CASE STUDY 44
Anshuman Magazine on Warehouse Rental Trends
NDIA'S MOST VALUED LOGISTICS MAGAZINE
Consulting Editor Ramesh Kumar criss crosses 10,000 km on Indian highways in trucks & trailers to examine the bottlenecks in road transportation. The first hand account of this nature presented first time by a publication...
All about Transportation, Distribution & Infrastructure Volume 2: Issue No.3 * July 2011 Editor in Chief Raj Misra email@example.com Editor Ritwik Sinha firstname.lastname@example.org Consulting Editor Ramesh Kumar email@example.com Mumbai Bureau Rahul Kumar firstname.lastname@example.org Sub Editor Neha Richariya Photographer Anil Baral Design Consultant S. Athar Hussain Designer Kausar Syed Circulation & Distribution Kamruddin SaiďŹ Legal Advisor Rakesh Garg
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 Kate Vitasek Faculty, Centre for Executive Education The University of Tennessee Prof. K S Pawar Nottingham University Business School Prof. Samir Srivastava Associate Professor, IIM-Lucknow Prof. Akhil Chandra Institute of Logistics & Aviation Mgt Sanjay Upendram Founder & Chairman, Amarthi Management Consulting Swaran Singh Soni Consultant (Oil Industry) Arif Siddiqui Chairman, Coign Consulting
Marketing & Sales Outthink Strategies Ph: 65177214, 26412476, 9818097385 Email: email@example.com
Consulting Editor Ramesh Kumar criss crosses 10,000 km on Indian highways in trucks & trailers to examine the bottlenecks in road transportation.
Printer & Publisher Deepa Misra for
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Edit Note News Briefs Transportation Curtain Raiser Events
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Seeing is believing The efforts gone into putting together the cover story of this edition “Highway Blues” reminds me of a quotation which I had read long time back, probably in one of Osho’s books. “There are two routes to pursue knowledge- either you buy it or borrow it. In our life, 99 percent of the knowledge which we claim to have is actually borrowed.” The bottomline of this statement is hardly shrouded in any mystery. More often than not, in our lives we build up perception on the basis of information passed on by somebody and not due to our own hardcore brush with the subject concerned. Period… However, we at Logistics Times, do quintessentially believe in buying the knowledge wherever it is possible rather than taking the short cut route and this probably finds ample expression in the cover story presented in this edition. Since November last year, our 55 year young consulting editor Ramesh Kumar has been criss crossing the country in trucks and trailers (so far he has covered 10,000 km and more miles would be covered in the near future) to get the real feel of conditions on the Indian roads which accounts for bulk of freight transportation. In the story penned by him, he has purely brought in his first hand account – things which he has seen and experienced while moving on heavy wheels from one corner to another. Some of his findings reinforce the perception which we keep on talking about – slow movement, rampant corruption on the highways, safety and security mechanism far away from being watertight, etc. But the crème caramel of the story certainly is the emphasis on the trying and testing conditions under which the drivers community has to operate- almost on a 24x7 basis. Leaf through the cover story for interesting details to understand the behavioural pattern of a section whom we probably neglect most even as they matter most … It’s a commonplace belief that efficient supply chain systems involving all stakeholders evolve out of standardised processes. The noted global agency GS1 has been working in this direction for over three and a half decades now and its Indian affliate is also pursuing the same goal since mid-90’s. We feature Ravi Mathur, CEO of GS1 India this time in the interview of the month section who makes no bones that in terms of process standardisation, Indian players have to go a long way. However, he is optimistic that this would happen with a greater sense of urgency now as, to quote him, “players are left with no choice.” Among other highlights of the edition are the views of Anshuman Magazine, CMD, C B Richard Ellis (South Asia) on the warehousing rental trends in the country and excerpts of a well-researched report on logistics parks. The report was released by CII Institute of Logistics and Amarthi Consulting recently and strongly pitches for bringing in a vibrant environment to promote logistics parks to curtail the high logistics spend of Indian businesses. Waiting for your feedback… Ritwik Sinha firstname.lastname@example.org
LOGISTICS TIMES May 2010
Exports growth difficult to sustain
While the last few months have seen the performance of India’s export sector surpass all expectations, this strong growth performance is not likely to be sustained in the months ahead. This is the key message given by exporters who participated in the latest round of FICCI’s Export Survey. A series of factors and developments are weighing heavily on the exporters fraternity making them a little less confident about their
near term export performance. First, the interest subvention scheme announced to support exporters during the period of global crisis came to an end in March 2011. This has led to a hike in the interest rates being charged by banks for export credit. Second, the DEPB scheme is also likely to end soon. Third, with inflation emerging as a key macro challenge in many countries in the Asian region and with interest rates being hiked, demand in the Asian region is likely to ease somewhat in the coming months. Fourth, rising cost of raw materials and rising price of oil are also adversely affecting performance of exporters. In fact, in the present survey nearly 75 percent of the respondents mentioned rising cost of raw materials as one of the factors that is troubling them. While exporters of textile products are facing pressure due to increasing cotton and yarn prices, exporters of chemical products are seeing input costs go up due to increasing polymer prices. The survey results also show that in case of nearly 50 percent of the surveyed firms rising cost of oil is having a negative bearing on export performance as inland transportation costs as well as international ocean freight rates have moved up.
Delay in infrastruture projects Industry body ASSOCHAM has expressed concern over increasing time and cost overruns of 15 major infrastructural sectors central projects in the past three years, saying such delays could further fuel inflation in coming months. Land acquisition problems, delayed environmental clearances, fund constraints and slow progress in works are prime reasons for the overruns. Delays pile up supply side constraints, leading to expected demand not being matched and pushing inflation to higher levels. The recent project implementation report, prepared by the Infrastructure and Project Monitoring Division of the Ministry of Statistics and Programme Implementation, shows that the proportion of central projects which are running behind schedule has steadily increased from about 34 per cent of the total projects in March 2007 to over 53 per cent during December 2010. “This is an alarming trend – given the fact that central sector projects which were facing time overruns had declined from over 62 per cent in 1992-93 to about 32 per cent in 2001-02,” said a senior official of the industry chamber. The figure remained below 40 per cent till 2006-07, after which it showed a sharp increase.
LOGISTICS TIMES July 2011
As a result, central sector projects which are facing cost overruns have also increased. According to the report, the cost overrun of central sector projects increased from about 12 per cent in 2007-08 to about 21 per cent till December 2010. The report looked into the implementation of projects worth Rs 150 crore and more from 15 different sectors that included railways, highways, power, petroleum, telecom, urban development, water resources, ports, steel, mines, coal, fertilisers, civil aviation and atomic energy being executed by the central government or its agencies. Of the 599 central sector projects worth over Rs 150 crore, 322 were found to be running behind schedule till December 2010. While the overall cost overrun of the 599 projects was 20.7 per cent, the cost overrun of as many as 203 projects was 81 per cent.
LOGISTICS TIMES July 2011
WDRA chief bats for infrastruture status Stressing on the need to encourage more investment in the warehousing sector, Dinesh Rai, Chairman, Warehousing Development Regulatory Authority (WDRA) has called for declaring the warehousing sector as “Infrastructure”. Rai raised this issue while delivering key note address at a wrehouse workshop in Chandigarh early this month. According to WDRA chief, 83 percent of the warehousing facilities are in the public sector and only 15 -17 percent in the private sector.
Freight traffic up 11% Indian Railways’ freight division has begun the new financial year on a promising note. In first two months of the current fiscal (April-May 2011-12), the unit reported handling a total of 157.3 million tonnes (mt) of freight traffic as compared to 146.41 mt in the corresponding period of the previous year. This marks an impressive growth of 10.89 per cent. In May alone, the traffic throughput of IR was 79.78 mt as against 74.24 mt in the corresponding month last year which marks a growth of 5.54 per cent.
$150 bn market
Presently, the gap in warehousing is estimated at 32 million tonnes. The present capacity is of the order of 6.2 million tonnes.“Energizing road infrastructure, more gestation period, incentives, export import policy, effective procurement policy, all need to be in tandem”, added Rai. Besides, constraints like cost of transportation, godown rates, need to be addressed. He further stressed that the rate of interest has to be such that warehousing actually becomes attractive to the farmers.
‘Golden Peacock’ award DP World’s Nava Sheva terminal at the Jawaharlal Nehru Port in Mumbai has won the prestigious Golden Peacock Award for Environment Management. At an award ceremony recently held in Delhi, the marine terminal was recognised for its many initiatives in environment management including optimising natural resources such as rain water, introducing compressed natural gas buses for the staff of DP World Nhava Sheva, changing the equipment and administration building lights to low energy using LEDs to reduce electricity consumption and organising an oil spill cleanup drive with employees to protect mangroves and the marine environment around the terminal.
LOGISTICS TIMES July 2011
Boeing recently issued a projection which underlines $150 billion market for 1320 new passenger airplanes in India over the next 20 years as the economy aims for double-digit growth, stimulating strong demand for new and replacement aircraft. Boeing India president Dinesh Keskar shared the forecast that featured Boeing’s outlook for India’s commercial airplane market through 2030. “Robust growth with new economic prosperity amongst a massive Indian population, discretionary incomes, business progress and access to airports will increase airplane demand,” Keskar said. “In 2011, the economy continues to do well. Indian air carriers are becoming profitable and we expect the GDP to maintain its upward trend in the long-term. As a result, both the air travel and air cargo markets will grow.” Passenger traffic has touched 53.6 million domestic (fiscal 2011) and 13.1 million international, and is expected to grow at 8.1 percent annually over the long-term. “The economic and air-traffic growth will in turn stimulate demand for a variety of aircraft types,” Keskar said. “The need is great for new airplanes that can efficiently and profitably fly short and longhaul routes. This demand is driven by growth in developing and emerging cities, demand from low-cost carriers, and the need to replace an aging fleet.” Boeing predicts that India-based airlines will also grow by responding to passenger preference for more flight choices, lower fares and direct access to a wider range of destinations. Air carriers will focus on offering more flights using more efficient airplanes rather than on using significantly larger airplanes.
LOGISTICS TIMES July 2011
Rental Trends- Warehousing In today’s competitive and cut throat market, only companies who practice speed and response to markets will survive. This garnished with flexibility, agility and innovativeness will take them to the next level. With customers who are becoming more demanding in getting served through goods and services, logistics & supply chain management hence have become the back bone of any successful organization. Anshuman Magazine This has led to the traditional “Warehouses” Chairman & MD, CB Richard and “Distribution Centers” turning into Centers”. E-commerce, Ellis (South Asia) “Fulfillment automation and information technology have helped manage this phenomenon better. The critical question that any logistics manager faces today is, “Location, Location & Location”. Determining factors like number of distribution centers, their location, specification and size is a challenge which any supply manager goes through time and again, as the business dynamics are ever changing. This is also affected by factors shown in the box below:
• Sales volumes by Geography
• Service levels to customers
• Availability of Transport Network
• Rail Connectivity
• Proximity to labor markets
• Access to National Highways & Road conditions
• Access to Ports and Suppliers for inbound cargo
• Leasing Cost
• IT connectivity
• Accessibility to Public Transport
Hence, for companies which have huge import content either for raw material or finished goods, close proximity to the port of entry becomes a critical factor in reducing time to market. Consequently, companies are developing import centers near seaports. A classical example would be the Bhiwandi market close to Nhava Sheva Port in Mumbai. On the usage front, the robust domestic consumption has led to a steady demand of logistics space. Verticals like FMCG, consumer electronics, automotive, pharma, retail, 3PL service providers are leading the pack. A new entrant is online retailers who are investing in huge warehousing facilities to build capacities for the future and cash in on the online LOGISTICS TIMES July 2011
shopping trends. This has led to a steady absorption of existing capacities. The industry is evolving and new assets being delivered are getting better both in terms of design, quality and specifications like vertical height and floor load bearing strength. This has also been a result of professional developers entering this domain with the backing of private equity funds. There is also an increase in the ticket size of these assets and the market has started seeing a migration from stand alone and two-three tenant facilities, to industrial & logistics parks spread over 70-100 acres. These parks are designed according to international standards, where focus is given on world class warehouses, seamless expandability and additional infrastructure like business centers, parking yards, weigh bridges, fuel stations, etc. The trend has also shifted from leasing ready to move in facilities to Built – to – Suit ones, as more and more clients are demanding state-of-
the-art facilities specific to their business needs. They are actively participating in the design element by hiring supply chain consultants and taking the help of project management and or monitoring firms to ensure the committed quality is delivered as per the agreed timelines. This in turn has led to an increased cost of construction of these assets. This along with a steady delivery of fresh capacities has not let the lease rentals grow substantially despite abundant queries and a steady absorption. Another fact that has compounded this problem is the excess capacity already present in all micro markets since 2009-10. The preferred markets for leasing of
warehousing space remain the same i.e. N.H.8 in the National Capital Region; Bhiwandi in Mumbai; Tumkur and Hosur Road in Bangalore; Mdhavaram and Sriperumbudur near Chennai; Medhchal in Hyderabad and Chakan, Talegaon and Nagar Road in Pune. However, looking at the cost of acquisition of land in these well developed markets, the increasing cost of construction and the clientâ€™s penchant for the highest quality at the lowest possible leasing rates, a lot of land consolidation has started happening in areas away from these micro markets. These are in light of creating mega complexes, offering value for money solutions and keeping in view the future wave of infrastructure development on ports, roads and railways happening in various parts of the country. In terms of the attractiveness quotient of various markets in terms of lease rentals, Pune and Chennai have held
fort in terms of not just maintaining the growth of rentals, but also of a better absorption rate of assets being delivered. These are a mix of Industrial and logistical facilities. Emerging markets in Pune are Wagholi and Nagar road, even though Chakan still manages to attract the Grade A transactions at almost 1.5 times the rentals in the other micro markets. The Chennai warehousing market has started migrating towards Sriperumbudur without letting the lease rentals go south. The National Capital Region market entertains the most consistent and the largest demand for warehousing space. Most of the new queries are in excess of 200,000 sq.ft. and customers prefer a Built to Suit model. The preferred micro market is NH 8 in light of access from ports, North Indiaâ€™s major link to south and infrastructure development in the pipeline giving easy access to North India and Uttar Pradesh. The rentals
have picked up in the past six months and will maintain this trend. The Mumbai market has seen fresh capacities, big developers, and steady demand; however the lease rentals have remained constant barring a few transactions. The Bangalore, Kolkata and Hyderabad markets have seen new assets, sustained demand and the rentals firming up. The reason for this is a shortage of Grade A supply and the migration of more and more clients within these markets for expansion and to legal industrial properties. All other markets from Guwahati to Ahmedabad and Ludhiana to Vishakhapatnam have seen a consistent demand for modern and efficient logistical space. And thatâ€™s why a lot of developers are acquiring and developing assets in Tier II cities. The future looks promising with leasing rentals expected to increase in the medium term.
