Celerity in Business through Supply Chain- Jan-Feb 2017

CELERITY IN BUSINESS THROUGH SUPPLY CHAIN

WALMART: THE ORIGINAL SHOP & SAVE

Krish Iyer, President & CEO, Walmart India, gets candid on living Walmart’s mission everyday

EXCLUSIVE

What should you do to prepare for the soon-to-be coming GST

Analysts' Colloquium on GST

IN-DEPTH

The clarity & ambiguity in GST Manish Saigal, MD, Alvarez & Marsal

INTERVIEW

How SCM optimization is moving the wheels of success

Pankaj Chandak, Asst. Vice President, FCA India Automobiles

INTERVIEW

Simplify SCM by wearing a broader hat

Rohit Batra, Vice President – Supply Chain, Ferrero India

FOCUS ON PHARMA SUPPLY CHAIN + DISRUPTION IS THE WAY FORWARD

CELERITYIN.COM

January- February 2017 Volume 1 Issue No. 1 For private circulation only

Publisher's Note

Roll with the changes Dear Readers, 2017 has brought with it what you now hold in your hands, the inaugural issue of ‘CELERITY in Business through Supply Chain’. Celerity means velocity and through this magazine we aim to promote how logistics and supply chain best practices bring speed in business and help businesses gain competitive advantage.

2017 also brings with it a more determined Government of India which will continue to stick to its guns and do whatever it takes to bring its agenda to reality, be it a cashless, sans black money economy or the GST roll-out.

While it’s a long rough road to being a digital cashless India, we are optimistic that this determination will also see GST being rolled out by September 2017, despite political resistance. Much has been discussed and written on GST in the last two years. This version attempts to bring all current perspectives of GST by all stake-holders and for all stake-holders in one issue.

Walmart’s mission of ‘saving people money’ has been its raison d'etre since inception. With one of the largest global supply chains in the world, Walmart’s core mission is directly driven by its global supply chain practices. Therefore, we were delighted when Mr Krish Iyer consented to speak to us. I am sure you will enjoy and benefit from this read.

Interviews with senior supply chain practitioners across Industry verticals also gives us the insight that the logistics and supply chain function is now progressive and innovative enough to come out of the backroom and drive boardroom agendas.

On that note, wish you a very Happy New Year! Enjoy the read.

Charulata Bansal Publisher Charulata.bansal@celerityin.com www.celerityin.com Published by Charulata Bansal on behalf of Celerity India Marketing Services Edited by: Prerna Lodaya Email: prerna.lodaya@celerityin.com | Designed by: DesignStyle Studios Email: hemali.dss@gmail.com 1504, Darshan Heights, B M Marg, Off Tulsipipe Road, Elphinstone (W), Mumbai- 400013 Tel. No.: +91 9821245526. Email: Charulata.bansal@celerityin.com Printed by: Magna Graphics (India) Limited, 101 C & D, Government Industrial Estate, Kandivli (W), Mumbai- 400067.

Logistics Partner: Blue Dart Express Limited

CELERITY • January 2017 | 03

CONTENTS

Vol. 1 • ISSUE 1 • JANUARY-FEBRUARY 2017

12

15

33

OUTLOOK

LEADERSHIP

Manish Saigal, MD, Alvarez & Marsal (A&M), demystifies the implications GST will have on supply chain

With an upbeat outlook on India as a market, Krish Iyer, President & CEO, Walmart India, speaks about Walmart India’s expansion plans and supply chain focus

6 GST – What will it Deliver?

COLLOQUIUM

8 Time Cometh Soon Enough

A discussion providing a holistic view on GST for all stakeholders

INTERVIEWS

12 Wheels of Success

Pankaj Chandak, Asst. Vice President, FCA India Automobiles, talks about the importance of optimization in SCM integration

15 Delivering in Style For Bestseller, technology is the backbone of supply chain, highlights Ranjan Sharma, Head – IT & SCM, Bestseller India

28 On the Cusp of Transformation Managing supply chain is not complex. You just have to wear a broader cap, asserts Rohit Batra, Vice President – Supply Chain (India Sub continent), Ferrero India EDITOR: Prerna Lodaya

04 | CELERITY • January 2017

18 Walmart – The Original Shop & Save

FOCUS

22 Encapsulating Growth

Sukhendu Patnaik talks about supply chain transformation happening in India’s pharma industry at strategic, distribution and technology levels

GAMECHANGER

25 On the Road to Disruption

Rajesh Yabaji, Co-founder & CEO, BlackBuck, highlights the disruptive changes they have brought in FTL transportation services

PERSPECTIVE

30 Change over to GST

A reality check on the industry’s perception and preparedness on GST

RECAP

33 Trending Globally

A brief look at global news

OUTLOOK

WHAT WILL IT DELIVER? GST is expected to positively impact supply chain for almost all industries and provide opportunities for logistics companies to evolve their business model. The positive impact for user industries include reduction in costs and simplification of documentation, writes Manish Saigal, MD, Alvarez & Marsal (A&M).

G

ST, in many ways, is going to be one of the biggest financial reforms since independence. The paradox about this reform is that while the wait has given enough time for stakeholders to prepare, there still are many questions to be answered. Many of the expectations will get realigned as we move to the execution stage. Over the years, the indirect tax regime in India had evolved into a complex structure, which is expected to be simplified with the introduction of GST.

Pre 2003

There are many aspects still to be answered, which include: • How will be the state and center’s share of tax evolve? This will have an impact on choice of consolidation centers for end users of storage and VAS services • The final classification list of products within each tax bracket will have an impact on choices that users will make • Impact of imposition of cess and practical & operational issues related to the same.

2003 - 2005

Single point taxation, Non-refundable

GST is expected to positively impact supply chain for almost all industries and provide opportunities for logistics companies to evolve their business model. The positive impact for user industries include reduction in costs and simplification of documentation. Some of the benefits to the users can be summarized as follows: Industries with high inventory carrying and warehousing cost are more likely to shift from using many sub-scale warehouse across India to the ‘Hub & Spoke’ model.

2005 – till date

Multi point taxation, refundable for within state transactions

2016 Multi point taxation, refundable for within as well as outside state transactions

Sales Tax (ST)

Implementation of VAT

Complete VAT regime

Implementation of GST

• Single point of taxation (manufacturing) on value addition

• Implemented in Haryana in 2003 and in 21 states by 2005

• VAT implemented across all states and union territories

• Model GST Law drafted in June 2016

• Disparity amongst states on the Sales Taxes (ST) applicable

• Multi point of taxation at each level of increase in value of product

• Greater uniformity in indirect taxation across states

• GST bill passed in Rajya Sabha in Aug 2016

• Non-refundable in nature

• Tax credit on inputs (ITC) available for transactions within state

• CST reduced from 4% to 2%

• April 2017 is the proposed date for implementation of GST

• Central Sales Tax (CST) for inter-state transactions • No ITC available on CST CENVAT – Central VAT VAT – Value Added Tax

CST – Central Sales Tax CGST – Central GST IGST – Integrated GST GST – Goods and Services Tax SGST – State GST ITC – Input Tax Credit

06 | CELERITY • January 2017

OUTLOOK Primary transportation

Warehousing

Secondary transport (Hub to Spokes)

Inventory

• Decrease in the primary transportation distance from production centers to hub locations

• Larger warehouses at hub locations

• Inventory maintained and managed at hub locations

• Increase in total distance on account of additional movement from hub warehouses to spokes

• Larger volume movement to/ between hub locations

• Potential to reduce the number of warehouses at spoke locations

• Reduction in the overall inventory levels in the supply chain

• Higher capacity vehicles could be used for movement between hub warehouses to spokes

• Use of higher capacity vehicles for movement between/ to hub locations

• Increase in number of inventory turns per warehouse

• Lower risk of obsolesce/ expiry

• Lower per unit cost per km for secondary distribution

• Lower per unit cost of primary transportation due to reduction in distance as well as the per unit cost

• Warehousing cost per sq. ft. could increase

• Increase in number of inventory turns per warehouse

• Overall increase in per unit cost of secondary transportation due to increase in distance

• Lower per unit cost of warehousing on account of higher inventory turns

• Reduction in the inventory carrying cost within the supply chain

15 - 25% reduction in primary transportation cost

20 - 30% reduction in warehousing cost

20 - 30% reduction in inventory carrying cost

30 - 50% increase in secondary transportation cost

Potential to reduce the overall Supply Chain cost by 20 - 25% Opportunities for logistics services providers

• Significant growth in organized companies could attract fresh talent result in innovations • Warehousing industry may witness significant automation and technology enablement.

The role of regulators will play a key role in smooth transition to the new normal. The expectations are high and the philosophy of GST is powerful. The benefits to the economy will depend on the effective implementation of the new regime without diluting the core principles. The journey will be exciting and outcome appears to be promising. However, the ride will be bumpy in short run as we migrate to the new normal.

Implementation of GST could create multiple opportunities for logistics companies on account of supply chain optimization initiatives by companies in key industries. The opportunities can be broadly classified into two categories – physical infrastructure & services and expansion of role in the value chain.

Physical infrastructure & services: GST will result in creation of hub & spokes for the users. Existing large logistics parks and new parks will evolve as key hubs.

The hub location will be determined by logistics cost reasons rather than regulatory reasons. The hubs will need to be designed and located to enable the following: • Capability to handle multi-industry users including B2C • Connectivity with alternate modes – rail, road, water • Automation to enable velocity of cargo movement • Ability to provide infrastructure to conduct last mile value additions on cargo.

Expansion of role in the value chain: The role of logistics companies is also going to evolve. Logistics companies will have to evolve to offer services beyond cargo movement, storage and handling.

This will include certain activities like: • Inventory visibility and analytics • Channel support for goods including insourcing of C&F capabilities

• Channel management and decision support system for movement of sales • Light processing and value additions along with documentation support.

Outlook for logistics stakeholders Currently, around 6-8% of outsourced 3PL logistics is served by organized participants. GST is expected to change this penetration significantly. 3PL service providers along with logistics park developers are expected to be the biggest beneficiary of this initiative. The likely positive impact on logistics industry could be as follows: • Evolution of logistics as an operations function than a cost center in the industry • Value based selling is likely to replace cost led initiatives in logistics

Manish Saigal leads strategy, market entry, commercial and operational diligence, and post-merger integration offerings for A&M in India. He brings more than 17 years of rich experience in strategy, operations, private equity (PE) and M&A consulting. He specializes in market entry strategy, business planning, commercial and operational diligence, integration and separation advisory and bid advisory for PPP projects. Before A&M, he spent 11 years with KPMG India, where he most recently served as Partner in their Transactions and Restructuring group.

CELERITY • January 2017 | 07

COLLOQUIUM

THE TIME COMETH SOON ENOUGH If all goes well, then the most revolutionary taxation regime – Goods & Services Tax (GST) would be implemented

by April 2017. These are really exciting times for the Indian economy and companies who are planning to explore & expand in the Indian market full of opportunities. The industry is eagerly awaiting the implementation of GST as it is bound to simplify doing business in India to a large extent in addition to removing inter-state trade barriers and make India a single market. But for this to happen in sanctity, the supply chain network needs to be recalibrated and the companies need to prepare well for D-Day to harness potential benefits and move up the growth ladder. This roundtable with industry analysts would offer you direction towards seamless transformation to be GST READY! What’s the sense of the market on the implication of GST on the Indian economy?

