real-time location information at a fraction of the price of satellite tracking and capture real-time proof of delivery with the consignee signature capture; can capture all your load related documentation and upload it to your back office imaging system for workflow. The document management feature allows you to assign the documents to a trip number as well as provide document typing for each document that is uploaded. Developer: ACS Expedited Solutions Language Supported: English Price: Free URL: http://bit.ly/eCgkId
The Gist Logistics Freight Finder mobile application is a service of Gist Logistics (GLI) that offers mobile users the ability to search GLIâ€™s available loads and to contact GLIâ€™s Logistics Account Representatives in order to inquire about available loads. Developer: Gist Logistics Inc. Language Supported: English Price: Free URL: http://bit.ly/GGzUvI
April 2012 | www.logisticsweek.com 49
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< EVENTS A pril 2012 April 12, 2012 Pharmatech India The Oberoi, New Delhi PHARMATECH INDIA has aims to bring in a huge positive change in the pharmaceutical sectors as the professionals coming from these sectors will get to see a wide range of advanced technologies and equipments which will surely bring in development in the mentioned sector. PHARMATECH INDIA will bring together the pharmaceutical experts who will provide reliable and best advices about the better methods of conducting the respective business condition. The renowned Indian vendor companies will be present to exhibit the respective range to the global attendees as well as they get a scope to widen the marketing networks. Organizer: PHD Chamber Of Commerce & Industry Tel: +(91)-(11)-2669652/2669662/2662981 April 18 - 20, 2012 Surface Transport Bombay Exhibition Center (BEC), Mumbai The objective of Surface Transport 2012 is to provide a unique single platform concept and focus on a cross sector and process oriented approach, to bring together all aspects of advanced infrastructure products and system technologies under one roof. The Exhibition will showcase the latest in products, services and technologies that would steer the highway/railway/port/metro infrastructure to greater heights of success. Exhibitorâ€™s include: Highway/railway/port/developers, construction equipments, construction inputs, tunneling and under construction technology, refurbishing of existing infrastructure, dedicated freight corridors, safety and security systems, banks and financial institutions, consulting, research and planning, environment. Organizer: Confederation Of Indian Industry, Mumbai Tel: +(91)-(22)-24931790 April 20 - 22, 2012 N Packtech Today Chennai Trade Centre, Chennai The Indian packaging industry is about $23 billion and growing at 15 percent year-on-year. It is expected to grow at 18 percent in the coming years to reach $40 billion by 2015. The growth will largely be driven by food consumption, which is expected to touch $240 billion by 2013, according to Ministry of Commerce and Industry. The demand for different types of packaging in the consumer goods sector has been growing phenomenally. Large supermarkets and malls have driven this growth even further. Innovative packaging solutions are the only way to maximise customer satisfaction in this sector. In India, there are about 600-700
April 2012 | www.logisticsweek.com
packaging machinery manufacturers who are in the small and medium sector.The domestic packaging sector, which has registered a 15 percent growth, is expected to grow at 18 percent in the next few years to touch $40 billion by 2015. Currently, it accounts for ten percent of the global market, constituting nearly 400 billion containers in terms of unit volumes. India imports about $125 million worth packaging machinery from Germany, Italy, Korea and China, with some 600-700 machinery manufacturers operating locally. Exhibitorâ€™s include: Packaging machines for food, beverage and dairy products, packaging materials, packaging printing machines, labels and labeling system, RFID, finished packaging goods, materials and containers, pack design and marketing, packaging convertors, anti-counterfeiting, coding and marking, contract packers, tools and equipment for assisting manual packaging, and flexographic presses /offset presses / gravure presses. Organizer: Buysell Interactions Private Limited Tel: +91 44 42177899/28353739 April 26 - 28, 2012 Automotive Engineering Show-Pune Auto Cluster Exhibition Centre, Pune Automotive Engineering Show - Pune is a renowned trade show that is dedicated to the automotive industry of India. This show welcomes the leading automotive professionals and qualified experts under one roof to deliberate more closely on the topical issues related with the sector. This show welcomes numerous potential customers and interested visitors from various parts of India and abroad to avail the latest technology at reasonable prices. The main line of items exhibited at the show includes machining centers and metal cutting equipment including laser cutting, productivity enhancers, latest concepts in tools, jigs and fixtures, specialized solutions in welding including laser welding and many more. Exhibitors include IT solutions in design, development, planning and manufacturing, assembly line system integrators and line builders, machining centers and metal cutting equipment including laser cutting, productivity enhancers, latest concepts in tools, jigs and fixtures, specialized solutions in welding including laser welding, end-to-end in-plant handling systems, automotive painting equipment, robotics, automotive electronics and many more. Metrology, quality inspection and vision system, advanced plastic materials and composites are also exhibited at the show. Organizer: Focussed Event Management Private Limited Tel: +91 22 32019137/40201000
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