LOGISTICS TIMES July 2011
GS1, the global standards body working in the area of improving Supply Chain efficiency for nearly four decades now, is credited with some path breaking intiatives which have significantly improved the supply chain processes of businesses across industry sectors permanently. Its Indian affiliate, GS1 India, has been in existence since 1996 pursuing the same goal in a market where business scale has dramatically changed in the past two decades. In a candid conversation with Ritwik Sinha, the CEO of GS1 India Ravi Mathur underlines the complications in the Indian market and shares the immediate agenda of the organization. Edited excerpts:
}There is no choice but to collaborate To begin with, I would like to get a sense of the evolution of GS1 both globally as well as in India. The Indian affiliate is also supported by the Ministry of Commerce. So my question is: what precisely is the mandate for GS1 India chapter? Just to take you back in terms of the history of GS1 worldwide, GS1 represents industry itself. GS1 is born out of the need of the industry to move to some kind of standardization by which multiple t stakeholders across different industry segments could derive the advantage of
higher efficiencies through collaboration and by doing so , costs could be brought down. GS1 was born as an idea about 35 years ago and originated from the retail sector. Retailing is big business worldwide and a strong need was felt by the big retailers as well as by FMCG gaints to evolve a seamless process of tracking the movement of goods.in the supply chain from manufacturing till its sale by retail outlets. They realised that business was getting extremely complicated in the sense that there were thousands of products being manufactured by
thousands of suppliers and sold through retailers across geographies worldwide. They were looking for ways to simplify the handling of physical goods and their movement by each stakeholder in the supply chain. They needed somekind of commanality, somekind of uniform standards which could be followed by all and enhance the efficiency and velocity and accuracy of physical goods flow and related information flow. It started with something as simple as the identification of the goods in transit. You can imagine this challenge was very serious when
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goods had to be moved to countries with different languages. This is why a concept of unique yet universal identification was born which today we popularly call 13 digits EAN code which appear on all consumer products and which always features below the bar code on the product. Bar code technology had been in existence since World War II but it had still to be perfected for commercial use and was largely unutilised. Industry represented by retailiers and suppliers looked at evolving a system for unique identification which could be encapsulated inside the bar code and then faciltate a very easy way of data capturing and communication and recording that information on the journey of the product from the time it is manufactured till it is sold out. The evolution of UPC (Universal Product Code) in 1973 has revolutionised retailing. When this system evolved, it was first adopted by retailers and manufacturers. It started with retail and then gradually encompassed other sectors as well. Please take me through to the GS1â€™s India chapter journey. Whatâ€™s the precise mandate? In India, the exporters fraternity was the first one who were impacted because of adoption of the UPC and EAN product codes worldwide with barcoding by overseas buyers. And because exporters were getting impacted, the Govt of India got into the picture because it was a trade facilitation issue. The idea was to spread the awareness that this numbering system is important not only from international
trade perspective but also to make domestic trade more efficient. So this is the genesis of GS1 in India. It was earlier called EAN India. In 2005, the name changed from EAN to GS1 India. GS stands for global standards and it is the apt connotation. In India, its founding members were Ministry of Commerce and leading industry chambers like CII, FICCI, Assocham, FIEO, BIS, IIP, etc. The charter of the organisation which was set up as not for profit registered society was to spread the knowledge and to help the industry in adoption and implementation of global standards and best practices in supply chain management. So at one level they could
integrate what were the requirements of international trade and at the other level they could try and achieve greater efficiency in the Indian market as well. We had started in very difficult circumstances. As I told you, the supply chain process revamp elsewhere in the world had started with modern retail. But in our case it was totally different since there was no modern retail at that time. All we had was 12 million kirana shops. So we had to look at n other business processes to help the industry in attaining efficiency and higher productivity. Applications like track and trace, product authentication, reverse logistics, automated replenishment, etc were thus looked at by us. Thatâ€™s how LOGISTICS TIMES July 2011
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the whole journey started in 1996. Since then and now in 2011, things have dramatically changed. And one of the basic premise of your operations is to improve the efficiency in supply chain. But when we talk to industry representatives, they speak of our supply chain systems still struggling to really become modern. As a body which is entrusted with the responsibility to revamp the supply chain processes through use of global standards with global best practices, how are you dealing with the prevailing
outside your business domain. Due to this, there are Supply Chain processes which Indian industry has not looked at to bring down costs associated with inefficiencies in the system. There is also a perception that if I have optimised internal business processes through implementation of an ERP system, I have done everything. But this is an erroneous belief. You have to do an ERP but optimisation has to be undertaken all the way till the end point where your product is sold or distributed and thus needs to cover trading partners as well. The other challenge has been to make the industry understand that by collaborating with different stakeholders
The responsibility to promote green logistics should be undertaken by companies themselves as a part of their Corporate Social Responsibility (CSR) intiatives. If big companies do it, then it will have trickle down effect. gaps? Do you still find Indian environment very difficult? You are absolutely right when you say that there are severe and huge challenges even in understanding of what supply chain is in India . I think, two things need to happen. First and foremost is the full understanding by industry on what all are the constituents of supply chain and what all does logistics entail. I think, these are terms which have been used very loosely. There is also a perception that logistics and supply chain are largely within the control of the single organisation. There isn’t enough appreciation that supply chain and logistics extend beyond to cover trading players
there is a strong possibility of bringing down costs and increase SCM efficiency. Do you find Indian logistics sector in that typical twilight zone. On one extreme, you have players who are failrly convinced that they need to improve the processes and have started making the moves. But on the other side, there are companies who perceive these changes as cost burden. The situation you describe is accurate. We have this two co-existing communities within the logistics sector. One which has very good exposure to global best
practices. But there is also another group which feels that any investment in technology or standards adoption is a cost. One of the unique features of the Indian logistics sector is that as opposed to the worldwide where there are large national level players who account for 7080 percent of the entire logistics trade, in our case that is not the situation. In our case, large players account for a meagre five-six percent of the total T & L trade. Relatively small T & L companies here account for most of the business in the country. The challenge is on how do get adoption done within these hundreds and thousands of T & L companies which account for 80-90 percent of the trade in the country. That needs to happen through a number of means. Firstly, it needs to happen from policy side. From that perspective, GST is a good step. But there should be many other initiatives which should encourage consolidation of logistics companies so that they truly become national players. Its only when they become national players and see economies in terms of scale at which they move products, they would start investing in the systems and technologies. You are indicating a mindset issue. But that’s always easier said than done… Yes, it’s true. There are enough statistics and facts and figures to show that if India continues to grow at a fast pace, our ports, roads,railways, airports, etc. would not be able to cope up and support the planned high GDP growth unless global standards and best practices are adopted by the T & L sector. I think, apart from policy intervention another key factor would be collaboration happening between consigners, consignees and 3PLs, etc. They all need to sit across the table and devise SCM collaboration modules. The challenges pointed out by you for the kind of transformation which is required in the Indian logistics business seem to be mountain hill. Do you really see them happening in the forseeable future? I don’t think the players have a choice.
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Just consider two sectors - automotive and FMCG. See the rate at which the automotive industry is growing and just imagine what it means in terms of production and distribution of parts, accessories and components all across the country. This sector typically requires Just in Time (JIT) delivery precision. The principle of JIT, in fact, came because of the automotive industry. So you need to have SCM and related T & L processes which can handle such large volumes through multi-modal transport. In a similar manner if you look at FMCG, with population growing, aspirations rising and more people moving into higher income brackets including in the rural sector, the only option left is to produce more and reach out to larger number of consumers. If you donâ€™t get your backend supply chain and logistics lean, demand and supply chain linked correct, how will you do it? In India, we notice logistics players have begun talking about concepts like green logistics. But do you notice any serious intent or is it just a fashionable term right now? In the global context, green or sustainable are just not fashionable words any more. And they have to become the way of life if we all have to provide a sustainable future for our future generations. Its not a luxury or a buzzword, we have to practice it. The environmental implications are grave if this issue is ignored. Unless logistics collaborate in such a manner that there are fewer trucks out, companies pragmatically share capacity of those trucks and trucks are built in which it easy to move items in and out depending on loading and unloading points, etc green logistics is not possible. There are several other promising areas of collaboration on green logistics - palletisation, sharing of warehouse space, etc. It would be win win situation for all with lower T & L costs and hence lower end product costs to consumers. But even those who are publicly endorsing it, many of them will tell you privately that adopting green
logistics would enhance the cost of their services? They donâ€™t generally go into the depth of the issue. There are examples in the Indian market that in the name of green logistics offerings, companies have enhanced the price of their servicesâ€Ś That may be true. Many times it becomes a convenient excuse to increase the price when actually the price should have gone down. Maybe there are certain areas which require capital investment initially. But I think in all of them, there is a
to promote green logistics should be undertaken by companies themselves as a part of their t Corporate Social Responsibility (CSR) intiatives. If big companies do it, then it will have trickle down effect. Secondly, from policy intervention, whenever there is a large community good involved especially when it is related with health and wellness, energy savings etc, those could be mandated. At the policy level, incentivisation for adoption of green practices should also be considered. Finally what are the critical challenges you anticipate for GS1
We have this two co-existing communities within the logistics sector. One which has very good exposure to global best practices. But there is also another group which feels that any investment in technology or standards adoption is a cost. definite payback and ROI in the long run. Also I believe it is no longer a matter of choice. You look at this entire exercise of adopting CNG as a fuel for mass transport. It seemed as coming at a huge a cost but at the end of it look at the benefits. Sometimes there are larger objectives which need to be looked at when considering green or sustainable initiatives. Would you advise that the policy makers make it mandatory for logistics companies to adopt and promote green practices? I think, we need a twin approach here. First and foremost, the responsibility
India in the near to medium run? Relating to the logistics sector, what we would like to do is to actually facilitate the collaboratiion between T & L companies, manufacturers and buyers and retailers. We firmly believe that if these three communities can come together and discuss their problems, issues and SCM processes and adopt global best practices and standards, it would result in a win,win situation for all. If we can make this happen, the entire sector will derive huge benefits out of the collaboration and alignment of SCM processes between them through lower T & L costs,streamlined supply chain processes, greater goods visibility and track and trace and sustainability.