Varun Bhat, Senior Consultant, Transportation & Logistics Practice, Frost & Sullivan: There is no doubt in the market that, implementation of GST would be one of the biggest reforms in the recent history. Ever since the announcement of GST, lot of noise was generated. However, the overwhelming share of the noise is towards the positive change and benefits that would accrue to the Indian economy in the long run. The current indirect taxation structure is one of the major impediments to the country’s economic growth and competitiveness. By simplifying the taxation structure, GST is expected to significantly enhance India’s GDP and widen the tax base. Businesses expect benefits from streamlined and rationalized distribution. Mass market, consumer-oriented industries, with extensive and deep supply chain are likely

08 | CELERITY • January 2017

to have a high impact of GST. Suneel Aiyar, Partner (gSupplier & gIM), Worxogo: GST would boost India’s GDP growth by 1 – 2 per cent. GST will mobilize revenue and reduce the fiscal deficit. It is going to impact all sections of the society – from small time businessmen to huge conglomerates and from a developing state to a developed state in this country.

The implementation of GST will give a boost to the growth engine pursued by the government.

Manish Panchal, Senior Practice Head – Chemicals & SCM Practice, TATA Strategic Management Group: The industry is eagerly awaiting the implementation of GST as it is bound to simplify doing business in India to a large extent in addition to removing inter-state trade barriers and make India a single market. It is going to benefit producers and consumers in the long run by providing opportunities for serving consumer needs better while reducing costs for producers.

What are the challenges on the way to progress?

Varun Bhat: In a federal structure as in India, any landmark and transformational change is fraught with multiple challenges.

Forming consensus on the tax rate and implementation mechanisms between the Central and State Governments, mechanism of sharing the tax revenue, dispute resolution mechanisms are some of the few challenges that need to be overcome from the administration standpoint. From the market standpoint, businesses have to essentially absorb a behavioral change. Challenges would emerge in adapting to the GST norms, re-examining the entire supply chain and rapidly aligning to it, identifying any areas of adverse impact and developing contingency mechanisms.

Suneel Aiyar: Revenue Neutral Rate could have an adverse impact, if it is unduly higher than the present tax structure. The threshold limit of turnover for dealers

COLLOQUIUM under GST is another bone of contention, aiming to broaden the tax base under GST. Robust IT backbone connecting all state governments, trade and industry, banks and other stakeholders on a real-time basis is a must. The tax administration staff will have to ‘learn, unlearn, and relearn’ the GST not only in letter but in spirit too.

Manish Panchal: The immediate challenge for companies is the race against time.

If the GST is implemented as per the government’s target date of 1st Apr, 2017 the companies only have ~4 months to understand the impact of GST on their business and get the systems and processes in place in order to be GST compliant by the deadline. Next, they will need to have a comprehensive assessment of their entire supply chain in order to understand where opportunities lie for reducing costs and improving efficiencies. Here I feel that companies which are pro-active in grabbing this opportunity to improve their operations will create sustainable advantages in the highly competitive markets.

As far as supply chain is concerned, lot many firms are unison on the fact that GST is going to transform the way they operate business. Your critical remarks on the same.

Varun Bhat: Operationally, supply chain would be one of the functions that would be fundamentally impacted. The current taxation regime had a significant impact on the network structure of the supply chain, which would have otherwise been left to be completely based on supply chain considerations alone. Under GST regime, which follows a destination principle of taxation and which aims to enable a free flow of goods and services,

Suneel Aiyar

the supply chain network would need to be recalibrated. Although the degree of impact would depend on the nature of the industry, overall the decisions that business would have to take to realign their network would be more based on supply chain considerations than taxation considerations. From an operations standpoint, for example, truck idle time at borders and checkpoints is expected to come down, which would lower the logistics costs and help better match supply and demand.

Manish Panchal: The main benefit of GST will be in reducing the logistics and distribution costs along with improved responsiveness that can be achieved by

become more competitive & transparent.

The prevailing tax structure forced manufacturing companies to invest in multiple assets, such as warehouses, for product distribution in multiple states.

GST provides an opportunity to re-look at this model and consolidate the supply and distribution base or move into an asset light model based on business considerations.

GST would also provide a significant opportunity for businesses to warrant a modification and upgradation of their IT systems in order to ensure information captured is in line with the requirements under GST. Manish Panchal: GST will create a seamless market for companies for doing business in

Challenges would emerge in adapting to the GST norms, re-examining the entire supply chain and rapidly aligning to it, identifying any areas of adverse impact and developing contingency mechanisms. realigning existing networks for economies of scale. Apart from it, credit offsets which are not currently possible such as CST paid for raw materials which cannot be offset towards the VAT liability will be possible in the GST regime, resulting in lower tax liabilities on the products.

What are the opportunities that GST is going to offer companies going ahead?

Varun Bhat: The opportunities and its size would depend on the nature of the industry. In GST, the tax base would shift from production to consumption. One of the biggest opportunities is going to be in terms of product and service pricing.

As the costing of products & services will change with GST, pricing is expected to

India. Apart from removing the artificial barriers created by tax regulations, GST will also level the playing field between large and small companies while accessing far off markets. Companies can also benefit from simplification of their supply chains through aggregation to enjoy the benefits of economies of scale.

How companies can streamline their supply chain to harness benefits post GST era?

Varun Bhat: From a supply chain perspective, companies will have to reassess and recalibrate multiple aspects of their supply chain strategy, policy and operations parameters. Product flows would have to be streamlined from raw material, to work-in-progress (WIP) to

Manish Panchal

Varun Bhat

CELERITY • January 2017 | 09

COLLOQUIUM finished goods. This may necessitate change in their current network structure.

Existing policies towards suppliers and distributors in terms of contractual norms may need to be renegotiated.

Operationally, process and systems will have to be designed and implemented to conform to the rules of GST. To accomplish such measures, companies should create a project management organization (PMO) with a given mandate to identify areas of specific change, design new process and systems, and monitor the implementation along with change management within the organization.

Suneel Aiyar: The usual narrative for transformation is centred around gains in supply chain efficiencies. I believe, there are several ways in which transformation could possibly happen. Firstly, with reduction in number of layers in supply chain, and more incidences of direct deliveries to customers / channel partners, the information float in supply chain will come down drastically.

Supply chains will become more integrated and differentiated, specifically catering to customer requirements. Secondly there would be significant cash released from supply chain pipelines, thereby improving the liquidity in the economy and enhancing shareholder value. Changes in supply chain configuration and footprint will offer tremendous opportunities for logistics service providers. Manufacturers

Infrastructure, both physical and digital, is an enabling pillar for trade. With GST enabling free flow of goods & services across borders, infrastructure development would also need to compliment and keep up with the pace of GST adoption in India. to key consumer clusters from a central warehouse (in most cases, the transit times are less than 12hrs).

What are the infrastructural changes required for getting benefits on supply chain?

Varun Bhat: Infrastructure, both physical and digital, is an enabling pillar for trade.

With GST enabling free flow of goods & services across borders, infrastructure development would also need to compliment and keep up with the pace of

With reduction in number of layers in supply chain, and more incidences of direct deliveries to customers / channel partners, the information float in supply chain will come down drastically. Supply chains will become more integrated and differentiated, specifically catering to customer requirements. may alter the sourcing footprint beyond state, offering smaller suppliers, typically in MSME, access to more customers.

Organizations need to plan their cash flows better as the move happens from exemption based tax structure to refund based tax regime.

Manish Panchal: Realigning the firms’ supply chain away from the current practice of maintaining state-wise warehouses to larger regional warehouses to take advantage of economies of scale will directly help in reducing cost on transportation, warehousing and inventory holding by 5-8 per cent, 10-12 per cent and up to 25 per cent respectively for each of the cost heads, leading to an overall savings in the range of 10-12 per cent of the total logistics cost. For example, a company having multiple CFAs in Northern states can look at consolidating its network and having a regional hub to serve different markets. This is possible mainly because of the easier accessibility

10 | CELERITY • January 2017

GST adoption in India. Taking an example of freight transportation, in India majority of the freight movement is skewed in favor of road transportation. Today, the national highways constitute to only 2% of the total road network, but carry about 40% of the road traffic. Coupled to this aspect is the poor quality and maintenance of roads that lead to accidents and equipment breakdowns, further adding to the delay and ultimately costs. If the objective of free flow as envisaged in the post GST scenario has to be met, then the investments in growing and developing physical infrastructure that enable multimodal flow of goods across India has to be scaled up.

On the digital infrastructure front,

government as well as companies will have to invest in robust IT systems and tools that would reflect and be tuned to the post GST scenario. The government has already initiated work on the technology backbone for introducing GST. Companies will need to initiate work on readying their digital infrastructure for incorporating changes in master data, transactions, compliance and reporting to name a few.

Suneel Aiyar: Transportation network modes could change as layers reduce the haul distance increases. There could be a shift towards rail and multimodal transportation. More cross-dock points will emerge and all this would result in an increase in containerization and palletization. There will be more accent on scale & automation, as well as verticalization in supply chains. We could also see emergence of business models with similar level of collaboration and sophistication as seen by shared services.

With greater visibility and collaboration between customers and service providers, we could see a shift in model of service providers from aggregator and asset light to an asset optimal player.

Manish Panchal: Companies would have to take an integrated approach towards planning for GST and implementing the necessary changes before the implementation deadline in order to ensure business continuity. A complete relook is required from the business strategy, tax accountancy and compliance, implementing the IT systems and processes, and also ensure smooth change management across the organization. On the ground, requirements would range from working with logistics service providers in creating new capacities for transport and warehousing, network optimization and optimizing on the modal mix.

What strategy parameters will change for manufacturing companies to get full benefits of GST? Varun Bhat: From a strategy perspective, manufacturers have to routinely evaluate optimal sourcing, production and distribution strategies. In this evaluation, taxation has a high degree of influence especially in selecting the optimal location of the production and distribution.

With state governments offering tax incentives in terms of exemptions and other means, production centers would be located in such zones. In post GST scenario, manufacturers have to renegotiate incentives and exemptions with

One of the biggest opportunities is going to be in terms of product and service pricing. As the costing of products & services will change with GST, pricing is expected to become more competitive & transparent.

COLLOQUIUM the respective administrative agencies or move these centers to optimal locations or evaluate contract manufacturing in relation to the competitive dynamics in the post GST scenario. From supply perspective, decisions in relation to purchase categories, price negotiations, supply base consolidation and longterm supplier contracts, are some of the decisions that would need to undergo reassessment. In terms of product distribution, strategies towards, inventory flow, stock levels and inventory policies, network structure, logistics movements are some of the parameters that would have to be reassessed.

