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43

INTERVIEW G V L Satya Kumar

GREEN LOGISTICS DHL

SUPPLY CHAIN Warehousing

PROFILE Soman Nambiar

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At Your Service

July 2010

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LOGISTICS TIMES July 2010


Logistics Times All about Transportation, Distribution & Infrastructure

Volume 1: Issue No.3 * July 2010 Editor in Chief Raj Misra rajmisra@logisticstimes.net Editor Ritwik Sinha ritwik@logisticstimes.net Editorial Advisor Ramesh Kumar ramesh@logisticstimes.net Editorial Advisory Board Paul Lim Founder & President Supply Chain Asia Vinod Singhal Brady Family Professor of Operations Management, Georgia Institute of Technology, College of Management Sanjay Upendram Founder & Chairman, Amarthi Management Consulting Prof. Akhil Chandra Institute of Logistics & Aviation Mgt Prof. Samir Srivastava Associate Professor, IIM-Lucknow Mumbai Bureau Rahul Kumar rahul@logisticstimes.net Sub Editor Neha Richariya Photographer Anil Baral Design Consultant Sam Maitri Designer Kausar Syed Circulation & Distribution Kamruddin SaiďŹ Legal Advisor Rakesh Garg Marketing & Sales Outthink Strategies Ph: 65177214, 26412476, 9818097385 Email: sales@logisticstimes.net Printer & Publisher Deepa Misra for

E-77, West Vinod Nagar, Delhi -110092 Tel: +91 11 22478538-39, Fax: +91 11 22471764, Mumbai: +91 9322811550 Printed at Personal Graphics & Advertiser Pvt. Ltd. Y -22, Okhla Industrial Area-II, New Delhi-110020

www.logisticstimes.net

CONTENTS

COVER STORY

26 At Your Service DAMCO

Edit Note

6

News Brief

9

Events

48

Last Page

50


22

18

INTERVIEW

GREEN LOGISTICS

G V L Satya Kumar Dy Chairman, Vizag Port

Є10 mn savings

36

PERSPECTIVE

R C Dubey President, ACTO

42

WAREHOUSING

Sexy & Vital

47

45

From Shanghai

Soman Nambiar Director-FM, Ceva Logistics

EVENT DIARY

PROFILE


EDIT NOTE

6

DAMCO’s day out For the Indian logistics sector, the present spell is clearly that critical phase of transition wherein the larger pursuit is to shed away the blunt quotients of the past and give the business an organized structure. With India gradually emerging as a manufacturing powerhouse as well, the process is gaining momentum being shaped by the new advanced initiatives of domestic as well as established logistics firms. Its no secret to anybody that there are scores of global logistics leaders who have been present in India for decades working on both sides of the divide – pre and post liberalisation. And then there is another distinctive set of MNC firms which arrived on the Indian shores in the 90s. The opening of Indian economy was the trigger which brought them here and some of them have withstood the roller coaster ride of past two decades bravely to build a base. And now is the time for them to fan out and being in the vanguard of giving a structural shape to Indian logistics business alongwith their global peers with larger exposure of the Indian market as well as the prominent domestic giants. Damco is certainly one such story which set up its feet on Indian shores nearly two decades ago, has gone through the rigors of initial tryst but is now ready to expand its wings in all directions. Its vast global network ( covering nearly 120 countries), a very strong positioning in the matured Asian markets and capability to cater tailor made solution to every kind of supply chain criticality seems to provide it with a very potent armour to score significantly in the Indian logistics space. The company has recently bagged a major contract from Piramal Glass and is showing commitment to scale up operations in project and contract logistics – the concepts which have been heard domestically but probably the best of their manifestations are yet to be counted for. The cover story in this edition turns spotlight on Damco and its big qualitative plans for the Indian market. In today’s business environment, you do not assume leadership position simply by means of showing improved toplines and bottomlines year after the year. Initiatives meant to address larger social and environmental issues by the companies are increasingly being viewed as components contributing to their image. In the logistics sector, it is heartening to note that the global leader DHL is positioning itself in the forefront of this drive and, in fact, its GoGreen programme has started showing results in markets all over the world including India. We feature this endevour in the Green Logistics segment and details clearly point out that bringing down carbon emission may require some effort but its cost benefits imports are quite significant and serious. Only last month, we saw how international shippers were diverting their vessels away from JNPT due to acute congestion. Every now and then, such unfortunate developments pose the larger question: where are we heading? And this is the moot point which we posed to G V L Satya Kumar, Deputy Chairman, Vizag Port when we recently caught up with him. Speaking for Vizag Port, Kumar explained that a significant capacity expansion exercise is underway which would help the hub to sustain its position as one of the most prominent trade sea points in the eastern coast. In a free-wheeling interview, he also underlined the various components of the modernization plans for the port. Waiting for your feedback. Ritwik Sinha ritwik@logisticstimes.net LOGISTICS TIMES May 2010


7

LOGISTICS TIMES May 2010


MACRO MONITOR

8

Hardening scenario

T

he manufacturing sector may have started firing on all cylinders lately but in the near run, going may not be all that smooth for India Inc. There have been a spate of developments in last one month which clearly point out that pricing pinch will have to borne by all stakeholders in the economy including consumers. And then to rein in inflation, there are all indications of interest rates hardening again. Firstly, a decision was taken last month by the government to increase the prices of petroleum products which is going to send the transportation pricing in a spiraling trajectory. According to an estimate, the Railways

will have to take an additional annual hit of about Rs 470 crore because of the Rs 2 a litre increase in diesel price that has come into the effect. Railways Minister Ms. Mamta Banerjee has expressed her displeasure with the move in no uncertain terms. The domestic logistics companies which are involved in road transportation are also confirming that the fuel price rise has put their operations under pressure and they are likely to increase the fares by around 10 percent. Meanwhile, early this month, the Reserve Bank of India (RBI) raised key short-term policy rates by 25 basis points in an unscheduled announcement to

Fresh threat While Indian textiles and apparel exports to US and EU slowed down at almost same rate in 2009, competition seems to begetting harder for Indian textile exporters in US market as compared to EU market, noted FICCI in a recent analysis on textiles and apparel exports. In addition to China, countries like Indonesia, Vietnam and Bangladesh have managed to perform better, despite recession, than India in US market in 2009 according to FICCI analysis. FICCI analysis noted that India’s exports of textiles and apparel witnessed a negative growth of around 11% to both US & EU in 2009, but still managed to increase its share by 0.17% in both the markets. However, FICCI observed that in US market, imports of textiles from countries like Indonesia, Vietnam and

LOGISTICS TIMES July 2010

Bangladesh witnessed smaller decline than India. Also, these countries have seen slightly higher increase in their shares in US textiles and clothing market in the recession year 2009 over 2008, pointed out FICCI. The share of Bangladesh, Indonesia, Vietnam and China increased by 0.5, 0.4, 0.67 and 4.3 percentage points respectively in US imports in 2009 as compared to 0.17 percentage points for India. In fact, in 2009 Vietnam managed to surpass India in terms of share in US imports of textiles & apparels. EU & US are the major destinations of India textiles and together account for around two third of India’s textiles and apparel exports. Also, FICCI observed that in the last five years i.e. from 2004-09, while India’s textiles & apparel exports to US grew by 4.2% per annum whereas those of China, Vietnam, Indonesia and Bangladesh witnessed growth of 15.3%, 14.5%, 8.9% and 11.5% respectively.

tame doubled-digit inflation. Responding to the move, Finance Minister Pranab Mukherjee said, “They are desirable given that core inflation has risen and credit situation is tight.” The increase in rates comes ahead of the July 27 policy review by the apex bank, which feels that money supply in the system has started easing in contrast to the crunch felt just a fortnight ago, when corporate demand for funds shot up.

Boom time for organized retail Organized retail which presently accounts for close to four percent of total market will increase its share to over 30 percent by 2013, offering huge potential for growth in coming years, says a study, ‘Indian Retailing-The way forward’. The study recently brought by The Associated Chambers Of Commerce and Industry of India (ASSOCHAM), points out that retailing in India is characterized by a high degree of fragmentation with street markets and convenience stores (kiranas) accounting for more than 96 percent of retail business. There are over 10 million outlets, 96 percent of them are very small with an area of less than 50sqm. The organized retail sector with emergence of new store formats is recording phenomenal growth and will completely revolutionize retailing over next 3-4 years. The changing structure and scale of retail will critically impact several industries immediately – the retail industry itself, manufacturing, real estate and in the long term, cascading effects will be felt on tourism, information technology and others.


Ennore awarded UK-based infrastructure investment firm Eredene Capital has bagged the bid in a consortium to build and operate the container terminal at Ennore Port in Tamil Nadu. The estimated project cost of the Ennore Container Terminal is £207m. Eredene bid for the project in a consortium headed by Spain’s leading

Wow, Tuticorin! Tuticorin Port has reported record single day handling of cargo traffic on June 26 which amounted 1,20,953 tonnes. This surpassed the previous high of 1,16,955 tonnes handled in a single day on August 22, 2008, a port release said here on Wednesday. The major cargo that contributed to the achievement are industrial coal, coal for Tuticorin Thermal Power Station and containerised cargoes, the Tuticorin Port Trust Chairman G.J. Rao said.

New airport for Goa

port operator, Barcelona-based Grup Marítim TCB SL together with international construction group Obrascón Huarte Lain SA and one of India’s leading construction, power and engineering conglomerates, Lanco Infratech. The consortium has been given a Letter of Award in relation to the project on 26 June 2010 by Ennore Port Ltd. Eredene has a 22 per cent stake in the consortium. Eredene’s equity commitment to this project is up to approximately £23m, spread over a 48 month period. This commitment will initially be funded through existing cash reserves and then through the raising of additional capital into Eredene. Work on the new Ennore Container Terminal is scheduled to take 33 months and it is expected to be operational by the end of 2013. The concession will be awarded on a build, operate and transfer (BOT) basis for a period of 30 years. The terminal will have a quay length of 1,000 metres and an estimated throughput of 1.5 million TEUs annually. The terminal will provide 15-metre water depth at the berths and will be able to handle three container vessels of up to 8,000 TEUs simultaneously.

Wanted: containers Logistics and transport service provider DARCL Logistics is set to buy new containers during the course of the present fiscal to further consolidate its rail container business. It would be buying about 100 containers mostly from China. Currently, it operates two trains, doing roughly seven trips a month on the Mumbai-Kolkata route. It was one of the 14 companies that had got licence from the Indian Railways to operate container trains three years back.

Last month, the union cabinet gave green signal to the proposal of setting up a new greenfield international airport at Mopa, Goa. The airport will be designed and made in compliance with international standards. However, the cabinet clarified that clearance of the new airport proposal would not mean shutting down the existing Dabolim airport. The new airport would be constructed on a Build-Own-Operate-Transfer (BOOT) basis for which a private party will be selected through a tendering process.

Seaways’ new link Seaways Group, a shipping and logistics service provider, has recently started feeder service connecting New Mangalore port to Colombo, Mundra, Kandla, Kochi, and Tuticorin through its own vessel M V Seaways Volour. Praveen Kumar Bangera, Assistant General Manager, Seaways Group, said that MV Seaways Volour has commenced its services to Mangalore. The first vessel which arrived at Mangalore port discharged 250 TEUs (twenty-foot equivalent units) of containers and loaded 100 TEUs towards various connecting ports.

LOGISTICS TIMES July 2010

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NEWS BRIEFS

10

NATIONAL

Jai Maharashtra!

LPs galore

Maharastra chief minister Ashok Chavan has recently commented that ports will be accorded the status of industry. Chavan was speaking after the cabinet meeting which discussed the promotion of state government’s revised minor port policy. In the revised policy, the state government has announced a slew of sops to develop minor ports in the state. It expects an investment of Rs 22,775 crore in minor ports to enhance their cargo handling capacity to 254 million tonnes a year in five years. The policy provision states that along with the ports, maritime infrastructure such as multipurpose jetties and cargo terminals will get benefits under a package scheme of incentives for eight years. The policy also gives exemption on electricity duty, registration and stamp duty on infrastructure such as road, rail, water and power supply required for running the port.

In the logistics arena, what seems to be attracting the attention of the established as well as new players is logistics parks. Believed to be a vital element which would give a structured shape to the logistics business in the future, players are increasingly jumping on logistics parks bandwagon. And results are probably round the corner. Some recent reports suggest that Apeejay Infralogistics, the joint venture between Erdene Capital and Apeejay Surrendra group, which is developing two integrated logistics parks at Haldia (West Bengal) and Kalinganagar (Orissa) is likely to complete the first phase of these projects by the end of the year. The park in Haldia covers an area of 90 acres and the company is reported to be investing Rs 200 crore to develop the unit. The project in Kalinganagar is being shaped up with an investment of Rs 60 crore and would be spread across 30 acres. The park at both these places would be integrated units and would be laced with facilities like ICD, warehousing, truck terminal and trade facilitation centre. Meanwhile, Kochi based Sree Kailas group has also recently announced a logistic park at Oragadam which is emerging as a major business hub around Chennai. The company is reported to have chalked out an investment plan of Rs 120 crore for this unit and it would cover an area of 30 acres. The highlight of the project would be five warehouses which would cater to diverse industries like auto, commodities, FMCG, textiles, etc. The first phase of the park is expected to be completed by the end of the present fiscal. The project has been conceptualised and designed in conjunction with BPS Global, an infrastructure consultancy.

Highway projects clearance

The government seems to be in favour of allowing larger automobile carriers on Indian roads. The Ministry of Road Transport has recently floated a draft notification recently seeking the comments of the industry on the proposition. For vehicles used by auto manufacturers for the transportation of their products from factories to sale outlets, the ministry has proposed to allow a length of 22.75 metre (truck trailer and tractor trailers) and 18.75 metre. For tractor trailers, at present, the Central Motor Vehicles Act permits a maximum length of 18 metre. The idea of allowing larger carriers for the automobile industry seems to have emerged after a study undertaken by the Central Road Research Institute underlined that over 90 per cent of tractor trailers plying on Indian roads have higher dimensions than what is permitted by the existing law. The study was commissioned by the Road Transport Ministry and it had submitted its report about two years back.

Four highway projects worth Rs 2,536.16 crore have recently received approval from the Cabinet Committee on Infrastructure (CCI). These

highway projects would be set afoot in five states - Bihar, Gujarat, Madhya Pradesh, Uttar Pradesh and West Bengal. The biggest of these four projects would be undertaken in West Bengal which entail four-laning of the 78-km long KrishnanagarBahrampore section of the NH-34 at a cost of Rs 702.16 crore.