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Appropriate Response to Rising Fuel Prices Although there are many possible responses to rising fuel prices, some are better overall than others. The best responses Todd Litman* reduce total costs by increasing vehicle fuel economy and transport system efficiency rather than shielding consumers from fuel price increases. As much as possible, individual, short-term policy decisions should be consistent with this strategic goal. This requires a comprehensive evaluation framework that takes into account all significant impacts. The most beneficial policy responses are considered Win-Win Transportation Solutions, which are market reforms based on economic principles that increase overall transport system efficiency. One of the most appropriate is to gradually and predictably increase fuel taxes. At a minimum, fuel taxes should increase to reflect all public expenditures on roadways and traffic services. Additional taxes may be justified to internalize petroleum production externalities, pollution emission costs, and as an energy conservation strategy. The most effective energy conservation and emission reduction strategy is a carbon tax, a tax based on fossil fuel carbon content, and therefore a tax on carbon dioxide emissions. This can be a revenue-neutral tax shift, with higher fuel prices offset by reductions in other taxes. These increases should be gradual, typically about 10% annual real (inflation adjusted) growth in tax rates. Other Win-Win Solutions help increase
transport system efficiency by improving mobility options, correcting market distortions that encourage economically excessive motor vehicle travel, and encouraging more accessible land use development. These include: Pay-As-You-Drive Pricing - Convert fixed vehicle charges into mileagebased fees. Parking Cash-Out - Offer commuters financial incentives for using alternative modes. Efficient Parking Pricing - Charge users directly for parking facility use. Road Pricing - Charge users directly for road use, with rates that reflect costs imposed. Carbon Taxes â€“ Special taxes on fossil fuels based on carbon content, to encourage conservation and emission reductions. Transportation Demand Management Programs - Local and regional programs that support and encourage use of alternative modes. Transit and Rideshare Improvements - Improve transit and rideshare services. Walking and Cycling Improvements Create more walkable and bikeable communities. Smart Growth Policies - More accessible, multi-modal land use development patterns. Freight Transport Management Encourage more efficient freight transport activity. Carsharing - Vehicle rental services that substitute for private automobile ownership. Planning Reforms - More comprehensive and neutral planning and investment practices. Policies that encourage fuel efficient vehicle purchases are justified now to
prepare for higher future fuel prices, and to reduce the relative disadvantage of driving efficient vehicles (if the entire fleet becomes more efficient there is less stigma and risk to smaller vehicle users). These include vehicle fuel efficiency standards (or carbon emission limits), feebates (surcharges on less efficient vehicles with revenues used to rebate efficient vehicle purchases), and efficiency-based vehicle taxes and fees. To minimize rebound effects and maximize total benefits it will be important to implement fuel tax increases and mobility management strategies in conjunction with efficient vehicle policies. Increases in conventional fuel prices provide the best incentive for alternative fuels. Some alternative fuels may deserve public support, particularly for basic development, but these should be evaluated critically to insure they are justified, taking into account all economic, social and environmental costs. Fuels based on waste products, such as used vegetable oils and cellulitic ethanol, probably deserve support, provided they are environmentally benign and economically efficient. Corn-based ethanol is costly and overall environmentally harmful (air pollution reduction benefits are offset by increased agricultural pollution), and so should receive no public subsidy. Electric vehicle development should be encouraged, but their production and use should not be subsidized since their overall benefits are modest; they reduce tailpipe emissions but increase electric generation emissions, and already receive about 2.5Â˘ per vehiclemile subsidy because they pay no road use taxes. Electric vehicle benefits are too small to justify other incentives such as free parking or use of High Occupancy Vehicle lanes.
* Director, Victoria Transport Policy Institute
LOGISTICS TIMES July 2011
Propane and LPG also provide only modest benefits and so deserve only modest support. Synthetic fuels from tar sands, oil shales and coal are too environmentally harmful to be justified and so should receive no public support. Alternative fuel vehicles should no longer be considered fuel efficient for CAFE standards. Any subsidy or tax reduction to increase fuel affordability should be targeted at economically disadvantaged people and suitable for any transport mode. For example, low income people could receive an annual subsidy that may be used for fuel, public transit, taxi fares or to help pay for location-efficient affordable housing. Economic development policies should encourage resource efficient industries, particularly those that increase transport system efficiency. Support for vehicle and petroleum industries should be evaluated critically to determine whether they are cost effective compared with other industrial development investments, and whether they are consistent with strategic objectives and future consumer demands. Businesses that depend on energy intensive transport (manufacturing of fuel inefficient automobiles, recreational vehicles and motorized sports equipment) should be encouraged to diversify and develop alternative products that will be profitable if fuel prices increase. The CAFE fuel economy calculation offers alternative fuel vehicles an extra 0.15 Fuel Content Factor, so a 15 mpg dual-fuel E85 vehicle is rated as 40 mpg regardless of whether E85 is ever actually used. Raise My Fuel Prices, Please! Fuel prices are likely to increase in the future. Motorists are accustomed to low fuel prices and often demand price minimization policies. But such policies impose significant economic, social and environmental costs, by requiring subsidies and increasing total fuel consumption, vehicle travel and land use dispersion. This increases the economic costs of importing petroleum, pollution emissions, congestion, road and parking LOGISTICS TIMES July 2011
The Indian take Over 85% of the cargo moved by road is through middle-men known as Transport Company, Transport Contractor, Common –Carrier etc. Over 90% of the national truck fleet is owned by small entreprenures. Almost all the vehicles bought by these small, hardworking people, is funded by private financiers / NBFCs, at high interest rates, because Public Sector Banks are not keen on doing this business. Entire revenue to the Central and State Governments from road transport sector is coming from none other than the vehicle owners. The dynamics of road transport sector is such that the truck owners are not PRIVY to the Consignors and the middle-men. The middlemen are capable of charging freight at will from piecemeal consignors, while those dealing with corporate consignors enter into contracts (both for short term and long term) in which a clause is inbuilt for escalation of freight rates consequent to increase in input costs. Thus whenever price of diesel (constituting over 70% of the truck operating cost) is increased the middlemen are duly compensated by the Consignors. The Consignors, in turn, mark up their product and recover from the consumers. The middlemen, on the other hand gain, since, barring rare respectable exceptions, these people do not pass the recovery from “escalation clause” on to the truck owners whom they hire on per-trip basis. Indeed there is a nexus between the middlemen and the brokers in different markets, whereby truck hire are skewed in favour of middlemen. The brokers pay to truckers hire based on an illusive “Demand and Supply” basis. In this, for sure, input cost of operations are not factored in per se. The Government, in it’s anxiety to protect the legitimate interests of the truck owners, has specifically provided in the Motor Vehicles Act, 1988 under Section 67 that : “A State Government, having regard to ….. the desirability of preventing uneconomic competition among holders of permit … may from time to time, by notification in the official gazette issue directions …. regarding fixing of freights …… for goods carriages.” During the past over two decades, since this provision was incorporated in M.V. Act, almost all the Sates have remained oblivious of this. Nothing could be more unfortunate. We, therefore, seek your kind indulgence, on behalf of the millions of voice-less, fragmented truck owners of the country, to plead and urge that State Governments may be made to enforce the provisions of Section 67 of the Motor Vehicles Act, 1988 whereby Minimum Freight Rates for Trucks are fixed which should be appropriately revised whenever price of major components of operation cost are varied. THIS TRULY IS THE RATIONAL WAY FOR REDEEMING THE TRUCKERS -- The Most Vulnerable Within The Goods Road Transport Sector. - Excerpts from the letter to Prime Minister Dr Manmohan Singh from ACOGOA, (All India Confederation of Goods Vehicle Owners’ Associations).
facility costs, accidents and sprawl. Rather than trying to minimize fuel prices it is better to allow prices to rise and help consumers, businesses and communities reduce total fuel costs by increasing vehicle and transport system efficiency. These solutions provide far larger total benefits. The real problem of higher fuel prices occurs if we fail to change. Vehicle purchase and housing location decisions last years or decades, and consumers tend to apply a high discount rate when evaluating energy savings. As a result, they purchase less efficient vehicles and choose more automobile-dependent locations than what will be optimal during much of these productsâ€™ operating life. The key to avoiding a future crisis is to begin increasing efficiency now. If we treat high current energy prices as a temporary anomaly and try to shield consumers from price increases we encourage inefficiency and exacerbate future problems. If we begin raising prices now with increased fuel taxes, and work to make our transport system more
efficient, we can avert future problems. The current transport system is inefficient. Large efficiency gains can be achieved in cost effective ways that provide multiple benefits. Harm to consumers and the economy can be minimized by making fuel price increases gradual and predictable, and matching them with policies that improve vehicle efficiency and transport options. There is no equity justification to subsidize fuel since their primary effect would be to allow middle- and upper-income motorists to purchase less efficient vehicles and drive more. Targeted subsidies and policies that improve affordable transport options can do far more to help disadvantaged people while also helping to solve other transport problems. With these recommended policy changes, petroleum prices could double and consumers would spend less on transport than they do now. Consumers would still be able to access work, school and services, they would still take holidays,
businesses would still produce and distribute products, and economic activity could still increase, but these activities would consume less energy. These policies would change lifestyles and industries, more children would walk and bicycle to school rather than be driven, communities would be more compact, and industrial production would be more resource efficient. These changes can provide significant additional benefits besides just energy cost savings. A well-developed vocabulary exists for describing prices considered too high. People say that they are gouged, cheated, or fleeced. There is no comparable vocabulary to describe prices that are too low, although underpricing is equally harmful to the economy and ultimately to consumers. It is difficult to imagine consumers demonstrating with signs that say, â€œRaise My Fuel Prices!â€?, but it actually makes sense. The best response to rising fuel prices is to let them increase and create a more efficient transport system.
LOGISTICS TIMES July 2011
First hand impressions of the first 10,000 km on Indian roads on HCVs
Highway Blues Ramesh Kumar It all began on a rainy August afternoon last year when I was marooned at home with flooded Delhi roads denying an opportunity to step out. To kill time, I picked up The Working Group Report on Road Transport for Eleventh Five Year Plan prepared by Planning Commission. “The share of road transport in freight movement which was around 14 per cent in 1950-51 has increased to around 61 per cent while that of railways has fallen from more than fourfifth to less than two-fifth over the same period… During the post reform period (1992-93 to 2004-05) volume of freight (billion tonne km) carried by road grew at an annual average rate of 6.5 per cent compared with a growth of 3.6 per cent in rail freight. Over the years the modal split in freight movement between rail and road has skewed in favour of road,” wrote the expert committee. Is that so? A quick glance at National Highways Authority of
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India data revealed that India boasts of 33 lakh kilometers, second largest in the world. Table A: Indian Road Network Length in Kms
Expressways National Highways State Highways Major District Roads Rural & Other Roads
200 70,934 1,31,899 4,67,763 26,50,000
Source: National Highways Authority of India, 2011
What’s the vehicle population, particularly with reference to freight was the next obvious question. India became the sixth largest motor vehicle/car manufacturer in the world in 2010 and is expected to rise to the fourth position by
25 2014. According to International Organization of Motor Vehicles Manufacturers, India is the eighth largest commercial vehicle (0.53 m in 2009-10) and also the largest tractor manufacturing country (around one-third of global output). If Society of Indian Automotive Manufacturers (SIAM) were to be believed, commercial vehicles rose from 353,703 in 2004-5 to 752,735 in 2009-10. Doubled, indeed. Mind-numbing figures. Sitting in air-conditioned conference halls in metros and listening to the so-called pundits pontificating on policy prescriptions on how to assist the
crusade with Anna Hazare in the lead, how corrupt our bureaucracy is on the highways? Do 3PLs and fleet owners know what they are doing? What they care most: bottomline of their respective balance sheets? Or good business with a human touch? So, in the typical LOGISTICS TIMES style where we believe in action-based reporting, I decided to haul myself on HCVs – say for at least 10,000 km. Except the East coast (Chennai to Kolkotta), I managed to cover north-south and north-east sectors between November last year and May 2011 through
growth of Indian economy is one thing. To step out to check the ground reality is yet another route. Then the obvious question was: Is it possible to traverse the entire highways stretch to check out the ground reality? No way. Without first hand experience, all knowledge will be the “acquired” variety. But questions were many: Are these so-called national highways and state highways really good ones? How serious is the problem faced by heavy commercial vehicle drivers en route when they haul goods across length and breadth of this vast nation to bring in prosperity through better commerce and trade? In the light of ongoing nationwide corruption
multiple trips. On HCVs carrying passenger cars, farm tractors, huge concrete pipes for water and sewerage, plastic granules, masala recipe, rice and pulses etc. Special thanks to Vipul Nanda, Mercurio Pallia Logistics; Pradeep Tewari, Credence Logistics: Rajan Agarwal, Rinku Commercial Carriers; Mahmoud Ghouse, SG Transport; Sanjeev Kaduva, CPC Logistics; and Palanisamy, Velmurugan Transport. And a horde of drivers and cleaner/assistants who allowed my intrusion into the privacy of their cabins. The learnings were rich. Above all, it was a sort of Bharat Darshan for me at the lowest cost!
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Instead of the customary reportage, how about sharing my experience in a Q&A format? Ready? Here, it is: ˇ Is there corruption on the highways? What an inane question to ask? Don’t we all know it is a global phenomenon and India, the most ardent fan and admirer of this trait, cannot afford to be found wanting to be on the top of this dubious list? Remember the Transparency International sponsored report about “Corruption in Trucking Operations in India” brought out in 2007? If not, check out here: http://www.transparencyindia.org/ resource/survey_study/Corruption%20 in%20Trucking%20Operations%20in%20 India.pdf
Factor in inflationary impact over the past four years and you will have the latest estimates. On second thoughts, maybe multiply that final figure by two because the “greed factor” has taken an upper hand of late. Are we not living through the Scam era of 2Gs, CWG, hydrocarbon etc? ˇ Do our truck drivers steal diesel? Yep. They have a rationale, they claim. If they are paid peanuts, they have to resort to all means to sustain themselves and their family. Siphoning off diesel at marginally less than market price to petrol pump station owners is a way they have adopted to earn some “extra buck”. Fleet owners, in their defense, claim that they are fully aware of these tricks and therefore they pay less to drivers. ˇ How safe is our Indian highways? Not safe. I was a victim of highway robbery. I have lost my gold chain in a midnight heist in Kholapur, Maharashtra a few weeks ago. Also heard stories of highway hooliganism of hijacking, looting and pilferage and fake theft as well. Harbaks Singh, a Mercurio Pallia driver carrying Hyundai’s i10 cars, was hijacked after crossing Mumbai by hoodlums. He was kept captive for 48 hours during which time his fingers were broken to retrieve car keys in vain. Later he was released. In another incident, a brave driver on Bangalore-Mysore highway hoodwinked goons chasing him on motorcycles in midnight by driving into a police chowki as instructed by his
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remote CEO in Delhi to save himself and the goods he was hauling. At a great personal risk.