Suneel Aiyar: By reducing layers, connecting organization tighter with customers & suppliers, GST will make supply chain function gain more prominence and influence within organizations – power shift of a sort. The game will shift from traditional cost focus to value focus. Supply chain leaders and managers will have to demonstrate new set of values & behaviors to run their supply chains effectively. In my view, change in behaviour & mindsets within the organization would be the biggest challenge that needs to be overcome for reaping full benefits of GST. Manish Panchal: Manufacturing companies will need to take a comprehensive relook at their entire network – right from the

Transportation network modes could change as layers reduce the haul distance increases. There could be a shift towards rail and multimodal transportation. More cross-dock points will emerge and all this would result in an increase in containerization and palletization. source of raw materials, manufacturing locations, distribution warehouses and transportation modes. The elimination of state barriers in the GST regime may make current strategies employed by firms redundant or inefficient and certain other manufacturing strategies may become more attractive. They would require a Project Management Office dedicated to GST to assess its impact, develop new strategies and then implement them to gain benefits.

What would be the impact of demonetization on GST implementation?

Varun Bhat: Per se, there is no direct impact between the Central government’s recent decision to withdraw the legal tender status of high denomination bank notes and GST rollout. The former is a one-time activity and the latter a longterm tax reform. However, one of the common threads between these two reform initiatives is to widen the tax base.

Technically speaking, under the existing

Companies will need to initiate work on readying their digital infrastructure for incorporating changes in master data, transactions, compliance and reporting to name a few.

taxation system, loopholes were identified by various manufacturers, traders and distributors through which, they would sell goods downstream without invoicing and thus avoiding paying taxes. However, under GST, they are being incentivized to sell goods downstream through an invoice in order to claim input credits.

Suneel Aiyar: It would aid investments for building logistics infrastructure as demonetization is expected to make real estate cheaper. Also interest rates are predicted to drop. Growth in digital payments will make e-commerce sector scale faster. With growth in digital payments, role of wholesalers could undergo a change.

Manish Panchal: GST and Demonetization are two completely different policies targeted towards different outcomes. GST is applicable on all value-added business transactions irrespective of the mode of payment whether it be cash, credit or any other bank instrument. Moreover, while the government is targeting the GST rollout by beginning of FY 2017-18, realistically we expect the market to transition to GST only by Q3 of FY 2017-18 and by then the demonetization exercise would have been long complete. Thus, I feel there would be no visible impact of demonetization on GST implementation.

CELERITY • January 2017 | 11

INTERVIEW

WHEELS OF

SUCCESS You have been a part of the automotive transformational journey in India. How do you describe the scenario then & now?

The journey has been exciting as well as challenging. In my journey of over two decades, the automotive supply chain transformation has been huge. The transition is from a limited number of production plants & capacities to an entire global range available in the country today.

What used to happen then is that, the product innovation used to take the lead and supply chain innovation used to happen later. The gap used to be significant in terms of timing also. But now, it’s almost reversed or parallel. These days, supply chain innovations take place simultaneously with product innovation. This gives OEMs the time to optimize the operational efficiency of the supply chain and ensure the process is more robust. The biggest positive transformation that is being witnessed today is in our organically stimulated capability to match international standards.

12 | CELERITY • January 2017

The time gap has been reduced significantly and sometimes, supply chain innovation is even ahead of product innovation. This is surely a good sign for companies setting foot in this burgeoning market.

What are the prerequisites for any automotive company to stay ahead of the curve in such a stiff competition?

As the cost pressure is mounting, the supply chain is gaining more significance when it comes to optimizing the prevailing costs. In this highly competitive market, supply chain provides you an edge to stay ahead of the curve. If that can be managed smartly, half the battle is won.

It also enhances a company’s footprint in the market and ensures a faster customer outreach. Earlier the service intervals for cars used to be 5000 km. Nowadays, the cars we produce need not be serviced for 15000 km, which means that our customers get to enjoy their ownership experience with our cars without having to worry about the next service interval. This

INTERVIEW

“Optimization is the most important element for an organization to succeed. The best way to do that is to integrate the entire value chain and processes. The more you integrate, the more you are able to optimize the entire supply chain,” asserts Pankaj Chandak, Asst. Vice President, FCA India Automobiles. Having close to two decades of experience in managing automotive SCM, he shares his insights on the transformative landscape of supply chain over the years. Excerpts…

reflects the quality of our manufacturing and reliability of our products.

How can we optimize the entire automotive supply chain from production to service?

Optimization is the most important element for an organization to succeed. The best way to do that is to integrate the entire value chain and processes. The more you integrate, the more you are able to optimize the entire supply chain. This means that you can understand the needs of the entire

value chain well in advance. You have a better understanding of the value chain.

You have a fair idea on the fluctuations in the chain. All these aspects give you input for optimisation. Integration has two dimensions to it: integration through information technology and integration through analytics or human intelligence.

One must ensure that these two aspects are taken cognizance of while optimizing supply chain. Integration also offers you the ability to become more transparent across the value chain.

We are changing from a very fragmented structure to possibly a very unified structure. That will bring in a lot of change. Expectation from the GST regulation is extremely high right from a consumer to an organization.

Everyone feels that things will change overnight post-GST. But that’s not going to happen. To achieve such a level of efficiency will take some time.

The biggest pressure on the supply chain will be to ensure that there is a visible benefit to every element of the chain till the end consumer.

What are the qualities that you look for in a dealer & partner?

The most important criteria for evaluating a prospective partner is that he should have a system which gives us visibility of his entire operation. He should be mentally prepared to have his systems as transparent as possible. He should have a reasonable infra-structure with a sound financial bandwidth.

How do you build better supplier relationships to harness mutual benefits?

There are two significant elements of a business among others – technology innovation and the capability to produce.

There should be a seamless transfer of technological know-how as well as capability enhancements. A successful partnership is all about benefiting from each other’s strengths and grow together profitably. The expectations are set at the beginning of the contract. We work in tandem with our suppliers by transferring

CELERITY • January 2017 | 13

INTERVIEW intellectual input and technical expertise as we progress with our partnership. Today we have over 100 dealers in our network. From the input side, there are about 350 – 400 different categories of suppliers who supply us various products and services in India.

GLOBAL UPDATE

With Fiat Chrysler Automobiles being a global alliance, how are global best practices leveraged on the Indian ground with its inherent limitations?

Amazon has recently struck a landmark deal with Fiat Chrysler to sell three different models – the Panda, the 500, and the 500L, via the web, and for significant discount over what a dealership charges, the cars, which will initially only be available to Amazon shoppers in Italy. Times are a changing for automotive industry as well and it’s going to see disruption of sorts once online model starts working for this sector as well.

How crucial is the reverse logistics?

About two years back, as our business needs were increasing in terms of the space resource, we had two options – expand within the current space ratio or move out to a bigger place. After thorough evaluation, we realized that moving to a bigger resource would give rise to many transitional challenges because it might have impacted serviceability to the customer. We improved our process to about 60% by using various elements and by improving that, we could have achieved 60% more space, which was adequate for expansion plans. Prior to the year 2012,

The FCA India plant is as good as any global FCA facility because we have adopted all the global processes in our local manufacturing facility. As far as supply chain is concerned, the in-bound side, we adopt many global practices, because we have a specific pattern for in-bound logistics. However, for the out-bound side, we have to be dependent on the external situations such as infrastructure. We have certain specific locally developed practices to beat the inherent challenges.

Reverse logistics is gaining importance these days because it is an important tool for automobile companies to control warranty costs and provide speedier support to its clientele. At times, it fills in the gaps related to technical in-adequacies.

Chrysler Automobiles India.

Good quality human resource is the cornerstone of creating a sustainable supply chain. This should never be compromised. Also, one should be judicious when adopting new techniques to ensure they suit the purpose and help achieve the objective of the business.

What’s your message to new age supply chain professionals?

One of the important messages that I would like to give new age supply chain professionals is to remain grounded. They should never lose sight of the end customer even if you are not directly connected.

Whenever you are part of any operation, you should ensure that you should ease the life of an end consumer.

Kindly share with us one of the most critical projects you managed at Fiat

we had an external partner for our dealer network. However, in early 2012, we decided to develop our own national sales & service network. The call of the day was to change the existing dealer network to a completely new network. This was a really challenging task as we also had to ensure that our end consumers don’t suffer because of this operational transformation.

We evaluated all the partners and had to ensure they all were operational at the same efficiency level at which the network was, previously.

How can companies build sustainable supply chains?

Good quality human resource is the cornerstone of creating a sustainable supply chain. This should never be compromised. Also, one should be judicious when adopting new techniques to ensure they suit the purpose and help achieve the objective of the business.

Kindly comment on the supply chain era post-GST. We are changing from a very fragmented structure to possibly a very unified structure. That will bring in a lot of change.

Expectation from the GST regulation is extremely high right from a consumer to an organization. Everyone feels that things will change overnight post-GST. But that’s not going to happen. To achieve such a level of efficiency will take some time. The biggest pressure on the supply chain will be to ensure that there is a visible benefit to every element of the chain till the end consumer.

What are the green initiatives taken by the company?

We are working on a new supply line for new products which are to be manufactured in the year 2017. We have taken green initiatives for that. We might be buying zero energy from outside. This is under work in progress.

Pankaj Chandak has varied experience in Aftersales operations, Channel Management, Supply Chain Management, Logistics, Accessories and of course in Spare Parts Sales & Operations. At FCA India Automobiles, he has pioneered several new initiatives on the consumer and the business side which ensured timely availability of spare parts for consumers and significantly improved Fiat India dealer profitability.

14 | CELERITY • January 2017

INTERVIEW

DELIVERING IN

STYLE

“Supply chain has to be adaptable to changes and that can only happen when it’s fully integrated with technology,” highlights Ranjan Sharma, Head – IT & SCM, Bestseller. For Bestseller, technology is the backbone of supply chain and the company is progressing ahead in bringing out fast fashion for its consumers in the shortest time possible to maintain the lead.

CELERITY • January 2017 | 15

INTERVIEW How challenging is it to be a part of such a dynamic industry where fashion changes almost every quarter?

It is very challenging and at the same time exciting too, as you continue to innovate every day. Fashion doesn’t change every quarter. In fact, it changes every week for us. This means that we are launching new products every week.

Accordingly, we have schedules right from the manufacturing cycles to the store drops, our entire supply chain has been planned and organized in such a way that we adhere to these timelines. Yes, there are issues that crop up in between, but that’s part and parcel of doing business.

We are able to manage supply chain inefficiencies to a great extent by better predictions and involvement at regular intervals. When we start the planning, we start with the launch date at the store front. Then we start going backwards in terms of when and where the product should be manufactured, when should it be ordered, and we order accordingly. We have captive manufacturing units. Most of the manufacturing units across the globe are manufacturing products exclusively for Bestseller. This definitely offers us a lead over others. We have capacity block with most of the manufacturers and it becomes a little easy. But then again, the supply chain needs to be tracked and traced. We are facing issue in that regard. In order to gain complete transparency, we are working towards streamlining our supply chain efficiency. We are working in the direction of complete vendor collaboration to integrate with the supply chain.

How do you ensure keeping checks & points in place?

We have various check point in terms of quality control where we have in-line quality inspection at production facility to ensure that there is no deviation from the agreed specifications. Hence, we are able to control counterfeits to a great level. As part of sustainable apparel coalition (SAC), today, many companies have their own social audit standards and methods, some with only minor differences, which means that suppliers spend a lot of time and resources on managing the many audits.

We have a very stringent Code of Conduct, which governs the entire manufacturing cycle, which also involves raising labour standards at industry level as we need a feasible way to go beyond compliance.

How is technology an enabler in the whole scheme of things at Bestseller?