LOGISTICS TIMES July 2010

Comments, please


11

Doubling line According to a newspaper report, the Adani Group company Mundra Port and Special Economic Zone Ltd (MPSEZL) has decided to double the 57 km long private railway line between Mundra and Adipur. The company would be investing Rs 115 crore on the project. The company is believed to be undertaking the project considering the growth in demand at the Photo: Dilip Banerjee port. As per company plans, the second line would have four crossing stations and 99 bridges. It will have the capacity to handle 25-tonne axle load wagons running at a speed of 100 km/ hour. The project would be developed in two phases. The first phase encompassing laying double line on a stretch of 30 km is scheduled to be completed in next one year while the entire project will reach to the finishing line in the first half of 2012. The project is slated to be a vital cog in the process of providing double-line railway freight facility from northern India to Mundra Port with Indian Railways and Kutch Railway Company also working on similar projects in the region.

Does it again FedEx Express, a subsidiary of global transportation major FedEx Corp, has been ranked 22 in this year’s prestigious Great Places to Work Survey (GPTW) in India. FedEx Express is also ranked second amongst India’s best companies to work for in the transportation industry and is the only express transportation company to feature in the top 25 of the GPTW survey. The annual GPTW survey is conducted by the Great Places to Work Institute in association with The Economic Times and covers more than 400 companies across India. “At FedEx we understand that employees form the foundation of the organization’s success and motivating them is a core strategy for the success of our business. This is also complemented by our unique PeopleService-Profit (P-S-P) philosophy, which guides every initiative, policy, procedure and people practice that we incorporate,” said Kenneth F Koval, vice president, Operations, FedEx Express India. FedEx Express has consistently featured in the list of best companies to work for in various countries across the world. In India, FedEx Express has been ranked amongst the top 25 companies for seven consecutive years and was awarded the Platinum Award for Excellence in People Management in 2007 for consistent rankings. In 2009, the company was also awarded the special category award for Best Company for Leadership Development.

Service tax deferred The Finance Ministry has decided to defe the implementation of service tax levy on transport of goods by rail. The levy will now come into effect from January 1 next year. The latest move has come in the backdrop of the wholesale price index-based inflation nearing double-digit level.This is the second time this year that the Finance Ministry had resorted to deferral of the proposal. The Government had in Budget 2010-11 had proposed to bring transport of goods by rail in the service tax net from April 1.

Scouting for partners Kolkata Port Trust is discussing with Steel Authority of India Limited (SAIL) and the Shipping Corporation of India (SCI) to partner the port in undertaking transloading operation in the Bay of Bengal, according to an agency report. SAIL and SCI have already formed a joint venture entity named SAIL-SCI Pvt Ltd, to undertake the exercise. SAIL alone is slated to commence with a throughput of one million tonnes (mt) which would gradually be enhanced to six mt capacity base. The partnership negotiations are believed to be primarily focusing on the proposition whether mid-stream container handling could be undertaken. If the partnership materializes, then promotion of IWT (inland water transport) would be another thrust area.

Greenfield Airport @ Kannur The construction of $216 million Greenfield international airport project at Kannur, Kerala is slated to be kicked off from November this year. State Chief Minister VS Achuthanandan recently informed that 916 acres of land had already been acquired for the project and another 368 acres would be acquired by July end. The new airport is slated to handle 1,500,000 passengers and it will offer 86,000 tonnes of cargo capacity on an annual basis. It will be developed on a public-private participation (PPP) model.

LOGISTICS TIMES July 2010


NEWS BRIEFS

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NATIONAL

IRS joins IACS The Indian Register of Shipping (IRS) has been accepted as a full member by the International Association of Classification Societies, (IACS), hitherto, a closed club of 10 international societies. This would enable the IRS-classed ships equal status to that of ships classed by the other international societies. Classification societies undertake survey of ships and certify their seaworthiness and technical capabilities. Ships, which are not certified by a classification society, are not allowed to sail or call at a port. IRS is the first new classification society, which has received a full membership of IACS after new membership criteria were introduced by the intentional body last year.

Common user terminals The Railway Ministry has now invited firms to invest in developing common user terminals for automobile and ancillary hub. The Railways will provide land on lease initially for seven years and the lease can be extended every year, thereafter. The lease charges will be according to the Ministry policy on land. Railways are not charging any extra fee to the user. To be eligible as a common terminal operator, the Railways stated, “The company has to be a manufacturer of automobile or logistics company; or Society of Indian Automobile Manufacturers (SIAM) or registered freight train operator having an annual turnover of Rs 20 crore during last financial year.” Automobile and ancillary hubs shall be a common user facility for general use of the automobile industry, without any exclusive right. The objective of the policy on development of automobile and ancillary hub is to increase the modal share of Railways in transportation of automobiles.

LOGISTICS TIMES July 2010

Level playing field

The chief of Shipping Corporation of India (SCI) S Hajara has called for a level-playing field between domestic shipping companies and international shippers. Hajara, who also holds the position of the Indian National Shipowners Association was addressing the annual general meeting of Calcutta Freight Brokers Association last month when he stressed upon the urgency to create the level playing field. “The growth of the national shipping is critical for the growth of the economy in general and the country’s export-import trade in particular,” he said. He particularly pointed out at the high tax regime prevailing for domestic shipping firms which is holding them back from becoming competitive vis-à-vis global shipping majors. According to him, 95 per cent of the world shipping was subjected to a tax regime varying from zero to 0.5 per cent against the high single-digit levels of 8.5 to 9 per cent for Indian shipping industry. Hajara also emphasized that to create a level playing field, Indian shipping industry also needs similar provisions in terms of berthing rights as the one which prevails in the aviation industry where landing rights to all foreign carriers are given by an Indian agency. “There has to be a proper fiscal and commercial regime for the Indian shipping to grow,” Hajara observed.

Freight load improves The freight volume carried by railways has shown positive growth in May again. According to statistics released by Indian Railways, the fright growth has remained in the positive territory for the second month in succession. The freight loading in May registered a 3.5 per cent growth over May 2009. The rise in volume is mainly attributed to increase in loading of food grains, coal, raw material for steel plant, POL, and domestic containers. However, the month reported some drop in the freight volume of pig iron and finished steel, iron ore, fertiliser, and exim containers. There has also been a growth of 7.56 percent in throughput. Such a trend was noticed for iron ore exports, food grains and cement.The Railways has been able to register a 10 per cent growth in earnings, collecting revenue in the tune of Rs 5,121.79 crore in May over the corresponding period last fiscal. However, the increase in earnings has been supported by higher freight charges in May 2010 over May 2009. There has been an 18 per cent increase in freight charges of iron ore, 5.26 per cent increase for mineral oil, 16 percent for domestic containers and 13.5 percent for exim containers.


GLOBAL

Turkish Logistic villages

Around the world

Turkish State Railways has begun work to set up ‘logistic villages’ in 15 provinces around the country. Including investments amounting to $200 million each, the project will create employment opportunities for thousands of people. It will also relieve the burden on organized industrial zones as well as traffic. Accelerating efforts to realize an annual $60-billion logistics potential, Turkey’s state railways are now establishing logistics centers throughout the country in collaboration with local municipalities and chambers of commerce and industry. The project aims to ease producers’ access to the market and link eastern and western Turkey by building logistic hubs at key points. According to Fevzi Filik, logistics director of the Mersin Chamber of Commerce and Industry, logistics costs make up an important portion of the total costs and directly affect the profit margins in today’s highly competitive business world. The planned logistic centers will include computerized transportation facilities, warehouses, maintenance centers, offices, bank branches, hospitals and universities. In addition to decreasing logistics costs for local economies, the centers will bring new investment opportunities to the private sector with fast, secure and modern cargo-handling facilities. Noting the importance of Mersin as a logistics city, particularly with agricultural products, such as citrus, along with the automotive and chemistry sectors, a new logistics village in Mersin’s Yenice district would create employment opportunities for hundreds of people. “The Mersin trading zone has a wide hinterland including the provinces of Kahramanmaraş, Gaziantep, Konya and Ankara,” he said. “When we talk about Mersin’s logistics potential, we should consider all these regions linked to the province by both highways and railways.”

Worldwide SCM Vendor Software Revenue 2009 Revenue

2009 Market Share (%)

SAP

1,223.3

Oracle

Vendor

JDA Software

(In Millions Dollars)

2008 Revenue

2008 Market Share (%)

2008-2009 Growth (%)

19.8

1,341.3

21.5

-8.8

1,038.6

16.8

1,36.4

16.6

0.2

258.1

4.2

264.7

4.2

-2.5

Ariba

228.7

3.7

210.3

3.4

8.8

i2 Tchnologies

114.0

1.8

116.4

1.9

-2.0

Manhattan Associates

111.8

1.8

142.3

2.3

-21.4

Other Vendors

3,215.4

51.9

3,123.3

50.1

3.0

Total

6,190.0

100

6,234.7

100

-0.7

Note: Gartner defines total software revenue as revenue that is generated from appliances, new licenses, updates, subscriptions and hosting, technical support, and maintenance. Professional services revenue and hardware revenue are not included in total software revenue. Source: Gartner (June 2010)

Cathay Pacific Airways has announced that it will launch its first round-the-world freighter service on 9 July. The airline said that it has spent months developing the new route, which

will initially be operated twice weekly, every Friday and Sunday, using a Boeing 747-400 freighter. The flight will leave Hong Kong and fly via Anchorage to Chicago. From there it will fly onward to Amsterdam and Dubai before returning to Hong Kong. The round-the-world flight is an extension of Cathay Pacific’s existing service to Chicago – the airline currently serves the city with eight flights per week. The flight from the United States to Amsterdam marks the first time for Cathay Pacific to ever operate a transatlantic service. In total, the round-the-world flight will take 44.5 hours to operate, including ground time to uplift freight.

Now in Dubai Global forwarder Panalpina has commenced operating from its new 450,000 sq ft multimodal transit and logistics hub in the Dubai Logistics City free trade zone. The new facility consists of 30,000 sq ft office space, a 120,000 sq ft multipurpose logistics operating area with 10,000 VNA (very narrow aisle) pallet positions in a temperature-controlled ambient environment and a 150,000 sq ft lay down area. The facility will be TAPA A certified, it has 23 gates including 1 mega door, 10 dock levellers, air cargo pallet roller beds and 45 feet ceiling height. Being located in the Dubai Logistics City free trade zone adjacent to the new Al Maktoum International Airport and the Jebel Ali seaport between Dubai city centre and Abu Dhabi, Panalpina says that it that will provide customers with improved cost and service efficiencies in the United Arab Emirates and across the Persian Gulf region.

LOGISTICS TIMES July 2010

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GLOBAL

Eezehaul, new convert Eezehaul has gone live with a new system from DeltaWMS to support its growth. The WMS includes a radio frequency warehouse environment and handheld scanning equipment to drive Eezehaul’s new 80,000 square foot, 5,000 pallet-location operation near Gatwick, integrated with the company’s existing transport system. “We asked for and incorporated feedback from our own 3PL customers into the warehousing IT brief that we took to the market” said Eezehaul managing director Mark Duggan. “We have different, customised arrangements for the same activity across multiple 3PL clients. It is very important to us that our warehousing software can manage a full range of activitybased charging. Delta’s sophisticated, activitybased-costing facility will allow us to do just that, profitably.”

The error-free warehouse Knapp will be promoting its concept of the error-free warehouse. In particular it will highlight paperless picking systems, including pick-by-light, pick-by-voice, RF and now KiSoft VISION picking, as well as order checking solutions and lot tracking technology. Craig

Rollason, head of sales & marketing says: “We’ll also be explaining how the issue of ergonomics - including the integration of user-friendly materials such as wood and cushioned fascias is a key factor in moving towards the error-free warehouse.” Knapp will also be showcasing its universal shuttle concept, based on minimising the number of different technologies used around the warehouse. The bedrock of the universal shuttle concept is the OSR Shuttle system. Knapp says this can achieve six times the rate of totes in/out than an ASRS, with less than ten per cent of the energy use.

LOGISTICS TIMES July 2010

Fresh Always Supermarket chain Sainsbury’s has invested in a new technology designed to help reduce food waste by assisting with real-time supply chain decisions. The Real Time Supply Chain Technology is expected to reduce the amount of un-bought food which gets left on the shelves by 15% during periods of unexpected weather. This technology is the latest move by Sainsbury’s to reduce the environmental impact of its food waste. According to the retailer, periods of unexpected weather can cause perishable food to remain, uneaten, on supermarket shelves. It is hoped that this new system, which will monitor food coming off the shelves on a minute-by-minute basis, allowing Sainsbury’s to know which food to send to individual stores each day. Sainsbury’s supply chain director Tim Goalen said: “This new system allows us to react to any changes in buying pattern on the same day rather than overnight, meaning we can make far better decisions on where to send stock before it leaves our depots. Several times a year, shelves might be full of barbecue food for the weekend, only for unexpected rain to cause everyone to clamour for warm, hearty food instead. This new way of working will greatly reduce the risk of this.”

The Sellout YRC Worldwide has announced it will sell part of its logistics business to Austin Ventures, a private equity investor, for $37 million. The logistics business will operate as a private company owned by Austin Ventures. “This transaction enables YRC Worldwide to focus on our core transportation capabilities while continuing to offer full global logistics solutions for our customers through a strong business relationship with the new company,” said . “There will be no change in the way a customer’s business is handled, and they will benefit from advancements in the delivery of comprehensive supply chain solutions by both companies. In addition, the incremental liquidity from the transaction will support YRC Worldwide business growth.” YRC will retain all of its China-based operations, and the strategic partnership with Austin Ventures gives customers of the new logistics company ongoing access to these capabilities. “The current YRC Logistics management team remains in place and customers will experience the same expertise and accountability,” adds John Carr, president of YRC Logistics. “The substantial equity infusion from Austin Ventures positions us to pursue new business development as well as growth through acquisition.”


15

New COO @ CILT

BMW calls in Ceva

The CILT has appointed Donna Cresswell chief operating officer to take responsibility for operations at the institute and develop commercial opportunities. She has previously been head of communications at Carlsberg UK and director of communications at the motor neurone disease association.