ˇ The most corrupt RTO regime in India?
ˇ How much drivers miss their families? So much that they would have run away but for lack of life-supporting mechanism – read alternate job opportunities. None of them would desire their siblings to take up this profession. So, the shortage of drivers will loom large in the days to come.
ˇ The smoothest passage for HCVs in India? Gujarat and Tamil Nadu. Again, both non-Congress ruled states!
ˇ How about sex on highways? Opportunities galore. I had a tryst with a commercial sex worker at Hubli (see http://myroadiary.blogspot. com/2010/11/sex-hubli.html). Daytime soliciting is nothing unusual (See Box: Sex on Highways).
ˇ What is the status of highways? Excellent, mostly. Pathetic and downright dangerous in parts. In many parts of India, the National Highways pass through small towns – not villages – where the road width creates tension and traffic snarls. Towns in Northern India – Sultanpur, Jagdishpur, Rae Bareli, Benares-Lucknow (NH 56), MeerutKarnal are prime examples where HCVs find it extremely difficult to navigate through hard passages during daytime. For instance, we travelled at 15 kmph on Meerut-Karnal state highway. So bad was the road. It took us 7 hours to cross this stretch of 100 kilometres. Another challenge is the narrow bridges over water passages or rail tracks. They are very tricky and one slip, mishap is assured. ˇ How much fleet owners care for their flock – I mean, the driving community? Depends. There are some whose heart bleeds for their drivers. And there are some
who adopt a don’t-care-a-fig-leaf attitude. Karnataka tops the list, followed by Uttar Pradesh. Both non-Congress ruled states, by the way!
ˇ The best highways? Check out the previous response.
ˇ How hygiene-conscious our drivers are? Not at all. Sometime, one feels like spanking them. Eat, spit, wash their hands around themselves. Dhaba owners feel thrilled that their clients enjoy the atmosphere. ˇ How prevalent is the drink & drive routine? Pretty high. Amble around any dhaba on the highways and one cannot miss noticing empty cartons and bottles of hard liquor. So also empty tobacco pouches. The shouts of “make 400 km chai” in dhabas are common which basically is a signal to the tea-maker to spice his tea with something special which will keep him awake for extended hours of driving. That “something special” is nothing but some kind of narcotic item. ˇ Why RTOs and Traffic Inspectors are so powerful and fleece drivers on highways? Because they are backed by local politicians and mafias (are they one and the same? Maybe.). ˇ How much state governments are responsible for the RTO/TI menace on the highways? Cent per cent. How? Highways, falling under state subject, have become revenue-generating departments instead of enforcement wing of Motor Vehicles
Act. So, overloading is gleefully endorsed by levying penalty and permitting them to ply causing massive damage to the highways assets. Monthly targets are fixed. Once this is achieved, officials allegedly loot and plunder to line their own pockets. ˇ Why fleet owners succumb not fighting this menace? Good and the most relevant question. Most fleet owners are violators of MV Act in every single way possible. The argument runs like this: if MV regulations were to be followed, they will go out of business before they spell out “T-R-A-N-S-P-O-R-T”. Hence they do not mind greasing the palms and arms of corrupt elements in the bureaucracy in most states so that the overloading charges are overlooked wantonly. For instance, a 9 tonne truck carrying 18 tonnes is nothing unusual. Or 16 tonner carrying 35 tonnes is again winked at for a few Indian rupees. Overdimensional carriers (ODCs) willingly shell out approx. Rs.60,000 per truck for smooth passage only through Karnataka! ˇ What about the Supreme Court 2005 verdict on overloading which categorically states that overloaded vehicles should be stopped at interstate borders and only permissible load carrying vehicles be allowed to ply on the highways? Honestly, who cares? It is, no doubt, a sorry state of affairs. ˇ What about the highway facilities for drivers? Pathetic. No driver would like to halt at truck lay byes. Why? Because these so-called facilities are created with no food and bathing facility nearby. Drivers by and large would halt at hundreds of dhabas dotting the highways where the conditions are pathetic, but they feel at home with greasy and spicy food, alcohol, dirty and smelly cots and mattresses, 14 inch TV sets showing B-grade action flicks (mostly Zee Action) and occasional pick up joint for sexual activities. A rectangular tank that has pumped in ground water from nearby farm land where they wash their clothes and bathe occasionally.
community alone has sprouted up with huge parking lots and affordable food. Now Rajasthan is witnessing the entry of the same Gujarati trucker-friendly enterprises. Good. Unfortunately, truckers still prefer to sleep inside their cabins instead of hiring Rs.350 per night dormitories with basic bed and bathing facilities. ˇ What about toilet facilities for truckers en route? You must be joking. There is no such facility in most of the countryside. Some toll gates have toilets, but ill maintained. Otherwise, every single truck driver or his assistant fertilize the Indian soil in the caveman style: defecating in public. ˇ What’s drivers’ monthly pay like? The driver at Namakkal Transport Corporation (specializing in ODC movement) gets a fixed Rs.18,000 as monthly salary. When incentive is included on per km traveled basis, a few drivers take home Rs.50,000 even. Fleet owners in the west have understood that a minimum of Rs.15,000 is a basic necessity. In the south, 10 per cent invoiced amount goes to main driver and 3-5 per cent to assistant. In the north, the deal is slightly different. Drivers get paid Rs.6,000-7,000 per month as fixed pay. Each destination has a package which includes daily allowance (Rs.100 per day), toll charges (accountable because of receipts issued at every toll gate), bribery (to RTOs, TIs, Octroi checkposts etc). Plus diesel at fleet owner’s expense at the starting point with full tank and midway, if necessary, through fuel cards issued by the company. By the way, most fleet owners don’t pay for assistants. They are taken care of by drivers who incidentally bring these “understudies” from their
hometown with the promise that one day these kids will become full fledged drivers. ˇ What about the driving calibre? What calibre we are talking about? Most drivers are self-taught. By trial and error. With the introduction of multiaxle and higher end (higher tonnage) vehicles hitting the market, OEMs provide preliminary training to buyers who depute some for this induction. Some drivers on their own enroll to gain expertise by attending regular workshops conducted by Volvo, Manforce etc and on the strength of the certificate issued by the OEMs manage to land up better paying jobs. OEMs also act as employment agency for these trained drivers. But this number is negligible. Drivers teach their wards in their own fashion. By trial and error. No systematic classroom cum practical session type. Mostly through watch and learn. Drivers permit their understudies to drive on a daily basis under their supervision for a few kilometers. Extra violence during training lead to understudies deserting and the search begins again. But there are some driver training institutes. Ashok Leyland Driver Training Institute at Namakkal, Tamilnadu on a sprawling 25 acre campus is a case point. While this facility is fully owned and promoted by Ashok Leyland, more such institutions are coming up in association with various state governments with Ashok Leyland participating as private sector partner. Namakkal Transport Corporation is also building up an educational institution – again in Namakkal, the transport city of India – hardly a stone’s throw away from Ashok Leyland facility. Government is keen on setting up more
ˇ Which is the most trucker-friendly state? Gujarat, unmistakably. Every 10 kms, large motels catering to trucking
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It was early morning and we have been onroad with Mohammed Ayub Khan at the wheels of Leyland 2518 model carrying six Arjun Ultra tractors from the assembly lines of Mahindra plant at Kandivli, Mumbai. A day after I was a victim of highway robbery 10 kilometres before Kolhapur in Maharashtra, it was jointly decided that our night halt would be in an absolutely securitized environment and luckily we found one on NH 4 an hour after we left Dharwad, Karnataka. Yes, we slept well under the guardianship of the lathi-wielding, but limping
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Abubaker. Sharp three in the morning, we woke us and ensured we vacated the open lot after a hot cuppa. Bearded Ayub bhai, hailing from Pratapgarh, situated hardly 70 km from Sultanpur in Uttar Pradesh, began the journey which he promised would ensure I would sleep in a pucca bed and mattress instead of on the foamrubber seat-cum-sleeping berth inside the Leyland cabin over the past 10 days. Soon after we passed Davengere, a man in casuals halted us abruptly in the
middle of the road while waving a stick at us. Cursing his fate, Ayub parked the vehicle on the side and got out. Picking up his papers (vehicle documents) and invoice of material being carried, he crossed the road to the while government vehicle parked on the other side of the NH 4. From inside the Leyland cabin, I could not visualize the gent who was conversing with Ayub bhai, but from the expression of my colleague I could see he is distressed. In no time, Ayub was back and gave to vent to his anger by using some unprintable words as an abuse against the officer who he had met. Prodded, he revealed that the RTO belongs to Davengere and demanded his pound of flesh threatening that he would file a case against Rinku Commercial Carriers Vehicle which Ayub was driving for violating several sections of the Motor Vehicles Act. He was offered two choices: permit RTO to seize the vehicle, go to the court and get it released; or, cough up a fee. A cool bribe is all demanded as if it is RTO’s birth right. Ayub parted with Rs.100 and got himself relieved from the rigmarole of surrendering the vehicle and retrieving the same after a long drawn court procedure. “I never expected this
RTO here,” averred Ayub, “because we had long ago crossed Davengere and now we are in Chitradurga.” If Ayub were to be believed, the RTO Davengere has no business to be waiting like a roadside vulture in Chitradurga territory. I simply have no idea about this “corruption jurisdiction”. That’s when I asked Ayub whether he had paid the checkpost at Karnataka border when we entered from Maharashtra. He said, “No”. He only paid an “Entry” fee – meaning Rs.300 as bribe to the official at the border. Thereby saving a hefty Rs.1500-2000 fee which goes into the state exchequer with a receipt. This route of crossing any state by paying “entry fee” at the point of entry and exit (another Rs.300 or so) to another corrupt state border official works out much cheaper for the driver than paying upfront a big fat fee to the interstate border and riding with no worries at all. Why drivers prefer the entry option demands another story. But the risk is huge. Drivers confess that given the poor salary conditions of theirs, non-payment of official fee and instead settling for some bribe is their only route to livelihood on highways. Before we could recover from the RTO Davengere episode, we spotted half a dozen tilak-sporting, fat and slim guys stopping vehicles on both sides of the highway. Yes, a government vehicle was parked on the other side. We were in Chitradurga territory.
Several commercial vehicles were parked on both sides and a long queue of drivers were surrounding the government vehicle. Releasing another unprintable expletive, Ayub jumped out with relevant papers. I decided to go along with him this time to watch the drama from close quarters. “Kya re, kiska gaddi hai?” demanded that fatso. “RCC ka,” responded Ayub. I was in ear’s shot and could listen to every syllable uttered. “Ah, Rinku ka gaddi hai!” The sarcasm in the voice could not go unnoticed. Ayub “yes”sed. “Maloom hai, aap ne kya jurm kiya hai?” another shot from the fatso. Ayub remained silent. There was a long silence. Meanwhile, I looked into the vehicle and noticed the RTO was sitting in the seat, looking at the document surrendered by another driver and feigning to examine the same. Fair complexion. He would be taller than me, if we were to stand next to each other. A little over six feet. The fatso told Ayub to go the officer sitting in the car. Ayub inched towards RTO. I moved in closer. By now, the RTO gang of coolies noticed my presence near the vehicle. I did not look like a driver or conductor and hence stood like a sore thumb. I knew it. “Aap kaon?” demanded the fatso. I smiled at him. “Aap driver hai? Conductor hai? Truck ka malik hai?” It
was fatso again. “Main koi nahin hoon,” I responded. “Phir, aap idhar kya kar raho ho?” I responded with “Main aisa dekh ne ke liye aya hoon”. “Yeh drama hai kya?” asked the fatso. I switched over to English and “What is your problem if I stand here. I am curious to know what you guys are upto.” Fatso quickly looked at RTO inside the vehicle, hinting that he should handle me. The language of English rattles a lot. Not a highway friendly lingo. Now it was RTO’s turn: “Who are you?” “How does it matter to you?” I asked him. Then switching over to Hindi, I uttered: “Aapko taqleef kya hai? “No, no. You are standing near my vehicle. So I am asking,” he replied. “I am a citizen of this country. And I have every right to stand wherever I want,” I told him. He was foxed. I cursed my stupidity for this Hindi film style dialogue. “You don’t understand me, Sir. Are you with any of these drivers? Owner’s representative?” he asked. “Am no owner but travelling with him (pointed to Ayub),” I responded. “Look at this. This man (Ayub) is behaving like a sheep. He is not answering any of our queries. Have you noticed that his vehicle is carrying tractors which are jutting outside the vehicle dimensions. It is illegal. We can challan him, you know?”