Bestseller India is a very young organization and everything revolves around ease of use, speed and control. Hence technology is at the fore to deliver the same. As I earlier said, we are working towards

16 | CELERITY • January 2017

devising a solution to connect our suppliers and vendors in the value chain to make it more transparent. We are integrating our back-end supply chain.

Managing so many brands under the umbrella Bestseller, what are the challenges that come your way and how do you mitigate them?

We currently have 5 brands in India with all of them having their own ethos and DNA. But at the process layer, we try and maintain a uniformity, which helps the common layer to deliver things efficiently and effectively. Each brand’s thought process is very different from the other.

The challenge is what works for one brand may not work for another. So all these brands demand different strategies as far as store layout, visual merchandising and marketing is concerned. We have tried to keep the core processes similar. There will be variations in terms of store format, visual merchandising. But sourcing, buying and supply chain remain harmonized to keep things simple.

How does the entire value chain work at Bestseller, laying emphasis on supply chain?

Supply chain across all the brands is a common layer with unified process and technology. Our sourcing happens from

to diversity of the country, infrastructure availability, etc. Our supply chain is tuned to support the current prevalent conditions rather than going for a highly efficient supply chain network followed globally.

Our supply chain is geared up to suit to demands such as various assortments, size variations across different parts of the country, etc.

The company places strong thrust on sustainability. Your take on that Being a large global organization, sustainability is at the core of most of our decision making. BESTSELLER FOUNDATION has become shareholder in Lawrencedale Agro Processing (LEAF) that supports small scale farmers at one end and providing top of the range products at the other.

Around 80% of the population in India is involved in farming, but with an average plot size of just under three acres, the farmers as well as the retailers rely on middlemen to buy, transport and process the farm products before they reach the shops. It is LEAF’s mission to change that.

LEAF’s business model is designed to reengineer the supply chain for farm produce in India – empowering the farmers, the retailers and the consumers.

On average fresh produce in India changes hands seven times which results in loss of and damage to produce as well as a

Today more than omnichannel, it’s a hyperlocal market. Everything has to merge towards hyperlocal. You can’t exist in one channel only be it physical stores or online. You have to be available wherever your customers are. You can’t get your customers to store, instead you need to be available as per his convenience and not yours. multiple countries including India. And there are different processes followed in case of Import and India purchase. Once the merchandise is at DC then the common process kicks in. each of the brands may have different manufacturing vendors, but the moment they reach our distribution centre, the same process is followed across the group such as order management, pick-pack, logistics, etc.

What are the best practices implemented from the parent company?

Most of the best practices coming from our parent company are in the area of backward integration. We haven’t inherited much from the supply chain side from the global company except a lot of quality checks and balances. We have adopted the process of selecting vendors and manufacturers for our products from our parent company following the guidelines in our code-ofconduct. Not much has been implemented as far as supply chain is concerned owing

reduction in profit at every step. Ultimately that means low profits for the farmer and mediocre products at relatively high prices for the consumer, with minimum profit for the retailer. LEAF’s business model is based on control of every step of the supply chain – from farm gate to shop shelves.

LEAF supplies 300 retailers (and counting) all over Southern India with high quality produce, cleaned and packed. The produce is sourced from 1,500 farmers who receive high quality inputs and training on good farming practices. At harvest time the farmers can sell their produce to LEAF and are thereby guaranteed a profit.

From 2014 to 2015, data collected by LEAF shows a 25% increase in average productivity among the farmers. Until 2020/-21, LEAF aims to grow its network of farmers to include over 10,000 farmers.

How is technology enabling the company to enhance traceability & transparency in supply chain?

We use best of the breed solutions with

INTERVIEW GLOBAL FACT FILE Every year BESTSELLER brands have approximately 220 million products manufactured at more than 700 factories in Europe and Asia. The company acknowledges that this great leverage also brings along a responsibility to ensure that its products are manufactured under the right conditions both for the workers involved in the production and for the environment. high level of integration with logistics service providers for better visibility. On the sourcing side, we are in the process of finalizing new solutions to bring in seamless processes.

According to you, how would the technology systems look like in the years to come for supply chain efficiency enhancement?

Technology systems will become completely integrated for different processes with a lot of them becoming mechanical and hence giving better visibility and data for decision making.

Technology is the backbone of supply chain. If you want to drive efficiency, if you want to improve productivity, bringing in visibility, things have to become much more repeatable so that you reduce manual dependency to make things much more idiot proof. It has to be mechanical in nature rather than running under the dominance of a few people. Supply chain has to be adaptable to changes and that can only happen when it’s fully integrated with technology. There are various partners involved in the supply chain, so if

Localization in terms of processes, solutions and support and ease of use are some of the key factors that one needs to consider while implementing technology in SCM. The company should have a strong integration layer with scalability as a strong character. you leave a few people to decide and agree upon a decision, it might become chaotic.

What are the key factors that one needs to take into consideration while implementing IT in SCM? Localization in terms of processes, solutions and support and ease of use are some of the key factors that one needs to consider while implementing technology in SCM. The company should have a strong integration layer with scalability as a strong character.

What’s an ideal supply chain?

An ideal supply chain needs to have complete visibility in terms of backward processes, forward processes, and you are able to reduce manual intervention in the distribution centre front, then you can be foolproof. The average lead time to reach the store from the distribution centre is almost three days, and if we can bring that down, it will add up to the overall value. That’s best position to be in. I think the biggest gamechanger in this direction is GST. Road infrastructure needs to be improved significantly. If this is sorted, we don’t need to hold our inventories in our warehouses for long time.

What's your take on e-commerce expanse?

Today more than omnichannel, it’s a hyperlocal market. Everything has to merge towards hyperlocal. You can’t exist in one channel only be it physical stores or online. You have to be available wherever your customers are. You can’t get your customers to store, instead you need to be available as per his convenience and not yours.

Ranjan Sharma has been working with Bestseller India since August 2012 as Head of IT and Supply Chain and has over 20 years of experience. He started his career in June 1996 with Futurecom and thereafter a stint in Vishal Retail Ltd and Future Group. Academically, he is an MBA from American International University of Management & Technology and a GNIIT from NIIT.

CELERITY • January 2017 | 17

LEADERSHIP

THE ORIGINAL

SHOP AND

SAVE Walmart’s international success rests on the fact that in every location where Walmart operates, they are local. The company carries local products from local suppliers that appeal to local tastes, local needs and local fashions. “As a wholesale cashand-carry business, we work with and develop local suppliers and create local beneficiaries along the supply chain. Approximately 95% of the merchandise sold in the Best Price Cash & Carry clubs is locally sourced within India, thereby creating jobs and contributing to the local economy,” asserts

Krish Iyer, President & CEO, Walmart India. A long-term retail

professional with global retail experience, Iyer describes the entire retail transformational diaspora and how he plans to capture this vast ocean full of immense opportunities. Excerpts from an exclusive interview…

18 | CELERITY • January 2017

LEADERSHIP Having years of experience in retail sector, how has the entire retail sector transformed over the years?

This is truly India’s time. India is the sole bright spot on the global economic landscape. There is a lot of focus in India today on the fast-growing retail/wholesale sector. Experts see it as India’s next big opportunity in terms of investment, employment, supply chain growth and lifestyle changes. Through the last two decades, economic liberalization in India has opened up new avenues for every economic class, albeit in varying degrees.

India is an extremely attractive market for organized retail industry to service the traditional retail and also the end-consumers. As per the report titled, ‘Retail 2020: Retrospect, Reinvent, Rewrite’ by Retailer Association of India, the overall retail market is slated to grow at 12% per annum, modern trade will grow twice as fast at 20% per annum, and traditional trade at 10%. e-Retail is undeniably a very big change and is here to stay. Understandably, that is where the consumer is going. We believe the next five years will belong to those who commit to provide the omni-channel experience to customers.

On the policy front, there is a visible progress made by the Governments (both, the Centre Government and many state governments) to create ‘ease of doing business’ & planned GST rollout next year and I am convinced the country is headed in the right direction. Recent bold move by the Central Government on demonetization will push digital agenda and support growth of formal & visible economy. There are great initiatives such as `Make in India’, ‘Skilling India’, ‘Digital India’ etc., to realize the common goal of bringing long-term benefits to the country.

A few trends that are becoming prominent in Indian retail environment are: • Mobile Commerce – Increasing use of Mobile among consumer (4G & increasing use of smart phones will give it further boost) • We see trends like 'App only' emerging among several e-com players • Consumer is using these smart devices in every step of their journey (product research to mobile checkout etc., thus having a series of digital touch-points at a given point in time) • New non-cash payment solutions becoming mainstream (EMI, Credit/ debit, e-wallet, etc.)

• Retailers and tech companies will continue to disrupt the traditional delivery model – as companies go from national delivery to hyper-local to local with customers expecting multiple fulfillment options and cheaper & faster delivery. (Globally we are seeing

delivery solutions such as ship-fromstore, curbside pickup, expanded pickup in-store, Sunday delivery, delivery lockers, and ride-sharing-like delivery, etc.)

• Experiential retail is fast catching up.

Developers are focusing on integrating technology for an experiential shopping experience such as digital trials of apparel, entertainment zones, etc.

• S-Commerce: Commerce will continue coming through social media.

You have been a part of Walmart International before taking reigns of India operations. What are the crucial learnings achieved from that role?

Walmart is unique company very focused on living its mission of ‘saving people money, so that they can live better’ everyday. The stint in USA helped me become part of that culture and mission.

I take lot of pride in our culture and our way of working. The stint there has helped me in leading Walmart India business and growing the similar member focused & people oriented culture in our India business. As you understand, India is a unique market for Walmart as we are completely focused on growing our B2B Cash & Carry (C&C) business. Walmart has continued to strengthen its business in India in line with its commitment to the country and build a world-class operation in C&C business, bring global expertise and contribute to the success of small businesses, kiranas, small farmers and other stakeholders.

Companies across the globe follow Walmart model for growth. How difficult and challenging it is to sustain the growth momentum in

such a heightened competitive era?

Guided by the Walmart Mission of ‘Saving People Money, so that they can live better’, Walmart India is extremely focused on serving our members across all our 21 stores in 9 states. We believe that we bring great value to our members and they have reposed their faith consistently in us. Their valuable support continues to encourage us as we grow our business in India. Several independent surveys have rated as the best in ‘Cash & Carry format’ and on ‘Customer Service’.

The government has allowed 100% FDI in food retailing. What’s your perception on that and how can it be made more viable for companies wanting to do business in India?

As we have said earlier, the decision by the government to allow 100% FDI under government approval route, including through e-commerce in trading of food products manufactured and/ or produced in India, is very progressive and far reaching. This step will help in reducing wastage, farm diversification and encourage industry to produce locally within the country. This move will benefit farmers, give impetus to the food processing industry and create vast employment opportunities in the country.

We, at Walmart India, are evaluating the guidelines at this point of time.

Walmart is known as one of the best supply chain companies in the globe. What are the salient features of Walmart SCM?

Walmart India’s supply chain focus has always been towards building a foundation of supplier cooperation and operations capability. Managing vendor replenishment & fulfilment and ensuring

CELERITY • January 2017 | 19

LEADERSHIP

good inventory metrics (stock levels, vendor fill rates, forecast accuracy, etc.) help us drive the discipline towards cost and efficiency.