In Shanghai Agility has officially opened its new Shanghai Logistics Hub. As one of the biggest facilities of its kind in China to date, the 66,000sqm hub will receive and distribute up to 600,000 tons of polyolefins annually from Borouge’s plant in Abu Dhabi, UAE. Agility Abu Dhabi designed, constructed and owns this facility and will manage operations and distribution to the Asian market over 10 years. The Shanghai Logistics Hub will receive polymer resins in bulk containers directly from the Borouge Middle East gateway situated at Ruwais in Abu Dhabi. These polymers are used in a wide range of applications including pipe systems, wires and cables, automotive components and advanced packaging as well as household white goods. Adjacent to the Logistics Hub is a 30,000sqm Compound Manufacturing Unit (CMU) which produces 50,000 tonnes of polymer compounds each year. Agility Abu Dhabi, a joint venture between Agility, Mubadala Investment Company and Al Dahra, designed the building infrastructure and service connections that support the CMU. “The world manufacturing footprint of the petrochemicals industry is in major change, with production in the Middle East expected to more than double by 2015. The Shanghai Logistics Hub successfully demonstrates the key role Agility is playing in facilitating trade and investment flows and opening gateways from the Middle East to Asia and emerging markets,” said Philip Browitt, Chairman of the Agility Chemical Specialty business. Commenting on the project, James Gagne, Agility, Chief Executive Officer, Greater China said, “With its understanding of emerging markets and how business is done, Agility offered Borouge valuable market and industry expertise as well as, through our partner Schmidt Heilbronn, in-depth technical knowledge in polymer handling. Combined with our integrated business solutions approach, we provide our customers with a valuable supply chain advantage.” Elias Monem, Board Member, Agility Abu Dhabi emphasized that “The Shanghai Logistics Hub is the first of many such projects and Agility is uniquely positioned and committed to undertake and successfully deliver large-scale projects to facilitate significant and exponential growth in emerging markets.”

BMW Italia has brought in Ceva to run the BMW and MINI parts operation at its new Dealer Metro Distribution Centre, which supports dealers in Lombardy and Piedmont. Under the three year contract, Ceva will carry out up to three shipments to each dealer, per day.

Yodel picked High street lingerie chain La Senza has chosen Yodel, formerly HDN, to deliver more than 400,000 parcels annually to customers buying products via La Senza’s web site. Under the two year deal, Yodel will provide a wide range of consumer delivery services, including Next day, 48 and 72 hour services as well as Saturday and Timed services. Sean Pine, distributions director at La Senza, said: “We need a delivery partner that can support, react and deliver while maintaining our high standards at all times as our business continues to grow. “Yodel was selected based on its extensive range and flexibility of services as well as its proven success in delivering key delivery contracts for major brands. “We are confident that this partnership will allow us to continue to grow our business in the online retail market.”

Better “lifts” Transdek is installing 6.5 tonne double-deck lifts at Tesco Extra stores at the rate of two a week, and will have a lift on display at the show. Doubledeck lifts are designed to reduce distribution costs and improve carbon footprints through the use of fixed double-deck trailers. The lifts being installed at Tesco have been specifically designed for use at store level. The key innovation has been in the development of surface mounted hydraulic lifts, built into a chassis along with all working components and electrics. These are pre-tested off-site, meaning that installation can be achieved in less than a day and a half.

LOGISTICS TIMES July 2010


NEWS BRIEFS

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GLOBAL

Barloworld for Siemens

Siemens Industries is centralising its supply chain modelling and has selected Barloworld Supply Chain Software for supply chain modelling, network design and optimisation. It has more than 500 distribution centres round the world and in the past has optimised its supply chain on a regional or national basis. The Siemens supply chain is multi-layered and complex. Following a discovery project last year, it took the decision to invest in a system which would simplify its supply chain, carry out feasibility checks and model new parts of the network it was proposing.

Descartes buys RI Global on-demand, software-as-a-service logistics technology provider Descartes said it has acquired privately-held Belgian-based Routing International, a developer and distributor of optimized route planning solutions. Descartes paid for roughly $4.1 million for Routing International and incurred certain transaction expenses. Descartes officials said that Routing International will become part of its MRM 2.0 suite, which combines real-time planning with wireless mobile technology to manage research in motion. They added that MRM 2.0 leverages the power of real-time planning and wireless mobile technology designed to work as one.What’s more, this acquisition also makes Routing International’s customers members of the Descartes federated Global Logistics Network – facilitating improved performance and productivity of logistics operations across Europe and around the world.

LOGISTICS TIMES July 2010

30% premium game Leading global warehousing firm Metro International SA is said to be paying about 30 percent more than its peers in incentives to attract greater flows of primary aluminum into its Detroit location, trade sources said. Metro, purchased by Goldman Sachs in February, is said to be offering incentives or freight allowances for primary aluminum at around $110, and higher -- about 30 percent above an estimated $80 to $90 range competing warehouses are said to be paying, according to media reports. They have a freight advantage to the other warehouses. With material coming down from Canada, Detroit is the nearest location. Depending what the incentives are ... if they are higher, or on par with anybody else, it’s probably going to them. In mid-June, 945,200 tonnes of primary aluminum were being stored in LME-monitored warehouses in Detroit. The greater incentive Metro is said to be offering is helping to keep the U.S. Midwest aluminum premium over cash prices buoyed at around the 6.5-cent level. “It’s definitely holding the premiums up because the primaries are not going directly to customers. “The customers they are doing business with are comfortable with the 6.5, or somewhere around that premium,” he said. Warehousing and financing are big business, with banks and other investors earning millions of dollars by buying cash metal cheaply, sell it forward at a profit, and strike a warehouse deal to store it cheaply for an extended period.

UPS for Korus FTA Recently President Barack Obama said his administration is committed to resolving outstanding issues regarding the United States-Korea Free Trade Agreement (KORUS FTA) by November when he visits the country. The U.S. and Korea inked the KORUS FTA in June 2007. At this time, the U.S. said that if approved this agreement would be the United States’ most commercially significant trade agreement in more than 16 years. And the U.S. International Trade Commission estimated that the reduction of Korean tariffs and tariff-rate quotas on goods alone would add $10 billion-to-$12 billion to annual merchandise exports to Korea. While this trade agreement remains at a standstill, the prospects of getting a deal done were soundly endorsed by UPS. “South Korea has the 14th largest economy in the world and the increase in trade that will come from this agreement means more jobs and global competitiveness for the two countries,” said UPS Chairman and CEO Scott Davis in a statement. “South Korea is our seventh largest trading partner and we need to protect and expand that relationship.”UPS officials added that the company has supported the negotiation of the U.S.-South Korea Free Trade Agreement since its inception. UPS serves as a co-chair of a business coalition that is urging U.S. action, and it added that this agreement contains vital provisions for the express delivery industry, including enhanced market access and improved customs clearance times that allow companies like UPS to better serve its customers.


COLUMN

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Uff! Jus’ 3% Think on the following data! Eighty per cent of Japan Logistics is handled by 3 PL. Sixty per cent of Logistics is done by 3PL in U.S. while fifty five per cent of Logistics is done in Europe by 3PL. Only 10 per cent of Logistics in India is done by 3 PL. So India has to catch up in a big way to come to the level of developed countries in terms of improvement in Logistics infrastructure and outsourcing through third party logistics and Contract Logistics is a clear road map. Contract logistics is the outsourcing of the distribution function. Contract logistics providers invest in assets, dedicate capacity and personnel, and customize information systems and communications in order to improve the productivity and customer satisfaction of their manufacturing and retailing clients. Successful companies have found that delivering the right products in the right quantity to the right place at the right time and at the right cost is a key differentiator today.

Benefits Logic of outsourcing for manufacturing Enterprise and Retailers is to concentrate on one’s core competencies and leave distribution function on Contract Logistics players who are specialists in this field and can offer cheaper services as they take benefit of Economies of Scale operations arising due to concentrated capacities offered to many of their customers in terms of assets and personnel and services.. Outsourcing distribution permits you to get out of the transportation and warehousing businesses altogether, reducing equipment, facilities and personnel, as well as freeing up cash and improving ROI. Logistics providers can and do deliver greater savings and increased efficiencies because distribution is their business. They have greater resources and specialized expertise that is hard to find in-house. The capacities in area of transportation and Warehousing are optimally utilized and information technology, communication technology and Automation can be carried out seamlessly

by one dedicated party deriving the benefits of technology ultimately serving both manufacturers and Retailers in terms of better infrastructure, lesser logistics costs and more trade ultimately leading to better GDP growth. . Logistics providers also build integration economies that in-house transportation departments, no matter how large, can rarely match. Furthermore, the contract ensures that distribution process improvements and the resulting savings will be pursued continuously and singlemindedly automatically. There are marketing benefits too. You’ll never miss a sale again because of “outof-stocks.” Faster distribution means more selling days for retailers. Increased flexibility makes it easier to enter and to supply new markets, and to do so quickly. Risk management becomes much easier. Outsourcing provides distribution insurance that a manufacturing company cannot secure by itself. Logistics providers have the resources to keep your distribution network running in spite of unexpected disaster, wherever it strikes.

Prof. Akhil Chandra Institute of Logistics & Aviation Management

Offerings Contract Logistics players offer services like door pick up , brokerage , consolidation center , freight management, clearance at destination, deconsolidation center, pull to door through transparency, visibility, seamless communication and ownership among transporters, customs, labor and warehouses, forwarder, steamer agent, Airlines, clearing agent. Through Optimized inventories, routes and trucks, there is no longer a barrier of loss of control for manufacturers and Retailers. JIT deliveries can be led to the line. India’s third-party logistics (3PL) market is all set to experience a period of explosive organic growth, a high double-digit growth rates for both outsourced and contract logistics in India. “In addition, strong foreign direct investment inflows (FDI) on various sectors will lead to increased market opportunities for 3PL providers in India. LOGISTICS TIMES July 2010


GREEN LOGISTICS

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€10 mn Savings Global express major DHL’s GoGreen programme has picked up momentum in Asia Pacific countries including India. And the results declared by the company recently show that the initial attempts have met with considerable success, reports Ritwik Sinha

D

HL’s drive in inducing environment related efficient processes in its operations has begun to show results. The company recently presented a report card of its achievements on carbon reduction front in Asia-Pacific countries and the crucial figure which has been highlighted is the improvement in overall CO2 efficiency by 19 per cent on an annual basis. In more precise terms, it means reduction in carbon emission by 13 million kilograms for FY2009 which has delivered a significant saving of €10 million in overall energy and ground vehicular fuel costs. The icing on the cake is: the Indian arm of the global express giant has done considerably well in terms of adoption of environment friendly processes.

GoGreen Initiative The manifestation of this drive is reflecting in myriads of ways – ranging from keeping the lights off in an unused portion of an unit to switching over to a transportation mode supported by environment friendly fuel. And it’s a drive which is gradually expanding its ambit. “ At the core of our GoGreen Programme is a three-pronged method of assessing, reducing and offsetting. The GoGreen LOGISTICS TIMES July 2010


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Climate Protection Program was launched with the aim of reducing our individual and collective impact on the environment. The programme focuses on the calculation of our carbon footprint, identification of efficiency measures, and the long-term implementation of these plans on a global and local scale,” says R

S Subramanian, Country Manager, DHL Express India. Before launching the programme, the group had indulged in threadbare analysis of the main carbon emission sources in its operations. And the sources identified were air, road transportation and facilities. Based on this understanding,

the company has chalked out a long-term plan with a specific target. “DHL is the first major logistics provider to set specific and quantifiable CO2 targets that will be applied through a focused approach across four key functions - air, road, real estate and products and services. The quantified targets we have set are a timebound programme. By 2020, we intend to improve our energy efficiency by 30 percent using such measures as more efficient transport, optimized planning, alternative sources of energy and innovative technologies,” Subramanian underlines. The GoGreen Express programme was launched in Europe in 2007 and in Asia Pacific including India, it was introduced a year later. On a cumulative basis, this programme has been set afoot in 17 countries in Asia Pacific.

India Report Card Within Asia Pacific, India has registered one of the best scores for the reduction of CO2 emissions. In 2009, DHL Express India saw a reduction of 1.7 million kilograms of CO2 emissions across close to 150 sites of operations. It reduced its per unit CO2 emissions by 40 per cent year-on-year in ground transport and registered a 24 per cent reduction per unit CO2 emissions in its real estate energy consumption. Having reduced its per unit Ground Transport Fuel consumption by 6 per cent and improved its per unit CO2 emissions from real estate by 32 per cent, Blue Dart, part of the DHL Group, saw an improvement on CO2 efficiency by 10 per cent year-on-year. According to Subramanian, the considerable success which the GoGreen drive has met in the country owes to a series of initiatives taken in past two years. Primary among them being: introduction of hybrid and fuel-efficient vehicles. “We are currently operating over 250 Compressed Natural Gas (CNG) vehicles for CO2 reduction in India. Fleet optimization has been one of our key initiatives to improve carbon emissions. To increase fuel efficiency, we have replaced over 60 vehicles with 75 motorbikes,” adds he. Blur Dart has LOGISTICS TIMES July 2010


GREEN LOGISTICS

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LOGISTICS TIMES July 2010


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“In 2009, DHL Express India saw a reduction of 1.7 million kilograms of CO2 emissions across close to 150 sites of operations.” R S Subramanian, Country Manager, DHL Express India

specifically been pointed out as entity which has come out with flying colours in reducing carbon emission and here the major initiative has been the substitution of air routes with intercity road line haul. Blue Dart is also credited with introducing a host of other measures to improve carbon efficiency through close monitoring of energy expenditures, route optimization of vehicles, and introduction of fuelefficient vehicles. In addition, Blue Dart has introduced the lights-off initiatives and reduction in air conditioning usage, relamping using energy-efficient light bulbs, re-use of plastic bags, setting two-sided printing as default for all shared printing equipment, and launching an electronic edition of its newsletter, Daily News within the company to reduce usage of paper. With these measures in place, Blue Dart reported an improvement on CO2 efficiency by 10 percent year-on-year. On an overall basis, DHL’s transportation related steps to curb carbon emission have been adequately supplemented by initiatives which deal with new dos and donts within the premises of the company all across the country. These include such micro-steps as phasing out excess printers and photocopiers, auto hibernation of PC monitors, and prudent use of Material Handling Equipment (MHE) to optimize the energy consumption and utilization.

Quantifying CO2 reduction It is quite interesting to know the

methodology which DHL is using to quantify the worth of CO2 reduction. The process interestingly also has a strong consumer linkage which means apart from making its contribution to the cause of a greener environment, the company is also tending to spread awareness on environmental issues to other constituents of its business value chain. In terms of precise modality to derive the estimation, DHL calculates the carbon emissions generated by transporting each specific customer shipment from the country of origin to destination, and offsets these emissions by reinvesting in certified carbon management programmes such as alternative fuel vehicle technology, solar panels and reforestation projects. These projects have been identified via DHL’s dedicated carbon management function, with an aim to compensate for the emissions generated when transporting shipments across the globe. Customers have the option to choose the GoGreen Express service when ordering international express shipments and pay a 3 percent “green premium” on top of standard delivery charges to ship “carbon neutral”. This money finds its way to the carbon management programmes. The programme is annually verified by an external certifying body, the Swissbased Societe Generale de Surveillance. Customers then receive an annual certificate from DHL stating the total amount of CO2, which was offset on their behalf during the year.