I said, “ok”. “Sir, since you are only a passenger on that vehicle, please go and sit there,” the fatso joined now. RTO to Ayub: “I have to challan you. Kya karna hai, batao?” Ayub: “thoda time deeji ye.” Ayub spoke to someone on his mobile and returned. RTO: “Yeh Rinku ka gaddi hai!” said suddenly. Ayub: “Haan, sirji”. It is significant to note that RCC has fighting a legal suit against a RTO officer in Davengere/ Chitradurga for allegedly beating up their driver and putting them in jail for five days a few months ago. RCC officials during my interaction with them in Anand corporate headquarters shared these details with me and the case is still sub judice. RCC is a anathema to RTOs in Karnataka. Harassment is to be expected. But one positive effect of this fight against highway corrupt practices is that RTOs are a little scared of taking RCC head on because they have come to realize that RCC would not mind fighting them legally. RTO handed over the documents back to Ayub and looked at him closely. Now fatso intervened and told Ayub, “ok. Rs.100 de do”. Ayub pinched a Rs.100 note from his almost empty wallet and tried to give it to RTO. “Pagal ho gaya hai kya?” shouted the RTO. He was eyeing me at the same time. He meant that he does not directly receive this
“bakshish”, but has to be handed over to one of his gang members. Ayub parted with Rs.100 to one of the gang members and we walked back to the vehicle. “Agar, hamara naam RCC nahi hoti to, yeh RTO hamse Rs.300 liya hoga,” said Ayub triumphantly. Once back in the vehicle, I asked Ayub as to the real identify of these gang. Much to my surprise, I learnt that except the RTO, others were his private agents who help the government official to abruptly halt commercial vehicles on the highway and help him collect his “unofficial fees”. RTO at the end of each operation, shares a small portion with this private goondas! Atuylya bharat, such mooch! My one regret that I was unable to know the identity of the RTO because his nametag pinned on his chest was written in Kannada, not in English. The “MVD” (motor vehicles department?) brass tag pinned on his right shoulder did not glow since he was sitting inside the vehicle, not out in the early morning sun. One thing I must appreciate. The RTO was up and awake so early in the morning and performing his “duty”. Since he was again sporting tikka, I presumed he almost ought to have bathed and come to the battlefield – nay, the national highway! Look at the amount of trouble he has taken it upon himself! Mera Bharat mahaan, no doubt.
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such facilities because of the looming drivers shortage. Government funding is already happening for refresher courses. But there are glitches, I reckon. Nonexisting organizations have managed to get funding money. ˇ What about highways maintenance? As part of Model Concession Agreement signed by NHAI with contractors who got the highways construction and maintenance on BOT formula have to be monitored at regular basis. Otherwise, contractors would turn
“Can you see her?” “Who?” “That lady … na, girl, Sir” “Where?” “There…” Yes, at last I spotted her. Gawdily dressed. Kohl-eyed. Darkish pink lipstick. Anil Pandeyji winked at me. I know what that wink
a blind eye to maintenance. It is a big responsibility for NHAI. ˇ How serious is the toll issue? There are two schools of thought. Honestly, drivers don’t give a damn to toll. In fact, tolled highways mean better roads, less wear and tear of vehicle and more mileage and speedy delivery. But the transporters are divided. All India Motor Transport Congress (AIMTC) keeps threatening nationwide bandh (work stoppage) unless tolls are regularized in the sense that there is
meant. Yes, she is a commercial sex worker – CSW to be short. Subtly she was signalling the approaching truck. Would she be able to meet with the eyes of driver or his second in command behind the glasses of the Man Force truck coming in the opposite
Sex on highways
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some uniformity in the rates levied. This is unlikely because different stretches got awarded to different contractors depending on existing traffic density and the projection during the contractual period and various other parameters. There is another school, spearheaded by All India Confederation of Vehicle Owners Association (AICOGOA), that argues surface transport vehicles (called rolling stock on roads) should get the same favourable treatment like railway rolling stock is bestowed with. Toll is a non-issue, according to
direction? We were on National Highway 24 linking Lucknow with country’s capital: New Delhi. We had passed Bareilly and it was past half past two. Traffic was thin. A phat-phat with an overload of passengers almost hanging on its bumper was in front of our 40 tonne Tata trailer. In fact, that was moving faster than our truck. We were cruising at 30 kmph. Not because we love slow driving, but the highway was just a dual carriageway and with – yes, you’ve guess correctly – a lot of potholes. The CSW, whom Pandeyji fingered at, was hardly 100 metres away perhaps. Her signalling was superb: very subtle. Only a trained eye can spot that. Pandeyji, a veteran 20 plus year highwayman, was one such who sported an expert eye. Her right hand was kept closer to the body. Wherever it ended, her palm projected at 90 degrees and facing downwards, was moving up and down at a faster clip. The message: “come, come!” “Pandeyji, daytime
prostitution?” I demanded. “Anytime, Sir. Why only night?” By then, we passed the CSW in question. Pandeyji was keep looking at the rearview mirror to update me on further development! Nothing happened, I presume because he did not say anything. After a deafening silence for a few minutes, Pandeyji’s eyes lit up. “There… There. See… Another one.” Pervez, second driver, who was lying down on the lower berth behind driver’s seat, quietly sat up, rubbing his eyes to get a better view. He moved to the centre of the back seat which offered a better glimpse of whatever happening in front. I peered in front closely. Almost my nose touching the frontside transparent glass. I also rubbed my eyes. Quickly plucked out my eyewear, cleaned off and reinserted into the previous slot. A lot more clarity. Hawn… There they were. Not one, but two. Much younger lot. One in salwar kameez. Another in sari.
them. Fleet owners cry hoarse over rising toll charges because these are not factored in while commuting cost during negotiations with consignees.
That’s where a multi-cuisine set up can come in handy. By the way, most of the washrooms/toilets at fuel pump stations are stinking and unhygienic.
ˇ What about fuel stations on the highway?
ˇ What role truck terminals play en route? Visited two at least and spent considerable time: Devaraj Urs Truck Terminal, Bangalore; and Madhavaram Terminal, Chennai. Bangalore one has huge space, but poorly maintained. The state government-sponsored organization needs a heavy dose of administrative inputs. It is managed haphazardly. Security of trucks that
They certainly play a big role. But they can be upgraded and turned into a proper halting stations for drivers with adequate rest rooms, bathing facilities, multi-cuisine restaurants etc. Remember, north Indian drivers’ challenges when they have to forego roti/chapatti and instead forced to eat rice, sambar ini south Indian style in many southern states. Food is a habit.
Yes, they too were gesticulating. Suddenly, the Xylo in front stalled forcing us to halt. Good comeuppance! The driver from Xylo got out and began checking his tyre. Now we are hardly 15 metres away from the two pretty-girls-on-the-road. One of the trucks halted in response to their “mating call” perhaps. In a typical Hindi film style, the sari-clad CSW remained silent; her shoulder-length free flowing hair was covering her left bosom. She was coy and demure; but the come-hither-look was unmistakeable. The salwar kameez wali and the second driver or assistant were engaged in deep conversation. We were so close I could easily see her biting her lower lips in a seductive manner while the guy in the truck was mouthing something. Exploring business proposition! But for the cacophony created by traffic that has built up behind us and in front made hearing impossible, I would have heard ‘juicy’ dialogue! Alas. Pandeyji, Pervez and I were
curiously watching the drama unfolding in front of us. “Will the business materialise?” I asked no one in particular. “Hmmm.” The driver of Xylo, in front of our truck, managed to sort out his mess and vroomed away. We had no option but to move on. Again, we missed the full scene. Do they stop on the roadside if the transaction fructifies so that the partners in passion move into the back seat for business compliance? “Anything possible,” was Pandeyji’s quick repartee. A few months ago, I had a close encounter with a CSW in Hubli – but that was past midnight. (http://myroadiary.blogspot. com/2010/11/sex-hubli. html). Daytime solicitation was something I never anticipated. I could not resist asking Pandeyji about his take on highway prostitution. How was able to spot the CSWs whereas I could not? “Sadhus recognise sadhus. Criminals recognise
dock in Bangalore truck teriminal is not guaranteed because it is not a walled space. On the other hand, the Madhavaram truck terminal is gated with round the clock security to monitor entry and exit. Multi-cuisine restaurants are there, but nothing to write home about. Both facilities have poor infrastructure in terms of roads within the campus. They are not all-weather type. They become a nightmare during monsoon season. Unmotorable and unloadable.
criminals,” he opened up. Single focus. If one is looking for female company, he knows the signs and symptoms. No rocket science. In fact, there are many roadside dhabas we noticed with female servants serving truckers while crossing Bihar and Uttar Pradesh. “It’s just a camouflage,” explained my friendly driver. Everyone needs a pretext or setting to transact business. The dhabas or food stalls are used for negotiations. Even if there were police raids while the verbal transaction is in full swing, the cover of serving tea or food is helpful. If the verbal negotiations mature, they move into back rooms behind curtains or the paddy fields. It is a flourishing business. Pandeyji had an interesting question. He had many friends in the driving community who had died of AIDS. But he never heard of any CSW dying of AIDS. How come? “One of my colleagues, I saw with my own eyes, shedding weight: from 75 kilos to 30 kilos. Pathetic,” he recollected. At the same time, Pandeyji says with a straight face that he
had seen many CSWs over years who continue to do business even today. “They are still alive. They have not changed profession,” remarks he. My argument that maybe these CSWs go for medical check up and subsequent remedial treatment at regular intervals. On the other hand, men just carry on as if nothing has happened and pay a heavy price: death. Pity. ** Post Rampur, the sun is setting. Gentle breeze. I notice two ladies on the left side of the road walking towards us. They are beautiful. Come hither look, too. I pick up my camera to click a few images. Pandeyji restrains me. Why? “Sir, they are not CSWs. Family girls,” explains the road warrior. I quickly duck down in the truck cabin and dump the camera into the dashboard. Ohmigod! Mistaking rope for a snake! The fallacy of malobservation!. Dunno. I have forgotten the nomenclature I had learnt 35 years ago as a student of logic in college. Never mind. Few more highway trips and I would be as good as Pandeyji.
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ˇ Do truck drivers like GPRS? Not at all. It is seen as an “invasion of their privacy”. Though most fleets are fitted with GRPS equipments, they are not put to proper use in terms of safety of freight being moved. It is not uncommon for drivers to deactivate the instrument in some stealthy way so that their movement are not tracked minute by minute. Given the drivers’ shortage, fleet owners are also not too strict with them. Any punishment to one would drive away others, leading to loss of business. However, on fixed hours fleet owners watch the exact location of their vehicles. Rest of the time, GPRS has no role to play. There is also another reason. When consignments are negotiated, fleet owners fix a timeframe within which the goods would be delivered. But this timeframe always makes room for extra time. Those who insist on fixed time delivery are willing to shell out extra and fleet owners invariably share a portion of that extra booty with drivers. Otherwise GPRS is a junk. ˇ What to make of the transport booking agents vs fleet owners battle? Very interesting turf fight. Transport booking agents, no doubt, are middlemen. They have neither fleet nor freight. Yet they call the shots. How and why? More than 90 per cent of Indian fleet owners actually own between one and five trucks. For survival, they have to attach themselves with big players. It is no secret that big fishes will parcel out business only when they are not able to. It is a dicey game. On the other hand, booking agents befriend manufacturers and offer them freight rates that large fleet owners would think ten times before committing. Once having bagged the tacit understanding and contract in that order, the agents rope in small players offering decent rates which are closer what big players would have offered them if they wanted to or lower than that. Small players, for survival, accept agents’ orders and ply on the roads. Naturally, they would invariably slash down their costs by offering peanuts to drivers of their vehicles. Large fleet owners would be invariably rebuffed whenever they approach manufacturers directly because their freight rates would LOGISTICS TIMES July 2011
be higher than what agents’ offer. Even if there is not much of a difference, the local booking agents have “some axe to grind” with manufacturers’ representatives who manage logistics. No manufacturer would reject a lower transport bill, keeping his own bottomline in mind. Naturally, fleet owners and booking agents given a choice would burn down each other. That’s the level of animosity. Small fleet owners would prefer to dock their empty vehicles outside the offices of booking agents than in the vicinity of large fleet owners’ branch office because of assured and regular business – though with low margin – from booking agents. Smaller the fleet owner, larger the profit margin for the agents. All said and done, the local booking agents have better reach with local state government bureaucracy and an uncanny ability to solve crises during the passage of the outstation vehicle through their state. Fleet owners have not given up their fight this eternal rival. Existing provisions in MV Act do stipulate stringent punishment for un-registered agents of freight, but lacks enforcement due to a variety of reasons. ˇ Do transport agents serve any economic purpose? Certainly. They “facilitate” easy trade and commerce and collect a fee, thus giving a fillip to services sector contribution to GDP of the national economy. In pure common sensical terms, there are takers for their services both from consignees and fleet operators. Period. ˇ What should be done to improve freight
movement on roads? Want a genuine response?. ˇ Yes. Of course… Okay. Roll out GST as early as possible. That will reduce, if not eliminate, the interstate border crossing hurdles. Enforce the Supreme Court 2005 ruling on overload in letter and spirit. This will help all: vehicle OEMs, fleet owners, drivers and last, but not the least, NHAI. Once the overloading issue is tackled, then the ‘roadside vultures’ alias RTOs/TIs will be forced to look at less appetizing, but important clauses of MV Act that will improve the safety concerns of both road and road users. ˇ One last question. … What are chances of all the above things happening? 50:50. ˇ Why so pessimistic? Remember, this is India and we are Indians. We don’t believe in orderliness and like to thrive under chaotic conditions. Right or wrong? GST, as and when implemented, will be a watered down version of what was originally envisaged. With due respect to the apex court, its 2005 verdict will be observed more in violation. Until and unless someone files a PIL. Who that petitioner will be? Definitely not any of the stakeholders. So long as the lofty objective of 20km-a-day fresh road dream is being pursued, there will be little concern for safeguarding whatever exists onground. This again suits all: the NHAI, the potential bidders for future highways projects and rent-seekers. Why bother about what is already there?