Retail Link®, our platform for supplier communication and our Joint Business Planning and other practices, allows for better flow management. We work with our vendors to introduce automated scheduling and appointment capability, for purchase order visibility and other best practices such as direct to store shipments and palletization programs.

As we provide the convenience of online shopping and a Best Price app to our members, we have started providing delivery capability (through third party logistics) and visibility solutions.

Technology and processes thus enables visibility at all stages and allows us to efficiently manage costs and maintain a high level of service for our valuable members.

How crucial is enhancing tieups with the partners across the value chain to harness business competency? How do you achieve that?

Walmart deals with almost all major FMCG companies and with several regional and local players. There are many small suppliers in various states who have grown profitable and bigger by doing business with the brand. With ’Responsible Sourcing’ being a priority area, the development of suppliers in terms of helping them comply with laws of the country as well as upgrade their facilities, making them understand the right and ethical way of doing a business

20 | CELERITY • January 2017

is equally important. Through consistent efforts and training to meet global food and other safety standards, some of the suppliers have been able to grow their business significantly and find new opportunities to supply to new partners.

way business is done in India. Hence, I am confident that it will not only bring relief to the consumers, but also help retail sector and building supply-chain efficiencies in India in a big way. This is thus a win-win reform for all.

What’s your views on the GST implementation and how is it going to impact your business?

How do you plan to spread your wings across the country?

GST is one of the critical tax reforms, which has the potential to create one single market in India for goods & services and will boost country’s economy significantly.

Implementation of GST will reduce transaction cost of doing business, as well as reduce food wastage and bring down prices. This fundamentally will change the

We are in the country for the longterm. As we look at it with a long-term commitment perspective, we will continue to contribute to making a difference in terms of helping people save money so they can live better. Our mission for our cash &-carry clubs is about making every small business prosper. The focus is on the customer all the time and in ensuring

LEADERSHIP UP, CLOSE & PERSONAL Who’s your mentor?

I have been fortunate to have good mentors at different stages in my life and each one has helped me developed certain leadership competency.

One of the most important habit that my father, who was also my first Mentor, has inculcated in me very early in my childhood was to learn from all around us and from wherever we can acquire right knowledge, attitude, aptitude & all that makes this world a better place.

He was also a people’s person. I have learnt my ‘people focus’ from my father, who always used to tell me that ‘people’ should always be central to all that you do and every business is a ‘people business’.

During the time, I was doing my Articleship under CA Regulations, VC Darak, my Principal at the CA firm and my teacher has been my Mentor when it came to 'Acting with Integrity’ at all times irrespective of the business result that was required to be driven.

Early in my professional life, when I was working for ANZ Grindlays' subsidiary, Suraj Mehta, who was General Manager in the Bank and my Boss, was my Mentor. His management style and sense of fairness/ justice made a lasting impact on me.

I greatly admire Walmart CEO Doug McMillon for this immense focus on People and Culture. I practice many of the management principles, including agility & focus, advocated by former GE CEO Jech Welch.

Walmart Founder Sam Walton has been an idol for his golden ’10 rules for building a business’. I also deeply admire Apple’s Steve Job, P&G’s AG Lafley & Harvard Professor Clayton Christensen for their focus on ‘Game Changing Innovations’.

What’s your success mantra?

For me, success mantra is ‘People Focus’ that the customer saves money. We will continue to be true to our mission and our core purpose. Walmart India plans to take the total store count to 70 in a few years.

One of the key reasons of Walmart’s international success is the fact that in every location where Walmart operates, they are local. The company carries local products from local suppliers that appeal to local tastes, local needs and local fashions. As a wholesale cash-and-carry business, we work with and develop local suppliers and create local beneficiaries along the supply chain. Approximately 95% of the merchandise sold in the Best Price Cash & Carry clubs is locally sourced within India, thereby creating jobs and

& ‘acting with Integrity at all times’!

My efforts are always directed towards building four-dimensional leadership among our people. Four dimensions which encompass ‘Passion for People, Passion for Performance, Passion for culture-ethics-integrity and Passion for leading on social & environmental issues’.

Recent book you have read and have implied learnings on the business

I am currently reading ‘Competing Against Luck’ by Clayton Christensen & his co-authors. He is my favorite when it comes to Innovation. According to me, he is the foremost authority on innovation and growth. This book teaches as to how one can convert Innovation from being a game of chance to a robust process-driven initiative. Another compelling point the book makes is that for gamechanging innovation, understanding the customer is not enough. It is necessary to understand the 'job' the customer is 'hiring' the 'product or service' to do.

What’s your passion?

Making a difference in the lives of others is my passion. As an example, I take great pride in our work in Walmart India on ‘Women Economic Empowerment by supporting Women Owned Businesses and driving an effective ‘Diversity & Inclusion’ program for our women associates. It is also very fulfilling to see the impact which we make in the lives of thousands of small Kiranas and our small farmers. Our deep focus on renewable energy & waste management across our stores to keep our environmental footprint minimal is very satisfying.

Your most treasured asset…

My family is my most treasured asset.

It is a source of strength for me in my journey!! contributing to the local economy.

You have been taking various initiatives on CSR front. For instance, a recent initiative has been to equip women with professional and personal skills to build robust businesses. Kindly elaborate on some of them.

As a responsible company, Walmart India strives to improve the quality of life for employees, customers, community and country through financial contributions, initiatives, donations and volunteerism. The company focuses on skills training, environment sustainability, women empowerment & community

development. The company has a robust ‘Store of the Community’ program which encourages employees to volunteer in their local communities.

Walmart has an ongoing commitment to empowering women around the world and helping Women-owned Businesses (WOBs) succeed and grow. In April 2016 with support from Walmart, Vrutti and WEConnect International launched the Women Entrepreneurship Development Program (WEDP) in India with 32 selected WOBs in the first batch. The nine-month program aims to help the women develop their personal and professional skills to build robust businesses. During the ninemonth program, the WOBs will undergo capacity building training, mentoring and technical support customized to the needs of their businesses. The WOBs are located in Andhra Pradesh, Delhi NCR, Telangana, Punjab and Uttar Pradesh and deal in both food and non-food categories. This initiative is designed to help women entrepreneurs achieve higher levels of business growth and help them make more competitive and resilient in today’s dynamic business environment. In October 2015, WEConnect International launched the ‘Women-owned’ logo in India. As part of an overall strategy and goal to source more from WOBs, Walmart supported WEConnect International, to develop the logo to help members easily identify products made by WOBs. Besides, through training and sourcing, Walmart India’s Women Economic Empowerment initiative is providing sustainable employment opportunities and significantly expanding economic opportunities for women across India.

Training initiative focuses on women in agriculture, factories and the retail sector.

Walmart India is committed to increase sourcing from woman owned businesses in order to grow diversity in its supply chain. With a combination of our local programs and support from the Walmart Foundation, Walmart India is positioned to impact more than 75,000 women in India.

You are present in cash & carry and wholesale formats only. Are there any plans of stepping into retailing in the near future?

At Walmart India, we are completely focused on growing our Cash & Carry business in the country and plan to take our total store count to 70 with a full omni-channel strategy. This is an exciting market for us.

CELERITY • January 2017 | 21

FOCUS

ENCAPSULATING

GROWTH 22 | CELERITY • January 2017

FOCUS

Indian pharmaceutical industry is on a roll and how!

Unaffected by the economic downturns globally, pharma has been one of the few fortunate sectors to sustain growth.

But to augment growth going ahead, Sukhendu Patnaik writes that the industry must transform its tech capabilities and supply chain efficiencies. The good news is it has already started happening and the industry is set to offer newer paradigms in showcasing GenX supply chain best practices.

D

omestic pharmaceutical industry is one of the few sectors, which has remained unfazed by the economic turmoil during the last decade. Market growth has remained robust even though operating margins have been sluggish in the recent past. The industry has been facing a unique situation when new drug discoveries have been few and far between. New drugs are one of the major drivers of growth. During the initial days of a product in the market, the margins are justifiable high. Now that driver is no more present. During the last few years, government regulations have capped prices of large number of formulations and have removed quite a few fixed dose combination formulations. This has done two things. One – sizable top line is wiped out for discontinued formulations and two – both top line and bottom line are reduced for those formulations coming under price control. The industry is rediscovering itself to balance lower realization and subsequent lower bottom lines. During this, churning supply chain approaches of pharmaceutical companies have been undergoing subtle changes.

Finding the realms of supply chain

Supply chain as a function encompasses the upstream starting from manufacturing to the downstream of distribution and customer engagement. All other functions like procurement and planning fall in between. However, pharma industry is taking its own time to recognize this. Most players consider distribution function as

the supply chain. There are only a very few organisations who have a holistic view of the function. Most MNCs have a very different approach to managing supply chains. With new products drying up, operating margins under pressure, organisations are forced to figure out ways to optimize cost. This has led to focusing on supply chain as an opportunity to optimize cost. This exercise has led to recognize substantial organizational value tied up in this function. Supply chain transformation is being viewed at three different levels- strategic, distribution and technology adoption.

Working on core competencies

At a strategic level, organizations are asking fundamental question on manufacturing and distribution operations. Look at manufacturing from post-independence time to early 90s. During this period, every pharma company had to have own manufacturing facility to start with. There was no option to outsource manufacturing till mid-90s. Primarily the industry believed that confidentiality of technology and control over quality would be compromised if manufacturing is outsourced. However, the question

of core competence answered some of the riddles. Is manufacturing the core competence of the top companies? If not, then why not outsource those products, which do not have significant technological confidentiality? This has been a fundamental shift in the supply chain since the 90s. Currently more than 50% of all domestic products are outsourced.

Supplier management systems have ensured that quality management systems, documentation and compliances are at par with the best in class the in the industry. The contract manufacturing space has witnessed evolution with capability to develop new formulations.

Three major contract manufacturers cater to more than 25% of the domestic market demand. This shift in approach has offered significant flexibility to the industry for quick entry or exit. Access to technology through contract manufacturing has offered competitiveness to the industry.

Working on unique distribution models

On the distribution operation side, the transformation has been incremental.

This has three elements to consider.

One is the physical distribution network,

Connecting distribution centers with distributors and retail pharmacies on mobile app improve inventory turn. Inventory write-off to the extent of 1.5% would be reduced substantially. Warehouse operation efficiency is likely to improve by using RFID technology.

CELERITY • January 2017 | 23

FOCUS second is the logistics services and the third is the transaction solution. Till the second half of 80s, distribution network was replicated by most organizations.

All major companies would have their company owned depots at the same city across the country. For example, any company planning to operate in Gujarat will have a depot at Ahmadabad. Very rarely one would think of Baroda or Rajkot or any other place. Such an approach had reasons as well. Those distribution centers were manned by the company employees.

There were companies who would service customers (distributors) of a state which does not have a depot there from Mumbai. Those things have changed with outsourcing of distribution services to third parties. This has improved agility and reduced cost of operation. Pharmaceutical warehousing has been witnessing gradual changes over the last decade. Now quite a few large companies have developed their state of the art warehouses with 80% temperature controlled carpet area and a dependable cold chain ecosystem.