Role of technology Bringing in advanced technological processes is one of the cornerstones of DHL’s GoGreen programme. Says Subramanian, “Indeed, technology has been playing a key role in our carbon emission reduction programme. We have been deploying environmentally friendly transport technologies in order to achieve our quantified CO2 targets. We also have an e-billing service that customers no longer need to receive their invoices on paper. They simply login to an online portal to view and approve them electronically thereby saving valuable resources such as paper, ink, electricity and fuel which are consumed unnecessarily in the paper invoicing process every day. We want to play our part in reducing this waste and the detrimental impact it is having on our planet.” While pursuing its GoGreen drive, DHL has introduced smart trucks in developed markets like Germany which can calculate the most efficient delivery route at any given moment. The company has also initiated a specific Bring Buddy project which facilitates alternative transportation concepts for avoiding inner city traffic. The Smart Trucks are equipped with RFID technology to control the shipments while they are on board. The on-board unit automatically navigates the vehicle and draws up a stop list that takes into account current traffic data to avoid traffic jams. LOGISTICS TIMES July 2010


INTERVIEW

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‘Recession and competition don’t worry us’ In a no-holds barred interaction with Editor Ritwik Sinha, Vizag Port Deputy Chairman G V L Satya Kumar, an IRTS cadre, provides an insight into what is happening at the ground level and what to expect in the near future. Excerpts:

LOGISTICS TIMES July 2010


To begin with, I would like to get a sense from you on this port’s performance in past three years especially in the context of serious slowdown which was witnessed in 2008-2009? If you look at the cargo profile what is handled at Vizag port, despite recession and another port coming up in a nearby location, we in fact grew. Compared to last year, when we handled around 63.9 million tonnes, this year we handled around 65.5 million tonnes. That is the growth of around 1.6 million tonnes. We can safely say that the recession did not worry us. Nor the competition around us. This trend can be attributed to the growth in particular sectors especially coal which is a primary commodity here. We handled around 1.1 million tonnes more than the last year. That was the prime mover. The focus is not only on the indigenous coal production and movement to the power houses because there is an acute shortage with respect to capacity that is generated, there is a thrust towards imported coal. Vizag port already has a good tradition in handling coal. Other commodities like iron ore, we always had the strength. Out of this 65.5 million tonnes, 18 million tonnes consists of iron ore which is a captive traffic for us. We have a good handling mechanism which has evolved over the years and has a capability to handle 8,000 tonnes per hour. These bulk of iron ore and coal together give us a volume of 25 million tonnes annually. About 10 million tonnes is crude which again is a captive traffic of Hindustan Petroleum. They have a 9.5 million tonnes refining capacity and this is a traffic which has been with us. As far as growth is concerned, one is the bulk commodity and the other is the container volume. About 98,000 TEUs are handled and it is largely an underutilised facility now. There are tremendous facilities available at the container terminal and we can straight away go to 300,000 TEUs. With marketing efforts on, the growth would come in the container sector as well as in the bulk commodities especially coal. And to handle this, even though our

“Vizag port already has a good tradition in handling coal. Other commodities like iron ore, we always had the strength.” installed capacity in the port is around 62 million tonnes, we handled 65.5 million tonnes. It means our utilization ratio is around 110 percent. We are in an augmentation mode which includes modernization and automation in a big way. And the route we have taken as far as augmenting the berth capacity is the PPP model wherein 10 new berths are planned. We currently have 24 berths out of which eight are deep drafts which can handle around 20 meters and the remaining 16 are in the inner harbor which can cater to the parcel size of 50,000 to 55,000 tonnes. And now we are going for 10 berths which together will give us an additional capacity of 50 million tonnes by 2012. We expect 120 million tonnes would be the installed capacity at the port by the end of 2011-12. It almost amounts to doubling of the capacity. What is the kind of investment going into this exercise? This is being undertaken through the PPP route. We have already awarded four projects. One of them is under operations for last three years under Vizag Sea Port Limited. In fact, they have two berths. They have done pretty well. Out of this 1.6 million tonnes increment, around 1.2 million tonnes increment has come from Vizag Sea Port itself. We have awarded a Rs. 443 crore of prime project for the general cargo berth mechanization. It is the berth which generally handles coking coal. It has been awarded to a consortium of Vedanta and Latent Contractors, Australia in March. And the way they are going, they would definitely complete the project within 12-14 months. We have also given one contract for liquid cargo which is a specialized cargo: caustic soda, edible oil and bio diesel.

Other projects are on the anvil. We have one project for fertilizer mechanisation. We already have one fertilizer berth catering to the captive requirements of Coromondal Fertilizer International. Apart from that, we import about 4.5 million tonnes of fertilizers. To cater to this segment, which is presently semimechanised, we are going for complete mechanization. We are likely to award this contract soon. You are talking about PPP route for this huge augmentation exercise. Are you expecting to award all the contracts by the end of the year? Yes. Another three would be awarded by September and remaining around the beginning of the next year. You are talking of huge capacity augmentation in anticipation of a tremendous surge in demand. But do you think, demand would surge to the tune of your tremendous increase in capacity in the near run? Absolutely. The growth sectors are very clear to us. One is the coal. There is the stated policy of the government that 100 million tonnes of shortfall which is there in meeting the requirements of coal power houses, would be imported. And east coast port has been the only port to cater to this requirement apart from Mundhra which has a deeper draft. If you look at ports in the east coast, Vizag is in the prime position. And the way we are growing, we will fulfill this requirement. You have spoken about your captive strength. But going ahead, what are the new additions you are eyeing at to enlarge your portfolio? One is the aluminum sector which is LOGISTICS TIMES July 2010

INTERVIEW

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INTERVIEW

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largely untapped. Vedanta is coming up at Langigadh, Jasgoda. Then we already have Nalco which is in an expansion mode. Then Jindal is coming up and we have Utkal Almunium which is coming up at Tikri. So we find that a cluster of aluminium plants are coming up. To cater to the requirement of this sector, we have allocated two berths. For their raw material requirements, caustic soda and outward product of alumina. This we see as a promising sector. And bauxite, of course. It is a peculiar product. Normally it is indigenously mined and processed. But here we find some coastal movement of the bauxite also. We are getting bauxite from Rajasthan coming here to meet the additional requirement of Vedanta. That again is a pretty consistent traffic which is likely to grow further. We are also told that a series of SEZs are coming up in and around Vizag. How much are you factoring them in your scheme of things? Most of them would be producing high value products. Basically, they would need containerized movement. One bottleneck which we have here currently is the lack of world standard Container Freight Stations (CFSs) in terms of aggregation, disaggregation, stuffing and de-stuffing facilities. Here we have three terminals. And their conditions are pretty good. But there are certain bottlenecks like lack of adequate rail and road connectivity. So we are going in for logistics parks. We are trying a joint venture with Balmer Lawrie for this. Around 50 acres of land in our port is earmarked for this purpose which will be our equity. They would be setting up this logistics park which would include some value added services as well. We are going to have a truck parking terminal and probably they are trying to do some bulk processing as well. What is the kind of timeline you are looking to create this facility? We are in the process of forming this joint-venture. We have asked for a preLOGISTICS TIMES July 2010

feasibility study the report for which has been submitted. Now we will be going for a full-fledged draft project report on that. We have to get some clearance from the ministry to form this joint venture. This would, in fact, be first time when a public sector port would be going for a JV with another public sector company. We expect this process to seriously start by July end. As far as investment is concerned from our side, it would be land. And Balmer Lawrie would be coming with expertise in logistics. They estimate it to be anything between Rs 200- Rs 220 crore. You are optimistic about the hinterland growth. But here we have spoken with some industry players and their argument is this has been talked about quite long in Vizag but not much has happened. How would you respond to it? I think, the developments in the hinterland can be now noticed all around. You can look at developments in Orissa and developments in and around, the proof is here. Maybe in last couple of years, the industry has not taken off to the levels it was expected. But things definitely are really on the move again. If you look at hinterland here, RINL is the

major one and they are going from 3.6 to 6.3 MTPA. They are likely to commission the second phase by September. NTPC is adding another 1000 MW plant. However, there is a bit of concern on alumina plants because some of them are tied up in the land acquisition challenges. But Vedanta is on stream. And the growth in Angul area and this Karimnagar complex of Orissa is given. They have a captive mining industry there and all are coming up. But competition is certainly building up for your port. You have Gangavaram in the close vicinity and so many private ports are coming up in Orissa. Does it worry you? We have to respond to it. It’s good that we are in a competitive environment. It will only help us in adding efficiencies which are world-standards. We are working towards that even as there are those typical challenges which a brownfield port has to face while executing modernization. We have an investment plan of Rs 2,500 crore for our revamp which includes new berths, dredging, and procurement of new equipments. The investments would be made by the end of 2012..


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LOGISTICS TIMES July 2010


COVER STORY

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Lars Sorensen, CEO-South Asia

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At Your Service Seventeen years after pitching tent on the Indian shores and less than a year after consolidating freight forwarding and supply chain management weaponries under a single sheath globally, Damco – the AP-Moller Maersk sibling - is gung-ho about doing business in India. The changing logistics and transportation scenario are a big-enabler. Ramesh Kumar from New Delhi

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O

n a wintry December afternoon last year, Professor Richard Wilding of Cranfield School of Management was in an expansive mood. He was holding forth on supply chain with Steve Macaulay at the Bedfordshire campus. “For our economy to function, relationships between companies are absolutely critical. Nobody does everything – or very few companies do absolutely everything. We are dependent on other organisations to ensure that our LOGISTICS TIMES July 2010

organisations, as it were, can make some money,” said the mercurial knowledge czar. Thousands of miles away – Mumbai, the commercial capital of booming India, to be precise– under a sweltering May heat, Managing Director of Piramal Glass Vijay Shah decided to embrace Prof Wilding’s prescription. He signed up Damco to handle his publicly listed speciality glass manufacturing business enterprise’s supply chain needs. Shah decided to focus on what he is good

at: manufacturing glasses and not on transporting and distributing his products across the globe. Focus on your core competence is the oft-repeated theme. Good for Shah and Piramal Glass. And, of course, a helluva lot of moolah for Damco as well. And a prestigious client to the boot. Shah’s rationale to seek a supply chain partner was flawless. Hearken to him: “Today our markets are very competitive and dynamic. We need a very reliable and robust supply chain to serve our key customers and to manage our production, sales and distribution. We consider supply chain management as a key pillar that would drive our growth and capability to establish ourselves as a leading market player. We needed a partner who had complimentary capabilities to support our growth in Europe, North America, Latin America and Damco suited that profile”. The forty-plus Lars Sorensen, CEO of South Asia for Damco, was ecstatic after bagging Piramal Glass. For him, the gruelling bidding process has ended with the positive result. Talktime is over and now it is time for action to service one of world’s top five glass bottle makers by sales in the pharmaceutical segment and the third largest manufacturer of cosmetics bottles by capacity with a combined installed capacity of 1,115 tonnes a day and a US$250 million sale worldwide. Piramal Glass’s global footprint covers production facilities in India, the US and Sri Lanka besides sales network spread across 70 countries. Truly a big account. Big achievement. And, huge task as well. Damco and Piramal Glass are no strangers to each other since they had business relationship over the past few years. The only difference now is that Damco, the offshoot of September 2009 merger between Maersk Logistics and Damco (both owned by AP-Moller Maersk), will tackle end-to-end supply chain requirements of Piramal Glass, the only leading Asian glass manufacturer supplying to international Marquee clients across continents. Unlike in the past when it used to play a side role. Sorensen, needless to say, is “very excited


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to see the confidence that Piramal Glass has shown in Damco. Our focus is to ensure a seamless supply chain, removing wastage, increasing reliability and providing a strong network that will supply Piramal’s growth plans.” A dedicated supply chain expertise is critical for Piramal Glass to capture a larger market slice. Of the global packaging glass market of $28 billon, the multi-locational Indian MNC is aiming for a larger pie of $5 billion in the moulded glass segment estimated to be $26 billion, according to Bhavya Gandhi of MF Global, a research outfit.

Perfect Fit Supply chain experts concede that Damco is perhaps the best bet for Piramal Glass. “Yes, there are equally reputed players in this segment, but except Damco others have to outsource one element or other which will have huge dependability and cost implications,” avers a supply chain expert based out of Mumbai. He’s not off the mark for the simple reason that Damco in its original form as part of AP Moller-Maersk group but as an independent entity in the pre-merger era was a freight forwarding giant. Who does not know the muscle and clout the global

ocean liner wield? Look at Damco’s reach. It offers a broad range of supply chain management and freight forwarding services to customers all over the world, and has 10,500 employees in over 280 owned offices across 90 countries with representation in 120 countries in Africa, Asia, Australia, North America, Europe, Middle East, and Latin America. Last year (2009), it reported a net turnover of over US$2 billion, managed more than 2.3 million TEUs of ocean freight and supply chain management volumes and air freighted more than 60,000 tons. Its past is equally

History 1977-78

Consolidation services were established in Taiwan, Singapore, and Hong Kong under the name of Mercantile

1997

Hudd Distribution Services in USA was acquired

1998

Mercantile introduced warehousing, distribution and global airfreight services

1999

The A.P. Moller – Maersk Group acquired parts of Sealand, including Sealand Logistics

2000

Maersk Logistics was established, combining Mercantile and Sealand Logistics

2001

Maersk Logistics acquired US-based O’Neill & Whitaker, a licensed customs house broker and freight forwarder, now Maersk Customs Services Inc.

2001

Maersk Logistics acquired certain activities and assets of the USA logistics company Distribution Services Limited

2002

Maersk Logistics was accepted as the first logistics member of C-TPAT

2005

Maersk Logistics acquired P&O Nedlloyd Logistics incl. Damco Sea & Air

2007

Maersk Logistics’ forwarding services, including DSL Star Express, airfreight, and landside services and Damco Sea & Air merged into the freight forwarding company Damco

7 Sept 2009

Maersk Logistics and Damco merged into one supply chain management and forwarding company Damco

Name game Though the strategic decision to bring Damco and Maersk Logistics under a single umbrella was a cakewalk for the AP Moller-Maersk honchos, choosing a name proved to a tough nut to crack. "We had three options when choosing a name," says Habben-Jansen, "to come up with something new, which proved expensive and time-consuming, or to go with either the Maersk Logistics or Damco name." The Maersk name is probably better known, however the company decided to go with the Damco branding for that very reason. "We wanted to differentiate ourselves from Maersk Line and to establish ourselves as an independent logistics business," reveals Habben-Jansen. In fact, although owned by the same parent company they don't always favour Maersk Line. "Whenever we can work with Maersk Line we will, but we don't offer them preferential treatment. We ship goods with whoever offers us the best service and the best price." Damco actually ships around 50 per cent of goods with Maersk Line. However, although the company is keeping the Damco name it is keen to move towards a new brand image that incorporates the activities of both companies and as such has launched a new logo and tagline: "Global logistics. Individual solutions".