Building World Class Logistics Parks CII Institute of Logistics (CIL) and Amarthi Consulting recently released a report stressing on the imperatives of promoting logistics parks in the country which would accrue multiple benefits to the stakeholders in the logistics business. Excerpts from the executive summary of the report:
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India has experienced phenomenal growth in the last decade in terms of GDP, domestic growth as well as international trade. This growth is likely to continue for years to come given its strong services sector and a robust manufacturing sector driven by a large pool of bright and young workforce. This growth is welcome. However, this has also exposed the need for development of infrastructure and logistics to sustain the growth. Logistics costs in India are high at 13% to 14% of GDP compared to 8% to 9% for developed countries. This clearly indicates that India is currently disadvantaged and lagging on several key aspects (Figure 1) when compared to countries such as Singapore, Japan, United States, Germany, China, Korea and Sweden. Currently the physical infrastructure such as roads, rail, ports, the digital infrastructure of broadband networks, telecommunication and the service infrastructure of logistics â€“ are all being stretched to perform beyond their capabilities. Freight traffic across roads, rails, ports and air has been growing at double digit rates but the infrastructure growth has not grown with the same pace. At a GDP of USD 1.3 trillion this represents an excessive cost of USD 65 billion clearly signalling that the supply chains in India are inefficient and logistics need to be revamped. LOGISTICS TIMES July 2011
The government of India has realized the importance of infrastructure and logistics for the continued growth of the country and has been making reforms in policies and investing in building the infrastructure across rails, roads, airports and ports. The government has been giving impetus to the logistics sector by allowing 100% FDI, eliminating CST, introducing VAT, improving multi-modal transportation through projects such as dedicated freight corridor, encouraging public private partnership (PPP), and 100% income tax exemption for port development projects. All these initiatives are liberalizing the logistics sector resulting in tectonic changes that are spawning the evolution of multi-modal logistics parks across logistics hubs in India coupled with high investments in logistics infrastructure by global and local businesses. Multi-modal logistics park is a nascent concept in India, but an established phenomenon globally with clear benefits to the customer, company and the country. This will result in significant saving in terms of transit times, inventory costs, processing time and thus overall logistics costs. The benefits will be driven based on synergies across value added players co-located in the park, multi-modal transportation and economies of scale emerging from the national and regional distribution centres in the park. Key benefits are synthesized in figure 2.
With the mentioned benefits, the future is large national Logistics Parks (mfg. & distribution hubs) that provide economies of scale and scope. The logistics park is not just a modern warehouse but is a hub of value-added supply chain and manufacturing activities. Today most of the logistics parks in India have modern warehousing facilities but have a long way to go in terms of value added services to achieve world class standards. Maturity of the Indian logistics infrastructure as shown in figure 3 clearly indicates that majority of logistics infrastructure is either traditional or modern warehouses and with only a minority being advanced logistics parks. Over the last few years there has been a flurry of activities by various local and global players in planning and establishing logistics parks.
While they strive towards that end goal, it is also important to understand the potential pitfalls and the critical success factors in developing and running successful logistics parks. By 2012, around 110 logistics parks, spread over approximately 3,500 acres, are expected to come up across India at an estimated cost of US$ 1 billion. Optimal locations for logistics parks depend on strategic locational advantage, multi-modal connectivity, proximity to industrial hubs, proximity to demand-supply hubs, infrastructure development in that area and availability of large parcels of legal land. Based on the above parameters the future locations for setting up of logistics parks have been classified into primary and secondary hubs. The primary hubs include: Bangalore, Chennai, Hyderabad ,Kolkata, Mumbai, NCR-Delhi and Pune. The secondary hubs include: Ahmedabad, Surat, Goa, Chandigarh, Mangalore, Ludhiana, Nagpur, Vizag, Kochi, Indore, Alwar and Guwahati. Primary hubs are those locations which have excellent multi-modal connectivity to the other regions of the country. These are the most urbanized locations in their region with the presence of a large demand base in their proximity. These primary hubs serve a catchment demand base of
Multi-modal logistics park is a nascent
concept in India, but an established phenomenon
benefits to the customer, company and the country.
Fig 2 LOGISTICS TIMES July 2011
Fig 3 30-40 million. Six of the seven primary hubs lie on the golden quadrilateral and thus provide an added advantage. Several major Logistics Parks are currently under development across the country around these primary hubs. Various rail linked and multi-modal logistics parks are also being developed. Secondary hubs are those locations with sizeable Developing a clear value proposition of potential logistics catchment of urban and rural population savings for the customer coupled with good connectivity and infrastructural development and hence they serve as attractive emerging locations for Identifying the appropriate location of the park Conducting a detailed analysis of the catchment area and the logistics. demand potential They typically have a catchment demand base of 5 to 8 million populace and are expected to contribute to future growth. Providing seamless multi-modal transportation solutions These secondary hubs serve as regional industrial hubs and Providing flexible options for the customer in terms of financing and space planning are important locations in terms of access to markets and Ensuring that all the basic amenities are available manufacturing companies. Majority of the upcoming logistics parks are being planned in Providing world-class service standards and a professional environment. close proximity to primary hubs. However, availability of large land parcels at relatively low cost, excellent connectivity to multiple The logistics parks in India are evolving. Success depends on markets across states and proximity to industrial clusters has led adopting relevant best practices, follow the guidelines, focus on delivering the promised service value to the users and creating to the emergence of secondary hubs as favored destinations for awareness among the users on the benefits and value of logistics the development of logistics parks and warehouses. The guiding principles for the setting up a logistics park parks. include: (Coursey: CII Institute of Logistics)
By 2012, around 110 logistics parks, spread over approximately 3,500 acres, are expected to come up across India at an estimated cost of US$ 1 billion.
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LOW COST vs RIGHT COST With the increasing inflation rates and the worry that industrial growth may Sanjay Ghone slow down, Director ImpelPro SCM Solutions b u s i n e s s houses are under tremendous pressure to control their cost and live with NO or MINIMAL increase in their product prices. Increasing raw material cost and price sensitive market is further adding to this challenge. The first area for cost reduction that comes to any business manager’s mind is logistics. It is assumed that logistics does not contribute to the product quality and hence any cost reduction measures undertaken in this area does not render product uncompetitive for quality reasons. Once the pressure on cost reduction is mounted on the SCM/Logistics head of the organisation, it is expected that he gets “low cost at any cost.” It is very critical in this perspective to understand the difference between ‘Low Cost’ versus ‘Right Cost’. While low cost is always desirable, most often, it need not be the right cost. Overlooking this fact at times can lead to other complications including business disruptions. It is important that an organisation operates at Right Cost for its survival in long run. Following are the areas where usually Businesses fail in recognizing Low Cost as against Right Cost: Staff Cost Usually the outsourcing of logistics operations are done with a belief that the staff cost will be lower as compared to that of in-house operation. Besides for expertise or focus reasons, it is also done to save on staff compensation, welfare, training and other facilities which otherwise organizations would have incurred on their own employees. Given the expectations on competency and service levels from the outsourced agency, this need not be completely true. Labour Cost Minimum Wages Act is applicable all LOGISTICS TIMES July 2011
over the country. Once the organization negotiates and finalises the labour complementand cost, rest is left to 3PL operators to manage. One should not be surprised, if he finds that the number of labour actually deployed are more than the agreed number. 3PL operators still manage this within the agreed costs (or even at lower costs sometimes) by compromising on statutory provisions. There are examples where underage labour is employed at costs well below minimum wages. It is not that organizations do not know about it, but they have very little choice, because compliance attracts cost. The cost of correction, in case of non-compliance is seldom thought of. It would be a huge cost and irrecoverable damage to the brand. And hence, the RIGHT COST would be the cost that ensures compliances. Employee Facilities Most of the organizations provide free/ subsidised meals, conveyance and other facilities to offer comfort to the employees to retain them. However, when it comes to outsourcing, these expenses are seen unwanted and hence qualify for cost reduction efforts. The Right Cost in this situation will be the minimum cost required to provide comfort to the staff of 3PL and ensure retention. Higher labour turn-over affects service levels and results in indirect cost to the organization. Warehouse Facility Organization’s in-house warehouses invariably have all basic facilities and equipment which ensure proper handling, storage and product damages. Proper flooring, docks, dust free areas, quarantines, pallets, stacking norms, racking and shelving, requisite material handling equipments, temperature control systems, fire fighting, pest control etc. are invariably in place and costs are earmarked to maintain the standards. However, the same cannot be said when it comes to 3PL warehouses. Most of the basic facilities and good warehousing practices are compromised as a cost reduction measure. This results in lowered human and product safety along with inefficiency and higher product damages.
Warehouse Upkeep One would find that the quality of in-house warehouse upkeep as compared to that of outsourced one is way different. In many cases, this could be attributed to cost saving measures. The approach should be the Right Cost in line with expected upkeep standards. Conclusion: It is critical for organisations to consider logistics partner astheirextended arm. The same amount of thrust and importance that is given to other functions should also be given to logistics and supply chain function.A good quality product gets maximum value when it is made available at RIGHT PLACE and at RIGHT TIME. It should also be at RIGHT COST, rather than at vitiated low cost. How can an organisation ensure that they operate at Right Cost? By providing required manpower based on demonstrated productivity and mutually agreed improvements. By paying wages and salaries as per Minimum Wages Act or industry standards (whichever is higher). By providing adequate employee welfare, training and other facilities. By providing adequate equipments and tools to execute the logistics responsibilities. By allowing reasonable returns to outsourced agency in line with the investments, competency and efforts. By making 3PL team a part of organizations reward and recognition initiatives. The above will ensure. . . Low employee turnover in the logistics function. Thus continuity with no impact on operations. Motivated employees with higher productivity and creativity. Capturing of correct cost of operations. 100% compliance will keep the Organisation and Brand, risk free. Availability of stocks – at right time, right place and RIGHT COST. In promoting “partnership” rather than “principal-agent” relationship.
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Time for a Change 10 Essentials for Developing a Successful Outsourcing Agreement. *Kate Vitasek It’s long past time for a change in the way outsourcing contracts are negotiated and managed. In 1968 the legal scholar Ian R. Macneil observed that most contracts are ill-equipped to address the reality of business needs in his seminal article Contracts: Instruments for Social Cooperation. It has been a long time since he issued that challenge for change. But now there is a solution to deliver better outsourcing agreements. University of Tennessee researchers teamed with the International Association for Contract and Commercial Management write The Vested Outsourcing Manual: A Guide for Creating Successful Business and Outsourcing Agreements. The organizations believe the Manual will help drive the change needed to take outsourcing into the 21st century. The Manual provides detail guiding practitioners (and lawyers!) into developing a sound outsourcing agreement around 10 core “elements.”
Element 3: Statement of Objectives/Workload Allocation This element lays the foundation for the parties in the Vested partnership to do what they do best. Together the parties develop a Statement of Objectives (SOO), which is very different from the standard SOW. Simply put a SOO describes intended results, not tasks. Based on the SOO, a service provider will draft a performance work statement that defines in more detail the work to be performed and the results expected from that work. Element 4: Top-Level Desired Outcomes The Desired Outcomes are the centerpiece of the agreement because without mutually defined Desired Outcomes in place, a Vested agreement cannot go forward. Outcomes are expressed in terms of a limited set of high-level metrics.
Element 1: Business Model Map
Element 5: Performance Management
This first step is to understand and document an outsourcing business model. It is vital to take the time to determine how well the parties are aligned to each other’s goals.
A sound agreement defines how they will manage overall performance of the both parties in the outsourcing agreement. The metrics and the associated process for managing performance will help align performance to strategy.