Utilization of greater heights in warehouse has helped reduce warehouse rental cost. Some degree of modernization in warehousing like racking, stacking and use of mechanized storage and retrieval equipment has been witnessed during the last decade.

Material movement is an area, which has witnessed significant improvement in this industry over the years. There was a time when company owned vehicles, passenger trains, postal services were used to reach material to the distributors.

Now we have dedicated logistics service providers who offer multimodal transport solution to the industry. Though 70%

Reaching out to patients, healthcare professionals and trade partners through digital platform will be explored in the coming few years.

May be delivery of essential and life-saving drugs would be done through drones as long as regulations are in place to handle such operations. processes. In India, inventory management and commercial transaction on IT solutions started in the late 1990s. By the end of last decade, almost all companies were using some kind of IT platform for business transactions. However, implementation of a dependable ERP solution in large companies is not seen to the extent the industry requires. There are companies using legacy systems developed in-house even though the business volume has grown beyond Rs500 crore, data analytics to offer deeper insights to business is few and far between.

Key lies in adopting GenX Tech tools

Pharma supply chain is going to be transformed in foreseeable future driven by technology, GST roll out and

Truck deployments lead time; average waiting time, loading and unloading time are going to see significant improvement due to use of simple technology solutions. of materials are still moved on surface with an average speed of 40kmph, yet reliability of services have improved.

Cold chain vehicles and air cargo services have developed capacity to address the current need. Currently 30% of the market is contributed by metro and tier I cities. The balance is with semi urban and rural geographies. Over a period of time with hyperlocal operators, the last mile delivery will improve.

Tech adoption

Traditionally pharmaceutical industry is far advanced in adopting cutting edge technology as far as R&D is concerned. The same cannot be said for manufacturing though. And the industry is a laggard in technology adoption in any other business

24 | CELERITY • January 2017

infrastructure development. The most visible change would be in the space of physical distribution. Large aggregation of 3PL would be a game changer. 4PL operations would follow thereafter.

Some global 3PL players tried it out in the last decade without much success.

The industry was not ready for such a change 10 years back. In the recent past, there is a lot of buzz around tech enabled logistics start-ups. Few players with game changing technology and significant funding are changing the landscape for better. Better vehicle capacity utilization, real-time material and vehicle visibility are going to be the norm. Connecting distribution centers with distributors and retail pharmacies on mobile app improve inventory turn. Inventory write-off of

to the extent of 1.5% would be reduced substantially.

Warehouse operation efficiency is likely to improve by using RFID technology. Truck deployments lead time; average waiting time, loading and unloading time are going to see significant improvement due to use of simple technology solutions. Reaching out to patients, healthcare professionals and trade partners through digital platform will be explored in the coming few years.

May be delivery of essential and life-saving drugs would be done through drones as long as regulations are in place to handle such operations.

Things to look forward to

With GST roll out, large 3PL players will offer end-to-end supply chain solutions.

These entities will be managed by career professionals with high credentials. So, the current distribution centre operators who own legacy business without adequate skill and resources would give way to such entities. Such operations would offer single point contact with multiple services with a high-end technology layer. Pharma companies need not develop solutions for changing market environment. Distribution network design and optimization would be done by these 3PL operators. Market segmentation and customer connect would be handled by such entities while providing data analytics. These players would provide an opportunity for overseas players to enter Indian market through a single gateway.

These are exciting times for pharma supply chain to unlock greater value of the organization. Till the last decade, supply chain operations were managed by talents who have grown in the organization irrespective of the skillsets and competency for the job. Now, the industry has started realizing that skilled and trained talents are required to take the supply chain operations to the next level. The leaders in the pack have already initiated activities to transform their supply chain. Now it’s time for others to follow suit.

Sukhendu Patnaik is a veteran in Indian pharmaceutical industry for over three decades.

He was the supply chain director for Abbott’s Truecare business. He has created the supply chain organisation from scratch to support a fast-growing business of Rs350 crore with a CAGR of 180% over six years. He has been in the senior leadership role in organisations like Piramal Healthcare and Abbott. His domain expertise is in operations, supply chain, strategic management and leadership development. He teaches Supply Chain Management at NMIMS, Mumbai as a visiting faculty. He has worked in organisations like Alembic, Pfizer, USV Ltd, Piramal and Abbott over the last three decades.

GAMECHANGER

ON THE

ROAD

TO DISRUPTION

The road transportation sector in India is ripe for disruptive changes with the new breed of logisticians challenging the status quo. Bringing transparency, speed and reliability into this business through technology is what keeps BlackBuck busy, highlights Rajesh Yabaji, Co-founder & CEO, BlackBuck.

How did this interesting idea strike you?

During my stint at ITC, I led the task of transforming the supply chain. Freight was an area, which took a high spread of costs and it was really difficult to execute any change in the way things were executed.

It was clearly acknowledged that there has to be a different entity, which needs to execute freight seamlessly. The idea of building BlackBuck came across during this stint, met Subbu and Chanakya (Cofounders) with whom I shared similar passion for this industry and to bring in positive impact. This is how BlackBuck was born.

How difficult was it for you to execute such an idea and bring it to life?

When we started the business, we had no support from both customers and supply partners since we were new in the market. This phase was critical as we had to establish ourselves and prove the value we were bringing to the table, both for our customers and supply partners. The perseverance and the BlackBuck spirit demonstrated by the team lifted us from

the ground and took our scale through the roof. I think it’s important that quality time and effort is spent on all problems. Every problem you solve helps you add value to the business.

Marrying technology with supply chain seems quite promising for India growth trajectory. How do you plan to take this ahead?

Technology penetration in logistics is at the lowest. BlackBuck has built technology, which integrates both demand and supply on to a single platform. BlackBuck works with B2B customers through techintegrated platforms, where they can place orders very simply. Transporters across the country are empanelled on the platform through a mobile application, through which they interact with us. Transporters through the platform have real-time visibility of customers’ demand. The entire transaction has been made seamless for the ecosystem using technology.

We want to see the world of transportation to be run using technology completely. We believe this would be the best way to execute freight, which will make us the largest freight company in short-term. In the long run, we are looking at possibilities of launching multiple business segments and also taking the story global.

How promising is the logistics landscape that you started your IT venture into this stream?

The logistics industry of freight contributes to 6% of India’s GDP. Majority of this

CELERITY • January 2017 | 25

portion is intercity logistics. It is estimated to be a $100 Billion market in India. The logistics industry has always grown 2x the GDP growth. The current players operating in transportation are asset-light and very fragmented. The suppliers to them again are completely fragmented with average ownership of 3 trucks per person. The business in this industry happens in a broken offline method. BlackBuck is looking at this huge market to recreate logistics commerce using technology, building a platform where buyers and sellers of freight can engage seamlessly.

How has been the journey of one year so far? What are the crucial learnings you gained out of operating in such a complex industry?

It has really been a great experience so far. All our memories have turned very sweet, taught us a lot, and seasoned a baby BlackBuck into a commanding and dominant position. What was more important in all these instances was perseverance. We faced many challenges while we were building the business. The perseverance with which the team tackled these challenges is really commendable.

The most exciting aspect is that every day is a new day; every week has its own challenges. In start-ups, the goal-post you are hitting at continuously changes, the product you build for X scale does

Starting with 10,000 trucks, in December 2015 to operating 80,000+ trucks by October 2016, BlackBuck serves customers who order close to 20,000 trucks a day to small businesses that order possibly three trucks a month. not hold good when you are at 10X; the environment is too dynamic.

How did you develop a truly rewarding team brimming with motivation and destined to change the logistics landscape?

Majority of our hiring is through referrals.

Our first fifty employees were hired from very close circle of co-founders. We look for certain personal traits before we onboard any new member in our team so that there is coherence among the employees. We speak the same language; how to abandon age-old practices plaguing the industry and simplify the freight for

We want to see the world of transportation to be run using technology completely. We believe this would be the best way to execute freight, which will make us the largest freight company in short-term. In the long run, we are looking at possibilities of launching multiple business segments and also taking the story global.

26 | CELERITY • January 2017

all the stakeholders. Also, none of our employees, apart from three co-founders, have any prior experience in logistics. This is a conscious call, so that we do not take any time to unlearn.

What are the inspiring class room lessons that you have adopted in your venture?

Supply chain was very dear to me in college. I was lucky to get a chance of picking up my career at ITC in supply chain.

I applied a lot of best practices learnt at IIT-K during my stint at ITC, and I still keep applying those best practices best suited to our business proposition. Moreover M&A electives in school helped structure the company effectively.

Do you feel any gap between academics and implementing that idea into business? How can we bridge that?

I think this question is asked and debated a lot. I guess academia can do so much for an individual. It has the core job of making individuals aware of things which they can face. When the person faces these scenarios in real-time, he or she should connect the learnings and execute with the best of the knowledge. Speaking about the academia research and practice, a lot of gap is still present. That is more because of the lack of integrating levers between them.

What are future projects that you are excited to work on?

We are building an engagement platform for the truckers where their entire lifecycle will be captured right from buying trucks to purchasing all the inputs for their trucks to selling trucks. We have started a lot of such initiatives and are at different

GAMECHANGER stages of execution. This is going to be a challenging and time consuming task but certainly worth doing.

How difficult was it to convince investors to put in money on your project? How do you see the scenario shaping up in times to come?

It was not very difficult to convince investors. I believe that there are multiple factors which attracted the investors to our business – the market size, value creation opportunities, key difference being created by the company and the founding team.

Getting these right in your business model will excite every early stage investor.

Scenarios always remain same for great companies.

What keeps you going on time every time?

It is very rare that people get a chance to do something radical, disrupt a large industry. We believe we have a shot. All BlackBuck’ers are inspired and motivated to create this change. We will be at it, until it happens!! The direction is clear for us – We will win this game of freight, not only in India but across the world!!

What are the inefficiencies plaguing the industry and how is BlackBuck positioned to streamline them?

Logistics industry in India is highly unorganized and non-transparent. There is a huge asymmetry of information; the industry lacks trust. The technology

FACT FILE BlackBuck, founded in 2015, empowers countless businesses realize their full potential by providing effective technology solutions.

These include smart, easy and economical ‘Online booking of trucks, tracking and management of the transportation’ for the customers, optimal utilization and effective management of the fleet for the truck owners and improved network of facilities and support for the truck drivers. BlackBuck is supported by the best of the investors’ fraternity that includes Accel Partners, Tiger Global, Flipkart, Apoletto Asia. penetration is at the lowest. The commerce happens in broken and offline method.

BlackBuck keeps technology at the core of its overall offering and is committed to solve the age-old practices plaguing the industry: • Direct procurement channel BlackBuck’s direct procurement platform aggregates the supply from the freight market. This ensures availability of freight to the customers in the most reliable fashion. Depending on demand, continuous aggregation and empanelment is taken up for the BlackBuck platform.

• Quality Benchmarking Trucks are empanelled through

a standard quality auditing and verification process, which ensures quality shipping standards. BlackBuck audits trucks at periodic intervals depending on the industry of usage.

• Monitoring and control With investment in technology in the empanelled trucks, BlackBuck delivers track and trace facility for its customers where the entire shipment can be monitored from the placement at source to dispatch after the unloading process at the destination. With its proprietary geofencing technology, it authenticates all the process parameters of execution.