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Lars Sorensen has been associated with India since 2003. He is CEO, Damco(South Asia), based out of Mumbai and responsible for all the activities of Damco in the South Asia region, which comprises of India, Pakistan, Sri Lanka & Bangladesh. He joined as the Managing director of Maersk India Pvt Ltd (Logistics Division). Lars has worked for more than 17 years in the shipping and logistics industry. Before arriving in Mumbai he worked in Hong Kong as the General Manager, Supply chain management for Damco Hong Kong. Prior to his stint in Asia, Lars has held various responsibilities in Europe in the area of supply chain management. He fielded a volley of questions from Ramesh Kumar over telephone. Excerpts:

{Our global tap is a big advantage| What is your assessment of the Indian economy? India has been going steadily despite the global economic challenges. We are particularly happy over the past 6-7 months where exports and imports have started growing and economic analysts are forecasting a higher growth for India in 2010-2011 due to the improved economic scenario globally.

How logistics-friendly is the Indian policy framework? I have been exposed to India for the last 6-7 years and have noticed the changes in the policy framework being brought about. There is a greater awareness on the part of government that infrastructure improvement is essential for the economy to grow. Policy measures are being initiated to attract investments in railways, roads and ports. Even customs clearance procedures are getting better. All these are positive signals. I feel that India needs to keep improving on all fronts continuously to compete in the challenging and changing global scenario. I must tell you that India is on the right track.

What’s Damco's strategy for India? India is very important for our global network because it is one of the fastest growing countries globally. The Indian logistics industry is growing very fast and Indian companies are getting familiar with globally successful supply chain management practices, modern warehousing facilities and global transportation. We see a great opportunity to offer our services in India. We are focussing on high growth segments like technology, consumer goods and automotive and we are building our capabilities to offer services to customers in these industries. We are also focussing on segments like project cargo logistics which is witnessing growth due to India’s rapid industrialisation and infrastructure development. We feel that better infrastructure in LOGISTICS TIMES July 2010

India will open up a lot more opportunities for logistics services in India.

You sound like Oliver Twist - asking for more and more... Your appetite seems to be gargantuan... Why not? If this helps Indian businesses to succeed in the global market and gives logistics players like us more opportunities. Better infrastructure facilities will help us to reduce overall logistics costs and will in turn benefit the Indian exporters and importers to compete in the global market.

What about competition or rivalry in the marketplace? You cannot wish away that. When the size of the pie is growing, there will be more players willing to partake. At this moment, we look at two scenarios. Primarily, there are local, fragmented logistic service providers. Then, there is the entry of well known multinational logistics players into India. We came into India in 1992. We have seen a lot of changes taking place in this domain. Competition is definitely increasing and it is welcome because it improves the service standards prevalent in the industry. It ensures that the logistics service providers in the market are constantly innovating and coming up with ideas to refine and improve the supply chains

How do you cope with human resources challenge here? Logistics sector is growing fast in India. Naturally there is a lot of demand for skilled professionals in this industry. So far, Damco has been successful in attracting the right professionals to come on board and work with us. We realize that it is important to attract the best talent from the industry and to simultaneously groom fresh minds to take on roles that demand


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global standards. We have some training programmes both at the local and global level for our colleagues which enable them to learn on the job. In this process we give them cross country experience to gain knowledge of the global markets. At Damco, we focus on providing the right environment for our colleagues to learn and develop on the job and to succeed in the industry.

encouraged them to partner with supply chain service providers who can support them with global practices and knowledge. We are able to provide a good value proposition due to our global experience in this sphere. We are confident of supporting Indian companies and help them optimize their logistics cost.

What is Damco's USP? Do you see the need for tweaking the Indian curriculum incorporating logistics and supply chain in a big way given the fact that it is going to be a big employment generator? Certainly. We expect logistics industry to flourish in India and this will generate career opportunities for many skilled professionals in India. Like all other industries, logistics would also require a good academic network which would train and equip potential professionals for the sector in India.

Are you happy with the progress of containerisation in India? Containerisation is a growing phenomenon globally and we are witnessing similar trends in India as well. Containerisation offers a lot of advantages like safety and security of the cargo and efficient handling and operations. The pace of containerisation will be determined by the trade off between cost and benefit of containerisation. In the long run, a lot more commodities which are currently not containerised will eventually be containerised.

What is Damco's role in project logistics? We are witnessing a lot of growth in project logistics in India due to the pace of industrialisation and infrastructure development in India. Also many large Indian engineering and construction firms are winning infrastructure contracts in markets like Africa and Middle East. We have put together a project cargo team comprising of experienced project cargo professionals. There are projects we are handing both into and out of India. Once again, I have to emphasise the need for better infrastructure facilities in India to really gain out of this growing business.

How receptive are Indian companies towards contract logistics & supply chain management which basically means that they have to be outsourced? We are witnessing changes in the attitude of Indian companies towards outsourcing of logistics services to third party service providers. In the past, there was a lot of reluctance to part with this function to outsiders. Many companies are recognising that there are economies of scale to be gained through the outsourced logistics and supply chain management model. These economies of scale will directly impact their bottom line. The supply chains of many Indian companies are now truly global with customers, suppliers and manufacturing facilities which are spread across various global locations. The global competition is making businesses to be agile and vigilant and get their raw materials and or finished product to the shop floor or market space in the shortest possible time to gain market share. These trends have

A couple of things are involved in this. First of all, our global network is a big positive. We are present in over 120 countries and hence we are a global company with strong local knowledge of the markets where we are present. This helps global companies to utilise our network and our local knowledge to manage their global operations. Secondly, Damco has rich experience in handling many of the top Fortune 100 companies and hence we have first hand experience of how some of the most efficient supply chains in the world are managed. Our experience and knowledge in the industry allows us access to competitive costs and most modern practices in the industry. All these are big advantages when we seek business. It is imperative these days to combine your global knowledge with local knowledge to gain acceptance anywhere in the world. We are able to provide local solution with global mindset. That is probably where we make a difference when compared to other players.

India is a price sensitive market. So do you play on the pricing to grab business? Pricing is an essential component in any business deal and we focus on it to ensure a competitive offer. At the same time, while we propose solutions, we offer a variety of benefits to the customers which will have a long term impact on their supply chain efficiencies and speed to market. Clients have no hesitation in seeing the value proposition Damco offers and sign up.

How much of your global tag helps you gain marketshare? Customers definitely value when you have global exposure. It suggests that you have seen and handled all kinds of challenges in execution and met customer needs satisfactorily. Otherwise, survival would have been difficult. It is difficult to put an actual number on the weightage we get through our global tap. But it is a big advantage, no doubt.

What kind of weightage you would like to give for infotech in successful implementation of supply chain management? We feel that technology is a very critical component in successful implementation of supply chain management. Visibility is paramount and we are talking about intra-border transaction and movement of goods. Technology plays a very big role in tracking the goods either way - raw materials or finished products. Manufacturers across globe look for reliability and technology provides that support in tracking merchandise. Everything is transparent from end to end. Shop floor planning to inventory management becomes much more visible (Contd on P. 32) LOGISTICS TIMES July 2010


COVER STORY

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(Contd from P. 31) and reliable. Damco strongly supports this IT support initiative.

the next three to four years. We are confident of achieving this target through the initiatives we have planned for India.

What has been Damco's growth in India over the past three years?

Indian logistics industry is too fragmented. Do you foresee a consolidation and thereby the elimination of fringe players?

We have been growing 30-40 per cent year on year.

Which verticals have done well? Which have done not so satisfactorily? Supply chain management and freight management are our major strengths and we have done well in these segments in the past. We will continue our focus on this area. We will also focus on imports, air freight, project cargo and certain specific trade lanes which have high export-import volume with India.

Where do you see over the next three years? Definitely, we would like to double or treble our turnover over

Yes, this ought to happen in the interest of Indian logistics industry. Consolidation is bound to happen at some point of time for the simple reason it would not be economically viable for fringe players to service as the demands of customers grow exponentially.

Is Damco ready to go the inorganic way of growing by buying out fringe players? As we speak at this point of time, we have no concrete plans. But we are open to opportunities and will be evaluating them on a case to case basis.

More accurate The most precise instrument to pinpoint CO2 emission “hotspots” comes from Damco, according to a recently published joint study, conducted by Damco and the Massachusetts Institute of Technology (MIT). The study, conducted by MIT’s Center for Transportation & Logistics, found Damco’s way of measuring carbon foot print to be up to 25% more accurate than other approaches. The SupplyChain CarbonCheck helps companies assess and reduce their supply chain carbon emissions. Since late 2007, Damco has conducted SupplyChain CarbonCheck projects for a wide range of companies globally. With a 5-step methodology Damco enables customers to reduce CO2 emissions and increase supply chain efficiency at the same time. “Accurate CO2 mapping of the supply chains is critical for the companies that want to take the right actions and reduce their carbon emissions, cut cost, and deliver on sustainability strategies”, says Erling Johns Nielsen, Global Head of Damco’s Supply Chain Development. The main conclusions in the MIT study are that Damco's approach to carbon footprinting is more comprehensive and accurate than the predominant carbon footprint assessment - especially when ocean logistics are part of the mix. According to MIT’s researchers, the previous calculations have in some cases caused erroneous fluctuations of up to 25% in the estimation of carbon emissions due to the transport of products from the factory door in Asia to a distribution centre in the United States. “There have been no common standards for third party logistics providers when they calculate a company’s carbon footprint. Damco, through its work with MIT, has now established a new industry benchmark for how supply chain carbon emissions should be calculated in a uniform way. The added value of Damco methodology is, in part, based on improved operational insights and live data. Dr Edgar E Blanco and Anthony J Craig, who conducted the study, say: “In the case of Damco, a calculation methodology was available, it was accurate and automated through a standardized tool. Not all 3PLs may have this technology available. This requires construction of screening models to use as a reference to understand the differences. Also 3PLs do not always have higher visibility to all logistics functions. In the case of Damco, warehousing and port operational data was biased towards their own operations and was not necessarily providing higher resolution data, but just a different set of assumptions. For the selected international supply chains, this uncertainty did not significantly affect final calculations, but could be more important in other logistic networks. In those cases, it is important to selectively engage other parties in the calculation process.”

LOGISTICS TIMES July 2010


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impeccable (See See Box: History). History Last year, Damco on a global scenario handled 545,000 TEUs through ocean freight, 60,000 tonnes in air freight, handled 45,000,000 CBM supply management task, 70,000 FFEs in reefer logistics. In the process, it has managed 300 customer supply chain development projects within retail, electronics, FMCG, chemicals and cold chain sectors. It boasts that its clients saved US$130 million as a result of its SCM initiatives thus impacting their bottom positively to the tune of US$33 million.

India, Important Damco realized the importance of India long back. Rolf Habben-Jansen, CEO of Damco, is credited with the view that with Indian companies emerging as strong players in various global industries, it has to establish itself as their “logistics partner of choice”. Damco is perhaps one of the early birds to see the ‘sea change’ that was being rolled out under the new economic regime authored by the present Prime Minister Dr Manmohan Singh in his earlier avatar as Finance Minister in the P V Narasimha Rao government in the early 1990s. Today, it has 17 fully owned branches employing over 300 logistics professionals. While freight forwarding business has been an old hat, supply chain management was a new arena for Damco in India at least. Honestly speaking, it is doubtful whether the terminology ‘supply chain’ has crept into the business lexicon in the Indian context two decades ago when Damco had pitched tent on the Indian shores. Significantly the entry of multinationals through joint venture partners paved the way for Indian business community to get exposed to supply chain management practices of their foreign partners and explore its nuances at a leisurely pace. Over the years, Indian companies – the Tatas, the Birlas, the Mittals etc - have grown in stature through their acquisition and management control of companies outside India. With their projects – Greenfield or brownfield – needing inputs from home base, as well as global giants outsourcing components (automotive

sector in particular), Indian companies have to put in place some fool proof mechanism to ensure uninterrupted supply to their buyers overseas. All these necessitated a peek and absorption into supply chain management. Though Maersk has been offering logistics services to Indian companies under Maersk Logistics, the clubbing of Damco with Maersk led to a unified and seamless service to clientele.

Extra Activities Meanwhile, Damco is smart enough to see the business scope in the light of raging global warming or climate change debate. It has developed SupplyChain CarbonCheck and receiving rave reviews (See See Box: Most Accurate Accurate). It has beautifully dovetailed supply chain carbon emissions with supply chain cost reduction sales pitch. With companies across globe also trying to win brownie points over their rivals in the marketspace on the strength of the “go green” mission, Damco has a winner on its hands. Damco's SupplyChain CarbonDashboard was launched in 2009 and serves as an enabler for the reporting of carbon emissions on a periodic basis. By zooming in at specific emission levels, the CarbonDashboard immediately allows companies to identify "carbon hotspots" in the supply chain and take action. It is just question of time before it is able to sign up Indian companies in this sphere as well. India is believed to be contributing approximately nine per cent to its global volumes. Sorensen, however, refuses to confirm or deny this guesstimates. Damco is keen on enlarging its business footprint in India and open to inorganic route as well – meaning, through mergers and acquisitions. It is scouting for partners with domestic companies with expertise in road and rail transport. Though there are several fringe players ready to “dance” with Damco as partner, the global giant is choosy about whom it wishes to partner wish. Sorensen concedes that the Indian logistics industry is fragmented and consolidation is a necessity. “Consolidation is bound to happen at some point of time for the simple reason

it would not be economically viable for fringe players to service as the demands of customers grow exponentially,” says he (See See Box: Interview). Interview However, he hastens to add that “as we speak at this point of time, we have no concrete plans. But we are open to opportunities and will be evaluating them on a case to case basis.” Notwithstanding the growing competition from established global giants such as NYK, Toll Logistics, Panalpina, Ceva Logistics, DB Schenker etc. Damco is bullish about India. “We have been growing 30-40 per cent year on year,” elaborates Sorensen, despite the fact that global volumes fell by 30 per cent. It has done extremely well in supply chain management and freight management and naturally the focus will continue on there areas.

Global Clout All said and done, Damco’s global presence is a big advantage. Global exposure translates into a variety of challenges and the availability of ready responses to any criticality. While Sorensen was uncorking champagne to celebrate the signing of Piramal Glass in India, his counterpart in Vietnam Narin Phol perhaps performed a ‘jig’ when global tyre giant Michelin picked up Damco to handle its logistics

Rolf Habben-Jansen, CEO, Damco

LOGISTICS TIMES July 2010


COVER STORY

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in the fast-growing Asian economy a few weeks ago. Under the three-year contract, Damco will handle Michelin’s exports from Thailand into Vietnam, inland transportation, cross-docking and distribution to customers within Vietnam. Damco will also manage warehouse operations for Michelin in Hanoi and Ho Chi Minh City. The new logistics set up will enable Michelin to distribute directly to almost 100 dealers across the country. Henrik Kristensen, CEO of Damco Spain SL, a few weeks ago bagged the prestigious GFS’s countrywide rights for sales and distribution. GFS commenced operations with Damco, Spain last year and this is an extension of the partnership which sees both companies able to offer integrated door to door logistics services to Spanish based companies in need of transportation of non-hazardous bulk liquids to overseas markets. High street clothing chain Hennes & Mauritz (H&M) to handle its supply chain in India and Pakistan, building on an established relationship which sees Damco covering the retailer's operations in Bangladesh, Cambodia, Indonesia, Sri Lanka, South Korea, Vietnam and Thailand. Besides, it secured a three-year contract with LG Electronics to manage all warehousing and distribution operations LOGISTICS TIMES July 2010

for products imported to Morocco. Damco has also signed a Memorandum of Understanding with Boeing for the development of industrial and technological logistics tools for improving global supply chain management. The companies will explore opportunities to use Boeing's modelling and simulation tool to expand into commercial markets and incorporate Damco's supply chain management knowledge.