Element 2: Shared Vision and Statement of Intent With the business model understood and mapped, the parties then work together on a joint vision that will guide them for the duration of their Vested relationship. The vision and alignment forms the basis of a Statement of Intent drafted by the outsourcing teams.
Element 6: Pricing Model and Incentives The approach of many procurement professionals to outsourcing is stuck on one thing: getting the lowest possible service and labor pricing. The strategic bet—and paradigm shift—of Vested Outsourcing is that the service provider’s
*Kate Vitasek, one of the prominent members of our Editorial Advisory Board, is a faculty member at the University of Tennessee’s Center for Executive Education and is author of the popular book Vested Outsourcing: Five Rules That Will Transform Outsourcing.She teamed with Jacqui Crawford, Jeanette Nyden and Katherine Kawamoto to write The Vested Outsourcing Manual, which was released by Palgrave Macmillan in June.
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profitably is directly tied to meeting the mutually agreed Desired Outcomes. The more successful the service provider, the more money it makes. Element 7: Relationship Management A relationship management structure creates joint policies that emphasize the importance of building collaborative working relationships, attitudes and behaviors. The overarching principle is for both parties to manage the business— rather than the buyer managing the supplier. Element 8: Transformation Management Because the agreement is built on driving Desired Outcomes, by design the scorecard starts off “all red.” The agreement should set out how the parties will manage change as they jointly strive to accomplish the Desired Outcomes. The focus is on mutual accountability for Desired Outcomes and the creation of a culture that rewards innovation, agility and continuous improvement. Element 9: Exit Management Sometimes the best plan simply does not work out or is trumped by unexpected events. Business happens, and companies should have a plan when assumptions change. An exit management strategy can provide a template to handle future unknowns. The goal is to establish a fair plan and to keep the parties whole in the event of a separation when the separation is not a result of poor performance. Element 10: Special Concerns and External Regulations The final element recognizes there are often special requirements and regulatory protocols. This element covers how to handle those “special” requirements.
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What does it mean?
Howard James-Scott MD & CEO Big Bear Enteprises.
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Much of the language in the ‘C’suite of any company revolves around cost, PAT, margins, manpower etc. Performance, productivity and the cost effectiveness of the business units are headliners in any operational or executive board meeting. In recent times, however, one widely used term, raising itself to a position of importance in the eyes, and ears, of many senior executives, has been ‘Supply Chain Management’. To date I am still uncertain what this means to many people and what they might think supply chain management might do for their business! I am even unsure if they really appreciate that in order to have successful management in this area of their business they may have to enter into an area of collaboration & sharing that hitherto has been outside of their thinking. Heaven forbid anyone shares anything – even if it is aimed at developing a cost effective and high quality supply chain for their own business! One area of the SCM business that seems especially difficult just now is the introduction of multi-company logistics and supply chain management. Most likely because this requires even more sharing due to the nature of the multi user sites which can have many clients’, including various competitors, product at one site being managed closely together and with one single ERP system. As a consequence there appears to be some suspicion that integrity and information security will be compromised! This is a great pity as this area of the business is one sure way to deliver cost effective, high quality SCM solutions for several clients in one high integrity secure site. Think about it! Using the same manpower for several clients, adding flexibility to that manpower and using their skills extensively around the facilities ensuring high productivity and improved performance for a range of clients! It’s got to be good. Cost can be shared and the risk mitigated to such an extent that all parties, including the service operator – don’t forget they are in business too – can maintain good margins and derive good business results. Trusting to this, it seems, is somewhat difficult just now. Multi user sites – both warehouses and
distribution centers offer a range of benefits by sharing resources and offering cost effective flexible cost applications. Shared facilities such as warehouses and distribution centers provide improved agility and greater flexibility when demands fluctuate and volumes change. Rather like SaaS there is also every opportunity of employing a ’ pay-as-you-use’ methodology, with a shopping basket of solutions wherein the client can pay for the warehousing and distribution services and facilities as, and when, they are used at any particular time, for any particular standard or ‘value add’ service. This significantly reduces the cost of unused space and resources when demand and volumes change and the burden of identifying new space when major change creates overflows or expansion is needed. Optimization technology and flexible systems let companies change their supply chain comprehensively developing them into a significant business growth centers, improving efficiency and driving overall profitability. If this change includes a move to multi-user/ multi-client site operations then both Inventory & operational cost savings of circa 15% - 35% are likely to be achieved. Most multi-user/multi-client operators will use comprehensive systems for optimizing their operations and management. One such system is the IBM ILOG Inventory and Product Flow Analyst software, which is an excellent example of system orientation towards working capital management, inventory and transportation cost appreciation. These systems do need careful management by skilled personnel, but there are many logistics and supply chain service partners who can handle such complex systems and use them to the full. Such systems: Define the lowest cost strategy for each SKU, range of SKUs or even which region. Help set different inventory and stock control processes for regional or local distribution centers and/or local, regional or countrywide suppliers, this is particularly important if there is an opportunity to transport and collect/deliver for multiple clients across the region or country. Enables a formal, standardized, multi-user
inventory and working capital management process with configurable exception based workflows. Optimize product distribution and inventory levels: Define strategies based on sourcing, transportation and inventory holding costs. Provides service-level optimization: Techniques are available so users can optimize customer service levels throughout the supply chain based on a range of pre-set constraints. Source: IBM Business Innovation Centre
‘Total Cost’ of Ownership Companies casting their eye around India for new opportunities and initiatives for the supply chain arena, whether as a user of 3PL services or an in-house operator, should remember to look at total cost of ownership when searching for suppliers / vendors and be wary of those not providing innovative best practice solutions, even though they offer significantly lower costs! Even if some of those solutions do not suit your current need you must know that the potential provider is forward thinking, innovative and has cost appreciation at the core of their business. As is the case elsewhere in business low cost is completely different to cost effective and also higher logistics costs do not necessarily mean higher standards or better service levels. Cost effective solutions do exist and are well practiced around the world today. In general, industry analysts advise viewing your SC and logistics costs as a very important component in overall strategy for
business / operating cost mitigation across the whole business. A business strategy that takes into account innovative and future proof initiatives in all areas of their core business should do the same in the SCM area supporting that core business. In the long term, rising living standards are likely to drive up consumption,of all kinds, around the country, indeed we can see it every day, albeit at varying rates and with a concurrent rise in wages over time that could erode some of the countries’ current low-cost advantages. As wages rise companies are likely to push more and more towards ‘best in class’ production and SC methods in order to maximize their opportunity with the ever changing market. Recently, and in the near term, we can see the significant focus of investment in supply chain infrastructure — primarily new logistics and distribution facilities — concentrating around the major metros and larger cities, in locations with existing good transportation links. However this development also has increasingly more expensive labour and land, plus rental and lease costs continuing their upward trend. This should mean therefore that much more shared opportunity will evolve and the businesses in the ‘business’ of supply chain management should seize this initiative and drive the idea of shared services, multi-user/multi-client and innovative best practice sites/ facilities across to their potential clients but equally those clients should appreciate and become amenable to the demands for these services. LOGISTICS TIMES July 2011
Case Study y
Bring Frigoscandia Bring Frigoscandia is a logistics unit of the European business conglomerate Bring group, focusing on temperature controlled logistics.Bring Frigoscandia creates competitive advantages for its customers through flexible and effective logistics solutions for food items. Its distribution network is adapted for food items that cover all the markets that are important for the Nordic food industry. Bring Frigoscandia’s vision is to be the food industry’s first choice for logistics. To improve and simplify the understanding of their customers’ information flow, Bring Frigoscandia has chosen the GS1 System of standards as the basis for all information exchange, whatever the means of communication. In close cooperation with their customers, Bring uses GS1 guidelines for the numbering of
EDI communication flow. These GS1 Identification Keys are the foundation on which all other GS1-based applications are built. Bring Frigoscandia believes in the reliability and integrity of the GS1 System and feels strongly that more companies should deploy it in their supply chain processes. Bring Frigoscandia also uses the GEPIR system to identify and recognize partners and their GLNs. By using SSCC and GTIN in combination with GEPIR, Bring Frigoscandia can identify who has sent a particular SSCC and who has supplied the item. The GS1 standard label layouts contain standard GS1 data elements both in text and barcoded formats. This constitutes the basis for all other communication flows and for the automation on Bring Frigoscandia’s sites. The barcoded information on labels enables
identities, label layouts, and barcode structures as well as for Electronic Data Interchange. Bring Frigoscandia uses the GS1 GTIN to uniquely identify items in the different AIDC and EDI processes that link them with their customers as well as for internal communication purposes. By using the GTIN as a core identifier, items can easily be recognized by all partners in the supply chain. Another GS1 Identification Key, the SSCC, is used to uniquely identify all logistic units for both internal and external track and tracing. Every time a unit is handled at a Bring Frigoscandia site, its SSCC is scanned and logged in the company’s track and trace systems. Finally, the GLN is used for identifying both consignors and consignees and for identifying partners in the
efficient data capture both at receipt and delivery. If goods are delivered to any of sites without compliant GS1 labelling, Bring Frigoscandia re-labels them according to GS1 guidelines. At Bring Frigoscandia, all Electronic Data Interchange is performed according to the GS1 eCom guidelines using a number of standard messages. Before delivery to any of Bring Frigoscandia’s plants, customers send a despatch advice (DESADV) on item level (if the items are purchased) or despatch advice on SSCC level (if delivery is sent from their own production sites). After automatic controlling and counting procedures enabled by data capture through the bar codes on the GS1 standard labels, a receipt advice (RECADV) on SSCC level is sent as a receipt
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confirmation, including possible delivery deviations for each consignment. Inventory reports (INVRPT) are sent by Bring Frigoscandia to customers via EDI on a regular basis, which enables automatic comparisons and tuning of stock balances in customer systems. Bring Frigoscandia’s customers send selected portions of their customer orders (ORDERS or INSDES) to the current warehouse, where an automatic allocation of items is made. Before shipping the items, each unit is marked with a GS1 STILL label showing the correct routing and address information together with the SSCC. The scanning of GS1-128 bar codes containing the SSCC guarantees that the right item is routed to the right consignee. Shipment is confirmed to customers by a despatch advice message (DESADV) including possible delivery deviations. At the same time a despatch advice will be sent to the consignee where the AIDC procedures based on the GS1 System restarts. The use of GS1 standards in Bring Frigoscandia’s logistics processes complies with European food traceability regulations. Government food authorities can instantly be provided with detailed information about the origin and destination of any item. The same information, as well as any other relevant data, is also available to Bring Frigoscandia customers through the
networking systems that Bring Frigoscandia provides. In these visibility systems, also all other relevant data are included. Bring Frigoscandia is a long-time user of bar codes as carriers for core information on different levels in the supply chain. However, market requirements continue to evolve, and new technologies – such as RFID – are required to further increase efficiency. When the market develops to a point where implementation of the RFID solutions across the supply chain is required, then GS1 labels will be complemented with invisible RFID tags containing the same data as the barcodes. This will enable the automation systems along the supply chain to read barcodes, RFID, or both, depending on the local environment and other circumstances. Bring Frigoscandia will work closely with GS1 to further develop industry guidelines for the use of RFID in the supply chain. At Bring Frigoscandia, automatic handling has been raised to higher levels by using AIDC based on the GS1 System of standards. The company feels that their efforts to connect the different GS1 tools to a common data language integrated into their systems has resulted in an offer that allows them to provide a highly efficient logistic handling on their sites. Using the GS1 System in this way has been a major factor enabling Bring Frigoscandia to achieve its vision.
Courtsey: GS1 India (GS1 India is a not-for-profit standards body set up by the Ministry of Commerce, Government of India and leading Chambers of Commerce comprising CII, FICCI, ASSOCHAM, IMC, FIEO besides BIS, IIP, Spices Board and APEDA to educate and assist Indian Industry in adoption of global standards used in supply chain management for facilitating faster movement of physical goods and related information flow electronically. It is affiliated to GS1, Brussels which oversees more than 100 GS1 organisations worldwide.)