• Transportation analytics Data analytics on overall transportation provides all the information to the customer in a single view, helping the customer effectively manage transportation.

GST is seen as the real revolutionary moment for supply chain. Your take on this…

Overall GST bodes well for the entire logistics industry. The supply chain networks will become more business efficient rather than tax efficient. We have reasons to believe that optimized supply chain networks will demand increase in long hauls. For an organization doing business in intercity transportation, this is definitely a plus point. Also, I believe that implementation of GST will completely de-bottleneck multiple constraints in this segment.

SUCCESS FACTORS FOR ALL SEGMENTS A lean organization and governance Human resource excellence

Advanced IT & digital capabilities

Dynamic value pricing

A balanced business portfolio

Leading Practices in Road Transport

Distinct Approaches in Frieght Forwarding

Hallmarks of Contract Logistics

Lean operations

Scale per trade

Standardization and Industrialization

Strategic network and capacity management

Automation

Specialization and focus

Professional tender and contract management

End-to-end service quality

Long-term customer partnerships

A focus on attractive segments

Sales force effectiveness

Innovation leadership

Factors focused on rigorous efficiency

Factors focused on differentiating offerings

Source: BCG Analysis

CELERITY • January 2017 | 27

INTERVIEW

ON THE

CUSP

OF TRANSFORMATION

“Managing supply chain is not complex. You just have to wear a broader cap, looking at complete business perspective,” asserts Rohit Batra, Vice President – Supply Chain (India Sub continent), Ferrero India. Giving a totally new dimension to supply chain, he shares his extremely valuable insights for new age supply chain professionals through this interview. Excerpts…

How complex is the industry you operate in?

Food industry is a very competitive and sensitive Industry. Major challenge, which the Industry faces, is the ever-increasing awareness of the consumer. Today, the key to the success lies in SPEED, INNOVATION and CUSTOMER SERVICE.

What significant changes you have witnessed in supply chain landscape in the last decade or so?

Supply chain has evolved over the past decade. I have seen supply chain taking shape from just being ‘Logistics, A support function’. Today supply chain is an integral part of the business, equally responsible for the top line and bottom line. Supply chain is an end-to-end supply solution for the organization. Supply chain is transforming to a value chain and moving from just being a cost centre to a strategic function focusing on quality and quantity, fighting cost, adding value and improving customer service.

What complexities arise when it comes to managing supply chain?

Managing supply chain is not complex.

You just have to wear a broader cap, looking at complete business perspective.

It becomes easier when you understand the other side closely, i.e., sales, customer and cost. The difficult part of supply chain management is balance between adequacy and efficiency, managing sales forecast vs service level.

Kindly highlight one of the most challenging projects managed by you on the job?

For me, rationalization of SKUs between multiple manufacturing plants and markets was one of the most challenging projects managed by teamROHIT and me.

BATRA

You have a global presence. How do you perceive Indian market vis-à-vis other countries?

Indian market is getting mature year after year, there is a lot of potential that needs

“Even if you’re on the right track, you’ll get run over if you just sit there.” And just like Will Rogers says it, I believe in a continuous movement towards evolution.

28 | CELERITY • January 2017

to be harnessed and that is why I say, speed is a key at this stage. Indian market has an edge over other markets from cost standpoint. Due to low input cost, it makes better sense to manufacture same quality at lower cost in India. India can turn out to be a profitable proposition for being a manufacturing/supply hub for cluster of overseas markets.

Share with us the key learnings gained by you in supply chain profession.

Supply chain is a business function and not only a support function. The chain of supply includes sales, marketing, manufacturing, product development, finance, IT and logistics. Supply chain is about agility, adaptation as well as alignment. In simpler terms, it is a Customer Service Department.

What are the key factors that make one the supplier of choice?

Three words that best describe the

INTERVIEW

UP, CLOSE & PERSONAL What’s your mantra for success?

Be Optimistic and Trust yourself

Your mentor in life…

My father is my Mentor, my Guide and my Role model. I try to follow his steps on path of truthfulness, honesty and humility.

Recent book you have read and how has it helped you in taking decisions at workplace…

Supply chain works when something goes wrong – Most of the time you don’t have a second chance. Don’t be surprised, if people don’t know how you contribute to them. Smile and say - I am Supply Chain, I solve problems which you don’t know you have in a way that you can’t understand. supplier of choice are Cost, Quality and Speed. A supplier should be able to offer services at the most optimum cost, highest quality and most importantly in the best possible timeframe.

What can we look forward to in the coming years as far as streamlining the supply chain is concerned?

India is at a stage of taking next big leap and emerge as a developed nation.

The coming years will witness a sea transformation in the way supply chain operates today. We should expect major developments in terms of infrastructure, lean management in supply chain focusing on first time right and complete. Going ahead, supply chain will be taking the shape of an entire product value chain.

What are the qualities that make for an exceptional leader?

z Persistence – One should never give up. Try, Fail, pick your bag again till you get there z An eye for Talent – Great leader should always surround themselves with other great minds. One should have an eye for talent to make a good team z Never Satisfied – One should never be satisfied & contented with the achievement. The antidote is to think

every evening what can be done better tomorrow. z Fearlessness – As Branson said, ‘You don’t learn to walk by falling rules, you learn by doing and by falling over.’ z Toughness – You have to be clear on what you want and take stand for yourself. z Intuitive – As Albert Einstein said, ‘The intuitive mind is a sacred gift and the rational mind is a faithful servant. We have created a society that honors the servant and has forgotten the gift.’

Leaders are more likely to rely on hard evidence and data, logic and rational analysis to support their biggest and most important decisions. However, recent insights and discoveries have given new importance and credibility to the role of intuition in leadership, especially when it comes to decision-making.

What would be your message to new age supply chain professionals?

Supply chain starts from Sales, work hand in hand with Operations, Manufacturing, Finance, and is followed by Procurement, Planning, Distribution and Logistics.

Supply chain works when something goes wrong. Most of the time you don’t have a second chance. Don’t be surprised, if people don’t know how you contribute to

I am not very regular with reading books. Fortunately, had a chance to read this book, which actually made a big impact on me… The book ‘The Leader who had no Title’ by Robin Sharma is inspiring and I understood why it is important that each of us follow a level of personal leadership regardless of titles or position. What I liked most about the book was that it went past just being a fun story to read, it actually provided actions that each of us can take to increase our ability to lead without a title. By the way, if you do have a title, you should read this too. The first step in being an effective leader is to lead yourself exceptionally well. This book captures what it means to lead yourself exceptionally well. them. Smile and say, ‘I am Supply Chain, I solve problems which you don’t know you have in a way that you can’t understand.’

As part of Ferrero India Leadership team, Rohit Batra is responsible for end-to-end supply chain for Ferrero India Sub-continent. He has set up the function driving supply chain strategic Initiatives in line with Ferrero Global objectives and vision. Having more than 22 years’ hands-on experience, he has strong & intense knowledge of business processes integral to supply chain solutions and sound knowledge of Manufacturing operations. Prior to Ferrero, he has been a part of Sentiss Pharma and Wrigley India.

CELERITY • January 2017 | 29

PERSPECTIVE

CHANGE OVER TO

GST

Harkirat Singh

Stakes are high and reasonably so! It seems and is hoped that once the GST gets implemented in its entirety, the way India does business will change forever. We will be at par with the other 160 countries that have implemented GST. Here’s the reality check on the industry’s perception and preparedness on the most impactful taxation regime to be implemented soon…

How revolutionary is the GST implementation going to be for your business?

Harkirat Singh, MD, Woodland: Retail sector will get an advantage with the advent of GST. The implementation will lead to seamless integration of goods & service transaction across the states. Simplified taxes will help to achieve better margins.

Attaining raw materials and movement of goods would become easier, which will open gates for more suppliers/vendors to merge. A wider base of distributors would be available as paperwork will not be a problem, which will further lead to better access and low transportation costs.

An encouraging environment for supply chain will also reduce the working capital requirement. Overall, it will be beneficial for the consumer as well as the manufacturer.

D. Mohan, Joint Manager Director, CavinKare Pvt. Ltd.: We look at GST as a gamechanger, which will help the business to revisit its supply chain and other business processes. GST is not only a tax reform, but also a business transformation. In terms of GST implementation in CavinKare, we have thought through a structured program for the timely implementation with the help of our in-house team working along with leading consulting firms.

SA Mohan, CEO, Maini Materials Movement: Maini Material Movement has all its production facilities in Bengaluru from where the products are supplied to pan

30 | CELERITY • January 2017

India locations. Implementation of a unified tax system will help us save taxes as well as will make the supply chain simpler, resulting in hassle free transactions. These benefits will be transferred to our customers as well.

Under various tax grades of GST, material handling equipment will most probably fall into the second last slab, which will help us witness savings of around 9% in the total taxes because of simplification of taxation policies. The reduction in prices due to lesser taxes will definitely interest the customer as well as boost the demand of the product. Being a material handling & storage solutions provider, warehouses are one of the major customers for us.

Currently the warehouses of a single company are spread in almost all states for ease of supply through the complex tax structure. After GST implementation, these companies will look forward to combine these numerous small warehouses into a few large establishments. New generation MHE and storage systems will help them to increase efficiency of these smart warehouses bringing them cost reduction.

Yaduvendra Singh, Global Head & Vice President, GreyOrange: Currently, businesses design their supply chains to save taxation. For example, an e-commerce company would like to have its warehouse in each of the states where it sells its products so that there are no inter-state transportation taxes. However, operating many small warehouses means that the

D. Mohan

Yaduvendra Singh

PERSPECTIVE size and capacity of each of these is very small. This means that there is not much scope to take advantage of automation.

Once GST is implemented, there is no tax loss even if the goods move across several states before reaching to the end consumer.

There is a single tax levied basis ‘place of sale’. We will witness massive consolidation by companies making way for large, state-of-the-art, automated warehouses.

This is where GreyOrange products play an important role- to automate the warehouses to make these more efficient and accurate.

Vineet Baid, CEO, Falcon Autotech Pvt. Ltd.: With GST, restructuring of supply chains is expected. Number of warehouses, location of those warehouses and inventory would be driven more by operational optimization rather than tax optimization. With this, we anticipate consolidation of the warehouses, resulting in bigger warehouses. Such warehouses / distribution centres / fulfilment centres typically require warehouse automation products and services which are offered

by Falcon. Falcon also offers an integrated Warehouse Management System to manage the restructured supply chain.

Asim Behera, COO, Daifuku India: We automate material handling. The volume of goods in/out per location will increase significantly due to consolidation postGST; this is where we come in. Once the throughput of goods being handled at the factories, warehouses or DC (Distribution Centers) increases, humans can’t keep up or it’s not safe; then our solutions and robots come into play. They become the workhorse and enable factories and warehouses to increase their efficiency, utilization whilst reducing dependency on manpower.

Anjani Mandal, CEO, 4TiGO - The Truck Network: GST, as per the original concept and design, promises to be a gamechanger for the logistics industry as a whole and our business in specific. We stand for and support clean business transactions with cashless payments and high compliance to the regulatory authorities. We expect that after complete implementation of GST, users of the 4TiGO platform will be able to (a) reduce their transportation time by 2025% and costs by 15-20%, and (b) improve their utilization level by 20-35%.