Goal Orientation Damco’s track record has been impeccable. Rolf Habeen Jansen, during his interaction with professionals a few months ago, was ecstatic over posting “above 97 per cent performance on KPIs delivery capability” consistently. “Well over half of our top 50 customers … have been with us for more than 8 solutions years,” touted a proud Damco CEO. Damco has done a remarkable job in achieving increasing efficiency, raising customer satisfaction and being innovative at the same time. To improve customer service, on an average two layers of management have been removed throughout the organisation. “Ours is a flat organization,” concedes Sorensen, referring to Indian side as well. Damco honchos keep asking a set of rhetorical questions: Simplify and

innovate? Does this activity drive customer value and satisfaction? Why should we keep this activity local or can we consolidate/standardize? Which capabilities are needed when recession is over? Do we have enough passion on our organization and teams? There are more perhaps. A business enterprise that keeps raising these pertinent questions consistently and persistently is bound to come out as winner. There can be no two opinions on that score. “Damco inspired confidence throughout both the RFP and implementation stages of our EDC in Malaysia. Their attention to detail and rigour in implementing standard operating procedures flowed through to a seamless operational start up. Of special importance to our operation was a high quality materials handling capability as our products are relatively high value per unit and very fragile. We have been very impressed with both the quality of operations and the responsiveness,” says Michael Toy, General Manager Supply Chain, OceaniaWhirlpool. These are not pure words. But genuine compliments. Piramal Glass’s Shah, who has spent more than two decades at this speciality glass manufacturing global giant, knows a lot about Damco. Perhaps henceforth he can to go sleep every night with less or no concerns than in the past when he and his team used to burn the proverbial midnight oil wondering and worrying about delivery challenges in a complicated and turbulent global market scenario. Damco, which wants to be the “partner of choice” for India inc, is there to shoulder the responsibility with tailor-made solutions. With passion and dedication. Shah’s objectives are twin-pronged: he expects Damco to help him lower cost and improve customers’ service level. And thereby enlarge global turnover and profits. If Damco’s track record is anything to go by, delivery compliance will be 97% at least! Just short of Total Satisfaction! In the process, both Damco and Piramal Glass will make “some money” as Professor Wilding prophesized. Truly, a win-win situation.




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LOGISTICS TIMES July 2010


PERSPECTIVE

36

{Intention

good, implementation has to be right|

R C Dubey President ACTO

LOGISTICS TIMES July 2010

Indian Railways has announced two new initiatives recently to encourage private participation in freight related businesses – Special Freight Train Operator Scheme (SFTO) and Private Freight Terminal (PFT). In my opinion, these are very sound and progressive steps. Railways’ primary business is the transportation of bulk commodities from the source, i.e., coal mines and iron ore mines to the destination like cement plants, ports, and consumption areas. And all said and done, there are considerable gaps in the last mile delivery in terms of serving the customers, retailers, etc. The new initiatives are steps to bridge this gap. In my opinion, giving green signal to private container trains operators three years back was the first concrete step in this direction. Even as that step has not brought any revolution in the transportation technology, the major difference it has created is in having an interface with actual end users. These new schemes now follow that suit. The private freight terminals would provide the basic services to the end users with lot of add on services and after sales services. If you look at the freight terminals of Indian Railways today, they are handling many commodities and things are a bit disorganised. The interface with end user is not there and that is why there is a large battery of middlemen. These private freight terminals would do three things. Firstly, they will provide capital for investment. Secondly, they will be commodity specific and lastly they will serve the last mile connectivity requirements of the users which in turn would encourage the users to use Indian Railways network for freight transportation. Right now, the end users prefer road transportation all through the route – from point of origin to point of consumption. But setting private freight terminal would mean creation of an intermediate platform from

where the private operators can take for the final distribution. And at these units a lot of other economic activities can be facilitated like storage, temperature specific storage, labeling, packaging, packing, re-distribution, etc. The concept of logistics parks can truly find manifestation in these units. Coming to SFTO, I broadly look upon it as further expansion of container train operators scheme. In the previous scheme, only container trains were permitted to be run by the private sector. Here they are allowing normal freight trains and this is really innovative. It would facilitate transportation of special cargo and the possibilities in this domain are immense. We have seen how the demand for automobile carriers has grown in the recent past. But apart from that, there is a need for a lot of other cargo which are not moving by rail because of nonavailability of specific, suitable vehicles. Edible oils, chemicals, refrigerated cargo, etc. we don’t have train specific transportation mode for them. These are the commodities/materials which can move only after aggregation. You don’t expect edible oil trains to run with 4,000 tonnes payload. This is where the scope for aggregation and segregation comes in. People aggregate cargo from the larger hinterland, bring it to a freight terminal and from there they run special freight trains on a point to point basis. Both the schemes are by and large linked with the primary objective of increasing the rail share. They recognize the fact that some of the cargos can’t be brought back to the railways unless you have better freight regime for them. But the moot question is: have these new initiatives gone down well with the private sector? Unfortunately, the private industry is not in a very exciting mood. And this is primarily because the divide between the intent and the implementation has not been very friendly in


37 3 7

the last couple of experiments which railways has endevoured in terms of participation of the private sector in freight transportation. These two policies, the intent is yet to be clearly mentioned in terms of dos and donts, whereas and wherebys in the concession agreement which would be ultimately signed. My feedback is that the private industry would like to see and understand the final terms under which they would be allowed to operate. In terms of setting up private freight terminals, there are the usual problems like the non-availability of land, change of land use plan, cost of land, etc. So these are some of the issues which would be faced by the private industry. More importantly I think, private industry is looking for is transparency in the pricing. Terms of the final agreement should be matching the intent and there should be no diversion and there should be strong sense of continuity when it comes to implementation. For instance, there is the critical issue of concession. It is a commonplace knowledge that the gestation period for infrastructure projects is around 10 years or even more and the case is no different for railway freight projects. For ten years, there should be some element of certainty that things would not go haywire. Take the case of haulage rate. It is something which railways would always control, whether it is special freight trains, container trains or automobile carriers, etc. And people work out their viability on the basis of the existing rates and add some margin of inflation in their calculation. If they have to reach to the pay back period in ten years or so, they expect a little bit of stability. They do not expect bumpy ride in pricing. The issue is of paramount importance considering the fact that the new initiatives have a dual purpose. The larger purpose is to carry more traffic to long destinations in an eco-friendly mode of transport. The second crucial objective is to set up infrastructure at remote locations not just confined to metros and they would be permanent assets. One has to remember that the private players opting for these schemes are not just signing in to make profits but would also assist in expanding railways network in the hinterland. A common grudge against railways and its experimentation with public private partnership (PPP) formula is that they act as the dominant

partner. But I don’t think it is going to change overnight. Going by the experience of private sector with railways, they will be a dominant partner as long as major haul is with them, they are providing the locomotives and the line access as well taking care of maintenance. Whether it is private freight terminal, container terminal or freight train, 90 percent of the journey, asset utilization, transportation cost would be on railways which have to be controlled by them. But to bring in more operational efficiency in freight transportation in association with private operators, some changes can be induced radically. For instance, maintenance of wagons can be handed over to private operators in projects where they are

involved. They can also allow the locomotives to be owned by the private operators. They can also evolve a new financial formula as against the existing administered freighting structure. Something which is based on cost sharing and profit sharing. Coming back to SFTO and PFT, these schemes could attract new set of players other than those which are already existing in container space. We may see some new players stepping in from the logistics domain especially those who have significant strength in roadways. But all said and done, the success of the schemes would be judged by the implementation which has to be driven in the right direction at all cost. (As told to Ritwik Sinha) LOGISTICS TIMES July 2010


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Future Supply Chains

*Program Manager, Transportation & Logistics Practice, South Asia Middle East and North Africa, Frost & Sullivan

LOGISTICS TIMES July 2010

Srinath Manda* India, the world’s second most populous country and fourth largest economy (in terms of purchasing power parity), is home to a dynamic manufacturing industry sector and rapidly growing consumer markets. Globalization has opened up many lucrative avenues to the business world, but created challenges of managing seamless forward and backward flow of material and information. The scale of material sourcing, manufacturing, and distribution by Indian companies has risen multifold since the mid 1990s as a result of increasing globalization and growing export opportunities. India had emerged as one of the earliest major economies to recover from the recent global economic recession, and is galloping ahead with a fast-paced growth of the industrial sector, coupled with the more sturdy progress of the agricultural sector. However, logistics management in India is considered to be very complex due to the varying geographic and climatic conditions and disparate distribution of transportation, storage, and communication infrastructure, apart from complex tax structures varying across different states. Distribution network of majority of industries involves millions of retailers spread across the country and multiple levels of intermediaries, serving whom is an extremely difficult task to manage by any one industry participant. This makes India a land of significant opportunity for logistics service providers (LSPs). However, Indian LSPs lag significantly below end-user expectations on key performance criteria such as attitude of staff, process improvement capabilities, and material safety. The performance benchmarking of Indian LSPs, which is based on the ratings provided by leading end users from eight key industry sectors in the country revealed that with regard to aspects such as value addition, consignment tracking facility, and cost saving initiatives, LSP performance came close to enduser expectations. But inability of LSPs to keep pace with evolving volumes of end users and the lack of multimodal transpiration capabilities are other impediments and concerns the end users are facing. Moreover, at present, most of the logistics services

in the country are handled by the unorganized service providers that do not possess capabilities to provide integrated logistics solutions. Keeping in perspective the challenges faced by the LSPs and end users, Frost & Sullivan’s Transportation and Logistics Practice is organizing an exclusive strategy workshop on ‘Future Supply Chain Strategies’ from 14th to16th July 2010, at The Golden Palms Hotel & Spa, Bengaluru, India. The workshop intends to ensemble a network of today’s best thinkers, visionaries, and thought leaders from across key industry sectors such as Automotive, IT Hardware and Telecom Equipment, Retail, and Pharmaceuticals in India, for the specific and definite purpose of developing future supply chain strategies. In this endeavor, Frost & Sullivan will facilitate the participants to ideate and evaluate best possible methods and practices through workshops, breakout sessions, and panel discussions to develop practical, feasible and sustainable supply chain models essential for organizations. The workshop takes off with a unique conceptual session of ‘Logistics End user’s Outlook for Industry and Supply Chain Trends’ of two key logistics end-user industries - pharmaceuticals and retail by top logistics executives from these industries. The session would provide strategic insights on current status and outlook for the two industries, structural changes happening in the industries, logistics requirements and own capabilities, bottlenecks in industry’s supply chain and reasons. Responding to the future logistics needs, expectations from LSPs and gaps presented by the end-users in the first session, there would be another unique session titled ‘Future Readiness of Logistics Service Providers’, where top executives from two leading LSPs would elaborate on the existing and expected capabilities of LSPs in the country to fulfill the future logistics needs of endusers. In addition the LSP speakers would also present their expectations from the end-users. Following the stage set by end users’ perspective on logistics requirements for key industries and the LSPs’ perspective on capabilities to meet those requirements, a panel of leading logistics decision maker representatives from end-user industries and LSPrepresentatives (Contd. on Page 40)


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For superior SCM Bar Coding in successful businesses run on information. Companies that can’t provide information for their supply chain partners are at a competitive disadvantage. Many proven productivity tools like bar code labels will still deliver benefits, but have become a requirement of doing business that do not provide the functionality or competitive advantages demanded by progressive supply chain management operations.

Materials Management Case or shipment labels may not provide enough tracking detail for managing goods once they are entered into materials inventory, especially for companies that rely on inventory staging for effective workflow. With millions of parts to identify, locate, and move in and out of inventory, bar coding is essential. In the best-case scenario, the item’s inventory routing instructions are encoded and labeled at the receiving dock. Once the item arrives at the warehouse, users can use a wireless computer to scan this bar code label to record its arrival. The host materials control or warehouse management system (WMS) then directs the worker to the optimized putaway location based on the item’s size, shelf-life and predicted consumption schedule. Workers then store the item and scan a separate shelf label to verify the item’s placement. Each scan leads the user to the next task and updates the host system. If the inventory warehouse location information was not available for the incoming delivery when it first arrived at the loading dock, it is a simple operation to print that label at the warehouse entrance. Here, companies typically rely on a purpose-built bar code label printer that can withstand the rigors of an industrial environment. After installing a system similar to the one just described, baker and snack food producer with national distribution reduced inventory and distribution costs 30% by gaining improved tracking over work-in-process and finished goods inventory.

Production Line Application Most businesses apply bar code shipping labels when finished goods leave their

facilities. The most efficient producers have learned that pushing their identification and tracking systems as far back into the production process as possible provides tremendous labor and material savings. The baker referenced above provides an excellent example. Its bar code system enables it to track raw materials through to finished goods. When the baker discovered one of its suppliers had provided a bad batch of ingredients, the baker was able to determine the exact pallets had affected products and the specific stores they had been shipped to. The baker then contacted its customers for a targeted recall, avoiding the expense, embarrassment and associated damage to its reputation that a general recall would have produced. Bar codebased production tracking systems also can be used to automatically build audit trails and work histories to support ISO quality documentation requirements. Lot tracking also enables companies to take advantage of efficient new manufacturing processes. Encouraged by the success of Dell Computer and other make-to-order manufacturers, many companies started initiatives allowing customers to custom configure their products, without special order charges or longer lead times. These programs often rely on flexible manufacturing practices requiring frequent production turns, new levels of work-in-process (WIP) tracking, plus more frequent, smaller shipments. Fortunately, second generation barcode systems provide the necessary functionality for these requirements.