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“Hi! I am Violeta Roso, from Sweden. I am doing research on inland intermodal terminals in NZ and Australia and would very much appreciate a visit to your facility …” On the other end of the phone: “Of course. You’re very welcome to visit; which date suits you?” I couldn’t believe my luck--it was that easy! No “Call me later”! No “I am not the right person to talk to.” No need to beg! No involvement of mutual acquaintances. Just like that! Wahoo! Everybody told me that I was going to like Australia and NZ, and I did very much from the very beginning! While staying at UNWS as a visiting academic in January and February of this year I had the opportunity to meet with many people involved in seaports’ hinterland
development or in the improvement of seaports’ inland access. Some are directly involved in that development, like interviewees from the ports or private rail operators, while others are indirectly involved as consultants. No matter the direct or indirect involvement all meetings were extremely interesting and helpful and the different types of involvement provided different perspectives, which are crucial for good cases. And, good cases are what I need since the purpose of my visit was international collaborations in research. Unfortunately, during my visit both
countries were affected by natural disasters; there was massive flooding in Queensland and Victoria (Australia) and a horrible earthquake in Christchurch (New Zealand). But it didn’t break the spirits of those who live there; both Aussies and Kiwis are brave and compassionate and people from all over the countries went to the disaster areas in order to help those affected. In rescue actions, logistics plays an
The battle for the sea is won inland! * Director, Victoria Transport Policy Institute
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important role; therefore some of my scheduled meetings had to be cancelled since the persons in question were involved in those actions. And, it only confirmed what I knew before--the importance of logistics. Seaports and their inland access One of my main observations while researching seaports’ inland access was that seaports are not getting involved in the development of their inland access unless threatened by two big Cs: competition or congestion. Australia’s and New Zealand’s cases only proved this! Want to know the details? Keep on reading… New Zealand A few years ago, the Port of Tauranga had no issues with the two big Cs; with no other port in the vicinity to compete with and low volumes handled, the port had to find a way to endure. Currently, the port has a throughput of more than 500,000 TEU, compared to only 100,000 TEU in 1999 when the seaport gained a competitive advantage by establishing a direct rail access to Metroport in the Auckland area. Metroport handles about 40% of the port’s containers and the direct rail, operated by KiwiRail, runs three times a day to/from the port with future plans to increase the number of shuttles per day. The terminal manager showed me around the terminal, which was bursting with activity, but even more fascinating was the IT system they use. The success of the terminal depends greatly on this system that significantly facilitates coordination of arriving and departing units, making the turnaround of cargo very efficient. Nowadays, thanks to this well functioning inland port, the Port of Tauranga is the main
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competitor to the Port of Auckland! The Port of Auckland, with the throughput of almost 900 000 TEU, was more threatened by the third C, central location, than competition or congestion. Being centrally located, literally on the waterfront of the city centre, the port is seen as a hurdle by the community, i.e., as an obstacle between the city and the sea. The community seems to forget that if there was no port there would be no city and certainly no community. Urban growth has put pressure on the city’s infrastructure and this same community has demands for transport which naturally goes through the port. The community wants shops full of goods but does not want to see the traffic. Still, one has to go with the other and therefore the port tries to explain to the community its contribution to the city and the region as well. In that purpose the port has launched an online survey to find out how the port and the port activities are perceived by the community as well as a phone number for public feedback. The port also organises visits to the port with free bus tours so the visitors can get familiar with the port. Regarding environmental improvements the port is working on noise reduction since a large portion of goods is transported by trucks through the downtown area. One way to solve the truck related problems is movement of goods from road to rail and the port has done that by implementation of an inland intermodal terminal, Wiri, in the south of Auckland. However, the other reason, which I could sense during the whole interview, for the establishment of Wiri is strong competition with Tauranga’s Metroport – inland terminal in the same area; that apparently has taken over a great portion of the Port of Auckland’s volume. During my visit the inland port seemed quite busy despite the fact that the construction of the new rail link between the Port of Auckland and the Wiri inland port was completed barely a year ago. LOGISTICS TIMES July 2011
Australia The Port of Melbourne with a throughput of 2.24 million TEU in 2009/10 is the biggest container port in Australia, fascinatingly enough with no direct rail access to the docks! This means that train arriving units have to be transhipped onto trucks to the few hundred metres-distant port terminal area. This generates extra costs, which are not negligible, in particular when short haul rail is in question. The problem could be solved with significant investments in infrastructure but so far the port does not seem to have such intentions. However, lowering those extra port charges, which were much higher for the units arriving by shuttle trains than by road, could overcome the problem at least temporarily. Those excessive charges, in addition to high access fees and inconvenient timetables dictated by long distance trains, put out of service two rail shuttles to metropolitan areas: Altona and Somerton. CRT Group operated a shuttle to/ from their terminal at Altona, about 22 km away from the port, and Austrack operated a shuttle to/from Somerton, 20 km away. Closing down those rail shuttles, which would relieve the city from the congestion and also lower the environmental impact, shows once again that money makes the world go around and not environmentalism. The port operators prefer to run their own trucks to those destinations rather than let someone else take their share of the cake no matter how much more environmentally friendly this share could be. Those cases were rather obvious cases of competition between actors of the same supply chain that actually should cooperate for the common wellbeing. However, the Department of Transport Victoria has realised the importance of rail and put forward a proposal, “Shaping Melbourne’s Freight Future,” with the aim to introduce an intermodal solution to service the growing containerized transport through the city. Crossing my fingers for them…
Port Botany, belonging to state-owned Sydney Ports Corporation, is the second largest container port, handling around 1.9 million TEU in 2009/10, eighty percent of which are destined to the Sydney area. Despite a scheduled arrival of trucks for picking up or delivering containers, the seaport terminals and gates are threatened by one big C – congestion, creating delays. With a target of a 40% share for rail in moving containers to/from Port Botany, the port has prepared a Port Freight Logistics Plan to improve road and rail performance through maximisation of the use of rail, which should result in minimisation of growth of truck movements through the port and the city; and by that, improve inland access to the port. What actually attracted me to fly over to Australia, aside from its beauty, and what makes Port Botany very special, is the fact that there are 7 close (within 45 km from the port) intermodal terminals with rail connections to the port. However, one of them, Camellia, closed down recently with ambiguous explanations; and one, Enfield, with a capacity of 300,000 TEU, is not operative yet but its opening is expected anytime. The other five, although different in size, volume and goods handled, are functioning pretty well. Why is this so interesting? Well, short haul rail is heavily debated by academics as well as practitioners; some claim that rail services are generally competitive at distances above 500 km (typical for the USA) while some, those with European perspectives, prefer 300 km. However, Sydney’s Port Botany, with its close intermodal terminals, shows the feasibility of intermodal transport on shorter distances, and, as such, offers an important area for further research. To summarise my visit: Australia vs. New Zealand = even! Two beautiful countries, kind people, a great climate, strange animals, good food and a strong awareness that the transport future might be in rail! The awareness itself is not enough but it is something to start with--a step in the right direction…
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}There will be no change @ Mercurio Pallia~ On a whistle stop tour of India, 1951-born Yves Fargues, Chairman and CEO of Paris-based Gefco, a fully owned subsidiary of Peugeot, finds time to download a few thoughts with Consulting Editor Ramesh Kumar in Delhi. Excerpts: How did you get into Mercurio Pallia? We (Gefco and Mercurio) have been working together over the past 40 years in Europe and south America, particularly in Argentina and Chile. Recently, we decided to get married. That's when we bought majority stake in Mercurio. What's remarkable is their exposure to global markets. This came in handy when we at Gefco were looking at expanding geographically. We are the fully owned subsidiary of Peugeot. We already have a presence in most parts of the world. Recently we set up a joint venture in Russia. We felt a strong need to be present in Asia because that is where the phenomenal growth is happening. We are heavily specialized in automotive logistics both inbound and outbound - and we felt the time is ripe to enter India. Six years ago, we opened a subsidiary in China and doing well. When we saw Mercurio has a presence in India through its joint venture in the form of Merucrio Pallia Logistics, we said let us go. Besides, it is out in the open that Peugeot is building a manufactuirng plant in India. If Peugeot is there, we need to be here too automatically to manage its logistics. Our mission is to take charge of Peugeot's Indian logistics and support our shareholders in India as well. How Gefco's entry will change Mercurio Pallia ops in India? There will be no change in terms of spirit. They have been doing well in this market. One of the key factors to be the No.1 in any market is to offer quality and reliability. They have been doing that precisely and successfully in the competitive Indian automotive logistics market. Let us not forget that Mercurio Pallia has been servicing Japanese, European and American
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car makers in India. That is the right strategy. What will change now is the ability to enhance investment capacity and knowledge or technological base, the prerequisite for faster and steady growth. Our induction will help them enhance our service offerings. Mercurio Pallia has recently tied up with ETA Freightstar for rail logistics in automotive segment. Now you have walked into this picture. How this will change the new found alliance? Over the next few years, 10 million passenger cars will be plying on Indian roads. The road infrastructure would be inadequate to handle the delivery of finished vehicles to various parts of this vast country. We need to look at alternate modes of transport. Moving new passenger cars from point of production to dealers showrooms would get tougher. Not only us, everyone in this market is exploring some 'rail offer". Rail logistics is not easy, but complicated and constrained by a lot of factors. We, at Gefco, possess excellent relevant expertise in this area. In Europe, we own 300,600 vehicles or rail cars to move finished vehicles in double decker format. During this visit, we did have discussions with ETA Freightstar officials in India on some broad contours of the project. Were you not present in India a few years ago? Two years ago, we started a Representative office in Pune. However, the 2009 crisis made us reconsider that decision. So we did not actually come into India. That crisis compelled us to postpone our global expansion plans in many countries. Gefco always wanted to create two new subsidiaries every single year. But we could not do that last two years.
CII Institute of Logistics would be organizing the fourth edition of “Building Warehousing Competitiveness” conference in Chennai around the end of this month. R Dinesh, Joint Managing Director, TVS Sons and the event chairman shares the details of the conference in terms of its thematic crux and focus:
Need to promote modern, process oriented warehouses How would you explain the USP of the forthcoming building warehousing competitiveness conference? Warehousing had intially been seen as only a building provision. However, now this has evolved with both the shell and the internal systems being seen very differently and as even differentiators. The objective and the USP will be, how this and other issues affecting the sector and what is expected in the future by various players in this sector. Also, we are comparing benchmarks from countries like UK which has been the forerunner with Zoning, Tax Laws and systems which have helped the growth of not only warehouses but also the industries competitiveness. There is a strong perception that the warehouses in India continues to be the typical storage centers rather than vibrant distribution points which help all stakeholders in the value chain. Will it be a major
issue for deliberation at the conference? This was true but now both manufacturers and service providers have become clear that future growth cannot be managed unless warehouses not only become modern but where and how they are built, what are the systems and procedures driving the warehouses and last but not the least the people involved and how they become process oriented will all be part of the issues, which face the service providers in future. From the outside, it seems that the warehousing sector has witnessed explosive growth in the recent years. But WDRA statistics clearly underline that the contribution of the private sector is still very low. What’s your take on it? The earlier focus was that infrastructure will be built by the government organizations, while the private sector were users of the infrastructure. However, now it is not so. The private sector funded logistics
parks with warehouses are coming up all over India. Private sector players will also be one of the key participants in the conference. Another popular belief is the push from the private sector has almost come to a standstill in anticipation of the GST since it is slated to change the paradigm. Will the conference turn the spotlight on this critical issue? Yes. GST is not only needed for industry but for the future plans of infrastructure creation unless there is a clarity on how and when the GST will be implemented as the sector will not only wait but will suffer. Therefore, the conference will have a paper and deliberations on how CII and other players can work with the government to ensure early implementation of the system, which is very much part of the conference. What are the regulatory issues you would be taking up at the conference? The focus will be on three broad fronts. Firstly, how
wastage can be avoided in storage area by all possible means? Secondly, regulatory issues like tax, zoning and planning of support infrastructure would be discussed. And lastly we would deliberate on how processes and technology have to go hand in hand with the growth of the sector along with enhanced skill requirements to keep pace with the same. Adoption of technology and advanced systems in warehouse management is believed to be that critical gap. What is the message this conference would like to convey to the delegates on this front? Obviously, technology plays a key role in warehouse management. There is also going to be a session with IT major on the best IT practices in warehouse management. As far as this conference is concerned, there will not be any stone that will be left unturned for ‘Building Warehousing Competitiveness’. LOGISTICS TIMES July 2011
FedEx Express voted 2011 Best International LSP FedEx Express has been recognized as India’s Best International Logistics Provider in Frost & Sullivan’s 2011 Voice of the Customer Awards. The award was given to FedEx for its excellence in international logistics services and for overall best performance in this segment across key industry sectors, as rated by end users. FedEx received the highest ratings from customers for its excellence across evaluation parameters including timely delivery, security of material, pickup locations, global network, commitment to providing the very best in customer experience and value-added services. The Frost & Sullivan Voice of the Customer Award for Best International Logistics Provider is given to companies that truly demonstrate excellence in the international logistics sector. Companies with the highest ratings in the given award category from customers across the key industries are shortlisted for the award. The ratings attained by each contending Logistics Service Provider (LSP) on evaluation parameters are weighed against the importance assigned by end-users for the respective parameters, with the highest scoring company named the winner.
Regional Conference on Warehouse Development
Noted industry chamber PHDCCI with the support of Warehousing Development Regulatory Authority (WDRA) organised a day long regional conference on “Warehousing Development & Regulations- Opportunities & Challenges” in Chandigarh on 8th of July. The key note address was delivered by Dinesh Rai, chairman, WDRA. Other important speakers were: Dr B C Gupta, Secretary, Government of India, Department of Food & Public Distribution; R S Bedi, Chairman, Task Force on Logistics Management, PHD Chamber; Karnail Singh, Member, Warehousing Development & Regulatory Authority; Anil K. Choudhary, MD & CEO, National Bulk Handling Corporation (NBHC), and Arvinder Singh Bains, MD, Punjab State Warehousing Corporation. Over hundred delegates including senior government officials, captains of the industry and farmers participated in the day long deliberations.
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RNI No. DELENG-17848/2010-TC