Ameen Khwaja, Founder & CEO, LatestOne.com: The uniform pan-India tax regime is anticipated to reduce the cascading effect of taxes on the costs of goods significantly, which would reduce the cost of goods that can in turn be passed on to customers. Single tax system is expected to give benefits of seamless supply chain and logistics network that helps in meeting customer orders in different parts of the country. Credit of input tax over output tax on supplies will reduce the tax burden,

SA Mohan

further adding to reduction in prices of goods. Most of the retailers in our sector (Mobile Accessories) are not under tax purview, we hope GST to bring them under tax purview, thus we can compete better with them on the prices.

Sumit Khandelwal, Co-founder, Giftxoxo & Frogo: Currently, there are no clear-cut guidelines for GST for e-commerce and online prepaid instruments. There will be special provisions for e-commerce in the new regime, which were not addressed earlier, which will remove a lot of ambiguity in the way e-commerce companies function.

We believe that GST will definitely simplify the overall taxation and compliances mechanism for our industry. GST will bring in a wide set of suppliers, services, and goods under its preview, which will be beneficial for the end consumer and the overall economy.

What can be the probable challenges in implementing GST at corporate level?

Asim Behera

Vineet Baid

Harkirat Singh: It would be a great challenge for corporates to be GST-ready.

Sustaining the uniformity of taxation will be a big challenge especially at local level. GST is an opportunity of migrating to a worldclass indirect tax compliance system, one that is fully computerized. Industries would need to anticipate and develop alternate scenarios for the GST design and assess its effect on their accounting and compliance frameworks, cash flow and organizational structure. The other major challenge will be to roll out the required IT platform for implementing GST. D. Mohan: GST requires lot of preparations from systems and processes perspective as the reforms impact all aspects of business.

Eventually all of these have to be dovetailed into the various processes and IT systems before we go live. The GST implementation in any business is dependent on two factors, namely a) the availability of draft law and procedures in detail; b) the preparedness of ERP vendors to provide necessary GST patch / upgrades. So, as preparedness of GST is dependent on the above two factors, sufficient time should be made available post availability of detailed law and the ERP patch. As of now, we have a basic model law on the basis of which no system redesign can be undertaken. Similarly, as the ERP vendors are yet to come out with their GST versions, the challenge is going to prepare businesses for GST implementation from 1st April, 2017. We believe it is a challenge that can be managed. We understand that in other countries, sufficient time was available to facilitate such implementations (most recent ones in Malaysia, that took > 1 year). Indian GST being much more complex, it would be prudent and meaningful to give sufficient time for preparations.

SA Mohan: The country has been waiting

CELERITY • January 2017 | 31

PERSPECTIVE for enactment of GST since the time it has been announced. Though GST is sure to bring reforms in the tax structure for good, still it will be a challenge to come out of age old system and adapt to this change. GST aims to bring a centralized tax structure in India. Presently different states have different taxation systems and policies. With the introduction of GST, the regulatory establishment of these policies will be a challenge. The taxes will be levied by a single central body or by different state bodies is still an unanswered question. The current taxation system is very different from what it will be after GST comes into force. All companies need be made aware of the new return filing structure. It will take some time for the people to completely understand and implement the new rules.

All companies are using ERP to manage their functions. The current ERPs are designed and programmed as per the existing tax system. When everyone will move to this centralized taxation structure, all companies have to upgrade their ERPs in order to cope up with the tax reforms which GST will bring up. Implementation of GST will simplify the tax system but since it will be a new introduction, employees will need some time to understand and use it. The companies will have to organize training conducted by experts in order to train the employees on use of the new parameters for tax calculation.

Yaduvendra Singh: The objective of Goods and Services Tax (GST) is to simplify the mammoth Indian indirect tax structure.

When in force, GST will replace a host of indirect taxes by a single, unified tax.

However, all the states need to pass the GST bill in their respective assemblies before it is implemented. Moreover, there needs to be consensus about revenue sharing between the Central Government and all the states.

This may take a long time. Specific to the manufacturing sector, currently taxes are levied basis triggers such as: ‘manufacture under central excise’, ‘sale under VAT’ and ‘provision of service under service tax’. Post GST implementation, these three triggers will converge into one, i.e., ‘supply’ under GST. This means that tax will be levied if a product has been supplied or a service has been sold (single trigger), instead of multiple triggers. It is a welcome move for the manufacturing sector. The only challenge is that the industry will take some time to get used to the new structure. We may see new business models emerging in the industry to leverage the new tax structure.

Asim Behera: The biggest initial challenge or the work opportunity would be to relook at their network planning. Most of the Manufacturing & FMCG companies have set up factories and the warehouses basis where they get the best tax break rather than which makes the most sense from a purely supply chain/distribution model. This in itself is a mammoth task

32 | CELERITY • January 2017

Anjani Mandal

Ameen Khwaja

as whatever network planning they have done till now will go for a toss. Currently many have distributed factories and an equal multiple of warehouses/depots to serve the end customer; this will change to consolidated factories with bigger Finished Goods (FG) warehouses at the factory itself and these then supplying to RDC (Regional Distribution Centers) who then supply to the end customer. As a result, automatically the truck sizes being used at the factory for FG shipping will increase. So, one will need to relook if the current factory layout will be able to accommodate bigger trucks, higher volumes, etc.

Vineet Baid: One of the key challenges would be restructuring of supply chains.

Compliance requirements would increase.

Upgradation of systems, stabilization of upgraded systems will be tedious and data correction exercises can be expected.

Anjani Mandal: The challenges for customers would entirely be based on how much they under-estimate the impact of GST. Post-GST, cash-based business transactions and undeclared income will shrink in size, creating a large opportunity for corporates to cater to a significantly higher market size. Two sets of challenges will be present while corporates cope with this change: Firstly, their ability to change their accounting, billing, payment and dispatch systems and secondly, their ability to harness opportunities of a sudden market expansion.

Sumit Khandelwal: Implementation of GST will bring in couple challenges for us such as change in infrastructure (Accounting system, ERP, Books of Accounts etc.), the new set of documentation and registrations, education of our suppliers, which are mostly unorganized in our industry and identification of supply vs turnover. The major challenge will be to avail input credit from the large base of unorganized suppliers and passing the benefit to the end consumer.

How prepared are you to harness post-GST opportunities?

Sumit Khandelwal

Harkirat Singh: We are poised to grow and increase our production line. The abatement rate will increase the production because the tax burden would have been reduced under GST. Besides this, the reduction in excise will improve the quality of the product. We are fully prepared to provide more varieties, innovative designs and matchless quality to our consumer.

D. Mohan: We understand that the new GST revised model law expects businesses to pass on the benefits to the customers through its anti-profiteering clause.

Irrespective of the legal requirements, we are looking at GST to help, identify value so that we can effectively manufacture products and sell at very competitive prices.

RECAP

Trending Globally Industry 4.0 is here

A

udi has opened what it calls a ‘smart factory’, in Mexico, the first such plant opened by a leading automaker in that country. Smart factory is a term associated with Industry 4.0, and it refers to a manufacturing plant with modern technology. These technologies include robotics, automation, and what’s called 3D printing or additive manufacturing.

But crucially, smart factories in the world of Industry 4.0 feature lots of internet connectivity, or computer networks. The connectivity can be between machines, or devices, as well as between the factory itself with other plants.

Industry 4.0 is a term, which originated in Germany. It refers to the idea that the world is going through the fourth Industrial Revolution. The first Industrial Revolution was characterised by mechanization; the

second featured electrification; the third brought in computerisation; and the fourth Industrial Revolution is all about connectivity.

Some may not use the terms Industry 4.0 or smart factory, but it’s just one way to describe the new manufacturing landscape.

Moving towards Green

A

pple has invested in four subsidiaries of Goldwind, China’s largest wind-turbine manufacturer.

The investments in wind turbines will collectively yield 285 megawatts of clean energy. The company hopes to direct the power toward manufacturers connected to Apple’s supply chain. Since much of Apple’s production occurs in China, investing in green energy initiatives helps it reduce the environmental impact of its manufacturing.

In Germany, BMW too has been working hard to reduce emissions in all steps of its

manufacturing process. It has launched its first fleet of autonomous transport robots in everyday operations. The ten selfdriving Smart Transport Robots (STR) are transporting components through logistics at the Wackersdorf plant.

Also, a series of changes were made in their logistics when they rigorously analysed CO2 emission during the transport of vehicles to their end destination. To emit as little CO2 as possible, more than 60 percent of all new vehicles leave production plants by rail and all-electric trucks are already driving on the roads in Munich and

Leipzig, making local deliveries.

Over the long term, the BMW Group is striving for cost-efficient use of alternative drive technologies.

High on the sustainability agenda, Ikea Group too has just committed 1 billion euros to sustainable sourcing, on top of more than 2 billion already earmarked for sustainable energy. It’s a billion-dollar bounty for at least 10 other global players, including Whole Foods, Target, General Electric, Tesla, Chipotle, Nike, Toyota and Natura. All are generating new offerings to prove their sustainability mettle.

CELERITY • January 2017 | 33

RECAP

Alternative Fuel Fleet

G

MC and Chevrolet partnered with Power Solutions International, Inc. (PSI) to introduce heavyduty pickups and full-size vans powered

by 6.0-liter V-8 compressed natural gas (CNG) and liquefied petroleum gas (LPG)-capable engines starting in the first quarter of 2017. Chevrolet will also

offer CNG and LPG versions of its new Low Cab Forward commercial truck.

“Expanding choice is the key to helping more commercial and government fleets reduce their fuel consumption, fuel costs and emissions using alternative fuels and EVs versus using traditional gasoline,” said Ed Peper, US Vice President, GM Fleet. “There are no ‘one size fits all’ solutions for fleet managers.” GM Fleet’s partnership with PSI follows customer demand and ongoing investment by companies across the nation in CNG refueling infrastructure.

In November 2016, the US Department of Transportation’s Federal Highway Administration (FHWA) announced 55 routes that will serve as the basis for a national network of ‘alternative fuel’ corridors spanning 35 states. Though the network is nearly 85,000 miles long, more miles will be added in the future to accommodate electric, hydrogen, propane and natural gas vehicles as additional fueling and charging stations are built. Currently four of the top five ‘Green Fleets’ operate CNG-powered vehicles. All of the top 25 fleets use at least two fuels.

of experience especially within supply chain functions, but more recently also focusing on people and organizational development. Bali has demonstrated an ability to drive the changes required

in operations through the significant growth we have experienced during the past years,” remarked Niels Jacobsen, Chairman of the Board of Directors of the LEGO Group.

Leadership Lessons

O

f late, Chief Supply Chain Officers (CSCOs) are increasingly controlling over 50% or more of a company’s annual spending, with two thirds of all employees directly reporting to the role. In the past, we have seen incredible examples of SCM professionals moving up the CEO ladder of global iconic organizations such as Tim Cook of Apple, Mary Barra of General Motors and Brian Krzanich of Intel.

Lego, the iconic and highly profitable Danish toymaker, is the latest business to be headed by an executive rising out of supply chain to the role of CEO. “Bali Padda has a fantastic track record in the LEGO Group with more than 14 years

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34 | CELERITY • January 2017

STELLAR ADVT