Andrew Tay APAC President Zebra Technologies

Staging & Shipping Shipping operations can be improved using the same equipment currently used to produce shipping labels by modifying the system to take advantage of improved production tracking procedures. When production lots or specific items are tracked through manufacturing, ERP systems can associate them with a specific customer order (this is required in build-to-order environments). A plastics supplier to the automotive industry changed its labeling system to create shipping labels when items were produced, instead LOGISTICS TIMES July 2010


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of when they were picked for shipping. This seemingly small change immediately removed a consistent bottleneck in its order fulfillment operations that frequently threatened to delay customer deliveries. The new labeling system also automatically provided data the company used to prepare EDI advance ship notices (ASNs). Thus the company improved customer service while reducing the labor required to prepare shipments. The system could also be used to update CRM systems in real-time, so service representatives may promptly and accurately answer customer inquiries. Increasingly, companies are placing their order shipment information on a self-service Web site for their customers to access. Each day thousands of outgoing shipments

include a bar coded compliance label mandated by the customer. Future shipments may be identified with smart labels bearing traditional label data in text and bar codes and duplicated in a chip that enables unattended identification, verification and sortation at different points in the supply chain. Standard bar code systems provide a strong return-on-investment for users by reducing data entry and processing time, improving the data quality and the performance of enterprise software applications, and reducing the need for preprinted forms. Advanced bar code printing systems, supporting two-dimensional bar codes, smart labels, enterprise interfaces and wireless connectivity, can provide the realtime, accurate data that information-based business systems need.

SCM

Today & Tomorrow

4 Is SCM a big riddle for India Inc.? 4 Does SCM spend seen as an additional burden? 4 Adopting advanced SCM – is it an imperative or a myth? 4 Are you slated to lose out tomorrow by ignoring improved SCM processes? August edition of

Logistics Times, a supply chain special, would provide answers to these moot questions.

Don’t miss LOGISTICS TIMES July 2010

(Contd. from Page 38)

Future Supply Chains Following the stage set by end users’ perspective on logistics requirements for key industries and the LSPs’ perspective on capabilities to meet those requirements, a panel of leading logistics decision maker representatives from end-user industries and LSP representatives would evaluate their thoughts and opinions to establish the Logistics Capability and Maturity of LSPs and End-users in India. This session is aimed at enabling both LSPs and end users to demystify each other’s capabilities and requirements. Subsequently, two intense activity workshops spread over two days are going to be conducted involving multi-disciplinary expert groups each involving a specific end-user industry logistics decision makers, LSPs and thought leaders would work on defined assignments to ideate, evaluate, and establish a Robust and Dynamic Supply Chain for each key industry - Relevant for Today, Scalable for Future. The event would also include another conceptual session on ‘Cross Pollination Opportunities of Supply Chain Practices across Industries’, aimed at identifying best practices in supply chains of some industries, which can be adopted by other industries. The event will be graced by top logistics executives from leading end-user companies such as Johnson & Johnson, Dr. Reddy’s Laboratories, Spencer’s Retail, Woolworths Infiniti Retail India, Nilgiri’s Retail, Maruti Suzuki, Fiat Auto, LG Electronics, AlcatelLucent, Ericsson, GlaxoSmithKline, Shopper’s Stop, etc. Leading participant organizations from the LSP side include TNT, GATI, TCI, FedEx, Spear Logistics, etc. All the leading media organizations in the logistics and supply chain domain including Outlook Business, CIOL, Smart Logistics, Logistics 2.0, LOG.India, Logistics Times, Cargo Trends, and TransREporter among others would also be present at the event.


Big IT push T

he low IT spend by Indian logistics firms is a much talked about issue as it is believed to be the key bottleneck for them to attain global standards in services. Addressing this issue, two major entities in the Indian logistics space have joined hands to form a Center of Excellence (CoE) which would raise awareness about the imperatives of adopting IT applications. It’s a partnership meant to create a difference in Indian logistics sphere in terms of opening a new window of awareness. In a significant development last month, domestic IT major for logistics business Kale Consultants and the Chartered Institute of Logistics and Transport (CILT-India), the Indian affiliate of the globally reputed body for logistics professionals joined hands to form a Center of Excellence to push for IT penetration in the domain. As per the declared charter, the CoE would broadly promote excellence in establishing, nurturing and growing the use of IT in the Indian logistics industry. The four critical areas the CoE would be targeting are: creating platforms for recognizing and rewarding innovation, developing intellectual property for dissemination to the industry, acting as a forum for all-round development of IT practices and for discussion and debate on the IT practices within the industry. “You can call our CoE as the first initiative of its kind in the country in terms of its integrated IT focus,” Vineet Malhotra, head – marketing, Kale Consultants told Logistics Times. According to Malhotra, the need to have a dedicated IT specific forum for the Indian logistics industry has its origin in two surveys which Kale has undertaken

in past two years. The key objective of these surveys were to identify the level of acceptability of IT applications in the operations of Indian logistics firms and the results were far from encouraging. “Two years back when we did the survey, we found that on an average basis the total IT spend of an Indian logistics company was just 0.3 percent of its turnover which is far lower than two to four percent we notice in the developed and matured markets. The problem is:

not be possible if Indian logistics players continue to stick with basic software like accounting processes. They will need to adopt advanced applications,” Malhotra pointed out. According to Kale’s estimates, there are nearly 18,000 companies in Indian logistics sphere which make it one of the largest in the world. Meanwhile, in terms of raising the awareness about IT applications, a critical focus area for the CoE would be small

Container business is going to double in next five years. Vineet Malhotra Head – Marketing, Kale Consultants

the money spent on IT is counted as an expense rather than investment which is an erroneous perception,” Malhotra underlined. The partners behind the CoE are, however, convinced that going ahead the Indian logistics sector is slated to witness phenomenal growth and the unfolding scenario would make it compelling for the players in the domain to opt for advanced IT applications to bring in better operational efficiency. “The logistics business is going to register tremendous growth in the coming years. For instance, container business is going to double in next five years. We believe this kind of growth would

and medium enterprises (SMEs) in the business. “A major thrust for the CoE would be to provide consultancy services to the SMEs on adoption of IT. There is a huge gap there,” Malhotra stated. The governing body of the CoE is likely to be in place by the middle of July and initial activities of the center are expected to commence after September. The preliminary action plan would broadly comprise launching an educational drive through workshops and seminars. At a later stage, the CoE also plans to certify professionals for the logistics industry in association with a globally renowned logistics educational agency. —Ritwik Sinha

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LOGISTICS TIMES July 2010

TECHNOLOGY

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WAREHOUSING

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Exciting time ahead The challenge of a growing economy is an exciting time for warehousing in the Indian context. It is gaining the focus and attention of many firms and supply chains. Many firms are into warehousing capacity expansion; Logistics Service Providers (LSP) have come up in the present decade and are expanding rapidly; and even logistics parks are coming up. Prof. Samir K Srivastava of Indian Institute of Management (Lucknow) looks deeply into this changing scenario.

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here is a great potential for ways to improve warehouse management. Firms need to look at their SCM integration – warehouses in particular – as an area where greater efficiencies can be had. Managers need to make sure that warehousing link in their supply chains acts as a competitive advantage for their firm. Besides, the earlier structure of state taxes and laws made setting up warehouses in each state cost-effective. However, after implementation of GST (Goods and Services Tax), managing with just a few warehouses serving a host of smaller, transit warehouses in over four to five surrounding states (hubs and spokes model of logistics) is likely to be more responsive and cost-effective. So, after implementation of GST, warehouses require not only strategic redesign but also other considerations related to closure of some existing facilities and reallocation of capacities. Warehouses are used by manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc. Receiving, storage, order picking, and shipping are their basic functions. Traditional warehousing has declined since the last few decades with the gradual introduction of Just-In-Time (JIT) techniques. Warehouses today carry out a host of other additional activities such as selective racking and block storage, cross LOGISTICS TIMES July 2010


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docking, temperature control, kitting/ light assembly, repacking, labelling, palletising and other value added services such as specialised transport, duty and tax determination, complete documentation preparation, expedited customs clearance, tax exception and license application.

Rising Business Due to growing economy and increasing business volumes, many Indian firms like the Future Group, Suri Agrofresh Pvt Ltd., Hitech Frozen Facilities Pvt Ltd., Samridhi Bio-Energy Pvt Ltd. are largely into warehousing capacity expansion. Logistics service providers (LSP) like TNT, Transport Corporation of India

(TCI), Blue Dart, Gati and Safexpress, are looking at creating more than 25 million sq ft of warehousing space. Others to join in the fray are DB Scheneker, Om Logistics, AFL Logistics, Robinsons Global Logistics Ltd., CCL Logistics, etc. Jayem Logistics has set up three state-ofthe-art warehouses in Bangalore, Chennai and Delhi. They offer congestion-free facilities with three-docking stations that allow storage of odd-sized cargo. They are equipped with uninterrupted power supply, flooring with high load bearing capacity, security, closed-circuit television cameras, fire safety alarms and smoke detectors. Similarly, MJ Logistics Services Ltd PARIVARTAN SHARMA

(MJLSL) has opened its first hub warehouse at Palwal on the Delhi-Agra highway in October last year.. The facility comprises two lakh sq ft with computercontrolled racked shelving and 20,000 pallet positions of ambient storage and temperature-controlled chambers all under one roof. MJLSL has signed a threeyear contract with HCL Technologies Ltd for providing integrated services to this new facility. The Palwal facility as the main hub, is linked to two similar but smaller “spoke” warehouses at Zirakpur (Punjab) and Haridwar (Uttarakhand) thus covering the industrial regions in the north. The new facilities offer online tracking and backoffice services such as packing, labelling and kitting. The centres adopt pay-peruse policy model for the customers. MJLSL has until now operated leased warehouses serving a number of corporate clients such as Philips, Godrej, Colgate-Palmolive, Hindustan Unilever, Coca- Cola and ITC, among others. The new warehouses of AFL Logistics at Panvel near Mumbai, Gurgaon near Delhi, Kolkata, Bangalore and Chennai cater to all industries and are equipped with eco-friendly equipment and security devices. The company has a network of 50 warehouses across 37 cities in the country and handles 1,50,000 stock keeping units (SKUs) per annum.

Logistics Parks Logistics parks too are coming up. Sri City Pvt Ltd., Safesexpress and Shree Shubham Logistics Ltd (SSLL) are already in the process. Industry specific LSPs are also emerging. Aparna BPO Services Ltd. has set up a warehouse in Chimbli village near Pune city with a capacity for 9,000 tonnes of goods. The warehouse will mainly store auto components and spare parts required by SMEs in and around Pune city. Aparna plans to expand its warehousing division over the next five years. The company provides logistics support to companies such as Tata Bearings, SKF Bearings and NRB Bearings. In the government sector, Central Railside Warehouse Company Ltd (CRWCL) has LOGISTICS TIMES July 2010


recently set up three rail-side warehouses at Hatia near Ranchi, Dankuni in Kolkata and Dehri-on-Sone in Bihar. Transport Corporation of India Ltd (TCIL) is planning to set up warehouses in Chakan and Gurgaon. The Chakan warehouse will have a height of 15 metres making it the tallest warehouse in the country. It will have a capacity of 30,000 pallets and will be a multi-user facility. Central Board of Excise and Customs plans to set up new export warehouses in Thiruvallur district of Tamil Nadu. These would benefit manufacturing companies in Sriperumbudur region, which already has around four warehouses. Further, LSPs and firms are also adopting new technologies to track expansion of product portfolio, manufacturing locations, aggregating godowns and shipment warehouses. OM Logistics is planning to set up state-of-the-art warehouses at Faridabad, Chennai, Ahmedabad, Halol, Pune, Noida, Goa and Patna. These warehouses will have turbo ventilators with proper skylight; epoxy coating at flooring; heavy duty racks; conveyor belts from picking to packing to staging area; dock levellers and material handling equipment like fork lifts, pallets and stackers; air-conditioned office with special ventilation for warehouse; separate lockers, changing room and dining room for workers; and rainwater harvesting, landscaped gardens, pathways and interlocked stone. For cold storage purpose, the company is also planning to build a reefer point for 5,000 square feet of temperature-controlled warehouse.

Supply Chain From supply chain management perspective, in addition to improving internal efficiency, a real-time view of inventory and warehouse activity can improve customer satisfaction by facilitating timelier and more accurate shipping. It also allows companies to simplify tracking of hazardous and datesensitive materials for improved regulatory and recall compliance. So, focus of firms should be on categories, volumes, accuracy, visibility and integration. They LOGISTICS TIMES July 2010

WAREHOUSING

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Logistics service providers like TNT, TCI, Blue Dart, Gati and Safexpress are creating more than 25 million sq ft of warehousing space.

need to make smarter use of existing space to avoid costly expansions. They should take actions to optimize movement within the warehouse to cut the time wasted in warehouse operations. As there is a great degree of interaction between warehouse space requirements and materials management, suitable material management policies and practices may make it possible to postpone or eliminate the need for expansion in many cases. Similarly, storage and order, the two warehouse functions that have the largest impact on the overall warehouse operational performance including storage capacity, space utilization and order picking efficiency, may be improved. There exists sufficient scope for improvements applying basic operations principles like lean / six sigma, low cost automation and use of Operations Research (OR) tools and heuristics in decision-making as well as managerial initiatives like employee involvement, incentive alignment and skill upgradation of employees.

Design & Operations A number of improvements are possible in terms of warehouse design and operations. In design, these may relate to relative location of departments, sizing and dimensioning, size of the warehouse, department layout, pallet block-stacking pattern (for pallet storage), aisle orientation, number, length, and width of aisles, entry and exit locations, material handling equipment selection, level of automation, storage equipment selection, storage strategy selection (random vs. dedicated) and order picking method selection. Similarly, many improvements are possible in terms of warehouse operations such as dispatch scheduling, space allocation, assignment of SKUs and pickers to zones, storage location

assignment, batch sizing and order-batch assignment, routing and sequencing of order picking tours. The activities of warehouses can be automated to advantage by laser guided vehicles, increasing both warehouse efficiency and safety while reducing costs. LGV systems are usually implemented in existing warehouse environments, with little site modification required except for small passive reflectors located within the area to be automated. The system can achieve a high level of flexibility by block stacking, drive-in racks, gravity racks, push back racks and narrow aisle racking, giving the warehouse. ICT tools like RFID may also be deployed. RFID case-based resource management system has been used successfully for warehouse operations in the GENCO Distribution Systems. However, mere implementation of an integrated warehouse management information system does not actually guarantees the optimization of warehouse logistics. In order to improve the overall systems efficiency, it is required that ERP implementation be combined with the redesign and the reorganization of warehouse logistics and processes. At operational level, decisions need to be made quite frequently. Such decisions typically need to be made quickly without extensive computational resources. This tends to encourage the use of heuristic procedures that can find a good solution reliably in a reasonable amount of time. In addition, from the management point of view, an ideal solution method should be simple, intuitive, and reliable in order to minimize the training costs. Finally, firms should also focus on establishing actual performance improvements and benchmarks in warehousing practices leading to cost-savings and customer satisfaction.


Ceva, Ceva! W

hen any decent-looking and business-like co-passenger in flight offers to compensate whatever your current earning and top it with a decent profit margin to “open doors” to the Indian business, you and I may demur and just ignore. Change seats, if possible. Even if the offeror happens to be a foreigner. But, not Soman Nambiar. He just accepted the challenge, though he has zero experience in “opening doors”. Nambiar was in his early thirties, working with the likes of Shiv Nadar and Arjun Malhotra for DCM Data Products in Assam besides managing tea estates for Finlay, then. By a stroke of luck, the bearded Indian Institute of Foreign Trade alumni metamorphosed from a plantation-cumcomputer hardware sales and marketing professional into a freight forwarding wizard. Just that one flight changed his destiny. “Honestly, that was my first meeting with Michael Westphal – who died last year – (May his soul rest in peace.),” explains the 57 year old multi-talented Soman, currently Director in charge of Ceva Logistics’s freight management division. The only linkage is the “trucking” knowledge of moving tea and computer hardware in and out of the north east. He “opened” many doors for Westphal to grab bigger slice of selling the second hand machineries from Europe to the likes of the Ambanis of Reliance and Srinivasans of India Cements in the 1980s, much to the consternation of the established players

such as Le Muir, before it got gobbed up DHL.

By the way, he turned down the Shiv Nadar offer to join the original HCL

LOGISTICS TIMES July 2010

PROFILE

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PROFILE

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gang! He has no regrets. Memories of driving down the slopes of Assam tea estates in his brand new Amby – “only the richest of riches can afford to drive an Amby those days” – and lazing around exclusive swimming pool are vivid as he walks down his memory lane while seated in his huge brand new Gurgaon office in Cybercity on a hot and sultry June evening. Soman was lured by Le Muir thus paving way for his induction into the freight forwarding business. He has not looked back since then. In a moment of candid concession the Calicut-born, but brought up outside Kerala, professional says that he had not seen an Airway Bill until then and today he has risen to the Director level. If the Ceva Logistics honcho were to believed it would take at least 20 years before India can get to see the global level logistics and supply chain performance. I tell him, he is an incorrigible pessimist and he brushes away my cold assessment with his trade mark hearty laugh. Soman has seen the growth of Indian logistics industry through the eyes of Le Muir, Eagle Global Logistics, DHL and now Ceva Logistics. He gives credit to M J Arvind (of IBM-Daksh), working for Hewlett Packard earlier, for opening his eyes to a larger picture. Logistics is not just ‘trucking’ and there is much more. That is when he began to explore providing clients with end-to-solutions. Instead of taking orders from clients on their requirements, he began to negotiate on what they need. “There is a huge difference between these two,” explains Soman. Once he built up a massive modern warehousing facility to handle HP needs at Bangalore, he began marketing the

LOGISTICS TIMES July 2010

{I was not doing anything extraordinary. Designed supply chain solution instead of providing ‘godown’ space to clients,| same for other clients. “I was not doing anything extraordinary. Designed supply chain solution instead of providing ‘godown’ space to clients,” adds he. In this process, he changed the game with racking and engineering solutions. During the same phase, there was massive mergers and acquisitions in the logistics space across the globe. In the process Eagle Global Logistics got acquired by Ceva Logistics besides the TNT Logistics (not TNT Express) also falling into Ceva hold. It was Martin Herzke, headhunting for someone to lead Ceva Logistics in India, found Soman through a mutual friend. “One of the criteria was the person should know supply chain,” says he proudly. How did the name ‘Ceva” come about? Soman corrects me to pronounce it - like ‘Shiva’. Good, god: Ceva, Ceva! Seventeenth Century Italian mathematician-cum-engineer Gioavanni Ceva, renowned for his perfect triangle theorem, is the inspiration. Can you guess Ceva’s corporate logo? … Keep guessing or check out their website! Ceva Logistics in India willingly allowed many global accounts to slip out of its hands despite it handling the same giants outside the Indian shores. Reason: “Shortage of capability”, responds

Soman in the sphere of supply chain and contract logistics knowledge. “Mind you, contract logistics entails you knowing as much or perhaps much more than the client about the client’s business at the shop floor level. So, we need technology skills at that level. It would have been easy for us to sign up, but we would have been found wanting due to capability issue. It is better to build up that calibre and then go for clients,” explains Soman. I gently prod him by saying that the basic qualification to get an entry into Ceva Logistics is a first glass engineering degree! “We are moving in slowly, but with sure steps,” concludes as I shook hands with him after a 90-minute long session. By the way, he is a strong defender of India inc. Don’t underestimate their understanding of supply chain. They are as smart as their counterparts outside India, he warns me. More about it, later. Back home, I google for the image of Giaovanni Ceva to check whether the Italian mathematician genius sported a long white beard like Soman. No. What about Karl Marx? Sure, there is some similarity. Are long hair and white beard hallmark of knowledge warriors, I began to wonder. —Ramesh Kumar


From Shanghai

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There were a few Indian he emergence of China as one visitors, though. of the foremost economies in ACW (Air Cargo Week), the world is now an established organizes their Annual Awards fact. To supplement its manufacturing Night, during the course of Air prowess, China’s Transport Logistics is Cargo China. Their choices for a priority sector for them. It has led to Air Cargo 2010 Awards were them venturing into such complex areas (in no particular order): as commercial aircraft production. To The conference, which is showcase their Logistics Industry, the a sideshow attached to the 4th International exhibition for Logistics, expo, attracts some marginal Telematics and Transport took place in attention, but nothing Shanghai from 8-10, June, 2010. This noteworthy came from there. biennial event, which commenced in 2004, takes place concurrently with Air corner has not been turned fully and the The news that really electrified and lifted wounds of the recession are yet to heal the spirits during the course of the event, Cargo China, 2010, which forms part of actually came from the other side of the completely. the show. According to Eugen Egetenmeir, MD From the logistics angle, things were not world – from Berlin, where Emirates’ of Messe Munchen, the organizers, there too different, with no DHL, UPS, TNT, decision to purchase 32 more A 380s was were 13,500 visitors from 67 countries, Fedex, Ceva, etc. There was, of course, announced. With this acquisition alone, it which represents 20% increase over the some saving grace with outstanding would take Emirates’ tally of this aircraft 2008 event. He also stated that with 441 participations from Dachser, Turkish to 90 by 2017. exhibitors from 42 countries, it was a Airlines, Cargoitalia, Skyteam Alliance, The expo as a whole was, of course, very well Saudi Arabian Airlines, Etihad, Thai organized as one would expect from Messe marginal improvement over 2008 figures. However, the proof of success in Airways, the ubiquitous Panalpina, Munchen, who have set standards with their this matter is in the ability of the fair Kuehne + Nagel and the manufacturing various events, especially Air Cargo Europe. organizers to at least hold on to their “twins” Boeing and Airbus. Silk Way However, one point for their consideration and Air Asia came in groups as visitors, would be to have their inauguration right in important clients. the exhibition halls, instead of miles away The last edition of 2008 had almost though not as exhibitors. the same floor space and this year’s India, as a large economy in the region, in a hotel. The expo also brought to the event, though claimed to be bigger, would have been expected to put in fore Chinese industriousness, with dozens was disappointing in many ways. For a a reasonable presence. Regrettably, of good natured youngsters offering allied start, the last event’s major participants, participation from India drew a blank services for the booths, like brochure Lufthansa, Emirates, Qatar, did not turn as exhibitors, with the notable exception stands, extra furniture, decorative plants, up at all. Neither did British Airways, of Cargo Flash and perhaps the Indian fascia prints, etc., using meticulously made component of the Air Logistics Group. photo folders. Virgin Airlines, etc. The conscientious security While we can understand Category Winner staff must also be mentioned that the downtrend for the dedication with in Europe dampened Newcomer of the year Air Asia which they kept going to sentiments and thus Express Operator pf the year Fedex every booth and tying every attendance from that Air Freight Forwarder of the year Geodis Wilson laptop and bag to the frame region, the amazing Chapman Freeborn of the stall. part was that even far- Charter Broker of the year All said and done, it was east carriers, so close Airport of the year Hartsfied Jackson, Atlanta a good experience to be to the venue, found IT Co. of the year Redberry Software present at the expo and the event not worth Air Cargo Handler of the year Swissport return to the basics in taking part in. Imagine Customer Care Provider of the year Etihad Crystal Cargo many ways. no Cathay, Malaysian, —Vinod Kaul Singapore, Qantas, GSA of the year Air Logistics Group (The author is Group GM, etc. and none from Cargo Airline of the year Emirates SkyCargo Group Concorde) Taiwan. Obviously, the LOGISTICS TIMES July 2010

EVENT DIARY

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EVENTS TS

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T3 unveiled, Delhi airport elevated to the top league

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n 3rd of July, Delhi got a spanking new world-class Rs 9,000 crore airport that will integrate domestic and international operations and is expected to handle 34 million passengers annually. The new terminal or Terminal 3 (T3), said to be the sixth largest in the world, was inaugurated by Prime Minister Manmohan Singh. UPA Chairperson Sonia Gandhi, Civil Aviation Minister Praful Patel and Delhi Chief Minister Sheila Dikshit were among the dignitaries present on the occasion to dedicate T3 built by GMR group backed developer Delhi International Airport Ltd (DIAL). Spread over four kms, 80 per cent of T3 is made of glass and supported by metal frames. The nine level terminal building would be used for 90 per cent of the entire passenger movement in the airport The integrated terminal will become operational from July 14 when all foreign airlines shift their base from the existing Terminal-2. The day will be marked by the first flight of Air India docking at the plush T-3. The flight, AI-102, would fly in direct from New York, park at T-3 and later take off from there. The T-3 is scheduled to start handling domestic operations from July 30-31 after Air India, Jet Airways and Kingfisher Airlines shift out of Terminals 1-A and 1-D. LOGISTICS TIMES July 2010


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DHL & Blue Dart Take Gold DHL, the world’s leading express and logistics company and Blue Dart, South Asia’s premier express air and integrated transportation, distribution and logistics Company, have once again been voted as two of India’s most trusted brands in the ‘Airfreight/Courier Service’ category at the Annual Trusted Brands Awards 2010 organized by Reader’s Digest. The Brands were recognized in the midst of a gala ceremony held at Hotel ITC Grand Central, Mumbai on 29th June, 2010. DHL and Blue Dart have received the Gold Award in India in recognition of their marketleading positions and strong brand appeal. Continuing their winning streak, this year’s win marks the 4th Gold for DHL and 5th Gold for Blue Dart consecutively, in India. DHL has also clinched the overall Gold Award for Asia for the second year running, along with six other Asian countries.

Aramex safely transports lions from Jordan to South Africa In line with its commitment to corporate social responsibility and environmental sustainability, Aramex, the global logistics and transportation solutions provider, has safely transported two lions from Amman, Jordan, to their natural habitat at Lionsrock Big Cat Sanctuary in South Africa. This delivery of this precious cargo – including one young lioness, one male lion cub and three spotted hyenas – was provided by Aramex, and marks the second time this year the company has transported lions from the Jordanian capital to South Africa. This activity was carried out by Aramex in cooperation with the Princess Alia Foundation, a Jordanian nongovernmental organisation dedicated to promoting the balance, harmony and respect of all creation.

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Last mile connectivity

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cenario One: Somewhere in the suburbs of a bustling metro city, a Distribution Centre (DC) of a leading Retail chain of India. The driver who was waiting for in the queue to unload a truck load of goods from a nationally leading FMCG player brings in the documents such as Invoice, Lorry Receipt etc. to the receiving desk of the DC. The executive checks the documents against the Advance Shipping Note (ASN) received by them a couple of days before. To his dismay, there are mismatches: between the MRP on the product and what is mentioned on the Purchase order (PO), European Article (EAN or barcode) number mismatch, slight variation in the assured margin to the retail chain etc. The date and time mentioned is Saturday evening around 7PM. Neither the executive is able to process the Goods Receipt Note (GRN) against the Purchase Order on basis of which payment would be released to the supplier, nor the trucker is able to leave the premises to pick the load from some other point which has been ordered by his regional office. cenario Two: In a Tier II city apartment complex, after completing the necessary formalities at the main gate and at the block gate, the delivery boy and the driver park the truck near to the lift/elevator. They unload the goods: one refrigerator and a washing machine and put them onto a trolley, enter the lift, reach the fifth floor. Then they ring the calling bell at the apartment as mentioned in the Delivery Note. After lady of the house verifies the identity cards of the visitors, asks them to move the washing machine to the balcony and refrigerator to the kitchen area. There is surprise soon. Once the delivery boy removed the packaging of the washing machine, the lady started shouting that she had ordered a front loading model with 5.5kg whereas the one which came was a top loading 7.5kg one. Significantly, the invoice mentioned the model she had paid for. Moreover, the extended warrant for which she had paid

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LOGISTICS TIMES July 2010

also was not available. Above all, the refrigerator was of the different colour from the one she had asked to match her kitchen wall paint and tile colour. Besides, the anti-shake stand she asked for was not brought. Needless to say, the driver and the delivery boy had no answers as she was frantically trying to get in touch with the toll free customer contact number to shower the complaints. Last Mile connectivity and the initial customer touch point with a service perspective of the second B2C scenario was marred beyond repair just because the driver and the delivery boy (usually a labour) either did not care or know how to verify the details mentioned in the invoice/delivery challan with the loaded goods before leaving the dealer point. In the first B2B scenario, the driver of the transport/courier had no clue about the mismatches the receiving clerk was explaining to his category purchaser as reasons for not unloading the truck on time. Moreover the driver already started getting calls from his office to find out why his pre-determined pick up of another loyal customer is delayed In both places, the “driver” was a hapless person unable to provide any resolution, but the image of both the white goods manufacturer and the leading FMCG player was denigrated at the customer place for no fault of his. In India where the transport industry is still dependant on single or double truck

owners, than organized players, these situations are heart burns of a day-to-day distribution logistics. Every single penny invested in building a brand image is destroyed just because of the quality non-consciousness of the drivers. It is high time that organizations - both service providing as well as service utilizing - need to start investing in improving the basic literary as well other basic familiarizations with regard to the organization standards and service delivery to these customer fronting drivers. Expecting to employ graduates or higher educated chaps as drivers would be a distant dream. On the job and refresher trainings, along with gifts for right material, right quallity, documents at right time and cost would be initial steps for bringing this change faster. One step further, 360 degree feedback mechanism would get stronger if these people are utilized properly. Functions like brand management, customer research analytics will have a direct channel to depend upon which would be accurate and less lead time consumed. Another point for logistics/ supply chain to score points where they are always looked upon as a “cost centre”. —Deeyem (The author is a 17-year veteran in the logistics and supply chain industry. He will appear on these regular pages occasionally to share his observations and insights.)


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RNI No. DELBIL-07469/2010-TC

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Lt jult 2010 pdf magazine